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International Contracting – more or less important?

April 21, 2014

IACCM’s recent report on salaries drew attention to the different levels of premium paid to contract and commercial professionals with international contracting responsibility in the US compared with Western Europe. In Europe, the significant difference appears to be between those who operate purely domestically versus those who have any form of international exposure, including within a geographic region. In the US, there is a bonus for dealing regionally, but the real benefit comes for those who handle global markets.

The volatility of market conditions has raised the importance of high quality international contracting. It is critical to expand the trading base and to spread risks. On the other hand, it is also critical to be able to withdraw from markets and to maintain flexibility. International trade has many nuances, requiring appreciation of differing ethical standards, business practices and norms. Many companies have misjudged their trading partners or a country’s economic stability and taken huge losses as a result.

So it seems logical that international contracting expertise would attract a sizable salary premium. Why is it that Europe doesn’t seem to see things that way?

A couple of factors may be material and the survey data lends them some support – but I must admit these are at present hypotheses. First, it seems to me that many European corporations are less centralized and more diverse than their US competitors. For most of the large players, a majority of their business is overseas, which is less true for US corporations due to the size of their domestic market. European firms tend to have less control from headquarters and appear more likely to have multi-national leadership and staffing at their HQ (for example, how many major US corporations are headed by a non-US national?).  This difference reflects into the way contracts are handled, with a greater tendency in the US to operate through a central team, while European companies will rely more on resources within the overseas territory or region, or will have multi-national teams at the center.

A second factor is that European companies perhaps expect their staff to have a more international outlook. Wide cultural diversity is the norm within Europe and individual countries and markets are small. Some level of international awareness is therefore an assumed attribute for anyone wishing to progress in business.

I am not sure there is a ‘right’ or ‘wrong’ approach to international contracting, but my personal view is that it will be an area of increasing complexity over the next few years. In many ways, the hype over ‘globalization’ masked the realities of national and cultural difference. The forces it unleashed are now threatening many aspects of world trade and successful companies will need to invest significantly in their international management skills – especially those related to contract and commercial management.

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