International Assignment Cycle.pdf

Expatriation Dr. Elaine Berkery 1 Lecture Objectives To understand the role of Expatriation and Repatriation Management and the International Assignment Cycle To classify staffing policies, international staff and the advantages and disadvantages of each category 2 Expatriates ▪ Expatriates can...

Expatriation Dr. Elaine Berkery 1 Lecture Objectives To understand the role of Expatriation and Repatriation Management and the International Assignment Cycle To classify staffing policies, international staff and the advantages and disadvantages of each category 2 Expatriates ▪ Expatriates can be defined as employees who are transferred by their parent company to an overseas assignment to live and work in a foreign country for a period of time of significant length (Bossard and Peterson 2005) ▪ Could literally mean any employee working outside of home country 3 1 This Photo by Unknown author is licensed under CC BY-NC-ND. ▪ The emergence of these expatriates led to the development of a new discipline in Human Resource Management called Expatriation Management which started to become popular with researchers in the early and mid-eighties Expatriates ▪ In the region of 80% of medium and large companies use expatriates and almost half of those plan to further increase their expatriate workforce 4 International Staffing Policies 1. Ethnocentric; Appoint mostly parent country national (PCNs) to top positions in subsidiaries 2. Polycentric; Appoint mostly host country national (HCNs) International Staffing Policies 3. Geocentric/Global Staffing Approach; Appoint the best person regardless of nationality including third country nationals (TCNs) 4. Regiocentric; Transferred on a regional basis – midway between a pure 1&2 and 3. 5 Parent Country National (PCN) Ethnocentric Nationality of employee is the same as that of the headquarters of the multinational firm e.g. a German employee working at the Chinese subsidiary of Volkswagen Host Country National (HCN) Polycentric Nationality of employee is the same as that of the local subsidiary e.g. a Chinese employee working at the Chinese subsidiary of Volkswagen Third Country National (TCN) (Global staffing approach) Geocentric Nationality of employee is neither that of the headquarters nor the local subsidiary e.g. an Indian employee working at the Chinese subsidiary of Volkswagen Classification of International Staff Source; Reiche & Harzing 2009 6 2 Advantages Disadvantages o Familiarity with the home office's ▪ Difficulties in adapting to the goals, objectives, policies and practices o Technical and managerial foreign language and the socioeconomic, political, cultural/ legal environment ▪ Cost of selecting, training and competence o Effective liaison and communication with home-office personnel o Easier exercise of control over the subsidiary's operations maintaining expatriate managers and their families abroad ▪ Family adjustment problems, especially concerning the unemployed partners of managers Using PCNs 7 Advantages Disadvantages oFamiliarity with the ▪ Difficulties with socioeconomic, political / legal environment and with HC business practices oLower hiring costs oOpportunities for HCN control of subsidiary operations ▪ Communications difficulties ▪ Lack of opportunity for HCNs to gain international & cross cultural experience promotion & increased commitment / motivation oResponds effectively to the HCs demands for localization of the subsidiary's operation Using HCNs 8 Advantages ▪ Best compromise between securing competences and adapting to a foreign culture Disadvantages ▪ HCs sensitivity to TCNs ▪ Local nationals are impeded in career development ▪ TCNs usually career international managers, less expensive to maintain than PCNs & may be better informed about HC than PCN Using TCNs 9 3 ▪ International assignments last between two and five years ▪ Bonache and Brewster (2001) have found that assignments which require a high level of general management knowledge last the longest, while those assignments for which an expatriate needs merely functional expertise in a certain field show the shortest duration. Characteristics of Expatriate Managers and International Assignments 10 ▪ Most expatriates have little or no Characteristics of Expatriate Managers and International Assignments previous experience with the local culture, as 80% of all expatriates have never lived in their respective host countries 11 Types of Expatriate Assignments Swaak (1997) found three types of international assignments. 1. Management Development Assignments; aim to expose managers to foreign business practices so they can gather international experience. 2. Business Development Assignments; where managers from the parent company are required to assist a start-up venture abroad. 3. Technical Assignments; in which expatriates need to share their unique technical skills and knowledge with the foreign office. 12 4 Types of Expatriates Harzing (2001) classified expatriates as; 1. Bears; are sent to subsidiaries to act as decision-makers with a high level of authority 2. Bumble-bees; fly from plant to plant and thereby guarantee close connections between the subsidiaries and the headquarters, as well as amongst each other 3. Spiders; work on the establishment of communication networks. 13 Managing Expatriates: Selection Job factors 9-14 Relational dimensions Motivational state Success categories Family situation Language skills Copyright ©2014 Pearson Education, Inc. 14 ▪ Financial costs can include a higher salary, extended, allowances for expenses, assistance with moving, costs for preparation and training for both the expatriate and for his/her family, there can also be non-financial costs. ▪ Examples could be losing highly valuable Costs Associated with Expatriation knowledge and expertise or damaging the relationship with local employees who might feel belittled by the appointment of an expatriate manager as their superior 15 5 The International Assignment Cycle International Assignment Cycle Source: Hippler 2003 16 ▪ Researchers increasingly recommend to look beyond technical competence and knowledge. Recruitment & Selection ▪ Suitable candidates must show high levels of adaptability. ▪ They must be open-minded and should be able to speak the local language since otherwise chances are that the assignment will fail or at least that the expatriates’ performance will be worse than expected This Photo by Unknown author is licensed under CC BY. 17 Selection ▪ The organisation must show employees that foreign assignments do not damage their career, but in fact are a way which can lead to promotion. ▪ Therefore, the personal career aims of employees must be taken into consideration when selecting future expatriates. 18 6 Hiring ▪ The contract ▪ Remuneration ▪ Taxation ▪ Leave ▪ Family support 19 ▪ An organisation should provide its Preparation and Training employees with training that helps them to adjust to the foreign environment more easily. ▪ While expensive, it can increase the chances of a successful assignment and protect the organisation’s investment in the expatriate 20 ▪ Pre-departure training lessens the uncertainty of the employees ▪ Guarantees that once they arrive in the host country they are Preparation and Training aware of the peculiarities of the foreign culture and equipped with factual knowledge about every-day life in their new home ▪ They are also prepared that they will suffer from culture shock and advised how they can deal with it ▪ Post-arrival training however has the great advantage that expatriates relate more easily to the training as they can contribute by reporting problems that they and their families are actually encountering in real life This Photo by Unknown author is licensed under CC BY-SA-NC. 21 7 4 main objectives; Supporting the expatriate during the assignment • 1. Continuing to train expatriates after their arrival in order to further develop skills required for the assignment • 2. Assistance during the assignment in non-work related situations in order to improve the expatriates’ performances by allowing them to focus on their jobs 22 o3. Helping to avoid problems that Supporting the expatriate during the assignment could cause expatriates to return from their assignments prematurely o4. Providing a platform to stay in contact with the home office, thereby limiting the effects of the out-of-sight, out-of-mind syndrome 23 ▪ It is difficult to foresee exactly what problems a manager will face upon expatriation. ▪ However, certain problems Problems Frequently Encountered by Expatriates seem to be rather common and are frequently dealt with by researchers. ▪ 1. Culture Shock ▪ 2. Culture Distance & the Psychic Distance Paradox ▪ 3. Problems with Spouses & Children 24 8 ▪ The term was coined by the American anthropologists Culture Shock Cora DuBois and Kalvervo Oberg and refers to “the distress experienced by the sojourner as a result of losing all the familiar signs and symbols of social interaction” (Selmer 2005) 25 Culture shock is caused by ;  The confrontation with a new environment, Culture Shock  The failure of intercultural communication,  The threat of the emotional well-being of the sojourner and  The requirement to adapt personal behaviour in order to fit in with the new environment 26 9-27 • A state of disorientation and anxiety about not knowing how to behave in Culture an unfamiliar culture Shock • The goal of training is to ease the Cross-Cultural adjustment to the new environment Training Subculture Shock • When a manager is transferred to another part of the country, where there are cultural differences • The “shock” comes from feeling like an “immigrant” in one’s own country Copyright ©2014 Pearson Education, Inc. 27 9 28 Source: https://www.pinterest.ie/pin/294282156881010841 / 29 Culture Shock Experiencing some sort of culture shock is almost unavoidable for expatriates It is possible to reduce this problem by selecting employees for foreign assignments not only on the basis of their technical competence and knowledge, but rather by emphasizing their cultural adaptability and language skills (Bonache and Fernández (1999) and by supporting them while they are abroad. 30 10 o Cultural distance describes the Cultural distance and the cultural o psychic distance paradox extent to which the host culture is different to the home culture and was identified as one of the is most important causes of culture shock Expatriates find that the harder it is to adapt to a new environment, the greater the distance between the respective cultures in the home country and the host country 31 Cultural distance and the cultural psychic distance paradox ▪ Many studies have shown a phenomenon called the cultural psychic distance paradox which causes expatriates, who move to a host country with a culture similar to that of the home country, to underestimate the differences. ▪ They therefore experience greater culture shock related difficulties than those expatriates who move to a culturally very different host country This Photo by Unknown author is licensed under CC BY-SA-NC. 32 Problems with spouses and children ▪ Spouses refusing to give up their jobs back home was one of the most common reasons for employees to turn down international posts – 15% in one study ▪ The existence of a spouse and/or family is also often found to be a source of various problems after the arrival in the host country This Photo by Unknown author is licensed under CC BY-SA. 33 11 ▪ Failure to adjust can cause major problems leading to the early return of the expatriate ▪ Adjustment is the process by which overseas employees become comfortable with or acculturated to the host country (Parker & Mc Evoy 1995) ▪ This in turn can cause a sense of failure and negatively impact commitment to the firm Adjustment 34 Unitary or Multifaceted? Increasingly adjustment it is viewed as multifaceted, consisting of 3 main elements 1. Adjustment to Work and Work Roles 2. Adjustment to Interaction with host nationals 3. General adjustment 35 How to limit expatriation problems ▪ There are things that can be done by the employer as well as by the employees (and their families) in order to guarantee that the resulting problems are minimised. ▪ Sensible selection, comprehensive preparation and the support of the expatriates and their families can contribute to reducing culture shock. ▪ Narrowing the cultural distance and making sure that there are no expatriation-related family conflicts that hinder the expatriate manager to perform to his/her full potential. 36 12 The International Assignment Cycle Source Hippler 2003 37 • “The transition from a foreign country back to one’s own after living overseas for a significant period of time” (Hurn 1999, p. 224). Repatriation • Since international assignments are usually limited in their duration, both the employee, as well as the employer, will at some stage have to think about the return from the host country and the re-entry into the home office. 38 Repatriation • The management of repatriation can be seen as the last step in the circle that is expatriation management. 39 13 Repatriation Was initially ignored by practitioners as well as by the vast majority of researchers Repatriation management is now widely regarded as the most difficult and therefore most important step in the process of expatriation management As international managers seem to have to face problems upon repatriation which are similar to those they had experienced after they moved abroad, some researchers argue that the u-curve model could be more accurately described as a w-curve model 40 41 W Shaped Curve Home Host Country Home 6. Excitement 1. Exciting & New 5. Embrace differences 9. Incorporate new learning 8. Acceptance 2. Problems & Frustrations 4. Develop Strategies 7. Frustrated, lonely 3. Homesick 42 14 Preparation, Adaptation, and Repatriation Reverse culture shock occurs because • Reintegration is difficult • Expatriates are often “out of sight, out of mind” • Feelings of alienation from “home” Poor management of expatriates • Means fewer will be willing to take assignments Copyright ©2014 Pearson Education, Inc. 10-43 43 • Honeymoon phase – 2 months – problems blocked • This is followed by a stage of reverse culture shock and disillusionment when the international managers realise that their expectations are not met Repatriation • 3rd Phase – Adaptation: when the ex/repatriates try to fit into the environment and either start to cope with the new situation or acknowledge that they are unable or unwilling to adapt, in which case expatriates ‘fail’ and return home early while repatriates feel forced to leave their company. 44 Why Repatriation can be a problem • Most Human Resource managers, as well as most expatriates themselves, simply do not believe that repatriation could cause them much trouble • They do not expect that returning home could be difficult 45 15 Why Repatriation can be a problem Ignorance of the potential problems that can be linked to the process of repatriation is the first problem in itself. This shows some similarities to the cultural psychic distance paradox as it seems to confirm that it is particularly difficult for people to adapt to any sort of change in their environment if they do not expect any change 46 Why Repatriation can be a problem? 1. Unrealistic expectations and reverse culture shock 2. Lack of appreciation of expatriate experience 3. Unwelcoming social networks 4. Lack of appropriate jobs and tasks 5. Spouse-or children-related problems 47 Unrealistic expectations and reverse culture shock • 1. The human tendency to remember things easier, cleaner, nicer, cheaper or bigger than they ever were before and to “forget the limitations and imperfections of the environment and the people they have left behind in the home country” • 2. The organisation may have changed significantly, for example, by adapting new strategies, employing new people, and restructuring hierarchies • 3. The expatriates themselves have changed their values, beliefs, attitudes and behaviour • These can cause a phenomenon called reverse culture shock which can be just as difficult to deal with as the culture shock that is experienced after expatriation 48 16 • Expats often feel that their newly acquired skills and experiences are not valued by their superiors and colleagues. Lack of appreciation of expatriate experience • Most expatriates feel that working abroad in a position with a usually increased level of responsibility and authority should give them a significant career boost upon repatriation. • Therefore, they are surprised and disappointed to learn that, quite frankly, nobody cares about their experiences. 49 Unwelcoming social networks • When repatriates try to re-enter their social networks they had had before moving abroad, they have usually missed out on many social events back home over several years. • Therefore, the possible topics they can and want to talk about are naturally predominantly limited to their expatriate experiences, while most people at home are just not interested in hearing those stories 50 Why does this happen? 1. Friends and colleagues at home are bored by anecdotes from repatriates 2. Being told accounts of an expatriate’s experience could make some of those who stayed at home feel contested to go abroad too, and challenge their comfortable life at home 3. Colleagues at home might feel that the returning expatriates had an easy time in the sunshine in an exotic country, basically being on a five year holiday, thousands of miles away from the problems and the pressures they themselves had to face at the home office 4. Returnees can be seen as outsiders and outcasts because the years abroad can have caused them to change. 5. The returning expatriate intensifies the competition within the staff at the home office. 51 17 Lack of appropriate jobs and tasks • The out-of-sight, out-of-mind syndrome causes organisations to fill their vacancies as they come up without spending much thought on keeping positions free for their returning expatriates. • In some companies, expatriates may “even be removed from the domestic HR planning system • The result is that repatriates are often placed into positions without any real assignment which is not only a waste of their skills and knowledge, but can also be a highly demotivating experience for them. • Employees tend to believe that a foreign assignment has a massive career-boosting effect and they expect promotions upon repatriation. 52 • Employees see international assignments also as a chance to increase their personal market value for other companies • If they do not get the expected higher position, they might want to leave the company. Lack of appropriate jobs and tasks • However, only 4% of companies agree that taking on foreign assignments can have a career-enhancing effect. • Feldman and Thomas (2001) report that numerous repatriates regret taking on international assignments because they felt that rather than it being the springboard for the next step up the career ladder, being abroad for several years in fact hindered them from being promoted. 53 Click to add text Spouse-or childrenrelated problems • Problems which frequently cause spouses to find it difficult to settle back into their home environment can include applying for jobs and finding work, as well as the need to undergo training in order to update their outdated skill levels This Photo by Unknown author is licensed under CC BY-SA. 54 18 Consequences of poor repatriation management 1. Repatriates leaving the company - the return on the investment consists of the labour they do for the company while they were working abroad, but also of the experience they have and new skills and knowledge they have gained • It must be an absolute priority for the organisation to retain the repatriate in order to defend this valuable and rare resource • A study conducted in the UK found that one-fifth of all repatriates end up unemployed after returning from an international assignment (Foster 1997). 55 • However, usually it is the employee who decides to leave the company. • American repatriates leave their companies at twice the rate of other employees, with one-quarter of them leaving within twelve months after returning home and up to 50% within the next two years • Failure of companies to appoint their repatriates for suitable, challenging assignments is the single most important factor leading to this situation. Consequences of poor repatriation management 56 1. Improving selection; Improving Expatriation Management • By selecting employees with high levels of flexibility it is possible to reduce the likelihood of problems not only upon expatriation, but also upon repatriation some years later. • Those candidates variable enough to acclimatise to a foreign culture should also find it rather easy to re-adapt to the home country’s culture when they return. 57 19 Improving preparation • The information provided should consist of three basic modules: 1. Factual information on living in the host country, 2. Language training if required 3. Raising awareness of the problems that they are likely to experience even though they do not expect them, such as culture shock. • In anticipation of future repatriation problems, it is highly recommendable to establish career management schemes and mentoring programs before the expatriate even leaves the home office. • As employees over-estimate the careerboosting effects of taking on positions abroad, they must be clearly told how the international assignment will affect their future career once they return home in order to avoid unrealistic expectations. 58 Improving support Expats should be supported in relation to tasks at hand, to help them look after their careers and guaranteeing that taking on a foreign assignment will pay off for them or at least that it will not harm their future opportunities. In a mentoring programme, a senior manager should look after the expatriate’s career, send him/her company newsletters, internal memos, important publications and relevant job postings and arrange regular visits to the home office to fight the out-ofsight, out-of-mind syndrome 59 • The repatriation of international managers, the preparation for their departure from their host country and the aftercare once they have returned to their home office are, in fact, the most critical issues of successful management of expatriates. Conclusions • Various studies have shown that most international managers find it a tougher challenge to return home than to move abroad. • The biggest problem is that human resource managers and expatriates themselves still do not seem to understand just how difficult repatriation can be, and how important a phase this is for the returning expatriates and for companies alike. 60 20