Expatriate Management: How to Enhance Adjustment and Performance
Expatriates are employees of multinational organizations working in overseas subsidiaries on temporary assignments that usually take more than six months and less than five years in one term (Aycan and Kanungo, 1997). The key benefits of expatriation include knowledge transfer among organizations, control of the local unit and contribution to local unit’s performance and human resource development (e.g., Harzing, 2001; Hebert et al., 2005; Minbaeva and Michailova, 2004; Selmer, 2004).
Global expansion of business organization has become the norm. Multinational business organizations not only have subsidiaries, but also headquarters in diverse locations. For example, according to a recent survey (Brookfield Global Relocation Services, 2012), 42 per cent of business organizations have their headquarters located in the Europe, Middle East and Africa region (EMEA) in 2007 compared to only 10 per cent in 2000. Growing geographical expansion of business activities parallels a growing expatriate population. Although, depending on the purpose of the assignment, alternative forms of overseas assignments are proposed including short-term assignments, frequent flyers, international commuters, flexpatriates, international itinerants and inpatriates (employees from an international subsidiary working in the headquarter for a temporary period), expatriation is still the most common form of overseas assignments (see Banai and Harry, 2004; Mayerhofer et al., 2004; Minbaeva and Michailova, 2004). Sixty-three per cent of the 123 multinational organizations participated in the Global Relocation Trends (Brookfield Global Relocation Services, 2012) survey reported that their expatriate population are expected to increase from the previous year, whereas only 8 per cent reported an expectation of decrease. This trend is attributed to commercial growth within the European Union, the growth in the Chinese economy and high cost of doing business in the US.
HSBC Bank’s International Expat Explorer Survey (2008) of 2,155 expatriates showed that the top three destinations that Western expatriates preferred were the United Arab Emirates, Singapore and India, bottom of this list were the UK and France. This indicates that expatriates in growing numbers work in countries that are culturally dissimilar to their own. Hence, finding the right candidate for expatriation, preparing them for the assignment and retaining and motivating them are at the top of international human resource management (IHRM) agendas of multinational organizations. Before presenting specific IHRM practices to improve the success of expatriation, let us first discuss what we mean by expatriate success and failure.
Reports show that 12 per cent of expatriates leave the assignment and come back to the country of origin before their term is over, and 6 per cent failed during their assignment (Brookfield Global Relocation Services, 2012). Why do you think some expatriates prematurely terminate their assignment or fail in their assignment?
There is consensus in the literature to define successful expatriation on the basis of two criteria: cross-cultural adjustment and job performance (e.g., Harzing, 2004). An expatriate’s 'failure’ implies failure to adjust to the host country (adjustment criterion) and/or failure in the assigned job (performance criterion). The majority of expatriates who fail suffer from adjustment problems rather than job-related incompetence.