The Changing world of the expatriate manager
By Dr Hilary Harris, Director of the Centre for Research
into the Management of Expatriation (CReME)
The word ‘expatriate’ conjures up images of colonial
outposts, gin and tonics at the club and lavish benefits for
pioneering men bringing enlightenment to far flung corners
of empire. Whilst there may be some lucky expatriates still
enjoying a luxury lifestyle, the world of expatriation is
changing dramatically and permanently.
To achieve competitive advantage in an increasingly global
economy, organisations from both the private and public sector
need to view the management of expatriates as a critical part of
their international human resource management strategy.
Employing an expatriate costs an estimated three to four times
as much as employing the same individual at home. This has
implications for who is picked for international assignments,
why people are sent and how this fits into the organisation’s
overall global strategy.
Taking an expatriate assignment no longer automatically leads
to a promotion on return. Individuals now need to network
and be proactive in determining their own path forward. The
advantages of huge financial packages are also slowly
disappearing as organisations move towards equalising terms
and conditions between expatriates and locals. In future, fewer
and fewer people will be career ‘expats’.
International experience
Expatriates may be losing their security blanket, but the
challenges and potential long-term rewards of taking an
international assignment are growing. Most global
organisations see international experience as a prerequisite for
promotion to the top jobs. Although this experience can be
gained from working in cross-border teams and projects,
expatriation remains the preferred way of creating a global
mindset amongst managers. However, there is a need for new
skills and abilities amongst expatriates, and for far more careful
planning and monitoring of assignments by organisational
headquarters.
This is the result of three main factors. The first is the
changing nature of international organisations, with many more
joint ventures and alliances across national boundaries. The
Financial Times (28 July 1999) reported cross-border media,
technology and internet deals reaching record levels in the first
part of 1999. In just one example, the value of European
acquisitions in the technology sector in the US increased 293%
to $72.8 billion. Working effectively in an international joint
venture or alliance requires high levels of interpersonal and
cross-cultural skills on the part of expatriate managers.
We
are also witnessing the emergence of small to medium-sized
organisations (SMEs) as key players in global trade.
Appropriate deployment and management of expatriates can be
critical in the initial stages of internationalisation, implying an
urgent need for SMEs to develop effective systems in this area.
The second factor is a change in host locations, with a decline
in the proportion of expatriates going from the developed world
to the Third World. At the same time, there has been an
increase in assignments between developed countries as a result
of extensive European, Japanese and US foreign direct
investment and cross-border developments in New World
trading blocs.
Figures from the latest survey of expatriate
management trends by Organization Resources Counselors Inc
(ORC) shows the most popular regional destinations for
expatriates are Asia (33%), Western Europe (26%) and the
United States (16%). Expatriate managers working in
countries with highly educated and professional employees can
no longer adopt an autocratic approach.
Motivation and
development of local country nationals is an integral part of
creating a truly global operation and as such should be reflected
in performance measurement of expatriate managers.
The third key factor concerns the changing nature of
international assignees themselves. The traditional profile of
the male, married, career expatriate is rapidly giving way to
well-educated managers undertaking one or two assignments in
the course of their career in order to gain international
experience. Women still represent only a small proportion of
international assignees, but this number is increasing. For
these people, the costs and benefits of undertaking international
assignments have to be very carefully assessed.
Women in International Management: Still a long way to go.
In a recent UK study carried out by Cranfield, only 9% of
3,620 expatriates surveyed were women and only 5% of those
in management roles were female. The study questioned
traditional organisational reasons for failing to send women on
expatriate assignments. Fears about acceptance of women by
local nationals were found to apply to only a small percentage
of expatriate destinations. Even then, sensitive handling of
cultural expectations often resulted in successful expatriation
experiences for women in potentially hostile environments.
The study also found that women were just as interested in
taking up expatriate appointments as men. Dual-career issues
were seen to be problematic, but not just for females. The
main barrier to women taking up international assignments
appeared to be the operation of closed, informal selection
systems in which candidates were unaware that they were
being considered and selection criteria were not formally
agreed. In these cases selection decisions were highly
dependent on the personal preferences and assumptions of
selectors. Given the overwhelmingly male profile of
expatriates, selecting a woman is often seen as too risky in a
high cost, high profile position.
The expatriate cycle
For organisations to ensure effective expatriate management, a
strategic approach should be taken to the whole expatriate
cycle.
Figure 1. The expatriate cycle
The cycle starts at the planning stage. Traditionally, expatriates
have been sent abroad for the following reasons:

control and co-ordination of operations

transfer of skills and knowledge

managerial development
In order to operate strategically, organisations need to link
foreign assignments more closely to the strategic operational
requirements.
This requires a careful assessment of whether
an expatriate is the best and most cost-effective choice in global
sourcing decisions.
Problems of lack of strategic planning
One international company decided to reduce its costs by
cutting the number of expensive expatriates it employed around
the world by one quarter. The decision was taken at main
Board level but had to be implemented by the international
HRM manager. ‘No business manager was prepared to tell
me that he was running an unsuccessful operation,’ he said ‘so
the only thing we could do was to “localise” some of the jobs.’
Within two years he had achieved the objective: at around the
same time, the company realised that whilst some of the local
replacements had been obviously successful, some of the
changes had been – equally obviously – disastrous. Over the
next few years the company began to increase the number of
expatriates again. ‘Of course,’ the IHRM manager said ‘we
shouldn’t have started with a decision on numbers; we should
have found some way of working out which jobs needed to be
filled by expatriates and which didn’t. We’ve tended to do it
mainly by intuition.’
Cranfield has developed the ‘Expatriate Portfolio’ to help
corporate managers identify how an international assignment
should be managed and whether a local should fill it or an
expatriate. The framework outlines four types of assignment
based upon the degree of importance of the assignment to the
parent organisation, and indicates the most suitable type of
appointment for each instance. By plotting the assignment
against the Portfolio, managers can make more rational and
sensible sourcing decisions.
Fig. 2 The Expatriate Portfolio
Once a strategic decision has been made to use an expatriate in
an international posting, the selection process starts. Research
into criteria of effective international managers consistently
highlights the importance of ‘soft’ skills such as selfawareness, flexibility, intercultural empathy, interpersonal
skills and emotional stability. However, surveys of
international selection practice within organisations show that
most rely on technical competence as a prime determinant of
eligibility for international assignments. ORC’s 1997 survey
of International Assignment Practice also shows that only 8%
of international organisations use any form of psychological
testing during the selection process.
Pre-departure training forms the next part of the cycle.
Effective preparation can do much to alleviate culture shock
and help the expatriate and his or her family to adjust more
quickly to the new environment. In order to maximise the value
of this for the expatriate and spouse/family members a
framework has been developed by CReME which allows
international HR managers to customise training to the unique
needs of the expatriate and the assignment.
Fig 3: Framework for Expatriate Preparation
Using the checklist provided by the framework, managers
could assess both the nature and extent of pre-departure
preparation required for each individual. For instance, in the
case of a manager from a large multinational organisation
going to a set-up operation in Vietnam, the preparation would
need to concentrate on cross-cultural, language and local
business briefing, with substantial involvement from
headquarters’ expatriate administration department in arranging
accommodation and practical local living details.
Monitoring performance whilst on an expatriate assignment
requires an understanding of the variables that influence an
expatriate’s success or failure in a foreign assignment. Three
critical variables are the environment (for instance culture), job
requirements and the personality characteristics of the
individual. Organisations need to balance the desire for a
global standardised performance appraisal system with the
local requirements of subsidiaries.
The final stage of the expatriate cycle is repatriation. For
most organisations and individuals, this remains highly
problematic. In ORC’s survey 57% of organisations reported
that the job level to which expatriates are repatriated normally
depends on what jobs are available at the time. Expatriates are
now expected to be far more proactive during their time abroad
and to network in order to ensure a position is available on
return. For many expatriates, the impact of ‘re-entry’ can be
more traumatic than the initial culture shock at the start of the
assignment.
Organisations need to pay careful attention to the way in which
they handle repatriation for two key reasons.
Firstly, the cost
of losing someone who is dissatisfied with his or her position
on return is significant, both in purely financial terms and also
in terms of the investment in human capital. Secondly, and
perhaps more importantly, expatriate assignments are crucial
tools in the effort to create a transnational mindset in the
organisation. Failure to disseminate the individual learning
gained from a foreign assignment to others in the organisation
is a clear barrier to the goal of becoming a truly global
operation.
Successful management of expatriation requires an holistic
approach to the whole expatriate cycle. Organisations that
continue to send people on expatriate assignments without
carefully considering how this fits into the strategic plan are
likely to lose a valuable source of competitive advantage. They
will also find themselves subsidising some very expensive gin
and tonics!
CReME is a collaboration between Cranfield School of
Management and Organizational Resources Counselors, Inc.
Launched in July 1999 it is the first of its kind dedicated to
the development of new approaches in international human
resource management and expatriate management.