Effective Management of Expatriates in a Global Organization - Essay Example

Effective management of expatriates in a global organization Globalization Globalization has reshaped the way business is conducted and has affected even relationships between nations. The impact on business is profound as operation, e.g. production and employment is not anymore dependent on physical location. The advent of information technology also contributed to eliminating distance as factor in some business operations. The effect is that multinational corporations could now locate in almost all location in the globe, provided of course that the particular country offers favourable situation for the realization of company goals. There is now a trend for companies to design their operation according to changing global economy and local situation. This is more or less the scenario which poses a challenge to human resource management in a global business situation. Impact of globalisation to human resource management One impact of globalisation in human resource management is the phenomenon of international labour market. One of the specialised segment of this labour force is the expatriates from the home country detailed by the home office to overseer operation of their subsidiaries. Cohen as cited by Woods, defines expatriates are people working in foreign countries for a period of at least six months. Expatriates usually work at the technical or managerial levels who manages people with different cultural background. Globalization has created a setting for multiculturality and culture clashes. Entrekin and Chung as cited by Woods surveyed 209 Chinese managers in Hong Kong. They found out that most of those surveyed favoured multi-source evaluation but were uneasy with subordinate evaluation not on its efficacy in bringing a true work place picture but because of the paternalistic culture of the Chinese (Woods). This suggests the significance of the role of culture in human resource management. In another research conducted by Dawkins et al as cited by Woods, Indonesian and Singaporean respondents rated Australian expatriates as “friendly but simple, lacking understanding of Asians or Asian business practice (Woods).” Another area of cross cultural dilemma is bridging the language gap, Edwards el al as cited by Woods, asserted that “lack of cultural knowledge and language proficiency was factor for the poor performance of Australian firms in making headways in the Asian markets. It should be noted that cultural differences could be factor for the success of a multinational business enterprise. Understanding the host country’s culture is a must as globalisation not necessarily creates a uniform or global work ethics and business practices. There is still diversity of culture working parallel with global business practices. Advantages and disadvantages of using expatriates instead of local nationals There are invariably complications brought about by globalization and one of these touch on gauging the performance of subsidiary and expatriate employees once deployed in the foreign country. Dowling and Welch identify five constraints for judging performance of a subsidiary which may have impact on its employees’ performance contributing to difficulties encountered by expatriates and the firms which employ them. These constraints include: Balancing the measurement of a individual subsidiary’s performance in isolation with its contribution to the overall performance of the mother organization. Long term and short term consideration come into play with this situation Information about the performance of a subsidiary may be incomparable with other subsidiaries or with home country benchmarks Volatility of the international market which may render goals unrealistic Difficulty of communication due to different time zones and distance. The above mentioned constraints if not properly handled could translate as disadvantages in employing expatriates over the local nationals. Arguably, these difficulties add to the list of disadvantages of employing expatriates which complicate company policies on personnel working abroad. Dowling and Welch underscore the liabilities of employing expatriates for oversees posting. These are the high cost of maintaining expatriates in an international location and the high rate of expatriate failure. Such failure is due to either under-performance in the job or returning home before the assignment is completed (Dowling and Welch, 2004 as cited in p82, Learning Guide). According to the research Phatak it is estimated that US companies lose between USD 2 billion a year from failed foreign assignments (Phatak as cited in Learning guide). From the same research, it was found out that 29 percent of firms reported an expatriate cost of 2 to 2.9 times salary, 50 percent reported 3 to 3.9 times salary and 18 percent reported 4 to 4.9 times salary as compared to their local counterpart with equivalent skill and expertise. Payment scheme for expatriates is complicated and expatriates expected payment to include family resettlement and schooling for children. According to Almond, “pay is not simply determined by whether or not the firm adopts various forms of collective or individual pay based on some measure of performance, whether this be merit pay, performance-related bonuses, team based pay, profit sharing, or any of the myriad other means by which firms might attempt to relate pay to an employee’s perceived contribution to the firm.” (Almond, 2005) The high rate of failure Closer examination of the reasons for expatriate failure in foreign posting could be attributed to several factors which touch on the dilemma of adjustment to the foreign country which would be the second home for the expatriate. This is complicated if the expatriate will bring his/her family to the designated posting. Evidently, aside from cross cultural factors, psycho-social factors are operative as well. According to Dowling and Welch the personal and emotional maturity of expatriate comes into the picture and is complicated by the nature of the job and the length or duration of assignment. Willingness of the employee to move and resettle is also a factor to consider. There are other complications confronting the expatriates once they relocate, this include compliance with the host’s legal and social norms and issues on equal employment which varies between countries. Different social norms and work ethics from culture to culture brought to the fore issues on work relations, especially establishing parameters or indicators of performance. One critical concern on work relations with host country nationals is in performance appraisal. Are performance appraisal universal or should it be particularized on culture to culture basis? Dowling and Welch suggest that host country nationals develop their own appraisal system as they better understand local culture, customs and work practices. The key concept here is perception on the role of the employee which may be culture-based. Nevertheless, gap could exist between expatriates representing the home office and country nationals working under their wings. In spite of the disadvantages of employing expatriates and the high cost of failures, there is impetus for employee movement across borders as multinational companies tend to favour uniformity and control over the work organisation. Consequently multinationals align grading and performance systems to ensure smooth functioning of the expatriates under the corporations’ wing who formed the backbone of what Almond calls the global internal labour market (ILM) for managerial and high-level technical staff (Almond, 2005). And this is the main reason, in spite of the high failure of expatriates in foreign postings why local nationals. The critical knowledge The effective management of expatriates is mainly understanding cross-cultural dynamics. Expatriates should be able to understand the dynamics of the local political, social and cultural milieu in relation to their own psycho-social considerations which include their readiness for such postings and in case of expatriates with families the collective well being of the spouse and their children. Dowling and Welch suggest the following criteria for foreign posting which may be of help for companies with extensive business operation across borders. The criteria includes technical ability, requirement of the organisation, cross-cultural suitability, language ability and country/cultural requirements. The first two in list, technical ability and requirement of the organisation is generic to all managerial positions but the other three in the list mainly address the cross cultural factor. Phatak meanwhile espouses the desirable traits of expatriates to be successful in a foreign posting. The list include technical ability, managerial skills, cultural empathy, adaptability and flexibility, diplomatic skills, language aptitude, personal motives, emotional stability and maturity and adaptability of family. We take note that that technical and managerial skills are not enough to be successful in an international or foreign workplace. As Phatak pointed out, past performance is not sure indicator of future managerial success abroad (Phatak as cited by Learning guide). Cultural skills and psycho-social factors are equally important considerations. Consequently, Phatak considered the following questions for interview of prospective employees for foreign posting. Why does the candidate want to be considered for a foreign assignment? How keen is he or she about getting a posting abroad? Does the candidate have a realistic perspective of the opportunities, problems and risks involved in living and working abroad? Is there evidence that the candidate is self-reliant, adaptable, and able to work independently? What evidence is there that the candidate can learn foreign languages quickly? Does the candidate’s family have any medical problems? How many children does he or she have and how old are they? Will the children move or stay back home? How enthusiastic is each member of the family about staying abroad? Evidently, foreign positing is complex matter with no easy decisions. Careful consideration to various complications has to be considered by the employees and the companies with subsidiaries if the expatriate working pool would function as intended. It is not a simple question of matching jobs with the right people but includes a host of other considerations including the well being of the family. Apparently, the whole family is “employed” as well with its well being dependent on the firm employing the expatriate. Invariably, such difficulty of resettling in a foreign soil and the adjustment pressures from home culture to a foreign culture could strain the family no matter how close or strong the family ties. Strategies to address expatriate difficulties Given the complex cross cultural and psycho-social forces at work in the individual, in his/her family and the workplace, Fontaine (1989) suggested a strategy open to organizations to allay the anxiety of expatriates and their families. This strategy has several integrated programs which address the myriad concerns of settling and working in foreign soil. Orientation program – Fontaine suggest that expatriates and their families must be well oriented on the host country’s mores and norms, history, geography and possible risks and concerns not only of the part of the employee but on the part of the family as well. Self-selection program – in this strategy, employees are given leeway in selection of foreign posting and are assisted in making decisions with regards to the country of their choice. Evidently this approach will lessen the anxiety of the employee about their posting. Screening program – another element of this strategy which is very helpful is screening the potential employee to lessen the incidents of adjustment difficulties later on. Psychological and social considerations are properly evaluated to guide the firm and the employee of possible difficulties and asses his/her ability to cope with problems associated with working in foreign country and foreign cultural environment. Travel program – according to Fontaine, the importance of making the best travel arrangements to ease the transfer from the home country to country of destination is often neglected which sometimes start off the employee on the wrong footing. Travel to foreign countries could be filled with nuisances and the strangeness of culture could exacerbate anxieties especially for employees who will bring their families along with them to their new work. Training program – This program not only includes the nature of work or job assignment but includes language, geography and culture. The training program is also intended for the whole family. Support program - this is another area which is neglected by the home office. According to Fontaine, a support program to alleviate the resettlement anxieties is very important on the simple assumption that employees could function better if they perceive that proper arrangements for their well being is well in place. One reason which discourages oversees placement is the employee’s working spouse and family consideration. There are several strategies open for this (Dowling and Welch 2004) which include attempts by the organization to place the employee’s spouse in a suitable job with another organization with which they are associated; job hunting assistance for the spouse and the provision of employment within the organization. There are however, limitations and not all strategies work however as host government’s staffing varies with regards to couples for posting. Easing cross-cultural anxieties One of the most important considerations in placement of expatriates is cultural adjustments. This is underlined by the need for evaluating the similarity or dissimilarity between cultures. Tung (1981), suggested a test for would be employee for foreign posting which would evaluate the similarity or dissimilarity between cultures. The test includes a scale ranging from similar to highly diverse which will indicate the magnitude of difference between the two cultures for the organization to better orient and prepare their employees who will work in a foreign country with its foreign culture to facilitate adjustments. Criteria for competencies With all the considerations and concerns attendant to foreign placement, it would still boil down to the question of competencies. That is whatever the working condition in a globalised economic playground of multinational corporations, the main question would still be competence of the expatriate to deliver the expected outputs and achievement of goals attached to his/her position. Mendelhall and Oddou suggest expatriates must exhibit skills necessary for an international posting which included, being able to manage a workforce with cultural and sub-cultural differences; being able to plan for, and conceptualise, the dynamics of a complex multi-national environment; being open-minded on alternative methods of solving problems and understanding the interdependencies among the firm’s domestic and foreign operations. Juxtaposition of professional, cultural and personal considerations Effective management of expatriates in a global organization then is a juxtaposition of professional, cultural and personal considerations. Apparently, the traditional corporate value of keeping out of family affairs of its employees becomes impossible under the set of circumstances to which the expatriate is subjected. Management concerns then must also consider personal concerns of expatriate if it would effectively harness the technical and managerial expertise of its employee. Aside from the multi-level considerations, management must work within bounds of two constraints which according to Dowling and Welch affects management’s ability to deploy people for overseas posting - time available to fill an overseas vacancy and availability of suitable employees. Evaluating individual employee performance One human resource management concern is proper evaluation an employee’s work performance and evaluating the performance of expatriate employees needs special handling. Dowling, Welch and Schuller (as cited by Learning guide) suggest several variable which are important in terms of its effect on an expatriate’s performance – the task, compensation package, headquarters support, work environment and cultural adjustments. The task, the nature of task and the role of the employee should be clearly defined. This includes expectations of host country stakeholders. Compensation package, should be clearly evaluated whether opportunities posed by the assignment has been realized. Headquarters support should be evaluated on how the home office fulfilled all the arrangements for the benefit of the expatriate employee. The environment includes working conditions, and other arrangements and policies covering the performance of duties and responsibilities of the expatriate. Cultural adjustments should be measured both for the employee and his/her family. Difficulties in performance management Despite the importance of performance management, international managers encounter difficulties in actual practice particularly for expatriate employees. Among the problems encountered according to Woods are invalid performance criteria, rater competence and rater bias. This due mainly to the practice of “head offices evaluating expatriate managers with little regard for contextual difference or the unique cross cultural and cross-national challenges that an expatriate manager may face (Woods).” Repatriation The cycle of work of an expatriate should include post-assignment considerations. What happens next to an expatriate after serving his or her time abroad is repatriation which is important function of global HR management. Readjustment to home condition may be necessary as pointed out by Dowling and Welch. Repatriation has four stages covering preparation which involves the plans for the future in terms of their personal and professional life; physical relocation which involves movement to next location which takes into the picture separation from colleagues and friends; transition stage which means settling into the new life back home or other foreign destination which involves the arrangements for housing, schooling, and other things such as banking and insurance and readjustment which involves coping with the reverse culture shock and career demands. Other factors in end of assignment included anxiety and complications of re-establishing social contacts for the whole family. Such difficulties and anxieties associated with the concerns upon returning home could be reason why many employees do not accept foreign job placement. Performance audit and feedback system as a cross-cultural tool One important item in human resource management is performance audit which according to studies could improve from 15 to 20 percent in terms of engagement (Burns). Performance audit in the context of cross-cultural or multi-cultural work setting could be an instrument of understanding between employees with diverse organizational experiences coloured as it is by their beliefs and basic understanding of social relationships. Performance audit could be a learning tool particularly on the corporate culture of the individual organization as the unifying thread for employees. This corporate culture includes career paths and goals, development plans and office protocols. Performance evaluation seeks to determine the performance level of employees but it is also a potent tool for cross-cultural understanding and sharing. Getting the cooperation of host-country nationals Cross-cultural understanding is not a one way street, cooperative effort under a multi-national setting requires open-mindedness and flexibility on the part of the host country nationals. If there is need for training on culture, geography, history and language of the host country on the part of the expatriate, there is also a need for reciprocation, that is, there is need for training and orientation of host country nationals on the global trends and multi-culturality, if multi-national cooperation is to be achieved. According to Dowling and Welch, items which should be considered includes the cost of training local employees which may negate the advantages of cheap labour costs; potential of trained employees to be poached by competitors; the difficulties in joint ventures where the organization may have to fund training for the local partner’s employees and cultural differences. A last look at the management of expatriates in a global organisation There is need no doubt for reciprocity to allay cross-cultural conflicts but nevertheless expatriates are in a unique position to view the world from three perspectives – the home office perspectives which is trained on outputs and achievement of goals, the host country’s perspective which is anchored on its culture and accepted practices and perspective of the subsidiary operating between the imperatives of the home office and host country. Human resource management of expatriates in a global organization must effectively take into considerations these three perspectives if it hopes to fully harness the benefits of cross-national exchange not only involving considerable sums for investment but considerable amount of skill, technology, knowledge and culture. REFERENCES . Almond, P. (2005)., The management of pay, wage classification and performance in the UK subsidiaries of US MNC's Burns, J., Revving up your performance management Woods, P., Performance management of Australian and Singaporean expatriates Managing Human Resources in a Global Perspective  Read More