Problems Associated with Employing Expatriates and Suggested Solutions - Literature review Example

Introduction

An expatriate or an expat according to Black, Gregersen, and Mendenhall (1992) refers to an individual permanently or temporarily residing in another country abroad for work reasons. In simple terms, an expatriate is an employee who has been sent by his or her current employer to perform a given duty or to work in a foreign country. In expatriates' assignments, the companies assigning the expats refers to parent companies while the countries of employment are known as host countries (Glanz, 2003). For example, if Microsoft Company sent one of its U.K executives to supervise a new development in U.S, the executives will be expatriates, Microsoft would be parent company while U.S would be host Company. Over the past decade, many small, midsize as well as multinational corporations are sending expats to supervise or oversee different operations or to work temporary or permanently in foreign countries. According to statistics by UN in 2015, more than 233 million people making 3.3% of the world population, reside in other countries as expatriates other than their home country (Glanz, 2003). Increasing need for expatriate assignments requires different firms to understand the dynamic relations in international human resource management especially in staffing and outcome relationships as well as how they change over time in the context of foreign culture.

Tungli and Peiperl (2009) argued that expatriates provide a wide range of benefits when staffing international firms' subsidiaries. They permit closer coordination and control of international branches since they provide a broader global perspectives in control. They also help by increasing the understanding of the company worldwide operations as well as offering training and development opportunity for new management thus increasing strategic control of the subsidiary company as well as the main company in meeting its mission and objectives (Peterson, 2003). Peterson again provided that there are many issues that make hiring expats both desirable as well as challenging. He further argued that these issues range from international factors to smaller social or family issues. Despite ensuring greater parental control and other benefits, Tung (1998) stated that employing expatriate often possesses major challenges to hiring firms. These problems or challenges often exposes the hiring company to greater managerial as well as financial risks. To manage these problems, firms need to develop appropriate measures that shall provide long-term solutions. This paper, therefore, use the desktop review to assess critically the problems associated with employing expatriates together with some of the possible solutions to those problems.

Discussion and Analysis

Problems of Employing Expatriates

Different problems often associate with employing expatriates, and this problem can results in failure of the company if not handle with care. These problems, therefore, include;

High Expatriate Transfer and Relocation Cost - As companies businesses become global, many firms will consider sending their employees abroad as expatriates. In turn, these firms hiring expatriates will be forced to incur a lot of cost right from moving the expat until the time they settle for their jobs (Takeuchi, 2010). This often causes the firm to go through financial complexities as well as some liabilities. When a firm accepts to send employees to oversee work in foreign subsidiarity, they will incur liabilities and some costs associated with moving the individuals. Expatriates assignments according to Takeuchi (2010) are known to be an expensive investment for any firm because sometimes it costs more than four times an employee's total compensation plan for one year. Companies often take full cost of moving the individuals. Relocating expatriates and their entire family abroad is often stressful to the firm as well as the individuals (Tungli and Peiperl, 2009). Some expatriates consider moving with their entire family members with traveling cost being covered by the hiring companies. Some companies often take full cost of flying, accommodation and food for expatriates (Takeuchi, 2010). These companies find it expensive to finance such movement due to the high cost of associated with relocating. For instance, a U.S company such as Apple Inc. spent U.S$ 100,000 in 2014 in its expatriates' assignments package, a cost value which they considered as high over expected benefits (Glanz, 2003).

Expatriate transfer cost also involves standardization of salary and other monetary benefits package in the form of allowances. Aycan (1997) said that internationally assigned individuals are also entitled to additional non-monetary incentives including education expenses, housing, and health care. Some companies such as Johnson and Johnson and Apple Inc. always cover the cost of expats' children health and education completely in relatively expensive international schools (Hasleberger and Brewster, 2009). These cost often are high and have been identified as one of the major reason of failure to international firms (Hasleberger and Brewster, 2009). In addition to the high cost of remuneration, salary and compensation package to expatriates, firms also incur huge funds in expat orientations and training programs. Orientations and training programs are often good in streamlining the expatriates to learn foreign country's culture, to be familiar with foreign country's environment language as well as to teach various employees they need to work with (Mendenhall, Dunbar, and Oddou, 1987). Organisation and implementation of these orientation programs are relatively expensive thus discouraging the assignments of expatriates. Hasleberger and Brewster, 2009 provided that the transfer cost for expatriates can even be higher if the expatriation assignment is not managed and handle correctly and it may result in company failure regarding performance issues, delays in assignments as well as unmet goals.

Expatriate Failure - The major example of expatriate failure occurs when an expat deliberately returns to his or her home country before finishing the international assignment. This can occur when the individual intentionally resigns from his or near job before completing the assignment (Hays, 1971). Many expatriates often commit expatriate failure for various known as well as unknown reasons. A study found out that 70% of multinational corporation chief executives indicated a 20-40 % expatriate failure with the major case being evidenced in China as well as emerging countries like in Southern Asia (Kraimer, Shaffer, Harrison and Ren, 2012). Another study by Peterson, 2003 also indicated that failure rates are relatively high and can vary so much between 25% and 25% depending on the nature of the country.

Expatriates need to spend many hours at workplaces since they are under pressure of adapting to the new foreign culture and sometimes their overall responsibilities and duties are often larger than they had before. As a result families of expats especially their wives or spouses spend a lot of time alone thus experiencing the problem they have never had before. This often results in family crisis which results in failure. For example, a report by Asian Development Bank provided that more than 41% of their expatriate marriages fails as a result of the stress of overseeing position thus making them victims of expatriate failure (Hays, 1971). Other reasons for expatriate failure includes cultural inflexibility, emotional immaturity as well as physical breakdown. Tungli and Peiperl, 2009 also argued that the combination of physical exhaustion and emotional despondency caused by elevated stress levels and overload of work responsibility are common reasons for failure since they result in work interrupting illness as well as reduced effectiveness for expats. Expatriation failure exposes firms to many problems such as waste of time and resources. The cost associated with expat failure is considerably more expensive for firms and thus, can expose these firms to greater financial as well as managerial problems.

Lack of Familiarity with Culture, Language and Inability to Adapt to Foreign Environment - One of the major problems associated with employing expatriates include the inability to make international as well as cultural adjustments (Takeuchi, 2010). This results from a complete lack of familiarity with the foreign culture as well as the language of the host country. A study by Gertsen, 1990 indicated that expats sent abroad are often not ready for the assigned experience that they are weakly indoctrinated in the usual ways of their host countries and sometimes face the problem of not meeting the problem created by culture gap. The inability to adapt to a local culture often result in expatriate failure as seen above and also leads to a bad foreign image and cultural conflict in the host country and offices.

Having a bad foreign image and cultural conflict have been seen as a major cause for hostile work environment, sexual harassment, local government restrictions as well as racial discrimination that of the results in low morale as well as work performance that hinder the firm from meeting its objectives (Black, et al., 1992). Inability to adapt to foreign culture may also make the parent company incur huge sum of money training and developing expatriates to adopt. For, instance, many expatriates often face difficulty in adapting to the culture of Southern Asia countries such as Iran, Iraq, etc. due to cultural conflict and war which remains the major reasons why to expatriate assignment in those regions often fail thus exposing the parent company into serious challenges (Glanz, 2003).

Expatriates Selection Problems - The minimum requirement for selection of an expat is that he or she must be highly skilled in their assignments. Gertsen 1990, provided that many firms faced with numerous problems of staffing operations in their foreign subsidiaries cannot afford to recruit candidates who are not proficient and qualified. These firms often, screen expat candidates more thoroughly by conducting psychology as well as personal tests. These firms are known to incur a large cost, more resource and time in handling selection process. Andreason 2008, said that the cost of recruiting the wrong person for the expatriate position cost more than six times the basic salary for a foreign assignments. Poor selection of expatriates results in poor company morale, friction between foreign and home offices that cost more than $250,000 for one expat who fail to complete his or her international duty, poor market knowledge as well as ineffective product support (Tung, 1998). Good selection criteria of expats are time consuming and expensive and can expose the firm as well as the expatriates into serious social, financials as well as economic problems.

Possible Solution

Having looked at different problems associated with hiring expatriates, it is advisable for one to devise several strategies of solving them as follows;

Given these problems, it is significant for firms to use cost effective and rigorous expatriates selection process that would enable them to identify those employees who would likely to succeed as expats. Selection team should consider expatriates family situation, motivational state, job skills, learning ability, relationship skills and technical competency in selecting expats. For example, expats would likely to progress at the foreign location if they possess effective administrative, managerial skills, and conflict resolution skills among other skills. Effective selection process enhances adaptability to oversee experiences as well as culture thus lowering expatriate failure (Mendenhall et al., 1987).

Many firms need to improve motivation package to develop person interest in the specific parent country culture as well as in the oversee environment. The motivational package should contain all the possible benefits and allowances that would make expat more willing to stay oversee. This will improve expats willingness to acquire new attitudes and behavior patterns (Hays, 1971). Motivational benefits should also include free social training of expatriates as well as their family members as these will minimize failure.

Firms need to consider family transitions seriously especially for those expatriates who take their families along with them. An expat must be very comfortable on an individual basis; the spouse must be willing to live abroad, supportive and very adaptive as this will minimize cases where assignments are terminated because expatriate and spouse are unable or willing to make necessary adjustments to the host country (Andreason, 2008).

Minimum cost low effective interaction, cross-cultural as well as pre-departure training should be considered to inform them about the new country as well as immersing them in a new culture. Finally, firms considering expatriate assignment need to develop a sound financial plan to manage the entire process. To eliminate high transfer cost firms need to develop effective financial control plan and should regularly monitor expatriates actions. Firm need to conduct a financial feasibility study to determine whether the oversee assignments will result in more benefit than cost.

Conclusion.

The paper analyzed critically problems associated with employing expatriates as well as ways of solving such problems. The paper reveals that as much as the process of hiring expatriates is accompanied by problems, it also has many advantages which include increasing greater controls as well as a foreign image of the parent company thus boosting profits. The problems identified included; high expatriate transfer and transfer cost, expatriate failure, cumbersome selection process and lack of familiarity with the culture, language and inability to adapt to the foreign environment. The solution identified includes; sound and cost effective expatriate selection and hiring process, appropriate motivational package, well-organized and cost effective orientation and training programs, well-organized family transition and finally a sound financial plan and feasibility study. The study finally recommends firms to develop policies that will ensure implementation of above mentioned solutions process. The study also recommends firms to consider developing appropriate policies that will enhance the adaptability of expatriates in foreign countries.