International Management: For an Organization Expatriates Represent a High Cost Investment - Term Paper Example

FOR AN ORGANIZATION EXPATRIATES REPRESENT A HIGH COST INVESTMENT When someone is living in another country on a temporary or a permanent basis and is exposed to a foreign culture, not of his own native country, then that person is an expatriate. However, what differentiates an expatriate from an immigrant is his opinion about the host country. Immigrants usually adapt to the culture of their host country while expatriates are set on returning to their homeland one day and usually do not blend with the foreign culture as they are on business and deem it to be unnecessary. As the progressive trend in the growth of the businesses over the world is experienced, more and more businesses want to have a firm standing in the international market and due to this, a large number of assignments are being sent to other countries with expatriates (also known as expats). For companies who want to survive in the longer run and on a much wider scale, it has become a necessity to send assignments abroad. THE COSTS AND BENEFITS OF EXPATRIATES FOR THE COMPANY However, even if the practice of initiating expatriate programs is necessary, companies usually tend to think that it is a high cost investment as they are expected to bear the cost of the pay of the employees, their housing and the other facilities given to them and their family, like education, health, safety and the daily necessary expenses. The costs generally shoot up if the country they are being sent to have a high cost and low standard of living. Expatriate assignments may indeed be very expensive but some far sighted companies who have the longer run and the larger picture in mind are ready to afford the cost, as long as they believe that the return will be profitable and will help them expand. When it comes to calculating returns, not all companies can come to a satisfactory conclusion and experience qualms about entering into expatriate assignments. Some of the reasons for this are that costs cannot be traced back easily and the returns on the investment may take years to appear which may also not be very obvious at first. For example, a company may be able to report costs such as the remuneration given to the employee but can not quantify the return such as the value of the experience gained by the international managers at work, or the global exposure that the company got because of the assignment. Due to the difficulties faced in these calculations, many companies think that expatriates are very expensive and leave it at that, without bothering themselves about the future benefits they may earn over a period of time. There a number of things the human resource professionals of the company need to consider before embarking upon an expatriate assignment. These assignments need to be dealt with prudently as they incur a lot of costs for the company and the return they are expected to get may not be what the company has in mind. Thus, these assignments should be programmed along the strategic goals of a business. To minimize costs and to maximize the return, the human resource department of the company needs to decide whether the employees going abroad have the required technical skills to handle the task. Moreover, the employees being set abroad should be assigned a work that is important and will be beneficial to the business and the costs incurred by the company should not just be for a pleasure trip of the employees. When expatriate assignments are undertaken, knowledge transfer between countries begins to grow. One of the most important benefits of having international assignments is the multi-cultural knowledge and experiences an expatriate gains and the ability to survive in a challenging and a strange environment certainly assists the company in the longer run. The expatriates then become invaluable for the company as their abilities meet the requirements of international standards and their knowledge and experience enables the company to grow and maintain a healthy environment for its other employees. The human resource function of the company also needs to consider that the international assignments are going into the hands of the right employees, who have a promising career ahead of them and who are planning to stay with their company for a long time to come. The international task tests the potential of the employees and benefits the company by giving it exposure globally. The expatriates often have to experience a cultural shock when they move abroad and it generally broadens their mind-sets. Even more so, the expanding of the roots of the company to different countries may make the company undergo an organizational change as far as its structure is concerned. It may have to departmentalized and decentralized to allow greater flexibility to the employees and reduce rigidity. A system of delayering may also be followed to facilitate their current stance on the international market. This involves quite a number of costs and hiring and firing of employees may take place. Again, this will take time and expatriate assignment needs to be revalued and reviewed constantly to measure cost against benefit. To maximize profitability, companies sometimes plan on cutting costs by taking some facilities back but that may not prove fruitful for the companies as the employee may get de-motivated, inefficient and may want to come back to his home country. Even if he stays on abroad, there may be a decrease in productivity which may not be what the company wants. Ways of avoiding costs includes the use cheaper modes of travel, assigning of those employees who have the right capabilities but are willing to work for a lesser pay, encouraging of short-term assignments with greater returns, and the giving of clear and detailed directions to avoid confusion. Therefore, simply saying that expatriates are a high cost investment is not sufficient, the returns need to be carefully gauged and matched with the company's strategic long term goal to portray the right picture. Also, the company should work to retain the expatriates in their company after they have gained sufficient international experience. COMPETENCIES OF INTERNATIONAL MANAGERS AND THEIR SELECTION Companies, when deciding upon the workers they need to send with international assignments have a tough task of selection. The decision making process becomes more intricate because the workers, who maintain a more than average performance in their company, may not prove to be so efficient and productive when they move abroad. Likely reasons for this may be the cultural shock they will face, the troubles of starting from scratch, adjusting and settling families in a new area while surviving in a different environment with changed living standards and conditions. Moreover, they might be aliens to the new tasks assigned to them and will not be able to avail the comfort level of working from their own country. The expertise and the skills required to be efficient in the native country may be different from the experience and knowledge required in the foreign country. It may also be difficult to measure the loyalty of the employee to the company and some contracts will need to be made to tie the employee to the company so that he does not run away with the experience gained and benefit the other companies. Firstly, managers being selected for international leadership need to have an adaptive personality and their take on things should be moderate. They should be able to adapt to the new environment easily and should be able to work in a new and demanding work place effectively and efficiently. When faced with a cultural change, an employee should be able to tackle with it and blend in it accordingly but should not let the changes affect his work. They are not required to have rigid attitude with inflexible opinions and a fixed set of manner as the combination of these traits will make them appear as outcasts in the new society and they will have problem working as a team. This image of the employees may adversely affect the company's image too which would be quite an undesirable option. International managers may need to adapt to longer working hours, deal with an entirely different corporate culture and get used to the attitudes of other colleagues which is bound to be varied. They may probably face a hard time not being judgemental to other colleagues who may appear to be very different at first, from their attires, attitude or leisure talk. Managers sent abroad might even have to face hostility or racism on account of their religion, or cast etc. They should be competent enough to deal with these kinds of attitude and move on with the work assigned to them. International mangers not only have to be competent for themselves but they should also convince their families sufficiently. Workers living in a joint family may find it much harder to move and work abroad than a manager who is living alone. If the family is dissatisfied, international managers may often find it hard to concentrate on work and are likely to develop a sulky attitude. Sometimes, they may even have to face language barriers and the employees and their families may need to take a crash language course to be able to live a comfortable life in the foreign country. The education of children may need a lot of planning and the hassle of admissions and their adjusting with a new society which may completely differ with the moral and ethical values they were maintain at home. Then the cost of travelling to and fro from, say, country A to B would have to be borne by the company and in case if the family does not settle, the cost will shoot up. Another very important thing to consider is that the overseas managers need to have better communication and interpersonal skills along with a positive attitude towards challenges and new experiences. They ought to be focused on the long term goal of the company and should have an idea about the purpose of their working overseas. Leadership qualities are certainly required, not only to appear confident in a new environment but also to make the new colleagues accept the overseas manager without conflict. Thus, expatriates are required to have a good motivation level and a consistency in their work with sufficient innovative, leadership and management skills. HR PRACTICE IN DIFFERENT CONTINENTS Human resource policies and management in Asia are certainly different from the Human resource departments in companies of Europe. In Asia, Human resource is a developing department as it was quite unheard of just a few years ago. Businesses in Asia have just realized its importance and have started strengthening their business where they lacked before - human resource practice. When a multinational corporation in Europe, such as the HSBC bank is selecting expatriates, the human resource department will definitely look for experience in the relevant field; will check for knowledge and skills required the ability of the candidate to move and settle abroad, his attitude and past performance. In this regard, Asian multinational corporations, such as ABN Amro India are not quite different. They will also look for these factors, along with consistency, motivation and communication skills. "As global firms seek success in their Indian operations, and as Indian firms reach a higher degree of professionalism in the global context, they have to make critical decisions, related to people management as strategic choices. This will necessitate an appreciation of the factors which influence HRM policies and practices in the Indian context. These factors among others include availability of requisite skills and competencies, required mindsets, desired values and customs, facilitative legal framework, and institutions, and conductive cultural environment" Jackson S and Schuller R (2004) ABN Amro India, however, may insist on curtailing costs by not giving many benefits to the employees as the Human resource practice in Asia is still developing and they might not have a sound knowledge of the effect it might have on the employee's performance. Then, ABN Amro India might also insist on longer working hours and less pay as compared to corporations in Europe. The laws regarding health and safety laws in Europe are rigid but a bit relaxed in most Asian countries so employees may be at a disadvantage in Asia when being sent abroad. Then, ABN Amro India will generally look for employees with a more adaptive personality as cultural and religions norms are strictly followed like in India. The HSBC Bank in English might not be as worried as Asian ones, as European countries are a host to a lot of different cultures and the employees may not find it a problem to adapt or conform to a new society. In a nutshell, expatriates may be a high cost investment for most companies but if recruited for the right reasons and given the right plan, they will prove very beneficial for the corporations in the long run, while also adding to their own experience and learning process. References: Jackson S and Schuller R (2004) - Strategic Human Resource Management Competency model for HR Professional,(n.d.). www.opm.gov/studies/transapp.pdf Dowling P and Welch (n.d.)- Managing people in a multinational context. Jackson and Terence (2002) -International HRM Townsend, B. Competencies of International Managers (2005), Buzzle.com. http://www.buzzle.com/editorials/7-25-2005-73679.asp What competencies make international managers effective (n.d.). www.sietar-europa.org/congress2007/files/congress2007_abstract_ewington_.doc Read More