Failure of Traditional Expatriation Appointments - Essay Example

‘What are the Key Reasons Why Traditional Expatriation Appointments and Repatriation Often "Fail"? What can MNCs Do about this?’ Table of Contents Introduction 2 Literature Review 2 Critical Analysis 4 Measures to be taken by MNCs to Deal with the Failure of Traditional Expatriation Appointments and Repatriation 6 Conclusion 7 References 9 Introduction Globalisation and revolutionary changes in technologies have provided significant opportunities for the domestic business organisations to expand their business beyond the national periphery to overseas markets (Geiersbach, 2010). As a result of growing internationalisation of global marketplace, more and more firms can be seen to be operating in the international business arena. Globalisation has also resulted in augmenting the number of expatriates as well as repatriates (Friedman, 2007). However, these firms’ also known as multinational corporations (MNCs) are faced with certain imperative problems in terms of relocating their employees (expatriation) abroad and employees returning to their country of origin (repatriation). In this regard, it is observed that most of the MNCs in the current globalised world are encountered with high rate of the expatriates and repatriates failure. Such failure witnessed by the MNCs has reduced their capacity to sustain their business smoothly and profitably in the overseas market. At the same time, the increasing failure rate related to traditional expatriation appointments and repatriation has drawn urgent demand for resolving these challenges faced by the MNCs (Harzing, 1995). In a nutshell, this essay intends to identify and critically analyse the key reasons behind the failure of traditional expatriation appointments and repatriation. Later, the essay seeks to determine the appropriate solutions for successfully dealing with this problem. Literature Review Collings & et. al. (2007) asserted that staffing issues in the international context are complex and challenging. Despite the challenges associated with the staffing issues, it has been argued that MNCs are using traditional expatriation appointments on a frequent basis. Accordingly, myriad reasons have been propagated behind the use of traditional expatriation appointments. In this regard, one of the potential reasons has been associated with the rapidly growing demand for competent and experienced global managers which is accompanied with reduced supply of the same. The other reasons include the desire of the parent company to acquire centralised decision making and control over the operations of the subsidiary located in the overseas market. Thoo (2013) has defined expatriate failure as “as the expatriate’s premature return to his or her home country prior to the completion of his or her actual assignment duration”. Accordingly, Thoo (2013) has identified multiple reasons that contribute towards expatriate failure. Correspondingly, the new business obligation in the host country is ascertained to lead towards expatriate failure. Family problems related to spouse, children and aging parents are also considered as the major reason behind the failure of traditional expatriation appointments. Most importantly the failure of expatriates to adapt in a new culture also known as culture shock is identified to be one of the prominent reasons. Citing an example of Malaysian conglomerate, it has been reported that Malaysian Indian expatriates demonstrated their failure during their appointment in India particularly due the difficulties associated with the integration which has resulted in cultural clashes. On further note, Thoo (2013) asserted that insufficient compensation provided to expatriates as well as a lack of adequate communication from the headquarters often cause traditional expatriation failure. According to Qi & Lange (2005), failure rates of traditional expatriation vary across the nations. Contextually, it has been stated that failure rates in the most of the US MNCs range from 10% to 40% which is 5% less as compared to the failure rates in Japanese and European MNCs. Nonetheless, similar reasons as propagated by Thoo (2013) have been identified. Accordingly, it has been perceived that personal characteristics and technical competence of expatriates along with the environmental variables associated with the host culture are the major reasons behind the failure of traditional expatriation appointment. It has been further stated that cost associated with the failure of traditional expatriation appointment is massive which often results in MNCs to suffer from both financial as well as non-financial losses. Accordingly, MNCs experiencing expatriate failure is argued to suffer from heavy financial or direct losses in the form of expatriate’s remuneration, overseas service allowances, premiums and other benefits. Moreover, it has been argued that the impact of the non-financial or indirect losses can be more expensive and catastrophic that may be associated with deteriorating relationships with the stakeholders present in the host country including customers, suppliers, partners as well as government. It has been further claimed that substantive cost of expatriate failure can create significant challenges for the subsidiary to operate its business in the particular host country. According to Chew & Debowski (2008), repatriation is determined as the process when an expatriate returns to the home country from host country. It has been claimed that similar to managing of traditional expatriation appointments, repatriation is also a complex and challenging process. It has been affirmed that retention of repatriates in MNCs has proven to be a matter of concern. MacDonald & Arthur (n.d.) have defined repatriation failure as a situation when MNCs “lose a large development investment and high potential employee where a considerable knowledge leaves an individual who understands both corporate headquarters and overseas subsidiaries”. According to Paik & et. al. (2002) managers returning from subsidiary in abroad to parent company in the home country are likely to resign from their employment. In this regard, various factors have been articulated that have contributed in increasing the attrition rate of repatriates. Notably, reintegration associated with work environment, socio-cultural environment and family has been argued to be the major reason causing a significant impact. In the similar context, Rahim (2010) has also identified certain imperative reasons behind the repatriation failure. Accordingly, it has been claimed that career anxiety and the fear amid expatriates that their stay in the foreign location may have resulted in loss of visibility and isolation from the parent company causes expatriates to leave their employment. Moreover, Jassawalla & Sashittal (2009) stated that the loss of status and dissatisfaction amid the repatriated managers along with the failure to establish effective relationships by home office mentors with repatriated managers is often associated with repatriation failure. Critical Analysis It has been observed that over the last few decades there has been continuous increase in the globalisation of organisations. The globalisation of organisations has been further coupled with increasing expatriation which has been ascertained to play a pivotal role in the current MNCs. In addition, it is identified that human resource practices among the MNCs vary significantly across the globe. Besides, the noteworthy differences in the purpose of using expatriates are identified. For example, it is observed that MNCs in Germany use expatriates in order “to develop international management skills.” On the other hand, MNCs in Japan and the United Kingdom are using expatriates “to set up a new operation” while in the United States, MNC have been engaged in using expatriates “to fill a skill gap” (Tungli & Peiperl, 2009). Despite the differences in the purpose of using expatriates, high rate of failure in traditional expatriation appointments is found. The analysis revealed various reasons for the failure in traditional expatriation appointments. In this regard, the new business requirement either in the home country or the host country is identified to create immense pressure on expatriates which ultimately leads to expatriates failure. At the same time, it is recognised that the ability of the expatriate’s family members particularly spouse and children acts as a major determinant behind the success or failure of traditional expatriation appointments. Correspondingly, family members having difficulties in making appropriate adjustments is deliberated to result in expatriates’ failure. Moreover, it is obvious that the culture in one country differs from another to a large extent. Cultural shock experienced either by the family members or the expatriate him/herself is also ascertained to result in expatriates’ failure. The analysis further revealed that language barriers and a lack of sound understanding regarding the environmental variables including political, social, economic and legal environments are often perceived to contribute towards expatriates’ failure. In addition, insufficient compensation and a lack of proper communication from the headquarter causes significant dissatisfaction amid the expatriates which ultimately ends up with expatriates’ failure (Thoo, 2013). The further evaluation revealed that the cost associated with the expatriates’ failure is massive. MNCs that have experienced expatriates’ failure are more likely to suffer from financial and non-financial losses. The impact of non-financial loss on MNCs is evaluated to be drastic which may result in damaging the relationships with the stakeholders in the host countries thereby disrupting the operations of subsidiaries to a considerable extent. Similarly, it is evaluated that MNCs often find it difficult to retain repatriates. It is observed that often repatriates resign from employment on their return to home country. Various reasons were identified for the failure of repatriation in MNCs. Correspondingly, international experience often causes repatriates isolated from own culture and society which may result in social disappointment. In addition, loss of status and financial gains in terms of overseas service premiums and other related benefits may exacerbate their desire to work within the parent company. Apart from this, career anxiety and fear that the parent company will place less confidence on them often causes repatriates to leave their employment. As a result, MNCs often suffer from losing skilled employees having considerable experience and knowledge regarding both parent company as well as subsidiaries thereby reducing the organisation’s level of competency. At the same time, the failure to build relationships between the home office mentor and repatriates eventually causes MNCs to suffer from repatriation failure (Rahim, 2010). Measures to be taken by MNCs to Deal with the Failure of Traditional Expatriation Appointments and Repatriation As stated earlier, the cost associated with the failure of traditional expatriation appointments and repatriation on MNCs is massive. It is thus essential for MNCs to devise effective human resource strategies that would ultimately assist them in reducing he failure associated with the traditional expatriation appointments and repatriation. Responding to this, a few imperative measures can be identified that can aid MNCs in reducing the failure rate as well as cost associated with it. It is essential that personnel associated with the international human resource management (IHRM) within MNCs are well trained and hold broader mind-set towards rapidly growing globalisation initiatives. Besides, IHRM personnel are also required to have considerable understanding regarding the dilemmas encountered by expatriates and their family members in the host country. During relocation of expatriates, adequate supports and assistance should also be provided. At the same time, while recruiting and selecting expatriates due focus needs to be placed on examining their level of competencies and skills. Support activities related to training and development of expatriates should be expanded to their family members as well (Thoo, 2013; Okpara, & Kabongo, 2011). It would be vital for MNCs to make investments on the process that would assist repatriates on their return to effectively manage their anxiety and other ambivalences. It is equally important that home office mentors are engaged in building effective relationships with repatriates wherein they are motivated and are not ridden with the feeling of isolation or dissatisfaction (Jassawalla, & Sashittal, 2009). Conclusion It has been observed from the foregoing discussion that globalisation has promoted widespread expansion of business organisations beyond the national boundary to international arena. At the same time, this expansion has been accompanied with increasing expatriation. MNCs in different countries are ascertained to use expatriation driven with different motives and purposes. However, the growing use of expatriation is also ascertained to be surrounded with high failure rates. Numerous reasons such as family situation, inability to adjust in the new culture, a lack of sound understanding regarding environmental variables, insufficient compensation, and poorly channelized communication from parent companies were observed to contribute towards the failure of traditional expatriation. On the other hand, a lack of appropriate mentoring and failure to establish relationships with repatriates along with anxiety and feeling of status loss were prominent factors in repatriation failure. Besides, the cost associated with the failure of MNCs is observed to be massive and throbbing. In order to reduce the cost associated with the failure, it is essential that personnel responsible for IHRM are well-trained and have the sound understanding regarding the dilemmas faced by expatriates and their family members. Likewise, training and development needs to be extended to expatriates as well as their family members. Besides, MNCs should invest in framing processes that would assist repatriates in overcoming their anxiety and making the environment comfortable for them. Moreover, mentors in the home office should demonstrate their commitment towards building effective relationships with repatriates. Precisely, it can be concluded that MNCs are required to bring reforms in their IHRM practices. References Collings, D. G. & et. al., 2007. Changing Patterns of Global Staffing in the Multinational Enterprise: Challenges to the Conventional Expatriate Assignment and Emerging Alternatives. Journal of World Business, Vol. 42, pp. 198–213. Chew, J. & Debowski, S., 2008. Developing an Effective Repatriation Strategy for MNC: A Model and Tools for International Human Resource Management. Journal of Comparative International Management, Vol. 11, No.2, pp. 3-21 Friedman, B. A., 2007. Globalization Implications for Human Resource Management Roles. Employ Respons Rights J, Vol. 19, pp. 157-171. Geiersbach, N., 2010. The Impact of International Business on the Global Economy. Business Intelligence Journal, pp. 119-129. Harzing, A., 1995. The Persistent Myth of High Expatriate Failure Rates. Human Resource Management, Vol. 6, pp. 457-475. Jassawalla, A. R. & Sashittal, H. C., 2009. 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Thoo, L., 2013. International HR Assignment in Recruiting and Selecting: Challenges, Failures and Best Practices. International Journal of Human Resource Studies, Vol. 3, No. 4, pp. 143-158. Read More