REPATRIATION-HOW COMPANIES CAN PROTECT THEIR ROIBy Galen TinderIntroductionFor want of simple, cost effective programs, many international companies thatregularly send employees on global assignments are squandering millions of dollars ayear. For the largest companies that figure could be in the hundreds of millions.The villain is workforce attrition caused by the mismanagement, or non-management,of repatriates returning to their home country after several years on a globalassignment.This represents an odd misappropriation of attention. We have been hearing for twodecades about the corporate imperative to support its expatriates and their families.We have heard far less about what befalls these expatriates when they return home topick up where they left off. Not only do we hear less about repatriation but find, uponinvestigation, that the companies are doing less to help those caught in its grip.Every person who studies the phenomenon of repatriation believes this inattention tobe a costly oversight. They are supported by the numbers. According to the 2005Global Relocation Trends Survey, issued by GMAC Global Relocation Services andthe National Foreign Trade Council, 23% of repatriating employees leave theircompany in the first year. After three years the total is at least 40%, though somepeople place it closer to 50%.These figures represent not only widespread disruption in the lives of employees andtheir families but a staggering loss of corporate investment. A company that sends amanager abroad for a three-year assignment spends in excess of 1 million dollars, notincluding, as Russell Salton points out “the added cost of potentially losing a valuableresource and all of the knowledge base and years of investment in training, learningand development.” (gmacglobalrelocation.com) In an era when companies pay closeattention to controlling costs and retaining talent this post-repatriation hemorrhaging ofmobile personnel is a surprising instance of corporate self-neglect.To stem these losses requires, says Jan Nelson writing for Employee Benefit News(BenefitNews.com, November, 2005), “A formal repatriation program . . . to prepareemployees and their families to reintegrate into their professional and personal lives,

as well as to ensure the investment that was made to send the employee overseasdoes not walk away to the competition upon the expatriate’s return . . . “ An article onthe Cartus Website echoes this call to corporate action, pointing out that during aglobal war for talent companies need to ensure that their policies “are focused on notonly recruiting but also retention strategies to maximize experience of those, forinstance, who are coming back from global assignments.”According to the 2006 Worldwide ERC Global Benchmarking Survey, Vol. 1, 59% ofthe 51 responding companies have a formal repatriation program. Interestingly, morecompanies from Asia sponsored programs (87%) than did those of from the US (45%).This 45% compares with 31% in 1989. According to Cartus’ Emerging Trends in Policy& Practices, 80% of the companies that have programs acknowledge that they leaveroom for improvement.While the challenges of expatriation have gotten the lion’s share of attention over thelast couple decades, the need for corporate repatriation practices has not beenentirely neglected, at least by scholars who have wanted to understand both the highone-to-three-year attrition rate and the lack of corporate response in the form of welldesignedand executed programs. As early as 1982 M.C. Harvey wrote worriedlyabout the paucity of attention paid to repatriation compared to expatriation (Harvey,M.C., (1982). “The Other Side of Foreign Assignments: Dealing with the RepatriationDilemma”. Columbia Journal of World Business. Vol. 17, No.1.).After 1982 repatriation issues received occasional theoretical interest. The early 1990ssaw an outbreak of concern aroused by the continuing high rate of repatriate “failures.”In 1992 J.S. Black and his Dartmouth colleague H.B. Gregersen transcended therealm of theory to conduct the first studies involving actual repatriates. As they soughtinformation that would explain the hefty post-return dropout rate they discovered whatwould prove to be the critical piece of information. When it came to both generalacclimation to home turf and job adjustment, there was mismatch between expectationand reality. It was out of this mismatch that repatriate discontent grew. In 2003Johanna Elenius, Lars Garyik and Fredrik Nilsson noted that, in reality, the majority ofexpatriates find repatriation to be tumultuous, both personally andprofessionally.” (Masters Thesis, Goteborg University, 2003).If companies want to stem the loss of human resources they needed to close the

chasm between expectation and reality experienced by most returning employees. Inthe 14 years since the Black-Gregersen study, others have conducted moresophisticated and comprehensive studies of both corporations and individualrepatriates. Their findings have elaborated on the 1992 study and these elaborationshave prompted considerable speculation about the problem and its solution. Butnobody has successfully challenged the basic Black-Gregersen explanatory model.Now, 14 years later, nobody tries.This passage of 14 years makes it all the more astonishing that the attrition problemhas persevered with scant improvement and that companies have not mountedsuccessful efforts to stem the flow of deserting personnel. The loss of revenue hasbeen duly assessed and its chief cause identified. The necessary counter-measuresare neither complicated nor costly. What, then, stands in the way of progress on thisfront? Could it be so simple as the ascendancy of intuition (even when mistaken) overfact? Is it simply, as Elenius, Garvik and Nilsson noted in 2003 (Masters Thesis,Goteborg University) that “Human resource personnel often find it inconceivable thatreturning expatriates need to readjust to anything when coming home?” To evaluatethis curious possibility requires a closer look.Why Repats are Jumping Ship“To their great surprise many returnees and their families soon discover that they arereturning neither to the home they remember nor to the homecoming they hadanticipated,” writes frequent repatriate Jan Nelson (Employee Benefit News,November 2005). This is what she and others mean:First, reverse culture shock- many people living in a host country for several yearsexperience what one repatriate called a “transformational” process. When immersed ina culture different from their own they go undergo a broadening of mind and outlook.It’s often more than the enrichment of living in a different culture. Some haveepiphanies—they finally “get it” that what they have always taken for granted as THEWORLD-AS-IT-IS constitutes only an infinitesimal slice of the human experience. ForAmericans, as an example, one part of this epiphany is really taking in for the first timethat world history did not begin with the American Revolution. But how does onecommunicate this newfound awareness of the enormity of the human enterprise to thefolks back home? Largely, one doesn’t; it is literally a “you had to be there”

phenomenon that for some repatriates creates an unbridgeable chasm betweenthemselves and people with whom they formerly shared a similar worldview.Second, misleading memories- on another level, most expatriates do miss home. Somuch so, in fact, that with the passage of time tricks of memory enhance its plain,prosaic realities. Homesick expatriates develop “myths about the general environmentand culture of their home country” that no reality can match. (Bringing Them HomeAgain by Aaron Andreason and Kevin Kinneer, Industrial Management, Dec.2004).When they do return home the pleasant myths and heightened memories quicklysuccumb to plain facts. The reality they encounter can’t equal the myths their mind haswoven.. When their idealities are vanquished by reality, expatriates can feel moroseand diminished.Third, change happens- this disconnects between myth and reality takes place notonly in the mind of the repatriate but also in the fact that even the reality they left haschanged. It is not just a matter of the new supermarket where the old grammar schoolwas razed, the dualization of Route 1, the modernistic renovations to First CommunityChurch and the annoying traffic light interrupting the flow of main street traffic. It’s alsothe people. Some of the old friends and acquaintances have departed and beenreplaced by outsiders. Others have found new, time-consuming pursuits and aren’tavailable much. With others it is just hard to reconnect. All in all, repats returninghome yearn for familiar comforts and the routine of continuity. Within several days theysay to themselves and each other, “This is not what I thought it would be like.” Theincongruity between expectation and reality has hit hard.Fourth, unwelcome lifestyle changes- On a practical level, unpleasant adjustments inlifestyle may prove necessary. While on foreign assignment the employee and familyare often able to live in a semi-luxury that can’t be sustained in the home country. Afterreturning to the US following seven years abroad, one woman, self-sufficient in manyways, sheepishly admitted that one of the most jarring adjustment of her resettlementin the US was the absence of domestic help. Ironically, along with the absence ofmaids repatriates may miss rubbing shoulders with that slice of the intellectual andcultural elite found in many expatriate communities but seemingly in short supply backhome.Fifth, people again- many repatriates could gladly dispense with the elites if only the

non-elites with whom they have reunited were more interested in their slide shows offoreign fauna and stories of what at the time seemed like grand adventures. But theyare immersed in their own worlds and activities. They will stand tight for the punchy 30second story, but lengthier accounts missing any pungent point elicit frozen smiles andantsy feet. Repats are often astounded at the incuriousness of most people. They feeldiscounted, and perhaps hurt and angry.Finally, loneliness-To top it all off, what saved them, as novice expats when they lastfelt as lousy as they do now is not available. When expats ask what they miss mostabout their global experience many cite the closely-knit expatriate community. Theyrealize now that it was artificial in some ways, but it was also warm, vivid, embracingand fun. Even if wild beasts had prowled the outer walls of the expatriate compoundand mandated convivial togetherness, they still felt cared for and safe. This community,forged by the commonality of a tiny minority in a strange land, has no equivalent athome.So what? For most repats the kicker is that they had no idea it would be like this. Theyfeel almost betrayed, perhaps by the company, certainly by their own naïveexpectations. That they have themselves, in part, to blame, does not stem the onrushof jumbled emotions like sadness, embarrassment, anger and loneliness. Toparaphrase a variant of Tom Wolfe’s famous dictum: You can go home again, but it’sno longer home.At least the employee has a place he can go where he can feel affirmed in his globalaccomplishment, flushed with subdued pride and the expectation of reward. But again,reality disappoints. On his first day back at work he gets a jovial greeting from theformer coworkers who are still there and is then ushered into a manager’s office to betold, in so many words, that the company is not sure what job they have available forhim at this moment. Further conversation dispels the employee’s hopes for theimmediate gratification of promotion and generous financial remuneration.It may take a couple days of murmured exchanges around the corporate campus untilthe repat is plumped down in a position that not only neglects the skills he left with butmakes no use of those he gained while away. And it is all rather vague, hard to gethold of. Nobody really explains it to him straightforwardly and in this absence ofinformation and convincing reassurances unhappy thoughts take shape. This is the

sort of situation that led one recent repatriate to comment, “I can’t come up withanything positive…I would say zero positive aspects from repatriating.Professionally…no, absolutely zero positives professionally. Zero.” (Cited by SusanMacDonald and Nancy Arthur, Employees Perceptions of Repatriation, Journal ofCareer Development, 2003)The 2006 ERC Global Benchmarking Survey found that two-thirds of the HumanResources respondents believed international assignments essential to careermobility in their companies. But immediately upon their return many repatriates arealarmed to find that nobody knows what to do with them. They are stuck in lower level,temporary jobs that nobody knows the precise duration of. The old position is gone,either filled or absorbed by other functions and a job of equal challenge and authoritydid not materialize in honor of his return. Before he can blink twice the repatriateexperiences “a reduced work status, downward career move and loss ofautonomy.” (Maaike Platenburg, Expatica, 2006) This is what often happens in themajority of companies that the Cartus survey found bereft of ‘no-improvementnecessary’repatriation programs.Within a week’s time the employee’s commitment to the company plummets. Thisdisillusionment, seasoned with pinches of reverse culture shock, persuades theemployee to evaluate his other options. From this point it is only a matter of time beforehe becomes another attrition statistic.Although not our primary focus, we should note that the partner is also struggling witha combination of personal and vocational issues. According to the 11th GlobalRelocation Trends Survey spouses and partners of expatriating employeesaccompany them 81% of the time. Of these, 60% worked pre-departure but only 21%worked after the relocation. The survey does not tell us what kind of work the 21%performed, but anecdotal evidence strongly suggests that about half were employed intheir pre-departure profession. Thus, only 10% of working partners maintain acontinuity of employment from pre-departure through expatriate relocation. Theremaining 90% experience a career interruption likely to complicate their search foremployment once repatriated. So the partner’s predicament features her employmentstruggles, trying to cope with her mate’s unexpected resentment, the logistics of gettingthe family resettled and a general sense of displacement. Companies that want to

stem the flood of repatriate losses can’t afford to ignore the partner.What Companies Can DoAddressing painful issues of repatriation is not the responsibility of the company alone.But if looking for a rationale for action, companies can review Michael Harvey’s 1989study, in which he says, “The work-role transition that repatriation represents is of greatimportance for the company because of the vast amount of financial resourcesinvested in the person during the foreign assignment. It is a huge investment, and dueto this, a “return on investment” in which the employee puts into practice his or hernewly acquired knowledge or experience is expected.” (Journal of InternationalBusiness Studies). In short, to preserve their ROI companies need to take decisivesteps to prevent widespread repatriate disaffection.Fortunately, the causes of repatriate disaffection are straightforward and so are theremedies. Companies need to close the gap between expectation and reality. In somecases information and education can bring expectations into conformance with reality.In others companies need to bring reality into closer proximity with expectation. Withintentionality and planning, both can be accomplished.According to H.L. Sullivan, writing in 2002, a successful repatriation is “one in which,upon return, the repatriate: gains access to a job which recognizes any newly acquiredinternational competences, experiences minimal cross-culture readjustmentdifficulties; and reports low turnover intentions.” Companies can help produce suchhappy outcomes with a modicum of planning.When Worldwide ERC Global Benchmarking asked Human Resources professionalswhich features of international assignments posed the greatest risk to their companiesthey responded, in this order:• family difficulties posed by assignments,• selecting candidates that are either unsuitable or unwilling to accept assignments,• not taking advantage of the skills and knowledge acquired by assignees,• losing employees after repatriation,• remaining competitive while trying to control costs and provide consistent policycoverage,• security of assignees, and• non-compliance to various laws and regulations by assignees (sometimes caused by

“stealth expatriates”).By instituting repatriation practices companies address three of the first four items ofconcern.Some observers suggest that repatriation planning should begin when the expatriatehas about six months remaining on his assignment. But Andreason and Kinneer haveit right in saying; “The time to begin planning for reentry is even before sendingemployees on foreign assignment.” This sentiment is echoed by Lisa Johnson,Director of consulting services for Cartus: “Set post-assignment expectations beforethe assignment begins.”Comprehensive and effective repatriation programming addresses itself to the threefoldstructure of the repatriation event.Stage One: Pre-Expatriation1. Pre-departure briefings and meetings are necessarily focused on theupcoming expatriate experience but should include preliminary information onexpatriacy, especially on preparing the expats-to-be to develop realistic expectationsof their post assignment life back home. Expatriates to be must understand that thesesessions should be mandatory for employees and family members who are alsomaking the trip.2. An in-depth review of the employee’s goals and responsibilities while globallydeployed should include establishing written processes by which employeeperformance and progress are monitored. While care should be taken not to impede,evaluative functions of the host office. But host offices don’t always have a personsuited to manage expatriates and on issues of job expectation and performance it isimportant for the future repatriate to maintain ties with home country management. Thishelps ensure the integration of the employee’s pre-expat, expat and repat careerobjectives. On the whole, the more communication between the expatriate and thehome office, the easier reentry is likely to be. The more accountability betweenexpatriate and home office the more likely it is that the repatriate will secure a positionthat leverages his global learnings gained in the host country. The nature and timingof written and verbal reports should be stipulated along with the frequency and criteriafor formal evaluation. These tasks can be executed by line supervisors and/ormanagers.

3. Mentoring, according to nearly everyone who has studied the vocational plightof repats agrees that mentoring is critical. In her article on the subject (Expatica.com,2005) Pauline Cowell suggests that mentoring relationships be kept informal indeference to everyone’s time constraints. However, the mentoring function is toocritical to leave to the vagaries of informality. Mentor and mentee should meet beforethe expatriate’s departure to build their relationship and agree on the nature andfrequency of their contacts over the coming several years. Ideally, the mentor shouldbe somebody positioned to speak knowledgably about company changes and toserve as the employee’s advocate when necessary. Mentor and mentee cancommunicate informally through email but should conduct scheduled phone callsonce a month. The sessions are opportunities for the expatriate to speak honestlyabout any troublesome professional or personal issues and for him to hear abouthome office changes and developments, especially when they may affect him.4. The repat’s exact position upon return to the home country cannot yet bedetermined. But it is not premature for the company and employee to have preliminaryconversation about the kind of position that will benefit both parties. It is unrealistic toexpect the company to guarantee a particular job three years hence. There is toomuch likelihood of change, within both the company and employee. But they canpromise him a job and work with him to make it suitable to his background and recentlearnings. Again, one of the purposes of introducing this topic at such an early stage isto help the employee to develop an accurate picture of how the global assignment fitsin with his larger career, an endeavor sometimes called career “pathing.” Someemployee advocates argue that a contract stipulating the guaranteed availability of aspecific position be signed. his position should be signed by both parties. But so muchcan change over the next two or three years that this rigid an arrangement favorsneither party. At this stage the discussions will be general but honest and lay thegroundwork for further talk down the road.Stage Two-While on Global Assignment1. Assuming that a solid foundation was laid pre-departure, the time onassignment will involve largely carrying out the established plans.2. Since the more contact the better, it is a good idea for the employee to visithome base twice a year and to host return visits from home office personnel as often

as possible. The key to healthy repatriation is frequent and open communication, witha vigilant eye kept on the relationship between expectation and reality.3. Discussion of concrete job prospects About six months prior to repatriationthe employee and the home office should discuss concrete job opportunities. At threemonths the employee should know the position he will assume. At the two-month markthe employee and family should attend several hours of reentry orientation trainingduring which they learn about and discuss the issues raised in this exploration. It willbe helpful if some of these sessions can be attended by several repats in training andled by a person who has experienced repatriation.4. At three to six months partners who plan to work once back on home turfshould begin working with a career and relocation consultant. Among other things, theconsultant can help the partner prepare for a changed job market. Although space hasnot permitted a full examination of the partner’s needs along these and other lines, hisor her concerns are as worthy of company attention as are the employee’s.Repatriation and Return1. If the two previous stages have been handled properly, there should now be nounpleasant surprises. Casual friends may not badger them for slide shows or fordetailed characterizations of host country foliage but the returnees will know that thishas nothing to do with them, but is simple how things are. The key is no unpleasantsurprises.2. Within one to two weeks of repatriation the employee and family are invited (ormandated, as in the case of the employee) to attend a day of activities that includes aninformal debriefing on the expatriate experience, open conversation on whatrepatriation has been like so far, training on reverse culture shock from somebody whohas experienced it and, if at all possible, informal conversation with other employeesand family members about the jolts of repatriation, jolts that should now be relativelyminor because in some cases expectations have been adjusted to the reality and inothers the reality brought into conformance with legitimate expectations. Ideally, theseevents should be led by a consultant to encourage honest conversation and protectemployee confidentiality.3. The early reentry phase of repatriation is not known to promote a high level ofintimate partner-to-partner sharing. Both parties are under strain and understandably

preoccupied with their own agendas. Though solid figures are hard to come by, thecoming months can be maritally vulnerable. She partner should be invited to as manyof debriefings and meetings as possible and should at this point be interactingregularly with her career and relocation consultant.4. One of the most common repatriate complaints is that the talent and expertisegained while on global assignment is not put to use upon return. Even if theemployee’s first job does not draw on global learnings, attentive company officials canprovide repatriates with speaking opportunities by sponsoring seminars, luncheonQ&A sessions and other informal events. This will go a long way toward helpingrepatriates feel valued.5. Lastly, we spoke earlier of the vital role played by the close-knit expatriatecommunity. It is impossible to duplicate this on the home front but this does not negatethe possibility of forming groups of repatriates to meet periodically in order to providesupport and share coping strategies.CODCIL- We end with a genuine question—why doesn’t corporate awarenessproduce ameliorative actions—and a pointed query—why don’t repats themselvesfight for what they need.The perplexity caused by the question is widespread. The problems of repats iscommonly noted and discussed, as is the ongoing inaction of the keepers of thecorporate tills. Since repatriate desertions come under the human resources retentionunder the human resource retention umbrella, it properly falls to human resources totackle the gap between understanding and corrective action.One problem may be that those with the most to gain by human resource initiatives arealready headed for the door, thereby depriving the cause of its most motivatedconstituency. If this is the case, then human resources needs to bring the cause morevigorously to current expatriates and their managers. In doing so they are bound toencounter the classic counter-intuitive nature of the difficulty. Fortunately, the studiesand surveys have been performed and a plethora of articles and white papers written.Where the facts drive a coherent narrative that stresses the financial hit companies aretaking, intuition will need to excuse itself from the conversation.The mention of current expatriates as a natural constituency to advocate for changebrings us to our query: why don’t expatriates press repatriation issues more

vigorously? The simplest answer is that their dispersion around the globe makesconcerted action difficult to organize. And perhaps they too are displaying the commonhuman trait of assuming that for them it will be different. So, the reform of ourrepatriation processes still awaits its champion.REA is an internationally recognized leader in providing global transition assistance and careermanagement services to corporations and individuals. REA’s services, which are customized forboth our client companies and our individual clients, include Spouse/Partner Career RelocationAssistance, Family Acclimation and Settling In Assistance, Outplacement Services, and CareerTransition Coaching. REA's unique business model (localized delivery with centralized support)allows us to deliver quality service worldwide, price competitively, and expand on demand to meetyour needs. REA's greatest strength is our highly educated and committed team of professionalcareer consultants located throughout the world, familiar with local markets and industries,employer networks, and professional and community organizations. To learn more about REAand these services, please email us at jcowan@reacareers.com.

More and more Canadian-based companies are conducting their business inother countries. Huge global companies like Noranda, Labatt’s, and Molson’shave long had extensive overseas operations. Global changes such as the rapiddevelopment of demand in the Pacific Rim and other areas of the world meansthat business success depends on the ability to market and manage overseas.Of course, to foreign companies like Toyota, Canada is “overseas,” and thousandsof foreign firms already have thriving operations in Canada.Increasingly, companies must be managed globally, which confronts managerswith several challenges.First, the number of their employees abroad has increased. With moreemployees abroad, HR departments have had to tackle new global challenges.Three broad global HR challenges that have emerged are as follows:1• Deployment. Getting the right skills to where they are needed in the organization

regardless of geographical location.• Knowledge and innovation dissemination. Spreading state-of-the artknowledge and practices throughout the organization regardless of wherethey originate.• Identifying and developing talent on a global basis. Identifying who has theability to function effectively in a global organization and developing theseabilities.2Dealing with such challenges means that most employers have had to developHR policies and procedures just for handling global assignments. From apractical point of view, one has to address issues such as:31. Candidate identification, assessment, and selection. In addition to therequired technical and business skills, key traits to consider for globalassignments include, for instance: cultural sensitivity, interpersonal skills,and flexibility.2. Cost projections. The average cost of sending an employee and family onan overseas assignment is reportedly between three and five times theemployee’s pre-departure salary; as a result, quantifying total costs for aglobal assignment and deciding whether to use an expatriate or a localemployee are essential in the budgeting process.3. Assignment letters. The assignee’s specific job requirements and associatedpay will have to be documented and formally communicated in an assignmentletter.4. Compensation, benefits, and tax programs. There are many ways in whichto compensate employees who are transferred abroad, given the vast differencesin living expenses around the world.5. Relocation assistance. The assignee will probably have to be assisted withsuch matters as maintenance of the person’s home and automobiles, shipmentand storage of household goods, and so forth.6. Family support. Cultural orientation, educational assistance, and emergencyprovisions are just some of the matters to be addressed before thefamily is sent abroad.4Among the many changestaking place in the internationalbusiness arena is theintroduction of the euro, asingle currency used by theEuropean Union since

1999.International HRM Associationwww.ihrim.orgThat is just the tip of the iceberg. Cross-cultural, technical, and languagetraining programs will probably be required. The complex and differentiatedtapestry of labour laws and rules from country to country and provisions for reassimilatingthe expatriate when he or she returns home are some of the otherissues that must be addressed.It is increasingly common for technology to be used to assist with globalrelocation. A WorldatWork survey found that 92 percent of expatriates say thatthe Internet is critical to their lives, and 96 percent say they use it daily. Infuture, it is expected that “relocation stores” will appear on the Internet, set upby relocation companies for corporations and consumers to access for help withcareer services, cross-cultural training, stress management, and more.5 And over80 percent of the Global 500 corporations (the 500 largest corporations in theworkd) use their Web site for global recruiting.6Second, sending employees abroad and managing HR globally is complicatedby the nature of the countries into which many firms are expanding.Employers today are not just transferring employees into the relatively familiarsurroundings of industrialized nations. For example, Figure 13.1 identifies 7 ofthe 15 countries chosen most often by 192 HR managers “as among the threecountries they see emerging as assignment locations for their organizations.”7Notice the range of HR-related challenges that an employer can expect whenassigning employees in some of these countries. In China, for instance, specialinsurance should cover emergency evacuations for serious health problems; telephonecommunication can be a “severe handicap” in Russia; and the compensationplan for employees in Mexico may have to deal with an inflation rate thatapproaches 52 percent per year.8

How Intercountry Differences Affect HRMTo a large extent, companies operating only within Canada’s borders have theluxury of dealing with a relatively limited set of economic, cultural, and legalvariables, as Canada is basically a capitalist competitive society. A company thatis operating multiple businesses abroad is generally not blessed with such relativehomogeneity. For example, minimum legally mandated holidays may rangefrom none in the United Kingdom to five weeks per year in Luxembourg.Another troubling issue is the need for tight security and terrorism awareness

training for employees sent to countries such as Colombia, where kidnapping offoreign executives is commonplace.9 The management of the HRfunction in multinational companies is complicated enormously bythe need to adapt HR policies and procedures to the differencesamong countries in which each subsidiary is based. The followingare some intercountry differences that demand such adaptation.10Cultural Factors: Wide-ranging cultural differences from countryto country demand corresponding differences in HR practicesamong a company’s foreign subsidiaries. The cultural norms of theFar East and the importance there of the patriarchal system affectthe typical Japanese worker’s view of his or her relationship to anemployer as well as influence how that person works. Japaneseworkers have often come to expect lifetime employment in returnfor their loyalty, for instance. As well, incentive plans in Japan3 Chapter 13HR Linkswww.shrm.org/hrlinks/intl.htmExpatriate Information About LivingAbroadhttp://idt.net/~sefco/expat.htmMobility Services Internationalwww.msimobility.comExpat Forumwww.expatforum.comCanadian Chamber of Commerce inHong Kongwww.cancham.org/home/home.htmlWhile vacationers like thesein Luxembourg are legallyentitled to five weeks’ holiday,standards vary widelyeven within Europe.tend to focus on the work group, while in the West the more usual prescriptionis still to focus on individual worker incentives.A well-known study by Professor Geert Hofstede underscores other internationalcultural differences. Hofstede says that societies differ first in power distance;in other words, they differ in the extent to which the less powerfulmembers of institutions accept and expect that power will be distributedunequally.11 Individualism versus collectivism refers to the degree to which ties

between individuals are normally loose rather than close. In more individualisticcountries, “all members are expected to look after themselves and theirimmediate families.”12 Individualistic countries include Canada and the UnitedStates. Collectivist countries include Indonesia and Pakistan. Masculinity versusfemininity refers, said Hofstede, to the extent to which society values assertiveness(“masculinity”) versus caring (what he called “femininity”). Japan andAustria ranked high in masculinity; Denmark and Chile ranked low.Such intercountry cultural differences have several HR implications. First,they suggest the need for adapting HR practices such as selection testing and payplans to local cultural norms. They also suggest that HR staff members in a foreignsubsidiary are best drawn from host-country citizens. A high degree of sensitivityand empathy for the cultural and attitudinal demands of coworkers isalways important when selecting employees to staff overseas operations. As oneexpert puts it, “An HR staff member who shares the employee’s cultural backgroundis more likely to be sensitive to the employee’s needs and expectations inthe workplace—and is thus more likely to manage the company successfully.”13Economic Factors: Differences in economic systems among countries alsotranslate into intercountry differences in HR practices. In free enterprise systems,for instance, the need for efficiency tends to favour HR policies that valueproductivity, efficient workers, and staff cutting where market forces dictate.Moving along the scale toward more socialist systems, HR practices tend to shifttoward preventing unemployment, even at the expense of sacrificing efficiency.Labour Cost Factors: Differences in labour costs may also produce differencesin HR practices. High labour costs can require a focus on efficiency, forinstance, and on HR practices (like pay-for-performance) aimed at improvingemployee performance. Intercountry differences in labour costs are substantial.For example, hourly compensation costs in U.S. dollars for production workersin manufacturing recently ranged from a high of $25.56 in Germany to a low of$2.65 in Mexico.14 Wide gaps also exist in hours worked. For example, workersin Portugal average about 1980 hours of work annually, while workers inGermany average 1648 hours. Employees in Europe generally receive fourweeks of vacation as compared with two or three weeks in Canada.Industrial Relations Factors: Industrial relations, and specifically the relationshipbetween the worker, the union, and the employer, vary dramaticallyfrom country to country and have an enormous impact on HRM practices. InGermany, for instance, codetermination is the rule. Here, employees have the

legal right to a voice in setting company policies.15 On the other hand, in manyother countries, the state interferes little in the relations between employers andunions.Summary: Intercountry variations in culture, economic systems, labour costs,and industrial relations systems complicate the task of selecting, training, andmanaging employees abroad. These variations result in corresponding differencesin management styles and practices from country to country, and such dif-Managing Human Resources in an International Business 45 Chapter 13

Figure 13.1 Emerging Destinations for Foreign AssignmentsPeople’s Republic of China (PRC) Communist $2,900 10.1% Standard Chinese Range: Mon. through Fri., Rules for hiring Chinese(Zhonghua Renmin Gongheguo) state or Mandarin, Yue $119– 08:00–noon and nationals depend on the(Cantonese), Wu, 226 13:00 (or 14:00)– type of establishment:wholly–owned, jointventure or representativeoffice.Minbei, Minnan, 17:00Xiang, Gan, Hakkadialects, minoritylanguages.Republic of India Federal $1,500 9% English is Range: A passport and Most offices: Less than 2% of the totalrepublic important for $186– a visa are Mon. through Fri., workforce is unionized.national, political 306 required. Also: Some offices: Worker days lost toand commercial evidence of Mon. through Sat. strikes and lockoutscommunication. yellow fever have declined sinceHindi is the immunization if the 1991.primary tongue of traveler is arriving30% of the people. from an infectedarea.Federative Republic of Brazil Federal $6,100 23% Official language: Range: Travelers must Mon. through Fri., Labour unions, especially(Rebublica Federativa do Brasil) republic Portuguese. Also $56– have a 08:30 or 09:00– in the most skilled sectors,Spanish, English 252 temporary 17:30 or 18:00 tend to be well-organizedand French. business visa with a one- to and aggressive in(valid for 90 two-hour lunch. defending wages anddays) if they plan Some factories: conditions.to transact half-days on Sat.business.Russian Federation Federation $5,300 7% Primary language: Range: Canadian citizensmust40 hours per week. Local labour mobility(Rossiyskaya Federatsiya) Russian. $191– have a within Russia is limited319 passport and visa. by housing shortagesVisas are issued and difficulties inbased on support obtaining governmentfroma sponsor: required residencea Russian permits.individual ororganization.United Mexican States Federal $7,700 52% Spanish and Range: Canadian citizenscan48 hours For overtime, workers(Estados Unidos Mexicanos) republic various Mayan $61– apply for a including one must be paid twiceoperating dialects. 255 business visa for paid day of rest. their normal rate—andunder a up to 30 days on three times their hourlycentralized arrival in Mexico. rate when more thangovernment Longer stays nine hours per week

require an FM-3 of overtime.visa.Republic of Singapore Republic $22,900 1.7% National language: $211 Passports are 44 hours: The government placeswithin a Malay. Other required. Visas Mon. through Fri., a ceiling on the % ofcommon- languages: aren’t necessary 08:30–17:30 and foreign workers variouswealth Chinese, Tamil for CanadianbasedSat., 08:30–13:00. industries may employand English. travelers. and a monthly levy foreach foreign worker.Hong Kong Territory of $27,500 8.4% Chinese $344 Visas allowing Mon. through Fri., Minimal labour relationsChina as of (Cantonese) and residence and 09:00–17:00. Sat. difficulties. The averageJuly 1997 English. local employment was traditionally a number of days lost duefor expats are half-day, but many to industrial conflicts isgranted on the companies now one of the lowest inbasis of simple advertise 5-day the world.procedures. workweeks.Country or RegionType of GovernmentGDP Per Capita (US$)Inflation RateNative LanguagesTravel Per Diem (US$)Entry RequirementsStandard WorkweekLabour Law SnapshotCanadian citizensmust have apassport and visa.Most businessvisitors on initialvisits enter ontourist visas, whichdon’t require aletter of invitation.

Managing Human Resources in an International Business 6Source: Adapted from Global Workforce, January 1998, pp. 18-21.583.6 5.2% 81.5% Domestic and Co. insurance 9 schools 15–25% Foreign Embassy of the PRCmillion (1995) (1995) international should cover in 6 cities investment 515 Patrick Street(1991) services are emergency including Ottawa, Ontario K1N 5H3increasingly evacuations. (U.S.): $38 Tel: 613-789-3434available for Serious cases billion inprivate use. are often 1995.Unevenly handled indistributed system. Hong Kong.314.751 Info not 52% Probably the Adequate 6 schools 10–20% U.S. High Commission of Indiamillion available. (1995) least adequate care is in 6 cities investment: 10 Springfield Road(1990) system of the available in $192 Ottawa, Ontario K1M 1C9industrializing population million in Tel: 613-744-3751E-mail: hicomind@sprint.caURL: www.docuweb.ca/Indiacountries. centres. 1995.Slows Doctors andindustrial and hospitals oftencommericial expect paymentgrowth. in cash.57 5% 83.3% Good working Information not 12 schools 0–10% U.S. Embassy of Brazilmillion (1995) (1995) system. available. in 10 cities Investment: 450 Wilbrod Street(1989) $23.6 billion Ottawa, Ontario K1N 6M8by end of Tel: 613-237-10901995. E-mail: mailbox@brasemb.org85 8.2% 98% Enlisting Far below 3 schools 10–25% Foreign Embassy of the Russianmillion (1995) (1995) foreign help to Western in 3 cities. investment Federation

(1993) speed up standards with (including 2650 Charlotte Streetmodernization. severe U.S.): $2.1 Ottawa, Ontario K1N 8L5A severe shortages of billion in Tel: 613-235-4341handicap to basic supplies. 1996. E-mail: rusemb@magma.cathe economy. URL: www.magma.ca/~rusemb33.6 10% 89.6% Adequate domestic Dependable 15 schools 0–5% Information Embassy of Mexicomillion (1995) (1995) service for in the principal in 10 cities not available. 45 O'Connor Street, Suite 1500(1994) business and cities. Most Ottawa, Ontario K1P 1A4gov’t, but the private doctors Tel: 613-233-8988E-mail: info@embamexcan.comURL: www.embamexcan.compublic is poorly have Northserved. Americantraining.1.649 2.6% 91.1% Good domestic Information not 7 schools 0% Foreign Consulate-General of themillion (1995) (1995) facilities and available. in a small investment Republic of Singapore(1994) international country (including 40 King Street West, Suite 3005service. U.S.) in Toronto, Ontario M5H 1H1manufacturing: Tel: 416-866-6134$4.1 billionin 19962.915 3.5% 92.2% Modern facilities Information not 11 schools 0% U.S. Embassy of the PRCmillion (1995) (Age 15+ provide excellent available. in a small Investment: 515 Patrick Street(1994) had domestic and region $13.8 billion Ottawa, Ontario K1N 5H3some international by the end of Tel: 613-789-3434school; service. 1995.1995)Labour ForceUnemployment RateLiteracy RateTelephone SystemHealth & Medical CareInternational SchoolsHardship PremiumDirect Investment (US$)Embassy Information

ferences “… may strain relations between headquarters and subsidiary personnelor make a manager less effective when working abroad than at home.”16International assignments thus run a relatively high risk of failing unless specialsteps are taken in selecting, training, and compensating international assignees.

Improving International Assignments ThroughSelectionCanadian companies have reported low failure rates for employees on foreignassignments relative to other countries, particularly the United States.17 Failureis defined as the premature return of employees to their home country or theinability of expatriates to achieve their business goals. One survey concludedthat three-quarters of U.S. multinational companies experience expatriateassignment failure rates of 10 percent or more.18 European and Japanese multinationalsreported lower failure rates, with only about one-sixth of Japanesemultinationals and three percent of European multinationals reporting more

than a 10-percent expatriate recall rate. For American multinationals, the reasonsfor expatriate failure (in descending order of importance) were inability ofspouse to adjust, managers’ inability to adjust, other family problems, managers’personal or emotional immaturity, and inability to cope with larger overseasresponsibility. Managers of European firms emphasized only the inabilityof the manager’s spouse to adjust as an explanation for the expatriate’s failedassignment. Japanese firms emphasized (in descending order) inability to copewith larger overseas responsibility, difficulties with new assignment, personal oremotional problems, lack of technical competence, and finally, inability of thespouse to adjust.19 Thus it is usually not inadequate technical competence butfamily and personal problems that undermine the international assignee.The Canadian experience is unique.20 Factors identified by Canadian firmsas important to expatriate success include flexibility, language ability, and familyadjustment. However, these factors were not identified by Canadian companiesas having been part of the selection and training process for expatriates.There are three potential explanations for this result. First, Canadians may bemore culturally adaptable than their foreign counterparts because they arealready familiar with bilingualism and multiculturalism. Second, Canadianexpatriates are so few in number that they can be dealt with on an individualbasis. Thus their firms may be doing more to prepare and support them thanthey report, because their systems are not formalized. Third, Canadian expatriateassignments have tended to be in culturally similar situations, which makessuccessful adaptation more likely.These problems have resulted in relocation policies becoming more flexible.21 Some organizations have moved away from full-scale relocation of anemployee and his or her family to alternatives such as: frequent extended businesstrips with corresponding time spent back at home; short-term assignmentsof from three to twelve months with frequent home leave; and the dual householdarrangement where the employee’s family remains at home and theemployee sets up a small household for him or herself in the foreign country.Cost is another significant factor behind the growing number of short-termassignments, as they are generally seen as less costly than traditional expatriateassignments.227 Chapter 13Canadian Employee RelocationCouncilwww.cerc.ca

Windham Internationalwww.ExpatSpouse.comA recent survey of 520 multinational companies worldwide, including 50Canadian companies, with a total of more than 30 000 employees on short-termassignment, found that overall program coordination is the biggest challenge—often finding out who is on short-term assignment can be a major problem inlarge multinationals. Unfortunately, relocation support services provided toemployees on short-term assignment is often inconsistent and frequently inadequate.More than half the time, orientation, security briefings, cross-culturaltraining, and language training are provide on a case-by-case basis. Thus managingshort-term assignments effectively is a significant challenge for both HRmanagers and business unit managers.23

International Staffing: Sources of ManagersThere are several ways in which to classify international managers. Locals arecitizens of the countries where they are working. Expatriates are non-citizens ofthe countries in which they are working.24 Home-country nationals are the citizensof the country in which the multinational company’s headquarters isbased.25 Third-country nationals are citizens of a country other than the parentor the host country—for example, a British executive working in a Tokyo subsidiaryof a Canadian multinational bank.26Expatriates represent a minority of managers. Thus, “most managerial positionsare filled by locals rather than expatriates in both headquarters or foreignsubsidiary operations.”27 There are several reasons to rely on local, host-countrymanagement talent for filling the foreign subsidiary’s management ranks. Manypeople simply prefer not to work in a foreign country, and in general the cost ofusing expatriates is far greater than the cost of using local management talent.28The multinational corporation may be viewed locally as a “better citizen” if ituses local management talent, and indeed some governments actually press forthe “nativization” of local management.29 There may also be a fear that expatriates,knowing that they are posted to the foreign subsidiary for only a fewyears, may overemphasize short-term projects rather than focus on perhapsmore necessary long-term tasks.30There are also several reasons for using expatriates—either home-country orthird-country nationals—for staffing subsidiaries. The major reason is reportedlytechnical competence: in other words, employers cannot find local candidateswith the required technical qualifications.31 Multinationals also increasingly

view a successful stint abroad as a required step in developing top managers.Control is another important reason. Multinationals sometimes assignhome-country nationals from their headquarters staff abroad on the assumptionthat these managers are more steeped in the firm’s policies and culture and morelikely to unquestioningly implement headquarters’ instructions.

International Staffing PolicyMultinational firms’ top executives are often classified as either ethnocentric,polycentric, or geocentric.32 In an ethnocentric corporation, “… the prevailingattitude is that home country attitudes, management style, knowledge, evaluationcriteria, and managers are superior to anything the host country might haveto offer.”33 In the polycentric corporation, “there is a conscious belief that onlyhost-country managers can ever really understand the culture and behaviour ofManaging Human Resources in an International Business 8the host-country market; therefore, the foreign subsidiary should be managedby local people.”34 The geocentric approach, which is becoming more common,assumes that management candidates must be searched for on a global basis, onthe assumption that the best manager for any specific position anywhere on theglobe may be found in any of the countries in which the firm operates.These three multinational attitudes translate into three international staffingpolicies. An ethnocentric staffing policy is one in which all key managementpositions are filled by parent-country nationals.35 At Royal Dutch Shell, forinstance, virtually all financial controllers around the world are Dutch nationals.Reasons given for ethnocentric staffing policies include lack of qualifiedhost-country senior management talent, a desire to maintain a unified corporateculture and tighter control, and the desire to transfer the parent firm’s core competencies(for instance, a specialized manufacturing skill) to a foreign subsidiarymore expeditiously.36A polycentric-oriented firm would staff foreign subsidiaries with host-countrynationals and its home-office headquarters with parent-country nationals. Thismay reduce the local cultural misunderstandings that expatriate managers mayexhibit. It will also almost undoubtedly be less expensive. One expert estimatesthat an expatriate executive can cost a firm up to three times as much as adomestic executive because of transfer expenses and other expenses such asschooling for children, annual home leave, and the need to pay income taxes intwo countries.37A geocentric staffing policy “seeks the best people for key jobs throughout

the organization, regardless of nationality.”38 This may allow the global firm touse its human resources more efficiently by transferring the best person to theopen job, wherever he or she may be. It can also help to build a stronger andmore consistent culture and set of values among the entire global managementteam. Team members here are continually interacting and networking with eachother as they move from assignment to assignment around the globe and participatein global development activities.

Selecting International ManagersThere are common traits which managers to be assigned domestically and overseaswill obviously share. Wherever a person is to be posted, he or she will needthe technical knowledge and skills to do the job and the intelligence and peopleskills to be a successful manager, for instance.39However, as discussed earlier in this chapter, foreign assignments makedemands on expatriate assignees that are different from what the managerwould face if simply assigned to a management post in his or her home country.There is the need to cope with a work force and management colleagues whosecultural inclinations may be drastically different from one’s own, and the considerablestress that being alone in a foreign land can bring to bear on the singlemanager. Of course, if spouse and children will share the assignment, thereare also the complexities and pressures that the family will have to confront,from learning a new language to shopping in strange surroundings, to findingnew friends and attending new schools.As summarized in Figure 13.2, personal characteristics successfully distinguishedthe managers identified by their companies as “high potential.”Consistent with results such as those mentioned previously, the characteristics—9 Chapter 13such as sensitive to cultural differences, business knowledge, brings out the bestin people, takes risks, and is open to criticism—reflect a blend of technicalexpertise, openness, and flexibility in dealing with people and getting thingsdone.Adaptability ScreeningAdaptability screening is generally recommended as an integral part of the expatriateselection process. Generally conducted by a professional psychologist orpsychiatrist, adaptability screening aims to assess the family’s probable successin handling the foreign transfer and to alert the couple to personal issues (suchas the impact on children) that the foreign move may involve.40

Managing Human Resources in an International Business 10SCALE SAMPLE ITEMSensitive to Cultural Differences When working with people from other cultures, workshard to understand their perspectives.Business Knowledge Has a solid understanding of our products andservices.Courage to Take a Stand Is willing to take a stand on issues.Brings Out the Best in People Has a special talent for dealing with people.Acts with Integrity Can be depended on to tell the truth regardless ofcircumstances.Is Insightful Is good at identifying the most important part of acomplex problem or issue.Is Committed to Success Clearly demonstrates commitment to seeing theorganization succeed.Takes Risks Takes personal as well as business risks.Uses Feedback Has changed as a result of feedback.Is Culturally Adventurous Enjoys the challenge of working in countries otherthan his/her own.Seeks Opportunities to Learn Takes advantage of opportunities to do new things.Is Open to Criticism Appears brittle–as if criticism might cause him/herto break.*Seeks Feedback Pursues feedback even when others are reluctant togive in.Is Flexible*Reverse scoredDoesn’t get so invested in things that she/he cannotchange when something doesn’t work.

Figure 13.2 Traits Distinguishing Successful International ExecutivesSource: G. Spreitzer, M. McCall Jr. & J. Mahoney, “Early Identification of International Executives”, Journalof Applied Psychology 82 (1), 1997, pp. 6–29.

Past experience is often the best predictor of future success. Companies likeColgate-Palmolive, therefore, look for overseas candidates whose work andnon-work experience, education, and language skills already demonstrate acommitment to and facility in living and working with different cultures.41 Evenseveral summers spent successfully travelling overseas or participating in foreignstudent programs would seem to provide some concrete basis for believing thatthe potential transferee can accomplish the required adaptation when he or shearrives overseas.Realistic job previews at this point are also crucial. Again, both the potentialassignee and his or her family require all of the information that can be providedon the problems to expect in the new job (such as mandatory private schoolingfor the children) as well as any information obtainable about the culturalbenefits, problems, and idiosyncrasies of the country in question. A pre-assignment

visit to the new location by the employee and his or her family can provide anopportunity to make an informed decision about a potential relocation assignment.42 International HR managers speak about avoiding culture shock in muchthe same way as we discussed using realistic job previews to avoid reality shockamong new employees. In any case, the rule here is to spell it out ahead of time,as firms like Ciba-Geigy do for their international transferees.43There are also paper-and-pencil tests that can be used to more effectivelyselect employees for overseas assignments. The Overseas Assignment Inventoryis one such assessment tool. Based on 12 years of research with more than 7000candidates, the test’s publisher contends that it is useful in identifying characteristicsand attitudes that such candidates should have.44

Training and Maintaining International EmployeesPainstaking screening is just the first step in ensuring that the foreign assigneeis successful. The employee may then require special training and, additionally,international HR policies must be formulated for compensating the firm’s overseasmanagers and maintaining healthy labour relations.

Orienting and Training Employees forInternational AssignmentsWhen it comes to providing the orientation and training required forsuccess overseas, most North American firms provide little or no systematicselection and training. While company presidents and chairpersonssay that international business is growing in importance andrequires employees to be firmly grounded in the economics and practicesof foreign countries, few of their companies actually providesuch overseas-oriented training to their employees.45What sort of special training do overseas candidates need? Onefirm specializing in such programs prescribes a four-step approach.46Level One training focuses on the impact of cultural differences, andon raising trainees’ awareness of such differences and their impact onbusiness outcomes. Level Two training focuses on attitudes, and aimsat getting participants to understand how attitudes (both negativeand positive) are formed and how they influence behaviour. (For11 Chapter 13Transition Dynamicswww.transition-dynamics.comThe Expatriate Group

www.expat.caOrientation and training forinternational assignmentscan help employees (andtheir families) to avoid “cultureshock” and betteradjust to their new surroundings.example, unfavourable stereotypes may subconsciously influence how a newmanager responds to and treats his or her new foreign employees.) Finally, LevelThree training provides factual knowledge about the target country, while LevelFour provides skill building in areas like language and adjustment and adaptationskills. The depth of training is of the utmost importance. If firms are goingto provide cross-cultural training, it needs to be in-depth and done with care.47For example, language training must include non-verbal communication awareness,as it varies so widely across the world.48Many organizations offer spousal assistance in the form of reimbursementfor continuing education, job search assistance, résumé preparation, or recertification.49 Figure 13.3 provides the results of a survey by Runzheimer consultantsof 43 relocation professionals on the types of spousal re-employmentassistance offered in formal relocation programs.Beyond these special training practices, there is also the need for more traditionaltraining and development of overseas employees. IBM and other majorfirms have established management development centres around the world fortheir executives. Beyond that, classroom programs (such as those at the LondonBusiness School, or at INSEAD in Fontainebleu, France) provide overseas executiveswith the opportunities that they need to build their functional skills.Managing Human Resources in an International Business 1219961998Reimburse employees for outside service toprepare résumé and provide career counsellingUse services availablethrough third partyTry to locate employmentwithin companyExchange résumés of employee’s spousewith other companies in areaRetain employment agency/executive search firmReimburse employee forspouse’ s lost incomeCompany employees assist in résumépreparation/career counselling

Belong to spouse résuméexchange consortiumReimburse employee for specialemployment-search trip(s) to new locationUse services available throughhomefinding company/real-estate brokerage0% 10% 20% 30% 40% 50% 60% 70% 80%

Figure 13.3 Expatriate Spousal Re-employment AssistanceSource: Runzheimer Reports on Relocation, Canadian HR Reporter (June 5, 2000), p. 11. © Carswell,Thomson Professional Publishing. Reproduced by permission of Canadian HR Reporter, Carswell, OneCorporate Plaza, 2075 Kennedy Road, Scarborough, ON M1T 3V4.

In addition, international management development often aims to improvecontrol of global operations by building a unified corporate culture by bringingtogether managers from far-flung subsidiaries and immersing them for a weekor two in the firm’s cherished values and current strategy and policies. The managersshould then be more likely to adhere consistently to these values, policies,and aims once they return to their assignments abroad.

International CompensationThe whole area of international compensation management presents sometricky problems. On the one hand, there is a certain logic in maintaining companywidepay scales and policies so that, for instance, divisional marketing directorsthroughout the world are all paid within the same narrow range. This reducesthe risk of perceived inequities and dramatically simplifies the job of keepingtrack of disparate country-by-country wage rates.Yet, the practice of not adapting pay scales to local markets can present anHR manager with more problems than it solves. The fact is that it can be enormouslymore expensive to live in some countries (like Japan) than others (likeGreece); if these cost-of-living differences are not considered, it may be almostimpossible to get managers to take “high-cost” assignments.However, the answer is usually not just to pay, say, marketing directors morein one country than in another. For one thing, the firm could thereby elicit resistancewhen telling a marketing director in Tokyo who is earning $3000 per weekto move to a division in Spain, where his or her pay for the same job (cost ofliving notwithstanding) will drop by half. One way to handle the problem is topay a similar base salary company-wide and then add on various allowancesaccording to individual market conditions.50Determining equitable wage rates in many countries is no simple matter, ascompensation survey data is hard to come by overseas. Some multinationalcompanies deal with this problem for local managers by conducting their own

annual compensation surveys. For example, Kraft conducts an annual study oftotal compensation in Belgium, Germany, Italy, Spain, and the United Kingdom.The Balance Sheet ApproachThe most common approach to formulating expatriate pay is to equalize purchasingpower across countries, a technique known as the balance sheetapproach.51 The basic idea is that each expatriate should enjoy the same standardof living that he or she would have had at home. With the balance sheetapproach, four main home-country groups of expenses—income taxes, housing,goods and services, and reserve—are the focus of attention. The employer estimateswhat each of these four expenses is for the expatriate’s home country, andalso what each is expected to be in the expatriate’s host country. Any differences—such as additional income taxes or housing expenses—are then paid bythe employer.In practice, this usually boils down to building the expatriate’s total compensationaround five or six separate components. For example, base salary willnormally be in the same range as the manager’s home-country salary. In addition,however, there might be an overseas or foreign service premium. This ispaid as a percentage of the executive’s base salary, in part to compensate themanager for the cultural and physical adjustments that he or she will have to13 Chapter 13Ernst & Young Electronic PublishingServices Inc.www.DoingBusinessIn.comInterlink Consulting Serviceswww.interlinkconsulting.commake.52 There may also be several allowances, including a housing allowanceand an education allowance for the expatriate’s children. Income taxes representanother area of concern. In many cases, a Canadian manager posted abroadmay have to pay not only Canadian taxes, but also income taxes to the countryto which he or she is posted as well.IncentivesOne international compensation trend is the use of long-term incentive pay foroverseas managers. Multinationals are formulating new long-term incentivesspecifically for overseas executives, using performance-based long-term incentiveplans that are tied more closely to performance at the subsidiary level. Thesecan help to build a sense of ownership among key local managers while providingthe financial incentives needed to attract and keep the people required for

overseas operations.A recent study by consulting firm William M. Mercer Ltd. found that inorder to discourage employees from leaving while on foreign assignment,“mobility premiums” are increasingly being used. These premiums averageabout 15 percent of base salary, but can go up to 30 or 40 percent for difficultlocations like Algeria, China, and Columbia. The survey also found that 20 percentof companies now pay part of the mobility premium at the beginning of anassignment, with the remainder paid on return to the home country at the completionof the assignment.53

International EAPsEAPs are going global, helping expatriates to take care of their mental health,which is often affected by the stressful relocation process.54 The approach is toproactively contact employees before departure to explain the program’s services,then about three months after arrival families are contacted again. By thistime, they have usually run into some challenges from culture shock and willwelcome some assistance. The expatriates and their families have then establisheda connection with the EAP to use for ongoing support.Problems such as homesickness, boredom, withdrawal, depression, compulsiveeating and drinking, irritability, marital stress, family tension and conflictare all common reactions to culture shock. Treatment for psychiatric illnessesvaries widely around the world, as do the conditions in government-run mentalhealth institutions. Thus consultation with an EAP professional having extensivecross-cultural training may be critical in ensuring that appropriate medical treatmentis obtained.55

Performance Appraisal of International ManagersSeveral issues complicate the task of appraising an expatriate’s performance.56For one thing, the question of who actually appraises the expatriate is crucial.Obviously, local management must have some input into the appraisal, but theappraisal may then be distorted by cultural differences. Thus, an expatriatemanager in India may be evaluated somewhat negatively by his host-countrybosses, who find his use of participative decision making inappropriate in theirculture. On the other hand, home-office managers may be so geographically dis-Managing Human Resources in an International Business 14tanced from the expatriate that they cannot provide valid appraisals becausethey are not fully aware of the situation that the manager actually faces. Thiscan be problematic: the expatriate may be measured by objective criteria such

as profits and market share, but local events such as political instability mayundermine the manager’s performance while remaining “invisible” tohome-office staff.57Two experts make five suggestions for improving the expatriate appraisalprocess.1. Stipulate the assignment’s difficulty level. For example, being an expatriatemanager in China is generally considered to be more difficult than workingin England, and the appraisal should take such difficulty-level differencesinto account.2. Weight the evaluation more toward the on-site manager’s appraisal than towardthe home-site manager’s distant perceptions of the employee’s performance.3. If the home-site manager does the actual written appraisal, a former expatriatefrom the same overseas location should be used to provide backgroundadvice during the appraisal process. This can help to ensure thatunique local issues are considered during the appraisal process.4. Modify the normal performance criteria used for that particular position to fitthe overseas position and characteristics of that particular locale. For example,“maintaining positive labour relations” might be more important inChile, where labour instability is more common, than it would be in Canada.5. Attempt to give the expatriate manager credit for relevant insights into thefunctioning of the operation and specifically the interdependencies of thedomestic and foreign operations, such as, do not just appraise the expatriatemanager in terms of quantifiable criteria like profits or market share.For example, his or her recommendations regarding how home office/foreignsubsidiary communication might be enhanced should also affect theappraisal.

International Labour RelationsFirms opening subsidiaries abroad will find substantial differences in labourrelations practices among the world’s countries and regions. The following synopsisillustrates some of these differences by focusing on Europe. However, keepin mind that similarly significant differences would exist in South and CentralAmerica and Asia. Some important differences between labour relations practicesin Europe and North America include:581. Centralization. In general, collective bargaining in Western Europe is likelyto be industry-wide or regionally oriented, whereas North American collectivebargaining generally occurs at the enterprise or plant level. Thus local

unions in Europe tend to have much less autonomy and decision-makingpower than in North America. Also, the employer’s collective bargainingrole tends to be performed primarily by employer associations in Europe,rather than individual employers (as in North America).2. Content and scope of bargaining. North American labour–managementagreements tend to focus on wages, hours, and working conditions.European agreements, on the other hand, tend to be brief and simple and15 Chapter 13International Labour Organizationwww.ilo.orgto specify minimum wages and employment conditions, with employersbeing free to institute more generous terms.3. Grievance handling and strikes. In Western Europe, grievances occur muchless frequently than in North America, when raised, they are usually handledby a legislated machinery outside the union’s formal control. Generallyspeaking, strikes occur less frequently in Europe, due to industry-wide bargaining,which generally elicits less management resistance than in NorthAmerica.594. Government’s role. In Europe, governments generally do not regulate thebargaining process but are much more interested in directly setting theactual terms of employment than is the case in North America.5. Worker participation. Worker participation has a long and relatively extensivehistory in Western Europe, where it tends to go far beyond such mattersas pay and working conditions. The aim is to create a system by whichworkers can participate in a meaningful way in the direct management ofthe enterprise. Determining wages, hours, and working conditions is notenough; employees should participate in formulating all management decisions.In many countries in Western Europe, works councils are required. Aworks council is a committee in which plant workers consult with managementabout certain issues or share in the governance of the workplace.60Codetermination is a second form of worker participation in Europe.Codetermination means that there is mandatory worker representation onan enterprise’s board of directors. It is especially prevalent in Germany.

Safety AbroadMaking provisions to ensure employee safety does not stop at a country’s borders.While Canada has often taken the lead with respect to matters such as

occupational safety, other countries are also quickly adopting such laws.Having employees abroad does raise some unique safety issues, however. Forexample, “kidnapping has become a way of life” in some countries in Centraland South America, and in many places—“Brazil, Nigeria, the Philippines,Russia, and New Guinea, to name a few—street crime is epidemic, althoughtourists and business people are rarely kidnapped or assassinated.”61 As onesecurity executive at an oil company put it, “It’s crucial for a company to understandthe local environment, local conditions and what threat exists.”62 Keepingbusiness travellers out of crime’s way is a specialty all its own but suggestionshere include:63• provide expatriates with general training about travelling and livingabroad, and specific information about the place that they are going to, sothey are better oriented when they get there• have travellers arrive at airports as close to departure time as possible andwait in areas away from the main flow of traffic where they are not as easilyobserved• equip the expatriates’ car and home with adequate security systems• tell employees to vary their departure and arrival times and take differentroutes to and from workManaging Human Resources in an International Business 16The Emerald Group (security)www.emeraldgrp.com• keep employees current on crime and other problems by regularly checkingtravel advisory service and consular information sheets; these provide up-todateinformation on possible threats in almost every country of the world• advise employees to remain confident at all times: body language can attractperpetrators, and those who look like victims often become victimized.64

Repatriation: Problems and SolutionsRepatriation is often a bittersweet experience for the returning expatriate.Repatriation, the process of moving back to the parent company and countryfrom the foreign assignment, means returning one’s family to familiar surroundingsand old friends.65 The returning employee all too often discovers,however, that in many respects his or her employer has ignored the manager’scareer and personal needs.Several repatriation problems are very common. One is the expatriate’s fearthat he or she has been “out of sight, out of mind” during an extended foreign

stay and has thus lost touch with the parent firm’s culture, top executives, andthose responsible for the firm’s management selection processes. Such fears canbe well founded, as many repatriates are temporarily placed in mediocre ormakeshift jobs.66 Ironically, the company often undervalues the cross-culturalskills acquired abroad, and the international posting becomes a career-limiting,rather than career-enhancing, move.67 Perhaps more exasperating is the discoverythat some of the expatriate’s former colleagues have been more rapidly promotedwhile he or she was overseas. Even the expatriate’s family may undergoa sort of reverse culture shock, as spouse and children face the often dauntingtask of picking up old friendships and habits or starting schools anew upon theirreturn. Expatriates who experience problems fitting back into the organizationoften leave, and the firm loses a valuable resource.68Progressive multinationals anticipate and avoid these problems by taking anumber of sensible steps. These can be summarized as follows:691. Write repatriation agreements. Many firms use repatriation agreements,which guarantee in writing that the international assignee will not be keptabroad longer than some period (such as five years), and that on return heor she will be given a mutually acceptable job.2. Assign a sponsor. The employee should be assigned a sponsor, such as asenior manager at the parent firm’s home office. This person’s role is tokeep the employee apprised of significant company events and changes backhome, to monitor his or her career interests, and to nominate the person tobe considered for key openings when the expatriate is ready to come home.3. Provide career counselling. Provide formal career counselling sessions toensure that the repatriate’s job assignments upon return will meet his orher needs.704. Keep communication open. Keep the expatriate “plugged in” tohome-office business affairs through management meetings around theworld, frequent home leave combined with stays at headquarters to workon specific problems, and regularly scheduled meetings at headquarters.715. Offer financial support. Many firms pay real estate and legal fees and helpthe expatriate to rent or in some other way to maintain his or her residence,so that the repatriate and his or her family can actually return “home.”17 Chapter 13International SOSwww.internationalsos.com6. Develop reorientation programs. Finally, provide the repatriate and his or

her family with a reorientation program to facilitate the adjustment backinto the home culture.7. Build in return trips. One study concluded that, particularly when theycome from a more homogeneous culture (in this case Finland) and are sentto a more “novel” culture, expatriates can benefit from more frequent tripsto the home country “to ensure that expatriates stay in touch with homecountrynorms and changes during their international assignment.”72Managing Human Resources in an International Business 18

Chapter Review1. Companies must increasingly be managed globally,which confronts managers with many newchallenges. As a result, companies today havepressing international HRM needs regardingselecting, training, compensating, and repatriatingglobal employees.2. Intercountry differences have an impact on acompany’s HRM processes. Cultural factors,economic factors, labour cost factors, andindustrial relations norms influence the natureof a company’s specific HR policies from countryto country.3. A large percentage of expatriate assignments fail,but the results can be improved through carefulinternational assignee selection. Locals ratherthan expatriates fill most managerial positions.This is not always the case, however. In the ethnocentriccorporation, the prevailing attitude isthat home-country managers are superior; inpolycentric firms, host-country managers predominate;and in geocentric firms, the best managerfor any specific position is chosen fromamong the firm’s global work force.4. Selecting managers for expatriate assignmentsmeans screening them for traits that predict successin adapting to dramatically new environments.Such expatriate traits include adaptability

and flexibility, cultural toughness, self-orientation,job knowledge and motivation, relational skills,extracultural openness, and family situation.…Eastern cultures have societies and systems thatare very different from those in the [W]est… InJapan [for example], the word for “individualism”has negative connotations. Groups tend to valuecooperation more [in the East] than in the[W]est…[G]roup rather than individual achievementand an approach [that] tends to be more holistic inthinking—looking for the collective good rather thanthe individual good—[is valued]. Individuals tendoften to do better on projects that have a socialconte[x]t, where there own output can be perceivedas part of the bigger picture. This is very differentfrom the [W]est, where being “best” or “top of theclass” has been the traditional underlying themethat affects both education and training. It is thisattitude that has caused many organizations suchproblems and stress in attempting to develop newforms of organization based upon teams and teamwork.This has traditionally been alien to the Westernworkforce despite the lip service paid to it….Source: HR Works/Training and DevelopmentGuide/Commentary/Special Training Needs/[67,070] Cross-CulturalTraining/[67,075] Cultural Differences. Reproduced with permissionfrom the Training and Development Guide, ¶67,075, published byand copyright CCH Canadian Limited, North York, Ontario.

“In North America the Squeaky Wheel Gets the Grease. In Koreathe Nail That Stands Out Gets Pounded In.”Adaptability screening that focuses on the family’sprobable success in handling the foreign transfercan be an especially important step in the expatriateselection process.5. Prior to assignment, training for overseas managerstypically focuses on cultural differences,on how attitudes influence behaviour, and onfactual knowledge about the target country. The

most common approach to formulating expatriatepay is to equalize purchasing power acrosscountries, a technique known as the balancesheet approach. International EAPs havebecome more common, and help expatriatesdeal with the stressful relocation process.6. The expatriate appraisal process can be complicatedby the need to have both local andhome-office supervisors provide input into theexpatriate’s performance review. Suggestions forimproving the expatriate appraisal processinclude stipulating assignment difficulty level,weighing the on-site manager’s appraisal moreheavily, and having the home-site manager getbackground advice from managers familiar withthe location abroad before completing the expatriate’sappraisal.7. Firms opening subsidiaries abroad find substantialvariation in labour relations practicesamong the world’s countries and regions. Forexample, even within Europe, differences existwith respect to centralization of collective bargaining,local union autonomy, use of employerassociations, procedures for gaining unionrecognition, and grievance handling.8. Repatriation problems are very common butcan be minimized. They include the oftenwell-founded fear that the expatriate is “out ofsight, out of mind,” and difficulties in reassimilatingthe expatriate’s family back intohome-country culture. Suggestions for avoidingthese problems include using repatriation agreements,assigning a sponsor, offering career counselling,keeping the expatriate plugged in tohome-office business, building in return trips,providing financial support to maintain the

expatriate’s home-country residence, and offeringreorientation programs to the expatriate andhis or her family.19 Chapter 13

RUNNING CASE: LearnInMotion.comGoing AbroadAccording to its business plan, and in practice,LearnInMotion.com “acquires content globally butdelivers it locally.” In other words, the courses andother material that it lists on its site come from contentproviders all over the world. However, the “hardcopy” (book and CD-ROM) courses are delivered,with the help of independent contracting deliveryfirms, locally, in three Canadian cities. Now the companyis considering an expansion. While the most logicalstrategic expansion would probably entail addingcities in Canada, one of its major content providers—a big training company in England—believes there isa significant market for LearnInMotion services inEngland, and particularly in London, Oxford, andManchester (all of which are bustling business centres,and all of which have well-known universities).The training company has offered to finance and coowna branch of LearnInMotion.com, in London.They want it housed in the training firm’s new officesin Mayfair, near Shepherds Market. This is an easilyaccessible (if somewhat expensive) area, within easywalking distance of Hyde Park and Hyde Park corner,and not far from the London Underground Piccadillyline, which runs directly through the city to Heathrowairport. Everyone concerned wants to make sure thenew operation can “hit the ground running.” Thismeans either Jennifer or Pierre will have to move toLondon almost at once, and take one salesperson andone of the content management people along. Oncethere, this small team could hire additional employees

locally, and then, once the new operation is runningsuccessfully, return to Kanata, probably within threeor four months.