A Potential Competitive Advantage for Multinational Corporations - Essay Example

Introduction In today’s global ever-expanding marketplace, many multinational companies (MNCs) have recognized the importance of global human resource management for their business success (Caligiuri et al., 2001). Many experts agree that it is imperative for MNCs to attract, select, develop, and retain employees who can live and work effectively outside of their own national borders (Caligiuri, 2000). These employees, who are sent from a parent company to another (non-native) country to accomplish a job or organisational goals for a specific, temporary timeframe, are called “expatriates” (Mesmer-Magnus and Viswesvaran, 2008). Armstrong (2006) considers that expatriates are required to provide the expertise that local nationals lack; he highlights that “the management of expatriates is a major factor determining success or failure [of an organisation] in an international business” (p.104). One of the significant problems of expatriate management is the ability of expatriates to successfully adjust to foreign environments. First of all, an expatriate’s cross-cultural adjustment to the host country influences deeply his or her own success during a global international assignment (Caligiuri et al., 2001; Tarique and Caligiuri, 2004; Takeuchi et al., 2005). Mendenhall and Oddou (1985) also say about “invisible” personal costs: the loss of self-esteem and self-confidence in the expatriate’s managerial ability and the loss of prestige among one’s peers. Second, poor performance on the international assignments of expatriates has costly implications both for the parent organisations and for the host companies. Mervosh and McClenahen (1997) give an example of the costs associated with the early return of a typical expatriate ranging from $250,000 to $1.25 million. Zeira and Banai (1985) argue that the real cost of unsuccessful international executives extends beyond the monetary expenses of compensation: an unsuccessful expatriate, “almost invariably has a negative impact on future interactions between the MNCs and the host countries” (p.34). Thus, increasingly, improvement and facilitation the expatriates' cross-cultural adjustment - the process by which overseas employees become comfortable with (or acculturated to) the host-country culture - become the focus of many initiatives and practices in the international human resource management. In this essay we will examine what factors influence an expatriate adjustment failure or success, and we will define critical actions that human resource managers of MNCs should take to facilitate successful cross-cultural adjustment for their expatriated employees. Cross-cultural adjustment process Cross-cultural adjustment is generally understood as the extent to which a person is psychological comfortable with various aspects of a host country (Black and Gregersen, 1991). Huang et al. (2005) refer the term “expatriate adjustment” to a process “through which an expatriate comes to feel comfortable with a new environment and harmonizes with it” (p.1659). In the past, most researchers treat the concept of adjustment as a unitary, one-dimensional phenomenon, mostly as a job satisfaction; however, beginning with Stewart Black’s work in the late 1980s, researchers suggest that cross-cultural adjustment is a multifaceted construct, where not only various interactions of expatriates should be taken into account, but also interactions of their spouses (Black and Gregersen, 1991). Black and his colleagues have proposed a three-dimensional view of expatriate adjustment: 1. Work adjustment – adjustment to job responsibilities, supervision, and performance expectations. 2. Interaction adjustment – adjustment to socializing and speaking with nationals of the host country. 3. General living adjustment – adjustment to housing, food, shopping, etc. This model has received much empirical support (e.g. McEvoy and Parker, 1995; Huang et al., 2005) and currently it is widely used in expatriate adjustment researches. Factors of adjustment failure or success Failure for expatriates is often understood only as their premature return home before the assignment is completed. Briscoe and Shuler (2004) argue that success or failure is more complex issue and a question of a broader definition. Currently expatriate success or failure often defines in terms of wider criteria such as (Scullion and Collings, 2006, p.60): Overall performance in the foreign assignment; Personal satisfaction with the experience; Lack of adjustment to local conditions; Lack of acceptance by local nationals; The inability to identify and train a local successor. Expatriate adjustment researchers suggest a number of different factors influencing expatriate failure or success, which have been summarised by Briscoe and Shuler (2004). We review them as related to four main dimensions: culture, family, work and personal traits. Culture International assignments require expatriates to relocate to another country with a culture that differ (sometimes significantly) from that of their home country. McEvoy and Parker (1995) define the concept of culture as follows: “Culture consists of patterned ways of thinking, feeling and reacting, acquired and transmitted mainly by symbols, constituting the distinctive achievements of human groups, including their embodiments in artifacts; the essential core of culture consists of traditional (i.e. historically derived and selected) ideas and especially their attached values” (p.97). Theoretical foundation for cross-cultural adjustment research is mostly based on works on culture shock, which suggest that when people first enter a new culture, they are not sure what behaviour is acceptable. Yet, they can see that behaviours which were acceptable in their home country are not acceptable in the host country, and on the contrary, the behaviours which were offensive in their home culture are allowed in the host culture. As a consequence, these behavioural expectation differences cause uncertainty that, in its turn, tends to inhibit adjustment (Black and Gregersen, 1991). The major factors of adjustment failure related to culture are (Briscoe and Shuler, 2004, p.244): Lack of cultural and language preparation; Dissatisfaction with quality of life in foreign location; Lack of support for expatriate and family while on overseas assignment. Family Black and Gregersen (1991) argue that some research discuss the development of global managers as though they are isolated from their families and spouses. But as they say, recent research has indicated that spouses are a major factor in the success or failure of expatriates, and there is a significant relationship between spouse and expatriate adjustment, especially in American and European MNCs (Scullion and Collings, 2006). Caligiuri et al. (1998) agree and assert that spouses’ inability to adjust to living in the host country is “one of the most critical determinants of whether an expatriate completes his or her assignment …and how successful the expatriate’s performance will be while on the assignment” (p.599). The major factors related to family are (Briscoe and Shuler, 2004, p.244): Inability of spouse / partner to adjust or spouse / partner dissatisfaction Other family-related problems Work One of factors related to work is technical skills that refer to procedural and declarative job knowledge and technical expertise, which an expatriate should be able to share with the host-country workforce (Mesmer-Magnus and Viswesvaran, 2008). But as Scullion and Collings (2006) argue a focus on technical skills only rather than on wider criteria in a selection of employees for expatriation is the major reason to failure. Factors of adjustment failure related to work are (Briscoe and Shuler, 2004, p.244): Expatriate’s inability to cope with larger responsibilities of overseas work Expatriate’s lack of technical competence Expatriate’s lack of motivation to work overseas Dissatisfaction with compensation and benefits Failures in expatriate selection Personality traits Personality traits are widely regarded as important factors leading to success or failure of expatriate adjustment. Huang et al. (2005) give an example of research found that managers who were less judgemental, less likely to evaluate behaviours in the new culture, and more willing to try new things - are more readily adjusted to expatriate assignments. Black and Gregersen (1999) identify such characteristics of successful expatriates as a “drive to communicate”, which includes proficiency in different languages, being extraverted in personal dealings, enthusiastic and sociable. According to Black and Gregersen (1999), successful expatriates tend to have contact with host-country nationals in non-work contexts, cultural flexibility, a cosmopolitan orientation, and a collaborative style of work. Mendenhall and Oddou (1985, p.42) give an example of research of Brein and David (1973), which found that well-adjusted Peace Corps volunteers in Brazil learned Portuguese in order to “get to know” and become more familiar with their Brazil hosts. The major factor related to personality is (Briscoe and Shuler, 2004, p.244): Expatriate’s personality or lack of emotional maturity. An integrative view of HR actions in expatriate adjustment Discussion of the main factors influencing a cross-cultural adjustment process presented above helps to understand how MNCs human resource managers can facilitate this process to succeed in expatriate adjustment of their employees. It became clear that: Expatriate adjustment involves not only adjustment to job, but also to the interaction of host nationals, as well as a more general adjustment to living in a foreign country; It is necessary to have a more sophisticated approach to selection, taking in account such skills as cross-cultural competence, language fluency and willingness to communicate; It is necessary to provide an appropriate job design and organisational support systems, that help to provide both material well-being and moral satisfaction of employees; It is necessary to include spouse in training and support programmes. Figure 1 represents an integrative view of possible actions that MNCs human resource managers can include in their programmes to facilitate expatriate adjustment. There are two main part of activity – the first one comprises activities, which are necessary to be provided before an expatriate will move to other country (we call this part as a pre-assignment stage); and second one consists of activities, which an expatriate should be provided during international assignment (we call it – a during-assignment stage). Analysis of Job Requirements and Country Assignments Both analyses are extremely necessary in order to understand clearly what knowledge, skills, and personal traits are required for a given position in a given country. As we saw above, an adjustment failure is often caused due to an erroneous candidate selection. So, the better a HR manager will understand what expatriate is needed, the less a risk of failure. Figure 1. HR actions for ensuring the successful expatriate adjustment. (Adapted from Briscoe and Schuler, 2004 p. 237) Evaluation of Candidate It is a process of selection, when not only a candidate is evaluated according the requirements, but also his or her family (a spouse and children) should be involved in the process. Black and Gregersen (1991) emphasise that a previous experience of living in foreign countries should be assessed as a positive factor, reducing uncertainty in the upcoming transition (and a culture shock) of both a potential expatriate and a spouse. Preparation of Candidate of Family Pre-assignment site visit Black and Gregersen (1991) consider that the opportunity to visit the host country prior to moving to that country is very helpful, because it provides expatriates with first-hand information about the country, consequently reducing uncertainties associated with the international assignment. Cross-cultural predeparture training Cross-cultural training (CCT) is defined as “any planned intervention designed to increase the knowledge and skills of expatriates to live and work effectively and achieve general life satisfaction in an unfamiliar host culture” (Tarique and Caligiuri, 2004, p. 284). Since early 1980s CCT has been considered as an effective mean of facilitating cross-cultural interactions and adjustment by many researchers and practitioners. Caligiuri et al. (2001) assert that a cross-cultural training’s objectives are threefold (p.358): 1. It enables expatriates to determine the appropriate cultural behaviours and suitable ways of performing necessary job tasks in the host country. 2. It helps expatriates to cope with unforeseen events in the new culture and to reduce conflict due to unexpected situations and actions. 3. It creates realistic expectations for expatriates with respect to living and working in the host country. One of the effective up-to-date ways of preparing expatriates to live and work in a new culture is electronic cross-cultural training (e-CCT). Tarique and Caligiuri (2004) consider that it possesses several advantages in comparison with traditional lecture-based CCT methodologies: it enables organisations to lower costs associated with delivering training content; it allows trainees to individualise and self-manage their learning experience, and it is easier to administer. Compensation and benefits Armstrong (2006) emphasises that the compensation policy of MNCs is to ensure that expatriates are no worse off because they have been posted abroad. Actually, different additional allowances or payments mean that expatriates have better compensation in comparison to if they would stay at home. The basic choice for MNCs is whether to adopt a home-based or host-based compensation policy for expatriates. Counseling by repatriates The important source of useful information about a foreign culture and behaviour accepted in a host country is repatriates. MNCs HR managers should provide social events to establish and foster communications between future expatriates and repatriates. In-house assimilation Cross-cultural and language training Once employees and their families have arrived in a foreign culture, organisations should not think that further assimilation will be a natural process. On the contrary, many researchers agree that after the first two months of living in a new country (it is so called a “honeymoon” period) expatriates usually feel a decline in morale and require support in further acculturation in a host country. So, the MNCs should continue providing cross-cultural and language training in a house country. In this case, the “trainers” will be the host national themselves, and training will be held in a framework of expatriates’ daily operations, so the learning process can be easier and faster (Caligiuri, 2000). Living condition Living conditions are a potentially important determinant of cross-cultural adjustment, because different and inadequate living conditions would likely create significant uncertainty concerning a variety of issues, such as shopping, laundry, food storage, cleaning, etc. It can cause a negative effect on adjustment (Black and Gregersen, 1991) Social networking Living in a country with a foreign culture, expatriates and their families should be provided with social emotional, informational and instrumental support from both their compatriots and host country nationals. Black and Gregersen (1991) consider the latter as a particularly important because: host country nationals understand the host culture; they can provide information on and explanations of the host culture; they also can provide feedback on the appropriateness of behaviors. Thus, this type of social support “serves to reduce uncertainty regarding the general culture and facilitate adjustment” (p. 466). Caligiuri and Lazarova (2000) argue that for expatriates in order to adjust to the local culture it is also important to have peer expatriates as friends; they can also provide useful information about the culture, norms and behaviors, as well as about local community regarding schools, shopping, leisure activity, churches, expatriate clubs and so on. Conclusion Expatriates represent a potential competitive advantage for multinational corporations. MNCs that assign expatriates to international assignments expect that they will be successful in their position and will adjust well to the host country. But managing expatriates differ drastically from managing a domestic workforce. Human resource managers of MNCs have to understand these differences to design effective HRM programmes, which include actions to facilitate expatriate cross-cultural adjustments as an important constituent. It is important to note that there are significant national differences in the causes of expatriate failures, which should be taken into account by MNCs’ human resource managers. Scullion and Collings (2006) summarised results of several studies as follows (p.62): In Japanese MNCs the inability of the spouse to adjust was not regarded as a significant factor affecting expatriate performance, while in American and European MNCs this factor is ranked by number one. Other family-related problems are also very important for success in international assignments in European MNCs (2nd place in a list) and American MNCs (3rd place in a list), while this factor is absent at all in a list of factors in Japan MNCs. Europeans have more exposure to differing cultures and languages; they are more international in their orientation and outlook. The main factors that influence cross-cultural adjustment success or failure in Japan MNCs are inability to cope with larger overseas responsibilities, difficulties with new environment and personal or emotional problems. Managing expatriates continues to be a significant practical activity and an active area of research. It is critical for human resource managers of MNCs to comprehend more about the cross-cultural adjustment and to gain a better understanding of the factors that facilitate or inhibit this process. References Armstrong, M. (2006) A handbook of human resource management practice, 10th edition. 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