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Making an Impact
Mary van der Boon
(this article first appeared on www.expatica.com/hr)

Expatriates can still make a valuable, even decisive contribution to international business, but in a way few old-style expatriates would recognise. Mary van der Boon examines the positive impact today’s expatriates can make on both overseas and head office company divisions, and how this is transformed into a return on investment.

Expat, Replace Thyself

Bert van der Hoeven is about to be made redundant, and he couldn’t be happier about it. After three years with his firm’s Shanghai division, Bert is being sent home, safe in the knowledge that he will not be replaced. "When I was asked to come out here, it was made very clear that transferring what I know to the local manager was the essence of the position", says Bert. "I even see it as a moral responsibility, because reserving all the top management positions for expatriates is very unfair to the local employees". To say nothing of very expensive for the international firm.

Globalisation and sweeping economic and development trends have not only reduced the need for expatriate assignments, but the traditional role played by expatriates in international business has undergone a metamorphosis as extensive and profound as the change in the organisations themselves. Top U.S. management guru Peter Drucker’s famous mantra, "management is getting things done through other people" has finally come home to roost in the New Age of IHR.

Innovative Trends

HRM experts predict that in the future fewer expatriates will be sent from the developed to the developing world, with an increase in assignments between developed countries themselves as a result of extensive cross-border mega-deals and trading pacts. The image of the expatriate is also undergoing significant change. According to Dr. Hilary Harris of the Cranfield School of Management, "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 need to be very carefully assessed’.

"These trends have led to many new forms of international working", continues fellow Cranston professor Savita Kumra. "These include traditional expatriate assignments lasting two to five years, primarily based in one country. Organisations may also use short-term assignments and commuter assignments (where the employee commutes from their home country to a place of work in another country on a weekly or bi-weekly basis, the family remaining in the home country) for foreign posts that require the dedicated input of an employee. Increasingly, however, organisations are expecting managers to undertake extensive international travel as part of their home-based role". Joint ventures, mergers and alliances mean that global markets are no longer dominated by gargantuan multinationals, but that smaller companies are emerging as key players in global trade. This trend will also have significant impact on the future face of expatriation.

In a shrinking, wired, global world there are still many reasons why human resource departments choose to send expatriates rather than hiring locally, including meeting key strategic business requirements, such as the need to establish a business presence quickly in response to rapid market developments and helping to recruit, orient and train new employees. Globalisation increases the need for representation following a cross-border merger, acquisition or joint venture and, perhaps still most importantly, expatriates play a strategic role in the transfer of corporate values and culture.

Executive Development

Overseas assignments may also be viewed by head office as the means of developing a corps of internationally experienced managers. "We use expatriates for a number of reasons," says Ted French, president of financial services and CFO of Case Corp., a Racine, Wisconsin, maker of farming and construction equipment with $6 billion in revenues. "Of those reasons, executive development is number one in importance. We are a global business and we need people to have a global perspective."

Long-term expatriates are still not viewed as the solution to every international business challenge. The challenge for today’s IHR managers is determining when the business goals can be met with a short-term assignment, a series of international trips or a local national, and when an overseas assignee is necessary.

With 210 expatriates out of 140,000 employees, FedEx, the Memphis-based express delivery company, looks to fill as many positions as possible with local nationals. "An expatriate is almost without exception more expensive than a local national," says Alan Graf, executive vice president and CFO of parent company FDX Corp. "For both cost and management reasons, we want our expatriates to develop local nationals and eliminate expat assignments wherever possible."

But in a company in which international revenues are expected to exceed domestic revenues within 10 years, expatriate assignments are also an important leadership development tool. Successful expats "come back with a broader knowledge of how FedEx works, and can make broader contributions to the company," Graf says.

Determining Success

Changing economic conditions have forced human resource departments to look very carefully at the cost-effectiveness of expatriates, and the selection processes used to identify them. In assessing the true return on investment of an overseas assignment, however, one must first establish criteria for measuring the assignment’s success. According to University of Melbourne business professor Anne-Wil Harzing all expatriate assignments fall into three main categories: filling a vacant position, management development and essential coordination & control.

Since expatriates are sent out for these very different reasons, says Dr. Harzing, practices with regard to their selection, training, appraisal and compensation might need to be tailored to these different reasons for transfer. For instance, an expatriate who is primarily sent out for coordination and control reasons (and specifically to improve communication channels between headquarters and the local company) needs excellent language and communication skills. These skills would be less important for an expatriate who is sent out to transfer technical knowledge (in this case, possession of specific technical expertise would be of most importance). In terms of appraisal and compensation, appraisal systems that are geared towards the realisation of the specific objectives of the assignment would put the expatriate in a far better position to reach his objectives.

"We feel too often expatriate assignment management has been seen as a one size fits all exercise", says Dr. Harzing, "and that closer attention to the functions of international transferees and HRM practices tailored to these functions might make expatriate assignments more successful". And result in a more effective assessment of benefit related to cost.

In the words of Lester C. Thurow, "A competitive world has two possibilities. You can lose, or if you want to win, you can change". Words companies like Bert van der Hoeven’s are taking very seriously indeed.