Should Your Business Axe Overseas Assignments?Ed P. Hannibal and Siobhan Cummins
As businesses continue to navigate their way through—and out of—the global economic crisis, almost every multinational organization is looking to tighten purse strings as we head into another year of what promises to be cautious spending. Unfortunately, expensive international assignment programs are often one of the first areas of focus for wary managers, who could pare down or even temporarily oust these assignments from the budget.
Nonetheless, strategically deploying talent worldwide can contribute to a company's bottom line in a big way. If cost-control efforts lead potential assignees to turn down transfers or grudgingly accept them, the focus on cost reduction may defeat the company's ultimate business objectives. So how can a company find the right balance?
Consider the Assignment
The overall goal of human resources seems simple: Put the right person in the right job, in the right place, at the right time and the right cost. By looking at the project's responsibilities and goals, management must determine if an expatriate or a local employee would be the ideal fit. If the analysis favors an international assignee, HR should consider the potential benefits for both the company and the employee. While the employee gains international experience and a potential career boost, the company achieves its goals. But at what price?
Consider the Cost
With any international assignment, management must scrutinize all the extra costs—housing, travel, and settling-in expenses, school tuition, tax liability, and hardship premiums—while still taking care to support the needs of the family unit.
For example, if an organization wants to relocate the family of an employee making $200,000, the overseas assignment is likely to cost the organization $800,000 annually when factoring in all the extra costs. While it may seem excessive, companies must realize they will most likely reap the difference in various ways through a successful assignment.
Yet with a mandate from senior management to cut expenses, HR managers struggle to reduce any allowances that seem unnecessary or too generous. The critical point is to determine which expenditures will have motivational impact and which ones you can trim away without damaging the employee's acceptance or morale.
What helps HR make the right decision is discovering what employees value. Do they care only about financial gain, or are they interested in career opportunities? Will they want cultural orientation programs or dual career assistance for their spouses? In addition, if family members are accompanying the employee, managers need to listen and respond, when reasonable, to their needs. This can go a long way toward increasing an employee's productivity on assignment.
Increasingly, companies are relocating employees on different types of assignments for varying lengths of time involving multiple home and host locations. As a result, some employers no longer assume a traditional "one size fits all" policy will work. Many are finding that multi-tier policies have become essential to meeting their business needs.
For strategic positions with high business and career development values, employers are likely to relocate employees with a full set of expatriate incentives and allowances. In turn, companies expect a decent return on the investment from these high-potential individuals.
A skilled position, where the assignment has high business but low developmental value, may or may not require an expatriate. The employer may deploy an expert to meet the immediate need until local talent can be trained to fill the position. The company might provide a pay package at the traditional level if the assignment is long term. But for assignments of brief duration, companies will use a short-term package with smaller allowances since the family will likely stay home.
Technical positions (of low business and developmental value) involve similar staffing, but the pay package is likely to be that for short-term assignees or business travelers if the assignment is not long term.
Developmental assignments, with low business but high developmental value, provide the individual with critical experience in the company's operations. The typical scenario would probably involve either a short-term or "expat lite" package. Expat lite packages usually exclude an incentive and provide smaller host-housing accommodations. In some cases, where there is an unknown limit to the length of the assignment staffing, the company may even choose to provide a "local compensation package," similar to what a national of that country would receive for doing the job.
Consider the Long View
To ensure a successful assignment for both the employee and the organization, management should clearly define its expectations for results and performance, as well as what's necessary to help the employee succeed. When searching for appropriate and qualified candidates, the employer should also factor in the individual's career goals and carefully assess whether the person is ready for such an assignment.
It's important to discuss the job requirements, working conditions, and family issues with the employee and spouse. And remember, ignoring the "softer" issues related to dual careers, children's education, and cultural orientation is inviting trouble. To succeed, the company must support the right candidate with not only reasonable and competitive pay and a defined career plan but also necessary programs. Failing to do so will result in higher costs in the long run from failed assignments.
There is a fine balance between managing a company's costs and developing and retaining talent. Companies that tip the scale toward costs over talent risk losing valuable workers once the job market improves. What employees need to know is that their company's human capital nets out over financial capital. Taking the right steps now could ensure that the organization does not lose top talent to the competition while helping sustain—or even strengthen—its competitive foothold in the fast-paced international marketplace.
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