The Importance of Expatriates In Organizations

Introduction

The importance of the management of expatriate’s has grown as the number of multinational companies has increased significantly over the last few decades, therefore increasing the need to be aware of potential problems which could cause high failure rates in expatriate assignments (Anderson,2005). Porter and Tansky (1999) write that an unsuccessful expatriate assignment is very costly for both an organisation and the expatriate themselves. But despite this very few companies have adequate processes for both selecting and training these expatriates.

As Harzing (1995: 457) notes, virtually every writer measures expatriate failure as “the percentage of expatriates returning home before their assignment contract expires”. Brewster (1988) also defines failure as assignments where expatriates were brought home earlier than planned. Brewster and Scullion (1997) say that the fact that corporations have heavy cost pressures has led to the policies for employee movement across countries being looked at. They also observe that it is becoming more noticeable that both the social and economic cost of failure in business abroad is more damaging than business done in home countries, especially in terms of market share and damage of customer trust (Zeira and Banai,1984).

It is therefore pertinent for academic research to both look at the major issues associated with expatriate failure and why expatriates often ‘fail’ in their assignments. From reading the literature these can be identified mainly as a lack of thorough selection procedures from employers to identify which managers would be successful on assignments in foreign countries.

This can range from not identifying what attributes certain candidates have that would make them more likely to succeed, to not identifying the family situations of potential expatriates which would also be conducive to successful assignments abroad. Once these factors have been identified it is then logical to assess what procedures could be put in place for the company to stop failure of expatriate assignments and how they can identify successful candidates for the roles. This is the format this essay will follow.

Reasons for expatriate failure

This study will first look at the issues associated with expatriate failure and what reasons and factors there are which lead to this end result. Enderwick and Hodgson (1993) observe that expatriate failure is caused by rash recruitment policies combined with preparation and training which is not thorough enough for the manager. This draws attention to the limited role of HR in the management of expatriates, and Halcrow (1999) also writes that HR are confined to administrative support as opposed to playing any meaningful role in any strategic aspects.

It is this lack of attention to detail and impulsive selection practice for expatriates which causes many of the problems. It fails to identify different characteristics and traits which are likely to be conducive to success in expatriate projects. Klaus (1995) notes that in the majority of companies expatriate selection happens quickly and irrationally. Something which is inherent in many international businesses is the fact that their selection procedures for expatriate managers are rather informal and they do not possess thorough enough assessments (Brewster.1991).

Mendenhall and Oddou (1985: 39) argue that companies often think that domestic performance success would equal overseas performance success, regarding the manager’s technical skills as being the most important factor to consider when looking at candidates to select for managing projects abroad. This shows a disregard for identifying the differences which can affect performances in different countries and cultures. The underlying assumption that companies who use this formula is that “Managing [a] company is a scientific art. The executive accomplishing the task in New York can surely perform as adequately in Hong Kong” (Baker & Ivancevich,1971: 40). Therefore a lot of multinational companies tend to send the manager and their family to the foreign countries without any cultural training. And when training is administered it is often far too broad or is not followed up with any reflection on how effective it was (Tung, 1981).

Brewster and Scullion (1997) discuss these difficulties that International companies who do actually undertake training and development programmes for expatriates come across. The first of these is that the manager not only has to adjust to a new job but also to an entirely different culture which they are not familiar with (Mendenhall and Oddou, 1985). As well as this, there is the family to consider. Training programmes for families also needs to be addressed as this is considered a major factor behind expatriate failure, and this is often not addressed correctly or at all. There is however, evidence that managers themselves value cultural training an awful lot and see the benefits from this (Brewster and Pickard, 1994). Cross-cultural training has long been proven to enable effective cross cultural assignments, yet still a lot of firms do not utilise this (Black, 1988). Different training and developmental models for these managers working abroad have been worked on over the last decade. These tend to take into account the job and the individual as well as the culture before deciding the amount and type of personal development that is required (Tung, 1981). Mendenhall and Oddou (1986) have developed a ’cross- cultural training approach’, consisting of three varying levels. Information-giving approaches are those which consist of factual briefings and cultural awareness development. Affective approaches would usually consist of cultural development combined with different scenarios and role plays. Finally, immersion approaches. These are different styles of assessment centres and in the field experience and scenarios. According to this model the style of management training given should take into account on a number of factors dependent on the project and the manager. These could include the length of stay and the amount of integration required to fit in with the host culture.(Mendenhall and Oddou, 1986)

Mendenhall et al. acknowledge there are many personal obstacles which could lead to many expatriates not completing their assignments and being branded a failure. These include factors such as “culture shock, differences in work-related norms, isolation, homesickness, differences in health care, housing, schooling, cuisine, and the cost of living, to name but a few” (1987: 331). These are all personal characteristics and attributes which would affect expatriate manager’s morale and ability to do an effective job. Porter and Tansky (1999) write that a high learning orientation is critical for an expatriate manager, this is because they will have continual experiences which are not similar to those they usually experience, and will need to be able to be resilient in the face of different challenges. Anderson (2005: 567) notes that although in the private sector the selection of expatriates is usually down to their technical competence, with “minimal attention being paid to the interpersonal skills and domestic situations of these potential expatriates”, that non-government organisations do actually utilise methods such as psychological testing and a variety of methods to ensure that the expatriates family is taken into consideration as well . These methods therefore usually lead to more effective expatriate assignments and less failures, in the next section of this report we will delve deeper into ways in which the likelihood of expatriate success can be increased.

What can be done to improve expatriate failure rates?

Currently the selection processes for expatriate candidates are not effective enough in predicting which managers will be successful in these assignments. It is necessary to focus on how these can be improved to address the rate of failures among expatriates. Halcrow (1999) has reported that less than two thirds of a survey of HR professionals identified personality as an important consideration when picking expatriate candidates, and 11 percent said it has little or no importance at all to the process. Family issues were also given the lowest of priorities, and 25 percent did not regard them as important. Here then, are the issues that need to be addressed, as can be seen from the previous section whereby these were identified as major factors in the success of expatriate projects. Effective selection, training and placement of expatriate managers is critical to international success argue Nicholson et al. (1990), and therefore the procedures put in place for this need to be effective.

Mendenhall et al.(1987: 333) state they have attempted to find the criteria which can predict productivity and acclimatisation in overseas assignments, and that a set of personality factors have been identified by numerous authors. They profess that these are “self-orientation, others-orientation and perceptual orientation” . Self-orientation includes factors such as how to reduce stress and how managers deal with being alone whilst abroad. ‘Others’ orientation includes factors such as how good the manager is at forming relationships and their ability to communicate with others. ‘Perceptual’ orientation includes different factors such as how flexible a person is and how open minded they can be. However, they indicate that US firm’s still appear to use only technical competence as their criteria for expatriate selection, and this is what needs to change as that is not a great predictor of expatriate manager success. The model proposed by Aycan (1997) also says that factors should be identified which are expected to account for a substantial amount of variance in expatriate adjustment. This is the fit between the expatriate and their environment which leads to less stress and better work productivity. This encompassed psychological, socio cultural and work adjustment. It is also required that organisational support and preparation is necessary.

Porter and Tansky write about the possibility of a learning orientation which could be important for both assessment and training for expatriates. They suggest that employee’s with weaker learning orientation could result in low levels of judgement in challenging foreign circumstances and vice versa. They state that this learning orientation approach could “benefit employees and their families and can increase the organisation’s chance for international success” (1999: 48). Porter and Tansky (1999: 50) observe that to eliminate the risk of expatriate failure that more emphasis should be placed on: “better identification of employee’s who are likely to function effectively in different cultures, development activities to enhance functioning in the expatriate role, and systematic analysis of problems during the expatriate assignment.” Mendenhall et al (1997) observe the impact upon spouses and families is also not taken into account when selecting managers for expatriation. As can be seen in the previous half of this report, how their family copes with the relocation can impact greatly upon the morale of expatriate managers. Some academics also suggest that the families of expatriates should be assessed on similar criteria to the managers themselves. Stone (1986) observes that failing to identify this problem is the greatest failure in the selection process for expatriates. Therefore one would have to agree that, as the family is seen as a major factor in whether a expatriate manager succeeds or not then they should definitely be taken into account during the selection process.

Guptara (1986) has written that there are a number of psychological tests that can be used in the recruitment processes for expatriates to test such psychological traits which could be conducive to successful expatriates, however this does not appear to be commonplace in corporate recruitment processes. Ioannou (1995) discusses the results of a National Foreign Trade Council of New York survey. Here it was shown that a variety companies did not use any form of psychological testing for possible expatriate managers. Tung (1982) finds that it is extremely rare that a company carries out a thorough assessment of a manager who is being considered to work in another part of the company abroad. Porter and Tansky (1999) advocate the application of a learning orientation to help this. They suggest questionnaire responses to show details on a managers beliefs about different traits and if they possess them. As well as task simulations to show if a person has different learning orientation behaviours. For example who which people will look for new strategies rather than rescind from these strategies when things do not go as planned immediately (1999:52).Here can be seen the discrepancy between academic musings on the topic and that of the practitioners. Writers emphasise soft skills while actual research into company practice indicates an obvious reliance on technical competence for the selection. If this were to change then expatriate projects may achieve a greater success rate.

Two major propositions can also be derived from Mendenhall and Oddou (1985) findings. The first would be that expatriate cultural adaptation is a multi dimensional process rather than a one dimensional one. This means that selection procedures of international companies for expatriates should be changed from their present one dimensional focus on technical competence as the most important criteria towards a more multi dimensional one. This should focus therefore focus on personal attributes which may be conducive to success working as an expatriate manager. Mendenhall and Oddou (1985) also recommend that training which deals with these factors needs putting in place, and which needs to be multi dimensional as opposed to one dimensional. Gudykunst, Hammer, and Wiseman (1977) combined a number of differing development approaches and compared the cultural adaptation abilities of managers who received the integrated training with managers who were the recipients of just one dimensional training. Integrated training produced much greater levels of culture adaptation. Along with other academics they again mention that both the selection and training processes must include the family of the expatriate. As well as this the culture adaptation training should be given to the expatriate’s family. As observed in the first half of this essay, it was shown that it was vital that not only the expatriate manager themselves, but also their family was happy as both had an effect on morale and performance. Corporate HR teams should have a clear direction to also hire a work fore who are internationally comfortable and experience too. Thus these would prove to be effective expatriate managers as they are relatively used to the process and overcoming the challenges they would face (Mendenhall and Oddou.1985).

Conclusion

In conclusion as many academics have identified there are serious problems with the way many corporations select and manage expatriate managers and their assignments. Many problems stem from the initial selection stage which is seen to be very lax and informal from many different businesses. These initial mistakes in the selection process mainly centre around focusing purely on technical competencies within managers for expatriate selection, and this has been proven to not be the most successful of indicators for success in international assignments of this manner. This is because it fails to take into account other factors which make a person more likely to be successful. This can include personality traits such as adaptability and how resilient they are. It also neglects the domestic and family situation of different managers, and indeed many HR teams have said that they do not even take this into consideration or treat it as important at all.

Academics have also suggested solutions to these problems in the way of recruitment processes and training processes which would be incredibly useful for business’s to implement with their selection and training for expatriates. These vary from personality tests to assess the traits that people have and if these would be conducive to being successful as an expatriate manager abroad, to a variety of assessment centre styles testing out people in different scenarios and if they were the type of person likely to succeed. As well as this it would be recommended that companies look at the family of potential expatriate managers to see if these were also likely to be happy once moving abroad as this has a visible and proven impact on the morale of expatriate managers. Training also needs to be more effective and focus on broader issues as opposed to just technical competency and understanding company systems fully, but to train expatriate managers culturally as well. Overall the key problems are predominantly to do with the selection processes of corporations. They need to improve by taking a wider range of issues into consideration and not just a one dimensional view of ‘if it works in our country it will work in another culturally different county’ approach. But they need to consider the softer side of managers, such as their characteristics and family lives, this is something business leaders could learn from academics.

Bibliography

• Anderson, B.A.(2005). Expatriate selection: good management or good luckThe international journal of human resource management. 16:4 567-583.
• Aycan. Z. (1997) Expatriate adjustment as a multifaceted phenomenon: individual and organizational level predictors, The International Journal of Human Resource Management, 8:4, 434-456,
• Baker, J. C., & Ivancevich, J. M. (1971). The assignment of American executives abroad; Systematic, haphazard, or chaoticCalifornia Management Review, 13:3, 39-41.
• Birdseye M, Hill J. (1995). Individual, Organizational/Work and Environmental Influences on Expatriate Turnover Tendencies: An Empirical Study. Journal of International Business Studies, 26:4, 787-813
• Black, J. S. (1988). ‘Work role transitions: a study of American expatriate managers in Japan’. Journal of international Business Studies, 30:2,119-34
• Brewster, C. (1988) Managing Expatriates, International Journal of Manpower, 9:2. 17–20.
• Brewster, C. (1991). The Management of Expatriates, London: Kogan Page.
• Brewster, C. and Scullion, H. (1997), A review and agenda for expatriate HRM. Human Resource Management Journal. 7. 32–41
• Enderwick, P. and Hodgson, D. (1993) ‘Expatriate Management Practices of New Zealand Business’, International Journal of Human Resource Management, 4:2. 407–23.
• Gudykunst, W. B., Hammer, M. R., & Wiseman, R. L. (1977). An analysis of an integrated approach to cross-cultural training. International Journal of Intercultural Relations, 1, 99-110.
• Guptara, P. (1986) ‘Searching the Organisation for the Cross-cultural Operators’, International Management, 41(8): 40–2
• Halcrow, A. (1999) ‘Expats: The Squandered Resource’, Workforce, 78(4): 42–8.
• Ioannou, L. (1995) ‘Unnatural Selection’, International Business, July: 54–7.
• Klaus, K.J. (1995) ‘How to Establish an Effective Expatriate Program – Best Practices in International Assignment Administration’, Employment Relations Today, 22:1. 59–70.
• Mendenhall, M. and Oddou, G. (1985) ‘The Dimensions of Expatriate Acculturation: A Review’, The Academy of Management Review, 10 (January): 39–47.
• Mendenhall, M.E., Dunbar, E. and Oddou, G.R. (1987) ‘Expatriate Selection, Training and Career Pathing: A Review and Critique’, Human Resource Management, 26:3). 331–45
• Nicholson, J.D., Stepina, L.P., & Hochwarter, W. (1990). Psychological aspects of expatriate effectiveness. In B.B. Shaw, J.E. Beck, G.R. Ferris, & K.M. Rowlans (Eds.), Research in personnel and human resources management, supplement 2, 127–145.
• Porter G. and Tansky J. (1999) Expatriate success may depend on a learning orientation: Considerations for selection and training. Human Resource Management. Spring. 47-59
• Tung, R. L. (1981) Selection and training of personnel for overseas assignments. Columbia Journal of World Business, 16:1, 68-78
• Tung, R.L. (1982). Selection and training procedures of U.S., European, and Japanese multinationals. California Management Review, 25, 117–126
• Zeira, Y. and Banai, M. (1984). ‘Present and desired methods of selecting expatriate managers for international assignments‘. Personnel Review, 13:3, 29-35.