Dateline: Bogota, Colombia
Earlier this week, I shared my thoughts on the pros and cons of doing business in Central and South America.
The Latin world has an incredible number of opportunities, no doubt. However, thanks to years of dictatorial or oppressive government influence in many Spanish speaking countries, some of the workforce has been trained to simply not care about working hard or achieving success.
Of course, this is a stereotype that in no means applies to everyone. I’ve met plenty of hard-working Colombians who are doing great things in business in barely one week on the ground here.
Now, its no surprise that the world’s emerging economies continue to, well, emerge. Even as emerging market currencies continue to trend downward, dozens of “third world” economies continue to grow.
Thanks to growth as well as inflation created by inept governments, wages in many of these countries are rising. While still incredibly cheap compared to countries like the United States, the cost of hiring help here is rising.
And as my friend Knut Anderson, who does business in Panama, told me in Cancun at our Passport to Freedom event last month, the cost of hiring QUALITY help is definitely rising.
No matter where you go, the talent pool is small compared to the overall job market. It’s hard to find good help, be it in Bogota or Chicago.
This is one reason I have previously advocated for sending work overseas: if you’re going to get mediocre output on drudgery tasks, it might as well be from a chipper Filipina working for $3 an hour than an entitled princess manning your office’s front desk for $15.
However, I have increasingly been hearing friends and colleagues of mine express dissatisfaction with offshoring work to virtual assistants they find online.
One friend was rather blunt when he said that “all Filipinos” start off doing a great job, then slide into inefficiency.
Of course, I would hazard to say that there are plenty of Filipinos who do a good job. The fact that countries all over the world ship them in by the truckload should speak to that.
But it brings up the issue of cultural differences and how much of a role they should play when hiring employees and contractors.
I’ve said it a million times before: the best advice when doing business overseas is “don’t be dogmatic”. My friend who lambasted Filipino workers may not understand the Filipino culture of micro-management.
For the most part, there is no such thing as autonomy when tasks are handed out to workers in the Philippines. Bosses sit on employees at every turn.
And that means employees have been trained to wait for assignments. Every. Step. Of the way.
A great place to run a hot dog stand and not get blowback when you, as the boss, hover a bit too much.
But, if you’re not ready for the adjustment, not the best place to say “get these seven things done by Friday”.
Is that the virtual assistant or employees’ fault for not adjusting? The employers’ fault for being myopic? Or is no one at fault, but the difference between the two cultures leads to disappointment?
While most currencies whose name isn’t “US dollar” are down this year, I don’t expect that to last forever. On top of that, some of the world’s largest outsourcing destinations already use the US dollar or think in dollar terms: Cambodia, Panama, the Philippines, etc.
On top of that, rising wages in some of those countries are causing top talent to demand more significant salaries.
Here in Latin America, where the common language of Spanish allows for a somewhat regional approach to business where a greater part of the population has no need to learn an international language such as English, wages in the English-speaking outsourcing market are driven even higher.
For example, another friend of mine reports paying an English-speaking secretary in Panama City $1,100 per month; a hefty premium over what a secretary that only speaks Spanish would charge.
Meanwhile, the minimum wage in western European countries like Germany isn’t THAT much higher than the premium the alleged top-tier in some emerging countries charge. Head south to Spain, Portugal, Hungary, or even Poland, and prices are substantially lower.
In fact, for all the talk of how expensive Europe is, so long as you stay out of Denmark, Belgium, and the Scandinavian states, the cost of labor in Europe is actually less than you might expect.
I’m not suggesting that a minimum wage employee will light the world on fire. However, my example speaks to cultural differences that many of my colleagues have commented on when doing business overseas.
Namely, there are certain cultures where people expect to work longer hours and put in a greater effort.
China is one example of this, and I have often wondered why more western business owners haven’t exploited the millions of young, globally minded, English-speaking college graduates who struggle to find a good job because EVERYONE in China has at least one college degree.
The point is, if you’re going to continue to offshore jobs that require someone a brain, you are going to need to get creative.
Sending work to the Philippines will continue to work, but you aren’t going to get the 10-to-1 salary advantage that has been promoted by the likes of Tim Ferriss and his minions.
That doesn’t mean that hiring virtual assistants in the Philippines, Bangladesh, or elsewhere won’t continue to work, but the fact that there are a growing number of business opportunities in those emerging markets speaks to the fact that labor is becoming more expensive.
A larger middle class in the emerging world is good for many businesses, but will slowly erode the benefits of overseas virtual assistants.
For affordable general labor, consider China. For menial tasks, I have had some breakout stars in Bangladesh, although I haven’t managed entry-level labor in about two years.
We have also seen some success outsourcing entry-level sales tasks to the Middle East.
The idea of hiring a virtual assistant for 43 cents a day sounds cool. It helps to sell books.
However, eventually the question becomes “how much is MY time worth?” Would you rather pay a secretary in Germany double what you’d pay a good one in Panama if it meant less management and oversight?
The fact that one of my friends recently boasted about his fantastic VA, who earned $13 an hour, speaks to the direction of virtual employment. $13 isn’t exactly the kind of “slave wage” some expat entrepreneurs speak of when hiring.
I’m not suggesting that virtual assistants are going away. If anything, more and more people in both the developed and developing world will become contractors as the idea of 9-to-5 at an office diminishes.
However, the dynamics will change.
For now, you can take advantage of a short-term correction in emerging world currencies to hire on the cheap. For jobs that require higher quality and attention to detail, however, I would suggest looking at expats, backpackers, and other westerners who need an income but aren’t sure how to support themselves while traveling.
Additionally, the glut of Americans in particular graduating from college with worthless degrees and a lukewarm job market will mean opportunities to find good (maybe not great) talent willing to work relatively cheap with a few incentives for performance.
As always, thinking outside the traditional box will yield the best results.