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Personnel Demands Attention Overseas

NEW YORK - Human resource considerations should be paramount when investment companies consider going global, and yet usually, they are given the lowest priority, according to Sheryl Colyer, global head of human resources at Citigroup Asset Management of New York. Colyer spoke at the National Investment Company Service Association east coast regional meeting held here earlier this month. The priority given human resources could be decisive in a company's success or failure abroad, she said.

Staffing is one of the critical issues for a company when entering new markets, according to Colyer. A company's approach depends on whether it is expanding overseas by acquiring an existing company or by building ones own, new operation, she said. Citigroup has both formed several joint ventures and made acquisitions in Latin America while it has created its own operations in Asia.

Regardless of whether a company chooses to build its own or acquire existing operations, companies must decide if they are going to hire locally or send workers from existing offices and pay expatriate costs, according to Colyer.

"We really need to think about this hard and fast and consider it up front," said Colyer. When going into other markets, there are certain skills needed, she said. In some cases, those skills will not be found locally. If some people have the necessary skills, there can be stiff competition for them and a company will probably pay a premium for the skills.

Companies should have specific plans with regard to expatriate issues, she said. When Citigroup reviewed its expatriate costs, it found that many people were "career expatriates," meaning they and their families lived abroad permanently, according to Colyer. That is not the best system because it does not make the best use of workers' experiences and because expatriate employees are, in general, more expensive than people hired locally, she said.

"What we've learned from this is to certainly have an exit strategy in terms of sending someone over to do specific things," said Colyer. "The plan is to train and transfer the skill and knowledge to someone in the other country or [to] rotate them out. We now look at the expatriate situation to be something not more than a 3-year assignment."

When a company buys an existing overseas operation, retention of the existing employees is a key concern. When doing a cost/benefit analysis and determining whether it is advantageous to go into another country, companies must figure in the cost of retention packages, according to Colyer.

"Often we don't [do this] and we have found that it is a significant cost to retain," she said. "We try to phase that in over time." Usually, it can be paid out over a two-year period, she said.

"What we have found is that if you're not careful with your comp and benefit packages and how you staff your leadership in these countries, you become the recruiting ground or training ground for other firms," Colyer said. "It's important to note that, if a company is entering that country, they will pay a premium for that skill that you have spent many hours and dollars training."

Furthermore, with regard to compensation, companies need to determine which jobs are global, meaning they require certain compensation regardless of location, according to Colyer. The majority of jobs are not like that.

"A one-size-fits all philosophy won't work," she said. "A pay scale out of New York may not be appropriate in Taiwan. Complications around a global pay scale severely disrupts the pay practices when you have other businesses in those countries."

Understanding what resources are available and at what cost, specifically with regard to human capital, is critical before moving into new markets, according to Sanjay Vatsa, vice president of global operations and business strategies and solutions at Merill Lynch Investment Managers of New York.

"In some countries, people are less expensive than gas and water," said Vatsa. "You have to understand the data mix in that country before you can adopt a process and implement a system."

While it is always important for companies to be explicit with regard to how they measure performance, it is particularly important when working globally because of the independence global offices are given, according to Colyer.