So Close, yet So Far Away: How Expat Programs Are Failing Corporate High Flyers

Among the ranks of ambitious executives around the world, it’s long been believed that the way to get ahead at a company is clinch an overseas assignment. It’s a signal to bosses of their enthusiasm for gaining deeper, hands-on experience and a commitment to the company. Many have even gone so far as to build up thick portfolios of such assignments, becoming globetrotting expats on the move every two or three years before returning to headquarters to rise further up the corporate ladder. What’s more, expat assignments are often considered to be financially lucrative as companies spare no expenses on "perks" to keep their expat high-flyers, and their families, happy. But results from new research in Spain suggest that expat assignments might no longer have the luster they once had — for both employers and employees.

Part of the reason has to do with general corporate belt-tightening during the global economic downturn, says Marta Alvarez-Novoa, a Madrid-based partner responsible for expatriates at Ernst & Young (E&Y) and co-author of the research produced in conjunction with IESE business school titled, “The process of multinational corporate expatriation: Vision of the expatriate.” For one thing, she explains, “generous policies are being restricted.” She says even the profile of the candidates being sent abroad is changing to reflect lean times at home, noting that to avoid job losses, she’s noticing how some companies are sending more, but less senior and less expensive, home-grown employees to fill vacant posts abroad.

But another reason for the changing nature of expat assignments is a growing disillusionment about their effectiveness in developing a company’s future top brass. Not only can expat assignments be incredibly expensive, accounting for a sizable portion of a firm’s payroll — given the logistical costs of moving staff and their family from one country to another and so on — but they can also sour employee/employer relationships if assignments aren’t managed carefully from beginning to end, even after an expat is back at home, according to the findings of the E&Y/IESE research involving more than 500 Spanish expats.

End to End

The best way for a company to ensure that an expat program delivers on its promises, say the study’s authors, is to divide it into three phases – the beginning, middle and end – and manage each accordingly.

It’s often at the beginning phase — during the candidate screening — that many critical mistakes are made, which are then compounded in the subsequent stages, says Sandalio Gómez, professor of organizational personnel management at IESE and co-author of the study. That’s why companies need “to take into account all the dimensions of [a candidate], especially professional (future development) and family (family responsibilities, children’s age, the spouse’s job and so on)." But that often doesn’t happen. Poor communication between the company and the candidate, particularly in terms of articulating the financial and professional benefits on offer, is often at fault. "The more precise the offer, the less likely it will be that problems arise,” he explains.

What are companies and their candidates looking for during the first stage of the process? According to the survey, the two sides are not entirely in tune with other. The factors most highly valued by companies when selecting expats are industry knowledge and experience, which both scored 4.2 points on a scale of 1 being the least valued and 5 being the most. In third place is career considerations, which scored 3.9, followed by ability to adapt culturally as well as leadership and negotiation skills. Two factors that companies consider the least important are previous international experience and the candidate’s familial circumstances.

When an employee is considering accepting an expat post, the deciding factors are, in order of importance, the opportunity to gain international experience (4.4 points out of 5), followed by professional expansion (4.2), possibilities for internal promotion, financial benefits and increasing cultural adaptation skills. For the candidates, weighing up all those factors can often be a challenge. The survey finds that while 84% say being selected for an international assignment is a flattering way to be recognized by their companies for their good work and loyalty, 41% of the respondents believe that rejecting an offer to become an expat would have negative repercussions on their careers.

What role do financial rewards play? Some 21% of the roughly 125 female expats in the survey reckon the financial benefits they were offered had no influence on their decision to move abroad, compared with 11% of the roughly 375 male respondents. Nonetheless, the overall compensation package is an important negotiating tool, for both sides. Alvarez-Novoa says that among the "perks" companies generally provide are medical insurance that has international coverage, relocation expenses, annual trips home and housing allowances. Yet increasingly, companies need to take into account a much broader view of the expat experience.

A lot hinges on the assignment itself. An expat’s assignment will get off to a bad start if it is "unrelated to his or her experience and knowledge, or does not reflect the professional career that had been promised,” says Gómez. “In addition to the business dimensions involved in fulfilling the goals laid out and the benchmarks for economic success, the company should consider professional and family dimensions — that is, expectations of the professional who might want more training and promotion opportunities on the one hand, and family stability on the other.”

More often than not this means involving an expat’s spouse in the package, he says. More than half of the survey’s respondents say they traveled on assignment with one or more members of their family, and given the growth of double-income households, “there is a very high probability that the spouse works," he says. "If the company wants to get a person to accept its offer, it is increasingly obliged to take this reality into account by facilitating the spouse’s job search."

The discussion about the package also almost inevitably turns to a particularly sticky area: taxation. The buzzword these days is tax equalization. The aim is for the company to ensure that an expat is "tax neutral" by offsetting taxes paid at home and abroad in order to avoid double taxation. More than half of the respondents say they have been part of a tax equalization plan. The good news, says Alvarez-Novoa, is that "global tax equalization for expatriates is becoming more and more standardized.” Given this growing trend, she says taxation should not be a reason for a candidate to either accept or reject a relocation opportunity.

In the next stage of the process – the stint abroad — the survey finds that while despite major cultural differences between the country of origin and the country to which the expats were sent, only 11% feel they had difficulties adapting. Among those who traveled with spouses, 22% say it was hard for their partners to adapt, and nearly 10% say it was also difficult for their children. But the ease of the adaption process often depends on the size of the company. The report notes that 44% of expats working for large companies with more than 5,000 employees say there were no problems, compared with 29% at companies with fewer than 5,000 employees. This could be because employees at large companies are more accustomed to working regularly with international colleagues, even back at head office.

Back On Home Turf

Respondents generally have high level of satisfaction when it comes to fulfilling expectations about their jobs before going on an assignment and the company’s communication about what would be expected of them while abroad. But satisfaction levels often change over the course of an assignment.

For 34% of the expats working abroad for more than two years, the assignment did not fulfill their expectations. That’s also the case for 30% of shorter-term expats, and 33% of all managers and 28% of technical staff. According to repatriated workers, the assignments abroad are advantageous from the standpoint of professional development and financial benefits. Nevertheless, 17% of all respondents say that from the viewpoint of financial compensation, expatriation “wasn’t worth the trouble.”

Although international assignments are initially valued by participants as a way of increasing their chances of promotion, the reality doesn’t always live up to expectations — 22% of the respondents, in fact, regretted having accepted their assignments. According to Gómez, “There are … some people who, once they go to a place, find that conditions are not what they expected, and they even have trouble adapting to that country.”

The disillusionment grows after the assignment is done, he says: "In most cases, it is because conditions when they returned home were not what they had been promised. Indeed, companies and repatriating staff often underestimate the importance of the readjustment period, which should address managing post-assignment expectations, the development of new responsibilities rather than having repatriated employees return to their old jobs and their general status within the company.

The best way to avoid disappointment, says Alvarez-Novoa, is to standardize each phase of the expatriation process, with a particular focus on communication and transparency to address "whatever doubts and concerns the expatriate might have.”

Ultimately, to develop a winning expat program, says Gómez, "you have to find a common ground between the plans of the company and of the person, so that the expatriation process gets the results you envisioned.”

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