Reasons in expatriate management (Dowling, Festing, & Engle,

Reasons for
this high demand of expatriates in the ethnocentric approach can be the lack of
qualified candidates for executive positions abroad or simply headquarter’s needs
to keep control on their foreign operations and ensure compliance by
headquarter-loyal employees in key positions (Dowling, Festing, & Engle, 2013, p.110). Organizations
following a geocentric approach, where subsidiaries and headquarters tend to be
equal in terms of their contribution to a global talent pool, always try to
recruit the best people possible for a position and do not see nationality or
headquarter experience as more important than a candidate’s qualifications.
While the main reasons for the transfer of employees are their qualification
for a certain position abroad as well as the development of a global
organization, the expat management in geocentric companies is much more complex
through the high amount of nationalities and host countries that have to be
targeted. (Dowling, Festing, & Engle, 2013, p.112; Mondy
& Martocchio, 2016, p.396) The
regiocentric approach is similar to the geocentric approach but limited to
regions, trying to put more emphasis on local conditions by only transferring
employees within their home region and reducing complexity in expatriate
management (Dowling, Festing, & Engle, 2013, p.113). Typically,
the business world is split in the regions Asia-Pacific (APAC), Europe Middle
East and Africa (EMEA) and the Americas. However, custom regional definitions
by organizations depending on their business needs are common.

 

2.1.1 Assignment Objectives

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Depending on the staffing approach as
described above, position filling is driving expatriation. In addition, international
assignments can have various other objectives such as associate and
organizational development. Another reason can also simply be the need for
control in a subsidiary.

For some
expatriates, their stay abroad is part of the organization’s associate
development program in order to gain intercultural competence and improve their
leadership skills when working in a new business and cultural environment.
Sometimes, the assignment aims predominantly on associate development in the
host country and the expatriate in this case is responsible for the education
and training of local associates. (Dowling,
Festing, & Engle, 2013, p.117; Kühlmann, 2004, p.8)

A main goal,
when using international assignments for organizational development, is the
knowledge transfer between a company’s headquarter and its subsidiaries. This
can be a transfer of technology, the roll-out of corporate systems in
administration or simply information exchange about procedures and practices.
Assignments are also helping to improve the company culture as well as the
relationship between headquarter and subsidiary, if expatriates and host-company
employees work successfully together. (Dowling, Festing, & Engle, 2013, p.117; Stroh, Black, Mendenhall,
& Gregersen, 2005, p.4; Kühlmann, 2004, p.8)

Especially in highly centralized
organizations, the expatriation of headquarter employees is often used to
control the subsidiary’s activities and coordinate the implementation of
corporate processes and standards. (Stroh, Black, Mendenhall, & Gregersen, 2005, p.4; Kühlmann, 2004,
p.8)

According
to a study by PWC in 2015, around 85% of organizations stated, that the
transfer of knowledge and skills to the host location is a main objective when
sending employees abroad, while 60% of organizations conduct international
assignments as part of their talent management or development program. However,
for 98% of the organizations the main reason why they move employees abroad is
to tackle business needs (PWC, 2014). This shows, that organizations’
top priority is to fill positions with international assignments, but they set
organizational and associate development as additional objectives.

 

 

2.1.2 The Importance of successful Expat Management

 

In order to
be successful in today’s globalized world, companies have to develop global
leaders, who are able to find solutions to global challenges and at the same
time understand the needs of their customers and employees from various
cultural and ethnical backgrounds. The ability to manage cross-cultural teams
or anticipate opportunities and threats abroad results from a manager’s
international experience and perspective. Stroh et al. even argue, that global leaders
build the organization’s competitive advantage and are essential for its global success.  (Stroh, Black, Mendenhall, & Gregersen, 2005, p.3-6)

Therefore,
a powerful expat management is required to ensure that goals of the assignment
are met, development can be leveraged on return and that the organization is
not developing global leaders for its competitors. Assignments can be
considered successful when these three conditions have been met: a) the
assignment has not been cancelled, b) the expat has not left the company after
return and c) the expat performance has been according to expectations. (Dowling, Festing, & Engle, 2013, p.126) (Stroh, Black,
Mendenhall, & Gregersen, 2005, p.13-16)

Due to the
fact that an international assignment is a company’s highest per-person
investment (Stroh, Black, Mendenhall, & Gregersen, 2005), expat
management should also be related to efficiency. Assignment costs are estimated
to be around double or triple of a domestic income in a similar position, while
assignment failures can result in additional costs that are two to four times
as high as the assignee’s annual income (Kühlmann, 2004, p.6f). These
measurable costs are the direct costs that result from failed assignment, but
the indirect or invisible costs of failure are hard to estimate and often irreparable.
This includes the loss of
relationships with authorities and customers in the host-country which potentially
causes economic damage or problems in finalizing projects, but also a damage of
the assignee’s self-confidence leading to a decline in performance and
management ability (Lindner,
2002, p.7; Mendenhall & Oddou, 1985, p.39).

The most
obvious consequence of insufficient expat management are failed assignments
where expatriates return before the end of their assignment without fulfilling
all assignment goals. If, however, assignees do not return prematurely in order
not to lose their reputation in the company as well as the financial benefits,
their dissatisfaction eventually results in a decline of performance and
neglect of responsibilities. This so-called ‘brownout’ does not fulfil the
assignment goals either and is a heavy burden for the home and host company.
The most costly consequence of inefficient expat management is the turnover
after repatriation, when expatriates are leaving the company shortly after
their return. This implies that all investments on development of the associate
are lost and a competitor might benefit from it. In addition, the loss of
knowledge cannot be compensated. A couple of assignment failures might force
the company into a downward-spiraling vicious cycle: the failures lead to a bad
reputation of assignments in the company which makes it harder to find
candidates for future assignments and this might result in more failure and
more costs. The result is a shortage of global leaders in the organization,
which makes it hard for an organization to hold its globally competitive
position. (Stroh, Black,
Mendenhall, & Gregersen, 2005, p.13-16)

In order to
prevent this, expatriate management should be clearly seen as part of the
organization’s global strategy and not as an administrative process only. The
following chapters will help IHRM to prevent consequences of mismanagement
mentioned above and instead contribute to the organization’s success by their
expatriate management.

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