Nearshoring has undeniably opened up a plethora of opportunities for companies to tap into wider pools of talent. Nonetheless, profitable investment in overseas talent is not always as easy as it seems.
Despite their geographical affinity, the US and Mexico have important differences in their cultures, values, and practices, differences that are substantial enough that they should influence decision making when identifying and managing a company’s nearshore talent.
Woman’s inclusion in the workforce
OECD and others’ statistics show a trend of increasing numbers of women entering into formal employment in Mexico. While in the US approximately 47% of the workforce is female, in Mexico it sits at 36.6%. This proportion is slowly increasing (up from 33.6% in 2000) as companies seek to meet labor and talent demands, while traditional male-dominated customs fade. It does not account for, however, one of the most important statistics that must be negatively affecting talent utilization.
2017 statistics show that women still earn 16.7% less than men and that only around 10% of senior posts are occupied by women. If one looks to the strong evidence that diversity (of gender, race, and nationality, etc.) leads to more creative, innovative and forward-thinking organizations, it seems Mexico (and most of LatAm) is lagging seriously behind.
If tech companies in Mexico want to reach and remain at the forefront of their industry, tapping into the female talent pool is an excellent place to start.
Already there are organizations such as Laboratoria, a coding-school just for women without high-school education, keen to demonstrate that organizations should consider other sources of talent when filling their recruitment pipelines.
Discovering the talent is just the start. A true competitive advantage will come from nurturing talented women and providing them opportunities to shine in the organization and climb the corporate ladder. Keeping this talent will also mean companies working to eliminate pay gaps and tackling other age-old issues.
In particular, women in Mexico struggle for work-life balance, especially in cases where the woman is a mother to a baby and/or young children. Maternity laws are relatively lax in Mexico and financial support from government is often near to zero.
Keeping all this in mind, US or international-based organizations can gain access to and keep highly talented women by breaking the status quo and providing creative, flexible ways to allow them to balance professional advancement and family responsibilities.
For many years there has been a perception that paying lower salaries to locals is the norm. Average salaries do sit significantly below international standards, but experience has shown me this strategy seldom works at the top-end of the talent pool.
The top 5-10% of the pool know they are talented, and so do other countries. The US, Canada, the UK, Europe, Australia, and New Zealand are all countries who have recognized that Mexico houses abundant, well-trained talent, especially in tech and engineering. These countries are willing to offer salaries above Mexican ones and talent is happy to move.
I have had the opportunity to work on-site at a variety of different firms in both the tech and other industries. When I have investigated and discovered the intentions of new-hires, well over 80% cite that a reason for joining the company was to seek out an overseas job, mainly because of better earnings prospects abroad. Moreover, I have encountered increasing numbers of Mexicans who are now hired by overseas companies, often working remotely, on internationally competitive salaries.
Companies need to recognize that top performers understand their worth and will actively seek out better paid jobs in Mexico or internationally. This problem is exacerbated more in international firms where there is greater visibility of what colleagues in other countries are making. Organizations can consider including data from international organizations when assessing and determining compensation packages, especially for top-performers.
Mexican talent is more internationally mobile than ever before and English-language levels have improved. The Millennial generation, keen for work-life balance, are far more open to international travel than their parents. Thus, organizations operating in Mexico must realize there is increased competition from abroad. Hiring and retention strategies must evolve with these changes.
Tech firms and other organizations I have worked with are addressing this challenge in different ways. Some are offering internal transfers within the company and others are offering secondments or placements abroad for short periods of three to twelve months. This serves multiple purposes, including keeping top talent in the organization, developing important skills, and creating individuals and teams with more international awareness that can contribute to innovation.
One of the biggest things to shape the Mexican employment market has been the growth of outsourcing companies. Initially conceived as a legitimate way for organizations to outsource recruitment and payroll, loopholes have arisen that have allowed many organizations to outsource payroll for the purpose of avoiding tax and for stripping away state and private benefits from employees.
Rather than focus on the moral or legal workings of these practices, I will focus on the effect it has on organizations’ talent. Employees in Mexico used to receive IMSS (state healthcare & pension), INFONAVIT (housing support), and other benefits like incapacity payments. Outsourcing has allowed many companies to avoid paying contributions and to remove employee status from people, hiring them under a different scheme.
While this certainly benefits the company’s bottom line, it does little to generate good will and promote loyalty. Consider also that technically capable staff are able to seek out online or remote-based work as well. I have, however, regularly observed international companies doing well in addressing this trend.
Organizations that provide competitive salaries, meet state requirements for employee contributions, and provide other attractive benefits, are regularly perceived by employees to be great places to work. If a US company were to remove benefits like the 401k and social security, there would be uproar. International companies operating in Mexico should proceed with caution when it comes to payroll for outsourced teams, especially when trying to attract and retain top talent.
Work-life balance and life goals
The old cliche that Mexicans are lazy simply does not rub in reality. OECD figures show that Mexican workers work some of the longest hours in the world. This has become somewhat ingrained in the culture of some generations in Mexico, but the younger generations are not buying into the idea of sacrificing their personal life for professional gain.
I have observed how major international firms with stellar reputations and career progression possibilities have reported losing top talent to their competition within only three months. The younger generations are becoming increasingly confident to shop around for a job that gives them flexibility and opportunities to pursue personal interests.
The boom in entrepreneurship has led to many talented individuals seeking to start their own companies, often straight out of university. To be an entrepreneur in Mexico is seen as fashionable and it forms part of the life-goals of many.
Organizations operating in Mexico are likely losing out on some of the best talent available. Technology start-ups are a haven for entrepreneurs and there is a FinTech boom coming in Mexico, with foreign governments looking to splash the cash to get access to what will be a huge marketplace. Nearshoring organizations should consider ways to attract and retain the best talent in these areas.
One possible avenue is ‘intra-preneuring’, where companies hire an individual and provide them money, resources, and time (in addition to their regular work) to seek out and grow a new business idea. This provides the employee with the best of both worlds and also brings benefits to the employer because the employee is developing new skills and business ideas to apply to the company. Rather than stifle creativity and freedom, tech companies are uniquely placed to give people those allowances.
The future possibilities for nearshoring in Mexico are bright and there will be definite benefits for organizations. It is, however, important that companies look to Mexico and other LatAm countries, not just for cost savings, but for quality talent.