Expats The Squandered Resource

The obstacles that organizations facewhen they globally conduct business are daunting: political turmoil, economiccrises, complex labor laws, poor infrastructures and more. How ironic, then,that one of the greatest threats to business success comes from within: thefailure to effectively manage expatriate assignments. That failure is widespreadeven though expatriate assignments are the first step most companies take whenthey establish operations overseas, and despite the prevailing wisdom that thoseassignments routinely cost $1 million – or more.

    Evidence ofCorporate America’s failure is found throughout the results of “MeasuringExpatriate Success,” a survey of HR professionals recently conducted byWorkforce in conjunction with Valhalla, New York-based Prudential RelocationInternational. More than 300 professionals answered the survey, which looked atnumerous aspects of expatriate assignments. The results show that companies withexpatriate employees are generally providing pre-assignment support effectively. 

    But the results alsoshow several causes for concern. Many assignees are sent abroad without clearlydefined goals for the assignment. Costs are often not projected or measured.Women are almost completely overlooked for assignments. And the repatriationprocess is rocky, at best. It’s little wonder that the assignment failure rateis significant, or that companies lose many repatriated employees within a yearof their return. 

    Given the importanceof expatriate assignments, why are the problems so widespread? According to theexperts in global HR that Workforce spoke with, the reasons are plentiful:internal corporate politics, cultural issues, family concerns and more. 

    The problems alsoreflect the fact that in most organizations, HR has a limited (or nonexistent)role in expatriate selection, management and repatriation. Instead, HR’s roleis primarily administrative support. That’s true even in organizations inwhich some HR staff members are dedicated solely to international issues. 

    Clearly, HR has yetto become a full strategic partner in all aspects of the business. Much of thework that is now routinely done within HR relative to domestic issues has yet tobe applied to offshore operations. The good news is that HR has a powerfulopportunity to make a real impact on businesses expanding abroad. To have thatimpact, HR must begin at the beginning: with selection. 

HR’s role is limited
    There are manybusiness reasons for sending employees on an expatriate assignment. Respondentscited more than 11 different objectives for assignments, including opening newmarkets, transferring skills, facilitating a merger or acquisition, and settingup new technologies and systems. Given the breadth of purpose, it isn’tsurprising that many types of employees are being sent abroad. (It’s importantto note that the study looked at employees sent from their home country toanother country on company assignment. Therefore, some expatriates are citizensof other countries coming into the United States.) 

    Middle managers arethe employees selected for assignment most often. But the list also includessenior managers, sales staff, engineers, IS programmers, scientists and HRprofessionals. 

    What is surprisingis the selection process. The overwhelming priority in selecting candidates istheir technical, management or other job-related skills. Almost 100 percent ofrespondents cited skills as the “most important” or a “very important”consideration in selection. A candidate’s personality traits – adaptability,flexibility or preference for autonomy – are given much lower priority, eventhough personality traits often play a larger role in an employee’s success atadapting to a new culture and working productively. 

    “Even thoughpeople probably have seen enough failed assignments, there isn’t a lot ofrecognition that there are different skills needed for internationalassignments,” says Kevin Oakley, international HR manager for PhillipsPetroleum Co. in Bartles Bille, Oklahoma. 

    Fewer thantwo-thirds of respondents said that personality is a very importantconsideration in expat selection, and 11 percent said it has little or noimportance. Family issues (such as spouse’s dual career concerns, the healthof family members or concerns for children) are the lowest priority. Just overone-third of respondents said family issues are important, while 25 percent saidthey aren’t important. 

    The relatively lowpriority of family issues in the decision-making process is somewhat surprisingbecause respondents report that accompanied employees (those on assignment withtheir spouse or domestic partner and/or children) are slower to becomeproductive on assignment and leave their organizations in greater numbers afterrepatriating. 

    The emphasis ontechnical skills (“hard data”) over “soft” issues (such as job fit orpersonality) in the selection process may reflect the discouraging reality thatof all the constituencies involved in the selection process, HR has the leastinfluence on the decision. 

    The primaryselection roles are played by senior management (such as the CEO), line managersin the country of origin, and line managers in the destination country – eachwas identified as playing the most significant or a very important role by 60 to65 percent of respondents. Functional managers were cited as most important orvery important by 55 percent of respondents. (Figures total more than 100percent because respondents were asked to identify everyone who played a role inthe selection process and to weigh their importance in the process.) 

    In contrast, HR wascited by just 31 percent as playing the most important or a very important rolein selection. A stunning 34 percent report that HR plays very little or no rolein the process. The results weren’t any more encouraging when respondents wereasked to specify HR’s role in the selection process. Five percent report thatHR has no role at all. Almost two-thirds say HR “serves in an advisorycapacity only.” A small but significant number (almost 20 percent) “presenta group of candidates from which the selection is made.” Just 7 percent havethe “authority to veto a selection,” while a tiny 3.5 percent actuallyselects employees for overseas assignments. 

    Of course, it’snot always appropriate for HR to select candidates for assignments abroad. “HRis here to support the business manager, but not really to make those decisionsfor them,” says Jerry Strickert, manager of international assignments forDallas-based EDS. 

    Brenda Spilker,director of HR planning and development for Calgary-based Suncor Energy Inc.,agrees, noting that usually HR doesn’t have final accountability for theselection. “Project managers want the final accountability for thedecision,” she says. 

    But they agree thatHR should still be involved. “The best way for HR to be involved is really tomake the tools available and to try to get involved early on in the selectionprocess,” says Oakley. 

    He suggests usingtools to help employees self-select for assignments. “Everyone wants aninternational assignment, but they really don’t know what’s involved untilafter they’ve accepted it,” he says. Even a simple questionnaire for theemployee and family members can help raise the issues they’ll face livingabroad, Oakley says. 

    Strickert takes it astep further. EDS encourages employees who are interested in an overseasassignment to assess their own skills and readiness. The employee’s currentmanager is then encouraged to use a behavioral interviewing tool to assess thecandidate. In three major business units at EDS, that process yields a pool ofpotential candidates from which assignees can be chosen. 

    However, in mostorganizations, HR’s current value is in providing pre-departure services toexpatriates and their families. In that role, HR is largely successful. Mostexpats are given a wide variety of support, including a pre-assignmenthome-finding trip, language training and cultural preparation. 

    Therefore, employeesare generally well prepared for their assignments. However, what they’reexpected to do is often an open question. 

Assignment goals and costs often areunclear
    Although the averageexpat assignment lasts 2.7 years and costs hundreds of thousands of dollars,there’s still a large gap between identifying the broad business purpose (suchas opening a new market or facilitating a merger) and setting specific goals forthe assignment. 

    Just 33.5 percent ofrespondents say their organization always sets measurable goals for assignments.Another 22.5 percent set measurable goals 75 percent of the time. But almost athird (31 percent) set measurable goals half the time or less. And a shocking 13percent say measurable goals are never set for expat assignments. 

    Respondentsacknowledge inadequate planning is a problem. Almost two-thirds of respondentssay that the lack of a defined goal has impeded the success of assignments, andanother 57 percent say ambiguity in communicating the goal to the assignee hasbeen a problem. 

    So why does theproblem persist? Some organizations get so focused on the logistics of theassignment that its purpose gets lost in the shuffle. “I’m working with acompany right now that is sending its first expatriate,” says Carrie Shearer,a consultant with The Thobe Group in Dallas. “I had a hard time getting thecompany to understand that it was important to specify what the person wasexpected to be doing. They eventually realized they wouldn’t want to get onthe plane if they didn’t know why they were going.” 

    In other situations,the company may have set goals. “Sometimes what happens is the sending companythinks they’ve set a goal, but when the person actually gets to the location,they find out that’s not what the company actually needs,” says Shearer, whowas a global HR professional with CalTex for almost 18 years and has been anexpatriate herself. 

    Because there arealmost always two constituencies involved in an assignment – the sending companyand the host – there can be disagreements between them. Shearer says the clientthat was about to send its first expat discovered during the preparation phasethat the sending organization and the company accepting the assignee haddifferent ideas about the purpose of the assignment. 

    That situation wasresolved, but in some cases, the antipathy lingers. Goals may be unclear, saysone HR professional, because employees in the host country don’t really wantthe expat, or see him or her as temporary and, therefore, unworthy of the timeand effort required to set and measure goals. 

    But the distance canmanifest itself in other ways, too. “The sending organization can’t alwaysset the goals,” says Malou Roth, vice president, human resources training anddevelopment for Molex, winner of 1999’s Workforce Optimas Award for GlobalOutlook. 

    To illustrate thepoint, she mentions a hypothetical situation in which a marketing professionalis being sent to Germany. HR may have a broad outline of what he or she issupposed to accomplish. But specific goals, relative to account management,customer service and market share, are likely to be set in Germany. “I reallydon’t need to know the details in Chicago,” she says. 

    Ultimately, howspecific the goals for an assignment are, and who sets them, are very muchdriven by the broad purpose of the assignment, how much experience a company haswith expatriates, and where the company is in its life cycle. It may also beaffected by the location of the assignment – the experts note that goal setting,in the American sense, isn’t part of the culture in some other parts of theworld. 

    When goals are set,once again HR plays a minor role. Respondents say that senior management in thedestination country is involved most often in setting goals (63 percent reportthat such is the case in their organizations). Others involved include seniormanagement in the home country (cited by 48 percent), line managers (46percent), employees themselves (39 percent) and department managers (29percent). HR was cited as playing a role in goal setting by just 16 percent ofrespondents. 

    Those involved insetting goals are also the people who measure them, and in very similar numbers.Again, HR’s role is smallest – only 16 percent of respondents say HR plays anyrole in measuring the goals. Most often, goals are measured annually (by 74percent of respondents), but in some instances every six months (22 percent).Almost half of respondents (45 percent) say that goals are sometimesre-evaluated and altered. Equal percentages of respondents (33 percent) say thatif goals are unmet, then assignments are extended until the goal is met or,conversely, assignments are curtailed if goals are met early. 

    HR’s peripheralinvolvement in setting and measuring goals is reflected in the actions taken inresponse to measurement. Mid-assignment interventions that take best advantageof HR’s expertise are relatively rare. The most common – cited by 38 percentof respondents – is to implement a performance management strategy. But only 13percent of respondents say that job training is offered to expats who aren’tmeeting goals, and only 8 percent say that cross-cultural training is used as anintervention.

    With goal-settingroutine in just one-third of organizations, it shouldn’t be surprising thatcosts often aren’t projected, either. Only about 40 percent of respondents saythat their organizations project both direct and indirect costs of expatriateassignments. Another 30 percent say they project direct costs only. But asurprising 17 percent report that whether they project costs depends on theassignment and the managers involved. And 14 percent don’t project any costs. 

    Lance Richards,director of international staff for Irving, Texas-based GTE International,“can’t imagine” business environments in which direct costs aren’tcarefully projected. HR partners at GTE calculate costs from the outset. Forexample, if the business-development division is developing a project inBotswana, HR will calculate the cost of an assignment including everything frompre-assignment assessment to housing, utilities and repatriation costs. 

    “On the front end,we can say this expatriate assignment is going to cost us X dollars,” Richardssays. “That’s very valuable to business-development people. It helps themanswer the question, ‘Can we make a profit on this?’” 

    But even when costsare projected, they’re often irrelevant. Almost one-third of respondents saytheir organizations never compare the actual cost of an assignment to theprojected costs. About 70 percent of respondents say comparisons are madebetween projected and actual costs, usually during the assignment. 

    Collectively, thesenumbers show that only about one-third of all expatriate assignments havemeasurable goals and fully complete projected costs. About one in sevenexpatriates are sent abroad with no articulated goal, and with no projection ofthe assignment’s cost. The rest of assignments are somewhere in between. 

    Almost nodemographic slice holds a monopoly on good or bad expat management. Settinggoals and projecting costs (or failing to) doesn’t correlate to company size,expat population, size of the HR function, number of HR professionals dedicatedto international issues, or years of experience in managing expats. In fact, theonly reliable predictor of effectiveness in managing expats is industry:Companies in education and legal or management consulting have by far the besttrack record, while those in oil, gas, mining and chemicals have by far theworst. 

    Given theuniversality of the issues, it shouldn’t be surprising that the failure ratefor assignments is high. 

    In definingassignment failure, several scenarios were evaluated. Respondents assigned thegreatest importance to damaged relationships with clients/vendors; 69 percentsaid it’s the “most important” or a “very important” factor indefining a failed assignment. The next greatest importance in defining a failedassignment was given to an expatriate’s decision to return home early (62percent cited it as “most important” or “very important”), followed byfailing to meet revenue goals (59 percent report that it is most or veryimportant).

    Least importance indefining failure was given to an expat’s inability to replace him- or herselfwith a local hire (just 30 percent said it was most or very important). 

    Using all thesepossible scenarios to define the problem, 75 percent of respondents report atleast some failed assignments in their organizations. The greatest number ofrespondents (28 percent) report a failure rate between 10 to 19 percent. Butsome organizations have been particularly unsuccessful: 5 percent report thatmore than half of their expat assignments have failed, and 2 percent say thatall their assignments have been failures. 

    Given the relativescarcity of expatriate assignments (the average responding organization has3,200 employees and 24 expatriates), each assignment is clearly important. Eachfailed assignment is costly and potentially very significant. It’s clear thatresources are being squandered on overseas assignments. And even greaterproblems arise involving repatriation. 

Repatriation gets less attention
    When it comes timeto repatriate employees, the same one-third of organizations who set goals andproject costs also plan the return home: They have a plan in place before theassignment begins. 

    Other organizationsaren’t so effective. One in four don’t begin formal repatriation discussions(to address not only the move home, but next job assignments, as well) untilthree to six months before the end of the assignment. But 4 percent wait untilonly two months before the return to discuss it, and a whopping 27 percent ofrespondents say their organizations may not have a repatriation discussion atall. 

    Expats oftenaren’t given much notice before the move home, either. Although 42 percent ofrespondents say that their expats are given 3 to 6 months notice, 14 percent saythat expats get two months notice or less – and 18 percent say that expats getno formal notice at all. 

    Organizations alsoare much less likely to offer help to employees as they return home than theywere given at the outset of the assignment, despite the fact that experts saythe return home can be just as great an adjustment. Almost three-fourths ofrespondents say that expats are given home-finding assistance when they return.But only 30 percent say that employees receive orientation counseling (toaddress such issues as the financial implications of a return), and only 21percent report providing career counseling. 

    “The perception isthat if you are coming back home, you shouldn’t have any difficulties,” saysFranchette Richards, manager of the human capital services area for ArthurAndersen. “Companies are unaware of the very real, very painful things thathappen to an expat coming home.” 

    Expatriatesreturning home find that “both their personal and professional lives havechanged,” says Franchette Richards. After being autonomous and pursuing a WildWest means of getting things done, expats return to bureaucratic red tape.“They feel stifled,” she says. “They aren’t allowed to use theircreativity.” In addition, they often face family difficulties at home. Shesays that companies need to look at what they offer employees when theyrepatriate, citing counseling and a career plan as particularly important. 

    In some instances,that happens. GTE’s Lance Richards says his organization gives expatriatesinformation about their return before they leave. Richards describes arepatriation matrix, which includes time frames for the return process up totheir placement in a new job. “The key to successful expat assignments, asidefrom the good selection process, is managing expectations,” he says. 

    Too often, thatdoesn’t happen. Repatriation plans – along with a solid selection process,effective goal setting and realistic cost projections – are happening in only aminority of companies. Consequently, the failure rate for assignments is high.As market pressures and a tight labor market escalate, failure is a luxury thatfew companies will be able to afford. Managing assignments for success isimperative, and HR has an unprecedented opportunity to get involved and to makea real impact. 

    “It’s a case ofold-school HR versus new-school HR,” Richards says. “Old school is where HRdoes what it does and no one really knows what’s going on. New school is anintegrated, business-partner approach, in which we’re closely involved andaccountable for numbers.” 

Workforce,April 1999, Vol. 78, No. 4, pp. 42-48 SubscribeNow!