Today’s post is a guest contribution from Erika Sandoval, who is global senior partner of human insights in the strategic advisory group at UKG, and it features firsthand insight into the practice of nearshoring.
As someone who has spent a lifetime navigating the proximities of the United States and northern Mexico, I have witnessed the cultural and business impacts in the cross-border business region. The interconnectedness between two distinct spaces has further influenced my experiences, especially after living and working in various countries across the world.
Nestled between forested mountain ranges, deep canyons, vast deserts, and changing rivers sits Mexico’s northern border region with the United States. Since the 1960s, northern Mexico has attracted manufacturing that spans industries, from automotive to aviation and aerospace to furniture and textiles. Today, nearshoring is picking up more moment than ever before between the United States and Mexico, as the geographic location and similar time zones among both countries are minimizing the disruptions in supply chains and business practices.
In the current economic height, particularly in manufacturing, we have seen shifts in trade between the United States and China that has led the former to think of strategic ways of operating business closer to home. As a result, Latin America has experienced an investment boom and has risen as the top region in the world in hiring practices. Specifically in Mexico, 2022 brought $30 billion in offshoring investments that have resulted in a waiting list of over 400 companies looking to acquire industrial spaces in the northern part of the country.
Tesla’s most recent $5 billion investment of a new gig factory in Monterrey, Nuevo Leon, is projected to be the world’s largest electric vehicle plant. I recently spoke to my UKG colleague, Carolina Gallardo, a native of Monterrey, about this phenomenon and the impacts we were seeing in our home regions. “It doesn’t surprise me at all that global companies are betting on Mexican talent in the area,” Carolina said. “Being part of border culture has prepared us with the latest trends, English skills, and talent opportunities. It really is an exciting time for cross-border business.”
Work around the world is now more connected than ever before, and, with rapid change, comes a time to rapidly adapt. Traditional work models are no longer the norm and human-centered approaches have become a fundamental practice. There are many things to consider when there are bilateral business agreements, but understanding how to operate and manage people on both sides is critical for the business, the workforce, and the overall workplace. While working with a trusted service provider can assist with challenges, there is still a significant importance in ensuring that organizational strategies are aligned with a localized approach.
During a consulting experience, I worked with a U.S.-based company that wanted to help its hiring managers in Mexico better define their workforce strategies so they could inspire and appeal to future and current talent needs. To roll out such a process, I worked closely with both the U.S. CHRO and the HR teams on both sides. One thing that we discovered was local candidates were expressing different needs upon hiring than what the HR teams were seeing in the United States. However, both teams were striving to achieve the same goal: ensure their hiring managers were tailoring and aligning their hiring practices with a local lens and not solely with a U.S. agenda. This involved gathering insights and metrics from both teams and understanding workplace trends and differences in the region and within their own workspaces. Most importantly, we needed to make sure that the strategy was weaved into the overall HR strategic plans and that it aligned to the company culture. Understanding and developing incentives around the needs of employees with a localized lens was key to overcoming turnover and improving retention.
One of the biggest and most known challenges in work-culture strategies is how people communicate. Proximity in nearshoring has been seen as a way to combat communication hurdles. However, the right channels of communication must be defined and with the right tools. When technology has inefficiencies and errors, it can impact engagement and productivity. Communication strategies must be able to connect and communicate with all employees, regardless of where they are located. This fosters an environment where employees can thrive and help contribute to employee retention and global brand. Businesses that are leading the way of work are investing not only in tools and technologies, but also designing work with people at the center — instead of with the transactional focus we have seen for years, especially in manufacturing.
Cross-border business may be booming between the United States and Mexico, but other countries are also playing an active role in the region. China has had a long history of doing business in Mexico, but now Chinese manufacturers are looking at Mexico as a destination for setting up base, due to the proximity to the United States. Traditionally, nearshoring has been focused around Mexico’s northern region, but we are also seeing states in the Bajío region and southern and center states starting to feel the impact.
Undoubtedly, the past few years have brought many changes to global organizations. As a result, modern workplaces in the nearshoring environment will need to continue to focus on building localized business strategies and advanced technology practices around the needs of the employees, while making sure that hiring and retention strategies are evolving. We will see more organizations work toward building business agility and adapting to market demands. Mexico and the United States have had decades of ongoing integration and business relations, but now they are centered as cross-border players in nearshoring discussions and are presented with a golden opportunity.
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