Expatriate Appointments
Expatriation is the practice of multinational to send some of its personnel to a foreign branch or region. In making expatriate appointments an MNC considers the personnel’s value and benefits. An MNC conducting an expatriate appointment needs to follow expatriate policies. An understanding of the management of expatriates is of growing importance because of the recent rapid increases in global activity and global competition. As multinational enterprises (MNEs) increase in number and influence so the role of expatriates in those MNEs grows in significance. Indeed, the effectiveness of these expatriates and, therefore, the management of this group of employees are recognized as major determinants of success or failure in international business. The use of expatriates can resolve a number of problems for an international enterprise. However, the use of expatriates also creates several areas of problems. These problems include the fact that the use of expatriates is a very costly practice (Mckern 2003). High salaries to persuade good individuals to work outside their own country are compounded by extensive benefits, moving costs, expense accounts and substantial administrative expertise for a relatively small, if crucial, group of employees. Expatriates are commonly reported to face significant adaptation problems in their new environment which make it difficult to operate effectively, particularly during the early stages of their international assignments (Brewster & Harris 1999).
Unsuccessful expatriate adjustment, personally, by the family, or in terms of inadequate performance, leading to early repatriation, have been commonly reported. A more common problem may be that of underperformance while in post. The problem of cost versus performance encapsulates the major issue in the management of expatriates for the organization. Since expatriates are among the most expensive people any organization employs and the measurement of expatriate performance is, to say the least, uncertain, this has had a direct effect on the way organizations view them. This has been made more difficult to handle by the reorganization of MNEs and the consequent reduction in the size of headquarters’ operations. Among other effects, a move towards organizing on the lines of business streams and a reduction in the number of people in corporate international human resource management departments has meant a significant change in the way expatriates are handled (Kaplan 2000). More than a few MNEs have lost the central expertise in the management of expatriates that had been built up over many years. In non-commercial organizations expatriation has also grown. More and more international governmental and non-governmental organizations, international aid organizations and charities employ an increasing number of international employees. The growth in their work also seems likely to be linked to a growth in expatriation. There has been almost no research into expatriation or the management of expatriates in these non-commercial organizations. Changes in the employing organizations and in the host countries have occurred alongside changes in the expatriate population. The traditional, middle-class, crusty, career expatriate can still be found, but much more rarely (Kuhlmann, Mendenhall & Stahl 2001).
Expatriates will more often do one assignment and then return home, occasionally undertaking a second assignment later in their career. More of them are well educated, with degrees or MBAs. One consequence is that they are more likely to see a foreign assignment as part of a career: expecting to come back to headquarters in an improved position and ready to negotiate and argue about their contracts. Expatriation remains a critical factor in international staffing strategies and is therefore included as a dominant theme, although it is recognized that this forms a subset of an overall strategic international human resource management (SIHRM) orientation. Yet despite the cost, both direct and indirect, of the continued use of expatriates, all the evidence points to the growing demand by multinational firms and international agencies for expatriate staff who can work internationally. Most recruitment specialists and consultancies suggest that multinationals expect to recruit more international executives and employ more expatriates. The benefits of expatriation helps it be chosen as a strategy by MNCs rather than going through job interviews and trainings (Maurer & Perry 2003). Expatriation policies have two basic functions. The first is to identify and attract employees with the knowledge, skills and abilities required for the successful implementation of the strategy of the subsidiary. Having obtained this pool, the next aim of expatriation practices is to encourage expatriates to behave in a way that supports such a strategy. The roles and purposes for expatriation may well be changing. As MNEs increasingly develop local nationals to run their overseas operations, it might be suggested that the numbers of expatriates may actually be on the decrease. Countering this possibility is the increased use of expatriation for individual and organizational development purposes coupled with the obvious increase in the number of firms operating internationally. Firms that are early in the evolution of their international activity tend to use more expatriates to manage and develop their international sales and operations than do more internationally mature firms (Backman & Butler 2003).
MNCs should make more expatriate appointment in order to exert greater success
One common feature of organizations operating in international arenas is the need for increased mobility of staff. The strategic and practical aspects of expatriation have been a favored topic of study for many IHRM scholars. Indeed, at one time, the topic of IHRM dealt mainly with the management of expatriation. Yet, amongst the larger and more established international players there have been significant changes, notably a much more competitive environment forcing an increasing attention to cost reduction and cost-effectiveness (Black et al., 2005). Since expatriates are amongst the most expensive people any organization employs, and the measurement of expatriate performance is, to say the least, uncertain, this has had a direct effect on the way organizations view their expatriates and the challenge of international mobility. This has been made more problematic by the reorganization of MNCs and the consequent reduction in the size of headquarters. The strong trends towards decentralization and downsizing over the last decade mean that many MNCs have lost the central expertise in the management of expatriates built up over many years, as the numbers of expatriates’ increases. Shareholders are mainly interested in the financial value of a company as evaluated by share price or rates of return. Other important shareholders' wants include operational performance, for example, quality, productivity, standardization, innovation (Briscoe & Schuler 2004).
Expatriates are often seen to be amongst the most expensive people any organization employs, with their whole compensation and benefits package costing three to four times that of a normal salary. This in turn will impact on the motivation of individuals to accept international assignments. Shareholder pressure is driving much of the interest in being able to measure the value of international assignments. In addition to strategic decisions in terms of the type of international assignment, organizations need to consider who they should be using to fill these positions. In general, these types of decisions reflect the overall orientation of the organization in relation to internationalization, as discussed previously (Tayeb 2005). A commitment to a geocentric approach would indicate equal gender representation amongst the international worker population and a proportional representation of managers from the countries and regions covered by the organization. The need for diversity forces organizations to make some important distinctions, notably between an expatriate and a global manager. The term expatriate or international manager defines an executive who is able to assume a leadership position fulfilling international assignments across countries and cultures. The term global manager refers to an executive who is assigned to a position. Although there is considerable overlap in the attributes associated with success of expatriates and global managers, for the latter as much emphasis has to be placed on cultivating the manager's mind as opposed to traditional concerns about relevant behaviors and competencies. However, by its very nature, the development of a global mindset can only be achieved through exposure to diversity (Brewster, Harris & Sparrow 2004).
It is hardly likely that a homogenous group of managers will develop a global mindset unless the composition of the group is changed to reflect the diversity within the organization and potentially within its client base. In many organizations a complex set of changes to existing HR programs have to be set in place in order to build this international mindset. Internationalizing the mindset of a workforce involves far more than just managing global assignments more effectively. However, global assignments are central to this process. Effective management of international mobility entails the need to take a holistic approach to all aspects of the assignment process. Both the cost of expatriate assignments and the problems associated with them, such as dual-career and family issues, have led organizations to investigate alternative forms of international working (Maddox 2000). A move away from reliance on long-term assignments increases the complexity of strategic decision-making in these areas. The problems facing international HR professionals trying to manage differing forms of international working are significant. In particular, few organizations have any real grasp of costs and almost no idea of the benefits to the organization of each form of international working. International career development in organizations represents a major challenge. However, the reality is that managers can develop parochial attitudes to international moves because at business unit manager level understandably commitment to the general good of the company can be weaker than commitment to the immediate needs of their business unit. It is difficult enough to plan for inter-unit technical moves, let alone international moves. So what is the solution? It has to be to internationalize the whole management development process so that even with constrained moves managers already have an international mindset (Denison 2001). MNCs should continue with its appointment of expatriates since it brings more benefits than problems. Expatriation reduces the cost of training and hiring local personnel since the firm sends trained individuals to foreign places.
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