deep
insight
STAFFING ACROSS CULTURES
Welcoming the Value
That Inpatriates Bring
By B. SEBASTIAN REICHE
D
espite the recession, multinationals continue to move an increasing
number of staff abroad. And there
is good reason for doing so: As suppliers such as Continental follow their key
clients into new markets, as service providers
such as Sun Oracle need to ensure local proximity to their clients around the globe, there
is a growing need to develop global managers
who can effectively bridge a multinational’s
different units and understand both global
strategic concerns as well as local market requirements.
However, the times in which multinationals restricted themselves to a unilateral
transfer of parent-country employees from
corporate headquarters (HQ) to foreign subsidiaries are long gone. In fact, parent-coun-
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second QUARTER 2010 issue 5
try expatriates are only one of many types of
international assignees who are temporarily
relocated across geographical and cultural
boundaries. Successful companies from Adidas to Royal Dutch Shell understand this as
they develop a portfolio of international
staffing strategies such as traditional expatriation, inpatriation, virtual assignments,
short-term transfers or business travel to
manage their global operations.
Incoming! Five Benefits
of Inpatriation
Among the various alternatives to expatriate
transfers, the temporary inpatriation of foreign
subsidiary managers to HQ, usually for a duration of one to five years, has received increasing
attention by multinationals for several reasons.
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First, as multinationals are trying to contain their rising costs for international staffing, the inpatriation of foreign staff is often
a cheaper alternative than relocating parentcountry employees, especially in the case of
inpatriates from developing and emerging
economies, where the salary level is relatively
lower.
Second, multinationals are facing increasing barriers to international mobility
among their parent-country employees, as
dual-career couples are less willing to relocate to another country at the expense of the
partner’s career. Inpatriates, who tend to be
younger, often have fewer family constraints,
and given the alternative of staying put in a
small country unit, they view an assignment
to HQ as a significant career opportunity that
is hard to refuse.
Third, the inpatriation of foreign staff is
often the only way for HQ to gain sufficient
local knowledge for entering and developing
executive summary
The temporary inpatriation
of foreign subsidiary managers to HQ is on the rise: it’s
cheaper than expatriating
staff, it’s often the best way
to gain local knowledge fast,
it wins over local workforces
and it expands the prospects
for staff development and
promotion.
However, the author’s various studies of subsidiary staff
relocated to the headquarters
of multinationals reveal that
for inpatriation to work, both
the individual inpatriate and
the multinational need to understand the key factors that
make or break these special
arrangements.
If the inpatriate is able to
build good social capital, is
mentored by HQ staff and can
speak the language of the HQ
country, then both sides stand
to reap mutual benefits from
the exchange. If there is an
ieseinsight
ethnocentric attitude among
HQ staff, a large distance
between the inpatriate’s home
culture and the HQ country
culture, and no real thought
given to what happens to the
inpatriate when the assignment is done, then the transfer is bound to fall flat.
The author recommends
that multinationals carefully
manage inpatriation at every
stage of the process – from
selection and preparation, to
relocation and reintegration –
in order to minimize turnover
tendencies and capitalize
on the real value that these
younger managers bring.
Managing this process well
can help MNCs to develop
strong leaders who can effectively bridge different units
and understand both global
strategic concerns as well as
local market requirements,
which is so vital today.
new markets. For example, when Lufthansa
decided to expand its cargo business from
Europe to China and Taiwan, instead of sending a German expatriate to those regions, the
company inpatriated a Hong Kong Chinese
who knew the local market and could quickly
push the business in that direction.
Fourth, inpatriation serves as an important developmental tool whose benefits are
twofold. By absorbing the corporate culture
and learning the management practices of
HQ, inpatriates are better prepared to assume future management responsibilities in
local or regional offices. This, in turn, reduces the perception among local staff that there
is a glass ceiling, especially in strategic units
whose top management positions are mainly
staffed by expatriates. These factors can help
to retain key talent in the long term. In fact,
in a study among Western multinationals operating in Singapore, I found the lack of such
international career prospects to be one key
determinant of turnover among local subsidiary staff.
Finally, providing development opportunities beyond the local unit also helps to gain
support from the local workforce in situations of organizational change. Consider the
case of an Australian franchisee of a large U.S.
soft drinks producer that set up operations in
Vienna. When the company found itself with
a strategic opportunity to expand into Eastern Europe, it was hampered by its failure to
prepare local staff sufficiently for international transfers. When the decision was made
to acquire operations across Eastern Europe,
the local Viennese staff was unwilling to relocate, which required the company to transfer
more staff from Australian HQ. This resulted
in greater staffing costs, and strained human
resources and career planning at HQ for several years.
Despite these many benefits, the process
of inpatriation is often not as formalized or
structured as the expatriation of parentcountry employees, as one U.S. inpatriate
found out: “As an inpatriate, you are still
considered exotic. The processes for being
transferred from HQ are very clear, but as an
inpatriate, you have to manage a lot on your
own.”
What’s more, given the relative recency
of the inpatriate phenomenon, the key drivissue 5 second QUARTER 2010
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Welcoming the Value That Inpatriates Bring
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Inpatriates face greater adjustment challenges
compared with expatriates. Not only do they have to
adjust to the national culture, but they also need to be
socialized into HQ culture.
ers for the success of inpatriates are not well
understood.
To address this gap and examine inpatriate groups in more detail, I conducted one of
the first large-scale inpatriate studies, which
included interviews with inpatriates and HR
managers, as well as quantitative data from
286 inpatriates, collected at three different
points in time over a period of four years.
These inpatriates were relocated to the headquarters of 10 German multinationals from
a diverse range of industries. I complement
these findings with additional experiences
that I obtained from dealing with and studying Western multinationals operating in Australia and Singapore.
Who Are the Inpatriates?
Who is this new breed of worker who bridges geographical and cultural boundaries for
multinationals? And how do these workers
about the author
B. Sebastian Reiche is assistant professor in the Department of Managing People
in Organizations at IESE. He
earned his Ph.D. from the
University of Melbourne,
Australia. His research focuses
on how actors access, maintain and leverage knowledge
resources, primarily from a
multinational and cross-cultural perspective. His research
has appeared in the Best Paper
Proceedings of the Academy
of Management and Academy of International Business
and is published in scholarly journals such as Journal of
International Business Studies,
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second QUARTER 2010 issue 5
International Journal of Human
Resource Management, International Journal of Cross-Cultural
Management and International
Business Review. He is a member of the editorial board of the
International Journal of CrossCultural Management and a
permanent chair of the annual
EIASM Workshop on International Strategy and CrossCultural Management. He has
held teaching appointments at
the University of Melbourne,
Australia, and Nile University,
Egypt, and has been involved
in various consulting activities
in Germany (his country of
origin) and Singapore.
differ from traditional parent-country expatriates?
Put simply, an inpatriate assignment is
merely an alternative form of HQ /subsidiary
linkage going in the opposite direction from
an expatriate assignment. However, the differences between the two groups are much
more pronounced (see Figure 1).
Inpatriates tend to be relatively younger employees or middle managers who are
transferred to a multinational’s HQ, often for
developmental purposes. Their role is, therefore, much less as a specific corporate agent,
more one of global potential. The inpatriates
in my study were an average of 37 years old.
They came from 45 different cultures, covering all major regions of the world. Among
the 286 inpatriates, around 60 percent came
from developed countries in North America,
Western Europe and the Pacific Rim, while
the remaining 40 percent came from developing and emerging economies. In terms of
national origin, inpatriates tend to be much
more diverse than their expatriate cohorts,
who largely originate from developed economies, which continue to host the highest
number of multinationals.
Not all inpatriates had the clear objective
of returning to their home subsidiary upon
completion of their transfer, possibly to replace existing parent-country expatriates.
Some continued to stay at HQ on a more permanent basis, acting as links between HQ and
foreign operations. Others accepted subsequent relocations to other country units, often within the home region of the inpatriate.
This finding supports the growing trend of
treating international transfers, not as isolated incidents, but as part of an international
career path.
Another difference between the two
groups of assignees is their status in the host
unit. Expatriates carry status as HQ representatives. Inpatriates, who come from the
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A New Breed of Worker
FIGURE 1
HOW DO INPATRIATES DIFFER FROM TRADITIONAL
EXPATRIATES?
Inpatriate
Expatriate
Age
Younger (average age: 37)
Senior
National origin
All regions of the world
Mainly developed economies
Perceived status
Peripheral
HQ agent
Level of influence
Low
High
Adjustment challenges
Corporate culture & national culture
National culture
Staffing philosophy
Diverse
Ethnocentric
periphery of the multinational, first need to
earn respect and credibility before gaining
comparable status, especially if they are from
developing economies or relatively small foreign operations.
Similarly, regarding their level of influence, expatriates usually possess an explicit
mandate to implement HQ procedures and
practices in foreign subsidiaries, whereas inpatriates’ objectives are often less tangible,
requiring that they learn HQ knowledge and
share subsidiary knowledge.
Inpatriates also face greater adjustment
challenges compared with expatriates. In
fact, inpatriates not only have to adjust to
the national culture, but they also need to be
socialized into HQ corporate culture.
As a Singaporean inpatriate remarked, “It
was to be expected that the German culture
would be very different for me (…but) what
I did not foresee was how different HQ looks
ieseinsight
from afar. And I’d say that it has been more
important for me to come to terms with the
culture in HQ than with the German culture.”
This is very different from expatriates,
who are expected to impose elements of HQ
corporate culture upon the subsidiary they
are sent to.
A final distinction is that the use of inpatriates increases the cultural diversity and
multicultural composition of staff at HQ. Integrating inpatriates into HQ management
teams, even temporarily, means that a higher share of employees with diverse cultural
backgrounds will be collaborating directly.
The use of expatriates, on the other hand,
reflects an ethnocentric, HQ-based view toward international staffing, and expatriates
generally continue to coordinate with their
own HQ management teams. In this regard,
the transfer of inpatriates to HQ has the added benefit of exposing HQ staff to international perspectives.
Facilitators to Inpatriate Success
While inpatriation has certain cost advantages over traditional expatriate assignments,
any international relocation entails a heavy
investment with an uncertain future return.
This is especially true for inpatriate transfers, given their developmental nature and
intrinsic long-term benefits. For multinationals to get the most out of this investment,
issue 5 second QUARTER 2010
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Welcoming the Value That Inpatriates Bring
THINKING
A multinational should strive for inpatriates’ long-term
retention, so that they can continue to link HQ with
subsidiaries, and eventually replace expatriate staff in
the local or regional office.
understanding the key drivers and barriers to
success is critical.
In my study of inpatriates at German multinationals, I was interested in two different
but interrelated dimensions of inpatriate
success. First, since inpatriates are expected
to learn the HQ corporate culture and HQ
management practices while also sharing
their expertise of the local subsidiary context, knowledge exchange between inpatriates
and HQ staff must be important.
Second, given the developmental nature
of inpatriate transfers and inpatriates’ understanding of both HQ and subsidiary contexts, a multinational should strive for their
long-term retention, so that inpatriates can
continue to link HQ with subsidiaries, and
eventually replace expatriate staff in the local or regional office.
Based on my findings, I identified three
key factors that facilitate the success of inpatriate transfers.
social capital . Social capital appears to be
the most important factor for both inpatriates’ knowledge sharing and their retention.
Social capital is a concept that goes beyond
mere social relationships; it includes trust
and shared identity. Building social relationships enables inpatriates to locate those HQ
employees who can benefit the most from
their expertise of the subsidiary context, and
enables them to access relevant HQ-specific
information for themselves. For example, a
Thai inpatriate used social relationships with
a higher-level colleague at HQ to obtain the
help she needed to compile a project report
in accordance with HQ standards.
At the same time, a large part of the knowledge that inpatriates exchange with HQ staff
is culturally imprinted. It is not easy to explain how to deal with local government
agencies in China if the other person has no
knowledge of appropriate business conduct
in China. In this case, a trusting relationship
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second QUARTER 2010 issue 5
will help the inpatriate and the HQ counterpart to learn about each other’s different frames of reference and to interpret the
meaning of the knowledge that is shared.
These social relationships and the trust
developed with HQ staff can be maintained
even after the inpatriate transfer has been
completed; in fact, they are instrumental for
inpatriates to access HQ knowledge relevant
for their new positions.
Trust also makes it more likely that the inpatriate will see positive career opportunities
and continue to stay with the company upon
completion of the transfer. Trusting relationships with HQ staff provide useful career support and endorsement.
Another aspect of social capital is identification with HQ. Identification helps inpatriates learn about and become socialized
into HQ corporate culture, while increasing
the likelihood that inpatriates will see career
opportunities and remain with the multinational after their transfer ends. Identification
enables inpatriates to understand what is required of them, in order to be successful and
get promoted in the company.
mentoring . A second factor that contributes
to the success of inpatriate assignments is the
existence of mentoring. HQ mentors are able
to open doors for inpatriates and essentially
share their own social capital with them.
Furthermore, the fact that a mentor backs
the inpatriate allows the latter to receive attention from other HQ colleagues and have
his or her qualifications acknowledged by seniors. This is particularly relevant for inpatriates who are newcomers from different cultures, because their qualities and skills may
be more difficult to assess by HQ staff due to
cross-national differences in educational and
organizational promotion systems.
Finally, a HQ mentor can provide access
to resources, such as important information
about existing power structures and inforieseinsight
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Ethnocentric attitudes among HQ staff inhibited
inpatriates’ ability to identify with HQ. This made it more
difficult for them to engage in knowledge exchanges,
and less likely they would remain with the company.
mal communication channels in HQ. As HQ
colleagues become more forthcoming with
information and inpatriates get to know additional sources of information, they enlarge
their social capital and knowledge exchanges.
Mentoring is a crucial driver of this whole
process. This is especially important for
shorter assignments, when inpatriates have
less time to develop relationships.
language proficiency . The third facilitator
is the inpatriate’s proficiency in the host
language. It is worth noting that this factor
is particularly relevant for multinationals
in which English is not the parent-country
language. Although most multinationals
mandate the use of English as the corporate
language, especially if employees from different national origins interact, in reality a
large part of communication occurs in the
HQ country language. Inpatriates who are
fluent in this language will be able to adjust
more quickly to the HQ environment while
also better understanding the subtleties of
the HQ corporate culture and specific practices and routines. Host language proficiency
also helps inpatriates to develop social capital with HQ staff more quickly.
Barriers to Inpatriate Success
My study also identified three barriers to successful inpatriation.
ethnocentrism . As cultural and organizational
outsiders to HQ, inpatriates may face biases
and negative perceptions among HQ staff.
This problem is more relevant for inpatriates
than expatriates, given that the former have
less status and influence attached to their
position.
Ethnocentrism refers to the belief that the
values and attitudes held in one’s own culture
are superior to those embraced by people in
other cultures. For example, an Indian inpatriate remembered the frequent doubts that
his HQ colleagues voiced concerning the
ieseinsight
need to employ an inpatriate from abroad
rather than tapping homegrown talent, and
this made it more difficult for him to provide
value to the HQ operation.
My study demonstrated that ethnocentric
attitudes among HQ staff had a restraining
effect for inpatriates. In fact, host ethnocentrism inhibited inpatriates’ ability to build
trusting relationships and develop identification with HQ. This, in turn, made it more
difficult for inpatriates to engage in knowledge exchanges, and also made it less likely
for inpatriates to remain with the company
in the long term.
cultural distance . Imagine a male inpatriate
being transferred from an Indonesian subsidiary to the headquarters of a German multinational to learn HQ routines and practices
and to share his knowledge of the Indonesian market. Can we assume this knowledge
sharing will take place automatically just by
relocating this person from a vastly different
cultural environment to HQ? The answer, of
course, is no.
When communicating across cultures,
people transmit words and signals rather
than meaning. The greater the cultural differences between the sender and recipient, the
more likely the meaning of what is exchanged
may be perceived differently, leading to incorrect attributions. The actual exchange of
knowledge only occurs if the knowledge sent
is correctly interpreted.
My argument is thus: The greater the distance between the inpatriate’s home culture
and the HQ country culture, the less knowledge exchange actually occurs. Moreover,
cultural distance also negatively impacts
inpatriates’ ability to build trusting relationships with host colleagues and to identify
with HQ, and by extension, reduces the likelihood of inpatriate retention.
lack of repatriation and career planning . Out
of all the factors measured, inpatriates rated
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Managing the Inpatriation
Process
FIGURE 2
CAPITALIZING ON INPATRIATE TRANSFERS
REQUIRES THAT MULTINATIONALS HEED THESE
CONSIDERATIONS AT EVERY STAGE.
SELECTION
1
the existence of repatriation and
career planning as the lowest.
One returning inpatriate was
very vocal about this: “Actual
focus is only on the short-term,
not on long-term development.
There is no career planning –
only waiting to see what posiP R E PA R AT I O N
2 tions open up and then dumping returning employees into
Provide cross-cultural training
them.”
for inpatriates and HQ staff
Overall, inpatriates seemed
Identify suitable HQ mentor
happy with their international
experiences, though this was
3 due more to the generally posiR E L O C AT I O N
tive experience of living abroad
Provide ample opportunities
than to the way the company
for inpatriates to develop
managed inpatriate transfers
relationships with other
and their longer-term career
departments or functions
prospects. The implications of
Provide ongoing development
this are clear: If inpatriates do
and social activities
not consider their employer
willing to take care of them,
4 despite having relocated geoR E I N T E G R AT I O N
graphically and culturally to
Make sure inpatriate transfer
often very different environfits into logical career path
ments, why then should they
Reconcile compensation
remain loyal to their employer?
systems across units
Why shouldn’t they turn around
and sell their international experience to another company?
Considering that smaller subsidiaries offer fewer opportunities for
promotion, longer-term career planning
becomes all the more vital. As a Japanese
inpatriate remarked, “The Japanese subsidiary is mainly a sales unit, and so, quite small.
Before coming to Germany, I had already
reached the highest possible level in my company. So what is my motivation to return to
Japan with (this company)?” Without a clear
and attractive plan of where to go, this inpatriate is unlikely to remain with the company,
jeopardizing the investment the company has
made in this manager.
Prefer candidates with:
a) previous international
experience
b) ease in building social
relationships
c) host language proficiency
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second QUARTER 2010 issue 5
Multinationals:
Take Hold of the Process
Given these challenges, capitalizing on inpatriate transfers requires multinationals to
manage inpatriation across every stage of the
process (see Figure 2).
selection stage . There are implications concerning the criteria that HR managers need to
apply for selecting individuals for inpatriate
assignments. Whereas many companies only
focus on technical expertise, other selection
criteria should be considered, too. For example, given the negative influence of cultural
distance, it is important to choose individuals
who have gained prior international exposure,
either through previous international assignments, or as a result of having lived or studied
abroad for a substantial period of time. It is
likely that these previous cross-cultural experiences reduce inpatriates’ perceived cultural
distance.
It is also important for HR managers to take
into account the quality and scope of potential
candidates’ social networks in their home unit.
For example, if an individual is able to maintain
an extensive social network at home that spans
different work groups, departments or even
functional areas, this indicates that the person
will be more able to build a similar network in
a new work context.
Finally, candidates with greater host language abilities should be preferred.
preparation stage . While much has been written about cross-cultural training for the actual
assignee, local staff is often left out of the equation. However, due to the role of host ethnocentrism as an important barrier to inpatriate
success, companies will also need to involve
HQ staff more explicitly in the inpatriation
process and prepare them to interact with inpatriates on an everyday basis. Only if locals
understand the value that inpatriates can contribute to the organization will inpatriates be
able to receive the necessary credit to build
social capital at HQ.
In addition, it is important at this preparation stage to search for and identify an appropriate HQ mentor who will be able to accompany the inpatriate upon arrival at HQ.
relocation stage . Given the developmental
nature of most inpatriate transfers, companies are well advised to provide inpatriates
with ample opportunities to get to know and
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Welcoming the Value That Inpatriates Bring
It is important to change the traditional mindset that
views multinationals as HQ-centric organizations
whose foreign subsidiaries are dependent. Diversity in
staffing provides a broader understanding.
develop relationships with different departments and functions at HQ. Having this diverse exposure allows inpatriates to build
greater social capital as well as learn and
exchange knowledge with a wider range of
sources.
It is also important for multinationals to offer ongoing development and social activities
during the relocation that help inpatriates to
develop identification with and become socialized into the HQ corporate culture.
reintegration stage . The study also highlights
strategic issues arising from the use of inpatriates. Whereas many companies plan and conduct international transfers on an ad hoc basis,
such an approach fails to capitalize on the longterm benefits that result from inpatriation.
Consequently, HR managers need to embed
staff transfers into logical career paths that fit
with the long-term goals of both the company
and the individual assignee.
In addition, inpatriation requires greater
integration of the different compensation
systems that exist in a multinational. The reintegration of inpatriates to countries with
substantially lower market salaries can lead
to a huge decrease of salary, a gap that is often
more pronounced than in the case of expatriate assignments, and may thus trigger turnover
tendencies among returning inpatriates.
Above all, it is important to change the traditional mindset that views multinationals
as HQ-centric organizations whose foreign
subsidiaries are dependent. Adidas, a premier
global sporting goods brand, is an exemplary
case of overcoming this HQ bias. Its corporate HQ – located in Herzogenaurach, a small
town in the south of Germany – is merely one
of many company units spread around the
globe. People are transferred in all directions,
with HQ acting as a provider as well as a recipient of international staff, just like every other
unit. HR managers at Adidas concur that it is
this diversity in staffing that provides employieseinsight
ees with a broader understanding of the overall
organization, that offers career opportunities
beyond the local context for parent-country as
well as foreign employees, and that ultimately
enables the company to respond to local differences in tastes and preferences. This is something that every multinational would be well
advised to learn from.
to know more
n
n
n
n
n
Reiche, B.S. “The Inpatriate Experience in Multinational Corporations: An Exploratory Case Study in
Germany.” International Journal of Human Resource
Management 17, no. 9 (2006): 1,572-90.
Reiche, B.S. “To Quit or Not to Quit: Organizational Determinants of Voluntary Turnover in MNC
Subsidiaries in Singapore.” International Journal of
Human Resource Management 20, no. 6 (2009):
1,362-80.
Reiche, B.S., and A.W. Harzing. “Management of
International Staff.” Barcelona: IESE, 2009. Ref. no.
DPON-79-E.
Reiche, B.S., A.W. Harzing and M.L. Kraimer. “The
Role of International Assignees’ Social Capital in
Creating Inter-Unit Intellectual Capital: A CrossLevel Model.” Journal of International Business
Studies 40, no. 3 (2009): 509-26.
Reiche, B.S., M.L. Kraimer and A.W. Harzing. “A
Social Capital Perspective of Knowledge Sharing
and Career Outcomes of International Assignees.”
Best Paper Proceedings of the Academy of Management Annual Meeting, Anaheim, August 8-13,
2008.
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