New research has investigated the growing trend of ‘Western’ executives appointed to headquarter positions by organisations in culturally distant ‘Eastern’ countries.
Dr Frithjof Arp of Monash University’s Faculty of Business and Economics has completed the first comprehensive study of this new phenomenon.
“Until recently, the appointment of foreign executives to headquarter management teams was a rare phenomenon, even in globalised multinationals of industrialised countries, and even more so if it involved significant cultural distance,” Dr Arp said.
Dr Arp said the phenomenon of foreign executives in local organisations (FELOs) was not limited to aspiring multinationals joining the global hunt for management talent, but also occurred in local organisations with an exclusively domestic market focus.
FELO appointments were highly visible, often controversial and very different from expatriate assignments in the subsidiaries of multinational organisations. They were typically the only foreigners in their workplace, needed to demonstrate their loyalty to local interests, and did not have the ‘safety-net’ of expatriates.
They reported to local chairpersons, family-owners, or dominant shareholders who often had significant influence on operational decisions. FELOs found themselves the subject of intense local scrutiny.
“Not unexpectedly, FELO appointments were initially aimed at temporary roles and the grooming of local successors,” said Dr Arp.
“The quick transfer of know-how and the leapfrogging of competitors rather than long-term capability building were among typical objectives.”
Dr Arp said while initial appointment reasons included strategic business knowledge, administrative, technical, marketing, or financing expertise, reasons beyond hard skills explained the long term presence of some FELOs.
Firstly, the soft skills of FELOs, their people-management style, host-country involvement, and progress with the internationalization of the local organisation often made the ‘successor issue’ redundant.The ‘graduation date’ continued to be postponed while awareness grew of the need for long-term capability building.
Secondly, while the study did not suggest that FELOs were better managers than their local peers, their unique in/out group status gave them a range of options that local colleagues did not have.
Thirdly, appointments of foreign executives could bring an image- or reputation-gain to local organisations in both domestic and foreign markets. With more international experience and ostensibly better formal qualifications than their local peers, FELOs were seen as aiding local organisations in their portrayal of ‘being internationalized’ – adopting international standards of corporate governance and business practice.
Dr Arp presented his research at the 2011 Annual Meeting of the Academy of Management in San Antonio, Texas.
Further information is available at www.FELOresearch.info . Dr Arp is available for interview on +60105020273 or firstname.lastname@example.org –
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