Managing Your Expatriates: What the Successful Firms Do Gary R. Oddou San Jose State University Executive Summary There will always be a strong need for expa- triates. As new countries become part of the global marketplace, U.S. firms initially tend to send their own personnel abroad. The need to provide a training ground for a firm's employ- ees makes intemational posts invaluable; fur- thermore, it is important to select carefully any potential expatriates. In the research presented here, several straightforward criteria about em- ployees’ domestic work performance, which can be used to evaluate prospective expatriates, are formulated, Recommendations by expatriates themselves to improve preparation for their in- ternational assignment are given, including rec- ‘ommendations such as: language training; more time off to prepare for the move; a clarification of performance criteria; and consistent expec- tations between the domestic and the interna- tional site management teams. Specific means to improve a firm’s overseas support of its ex- atriates are discussed, as well as how success- {ful firms manage their expatriates upon reentry. A\s survey after survey indicate, U.S. CEOs of the largest intemational and multinational firms increasingly expect their new growth to come from overseas, particularly from Europe. Ac- cording to one Wall Street Journal survey, 60% of the CEOs surveyed expected to increase their firms’ global scope by expanding into new in- temational markets within the next 12 months (Wall Street Journal, 1989). Increasing revenue and profitability are the two most cited reasons, for plans to expand. While developed foreign countries are sup- plying multinational firms with more and more of their own management and technical per- sonnel, expanding into new international mar- kets means (almost always) selecting and pre- paring one’s own personnel to help open new markets and then manage them. Likewise, maintaining an effective expatriate-repatriate program is tantamount to strategically devel- oping one’s senior managers to acquire an in- ternational or multinational perspective and to act as intemational coordinators for the firm (Kobrin, 1988). As expatriates return, their new perspective and experience can lead their firm toward effective multinational strategies. The primary purpose of this article is to ex- plain how firms can manage better this critical Tesource—expatriates—in order to maximize the value added from intemational work experi- ences. In past years, because of firms’ inability to effectively select and manage their expa- triates (primarily due to the lack of integrated international human resource (HR) strategies), attention has been focused on more seemingly substantive business elements: product inno- vation, product quality, and cost sourcing, Comments in a recent Wall Street Journal ar- ticle by such notables as Ed Dunn, CEO of Whirlpool Corporation; Duane Kullberg of Arthur Andersen & Co.; Douglas Danforth, former chairman of Westinghouse Electric Co. under- score the renewed interest and increasing im- portance of managing expatriates’ intemational work experience (Bennett, 1989). In addition, in very recent years, researchers’ interest in in- temational assignments as part of the growing global market-place has produced a consistent body of knowledge that was not available a de- cade ago. The suggestions in this paper are derived from MANAGING YOUR EXPATRIATES 301the result of a detailed survey of over 165 ex- patriates, mostly in the high technology and banking industries; in-depth interviews with over 40 others, and interviews with a number of cor- porate HR directors in charge of intemational assignments and associated with firms with su- perb industry reputations of their HR policies (Oddou, 1989). Effective management of a firm's interna- tional personnel includes properly selecting, preparing, supporting and reintegrating them. There is no magic formula, but rather an ap- propriate application of some straightforward findings. ‘Type of Expatriate It is the practice of firms to regularly send their “high-potential” employees on extended ‘overseas assignments to enrich their perspective of the company’s total operations. These same firms, like others, also send a second category ‘of employees to international posts simply be- cause there is an opening and because the em- ployee would like to go abroad. In this case, the firm has no particular investment in filling the post with a host national or an American. It is a question of who is qualified, available, and willing to go when the opening occurs (i.e., the “interested and willing” expatriate). The third type of expatriate who is sent is the technical expert, He/she is sent to act as technical sup- port (e.g,, manufacturing, maintenance, or sales suppor) for one of the company’s products. The product nearly always originates from the do- mestic operation and is then manufactured and/ or marketed overseas. The firm sends one of its employees who is intimately familiar with the product. In summary there are three basic types of employees sent on international assignments: the high-potential employee, the interested and available employee, and the technical expert Most firms with international operations send the last two types of individuals frequently; however, only a relatively few firms—generally the best performers—regularly send their high- potential employees on such assignments as part of their formal career path. Consistent with their 302 HUMAN RESOURCE PLANNING, VOLUME 14, NUMBER 4 view of the importance of their overseas mar kets and their plans to expand internationally, these firms ultilize strategic international HR for- mula generated by a more advanced manage- ment philosophy. These firms realize that their business strategies must reflect a sophisticated understanding of the global marketplace. As a result, including international posts for their fu ture management “stars” is straightforward logic. IBM, Merck, Westinghouse, Alean, Dow Chem- ical, Ford, and others form this group. Selection Criteria The selection of expatriates is determined partly by the firm's management philosophy, the type of markets it is in, and the type of need that exists overseas. Regardless of the type of expatriate being sent, however, there is always the danger of failure, Failure can come in two general forms: (1) premature return due to the employee's or the employee's family's inability to adapt, and (2) corporate-foreign site alien- ation, or deteriorated relationships between company image and foreign governments, or other very expensive indirect costs due to the expatriate’s inability to manage his/her assign- ment adequately. One of the most cited reasons for decreasing the numbers of expattiates is in- deed the cost-benefit ratio. With the risk of ex- patriate failure estimated at around 20% or more; the direct cost of expatriation estimated at be- tween $50,000 to $150,000 (Black, 1988); and the immense (potential) indirect costs, it pays to send the right person. Despite the potential and real costs involved, however, the risk is worth the benefit of generating an international and even multinational mentality within the firm. What constitutes the “right” person? First, there are never any guarantees. Based on the consistent findings in the literature (Black, 1988, Black and Stephens, 1989; Harvey and Lusch, 1982; Mendenhall and Oddou, 1986) and on numerous personal observations about what it takes to succeed in an intemnational assignment, some simple questions can be asked when at- tempting to select the potential expatriate:1. How easily and how quickly has the em- ployee adapted to changes—expected and unexpected—in the domestic workplace? Much of the stress that occurs in interna- tional assignments is due to unpredictable events. Employees lack familiarity with the everyday foreign culture and with the lan- guage. The employee's ability to deal ef- fectively with these kind of stresses, can be measured easily by his/her domestic work performance. For example, when new policies or procedures have been in- troduced, how easily has the employee accepted them and adapted to them? This is particularly critical with unexpected stresses—overnight changes in deadlines, an invaluable employee giving notice of termination without advanced warming with an important deadline approaching rap- idly, etc. The number of differences among cultures in the international assignment— even if known in advance—can simply overwhelm the individual who cannot adapt to new structures, new rules, and new faces, This dimension cannot be overlooked. 2. How open-minded and diplomatic is the employee about opinions, attitudes, and behaviors that differ from his or her own? How well did the employee handle the disagreement about the new production schedule or the new marketing strategy? How does the employee deal with those of the opposite sex or with those repre- senting various ethnic groups? After the discussions about lunchroom politics are over, how do the others feel about this employee? The implications of these questions for operating successfully abroad are obvious. Less obvious, however, is the fact that in most other countries there are distinct class differences, which are always represented in the work setting, Being able to learn how to approach separate groups of people can be essential to success. 3. Does the employee enjoy meeting new people and leaming about them? At parties or other social events, how does the employee act toward people he/she doesn’t know? If appropriate, does the employee seem interested in meeting them or asking them questions? Although a suc- cessful expatriate does not have to be the epitome of “out-goingness,” research has shown clearly that a strong desire to as- sociate with others is an essential element to successful adaptation. This desire to as- sociate with others coupled with a keen interest in the people and their culture can be a true asset to the expatriate. . How self-confident or self-reliant is the employee? When the employee has been given a challenging assignment, what is his/her initial reaction, and, more importantly, what have been the results? Has the employee “taken the bull by the hors” and, though sometimes by trial and error, progressed meaningfully toward the objective? Can the employee work independently when necessary, having sufficient imagination and confidence to work in an environment that. is somewhat unclear? How cohesive is the individual's family and how supportive are they? Although gossip is not a reliable source, what is the “word” about the employee’s family situation? Problems in the family before going abroad will mean almost cer- tain disaster abroad. The amount of stress created by the move can be extraordi- nary. With the increasing percentages of dual-career couples, a great deal of sen- sitivity is required. The spouse of the po- tential expatriate might value equally his/ her career and be hesitant to make a move that could jeopardize career continuity and mobility. Sensitivity to these issues, rec- ognition of them, and frank discussion of them with the spouse are essential. In ad- dition, sometimes action might be re- quired. Increasingly, firms are trying to find suitable, and sometimes equivalent, posts for the spouse at the foreign site. The abil- ity to do so significantly enhances a firm’s chances of employing a successful expa- triate. MANAGING YOUR EXPATRIATES 3036. Does the employee deal effectively with stress? Anyone who has lived and worked abroad, particularly with a family, knows that the amount of stress involved is high for the first six months to a year. As the preced ing questions imply, stress comes from the novel situation—new neighborhood, new stores, new regulations and laws, new procedures, usually a new language, new co-workers, a new organizational culture, etc.—all of which means that one’s nor- mal manner of dealing with life on a daily basis is not going to be as effective as it used to. In the domestic job, how has the employee handled stressful situations? Has he/she at- tacked problems head on or gone in hiding to see if problems disappear? If the employee has handled situations constructively, it means either he/she can operate well under stressful condi- tions or he/she has developed means of re- ducing stress (e.g., exercise, meditation, sports involvement, etc.) that enable him/her to con- tinue working at a near optimal rate, Since there is no way to predict all the ambiguities in a fu- ture situation, despite the best-prepared expa- triate, a significant amount of stress will occur with any intemational assignment. The advantage of asking these six questions is that they are mostly directed toward the em- ployee’s past or present work habits and family situation, Generally speaking, most of the ques- tions should be answered easily and the an- swers can act as an excellent predictor of the employee's potential success in the interna- tional assignment. For firms that would like to formalize this process, a very simple process is, involved. As part of the employee's regular per- formance evaluation, such criteria as those named above (except #5) can be assessed by the evaluator. In addition, a firm can emphasize the importance of noting “critical incidents” that relate to the above set of criteria. As such, when selecting an expatiiate is necessary, the perfor- mance evaluation file of the employee can be an excellent, permanent source of information. (A supervisor or manager who has just left the company and who is most familiar with some- 304 HUMAN RESOURCE PLANNING, VOLUME 14, NUMBER 4 ‘one's performance might no longer be available for comment, at which point the employer can depend on the permanent file for information rather than on the stability of the internal work force.) Further, using such criteria eliminates the need for expensive—and sometimes unrelia- ble—personality tests or expensive, unvalidated questionnaires. And perhaps most importantly, past performance cannot be faked. Preparation of Expatriate Over 65% of the expatriates in the survey reported receiving no training at all. (This fact simply underscores the importance of selecting the person who is the most prepared in the first place.). Surprisingly, even the best companies do not spend a lot of time or money preparing their expatriates for the cultural transition. Due to costs, time constraints, and other priorities, companies can rarely justify sending the em- ployee for two or three weeks of culture training in addition to any other steps in the preparation, process. There is no clear consensus on the type of training that firms offer their expatriates based on the different preparations actually men- tioned in the survey and interviews—prepara- tions such as survival language training, discus- ns with former expatriates, and reading materials. Of those who did receive some train- ing, only 26% believed the training helped them to perform well. This does not mean training cannot be effective, but itis important to match the type of experience the expatriate will have with the corresponding training method and content (Black and Mendenhall, 1990) Another very important issue is mental prep- aration for the way that the expatriate will use his/her time and resources in the intemational, assignment. Clearly explaining what the pri- mary objectives of the assignment are can help the expatriate to hone in on what he/she is responsible for and upon what criteria he/she will be evaluated. Yet, in our survey, one-third of the expatriates said they were never told the citeria of their performance review. Further, the interviews revealed that in most cases, the ex- patriate does not even know positively who orwhat combination of people are primarily re- sponsible for evaluating his/her performance. Based on the survey results, the in-depth in- terviews with expatriates and intemational HR directors, and the literature (Stephens and Black, 1988 and previously cited literature), the com- panies who are reputed to have excellent ex- patriate success rates prepare their expatriates in five important areas: 1. They supply the expatriate with detailed information about the tax implications of the move, including effects on retirement, stock options, etc. 2. They specify everything about the com- pensation package (e.g., salary, bonuses, allowances, etc.) as well as changes in benefits available in the new assignment. 3. They provide a short orientation (usually a week or less) to the country, its culture and customs, and any other relevant in- formation. 4, They pay for a site visit for the employee and spouse so they see firsthand the gen- eral location; the firm, itself; who the ex- patriate’s colleagues will be, and typical living spaces. 5, They provide an appropriate outlet to ex- pend his/her energy. The primary areas in which expatriates would like to see improvements made include the fol- lowing: + set up similar expectations for the assign- ment between domestic and foreign site management + clarify the performance criteria and the per- formance review process + provide more time off from the current as- signment at the domestic site in order to reduce the excessive stress felt in making the transition to the foreign work site * provide more language training to facilitate casual conversation at the work site and better communication with important non- English-speaking employees. The last point is particularly interesting in view of the current thinking in nearly all U.S. com- panies—that English is sufficient in the business world. Expatriates report that it is not sufficient to perform at one’s highest level. There is too much information that is not accessible or easily obtained as a result of being monolingual Overseas Support Depending on the site and the size of the overseas’ operation, there might be no other expatriates or there might be many. Regardless of the actual numbers and the physical sense of “inclusion,” the psychological “out of sight/ ‘out of mind” phenomenon is a real fear of many expatriates. They lose daily contact with col- leagues. They're certainly no longer automati- cally included in the business or collegial talk that typified their former work milieu. Whether they have actually been forgotten or not is not even the real issue, though. They fee! forgotten. This is much mote often the case for the inter- ested and available expatriate and the technical expert than it is for the high-potential employee who has been sent overseas as part of a specific career path. The latter expatriate feels taken care of because his/her significance to the company has already been identified through a specific process. In research to date, however, there has often been little actual difference in the amount of communication from the domestic site to the expatriate, regardless of his/her potential sta- tus. The most effective practices in support of ex- Patriates in their international assignment are quite clear and include: + regular contact with the expatriates in order to exchange information and allow an ave- nue for discussion of potential problems and future plans. Company newsletters and in- formation about policy changes, at the very least, should be sent. + liberal long-distance calling privileges for the expatriate. Even with the advent of elec- tronic mail, expatriates often are reluctant MANAGING YOUR EXPATRIATES 305to use it for various reasons such as pri- vacy. a continued effort to organize social activi- ties—grouping the current expatriates at the foreign site in order to facilitate exchange of information and problem solving in an informal setting. Usually the highest-rank- ing expatriate at the site is responsible for ‘organizing these activities. In addition, those areas where expatriates, themselves, felt that more effective preparation is necessary include the following: + language instruction, supported for at least the initial few months of the international assignment + a carefully selected mentor assigned to the expatriate at both the domestic and foreign site to act as a liason, listening ear, coun- selor, etc Repatriation ‘Once selected, the employee should be given @ realistic picture of the potential impact of the assignment. Probably the most frequent com- plaint by expatriates is that their expectations are built up about how the assignment is going to rocket their career into stardom when, tuality, many of them relate it had a more fiz~ dling effect. For example, 83% of the expa- triates in the survey felt that they were led to believe the international exposure would have a very positive effect on their career. Yet less than one-third said their firm had given any clear idea about their career path upon repatriation. In addition, while about one-fifth were pto- moted upon retum, a nearly equivalent number were demoted. Worse, only slightly over 50% said there was a specific position for them upon repatriation, It is no surprise that the most successful firms differ from others in the formalized process of repatriation. Nearly 40% of the expatriates in ‘our survey said that even upon return there was sill no specific job waiting for them. Instead, often there was a holdover position until some- 306 HUMAN RESOURCE PLANNING, VOLUME 14, NUMBER 4 thing more suitable could be found. Others were told to try and find a position on their own. It is no wonder that approximately 20% of the tepatriates leave their company within six months (Adler, 1987) or that, increasingly, firms are forced to provide written contracts stating that upon repatriation, the employee will be put in a position equal to or superior to the one held before leaving on the international assignment. Expatriates report that their international as- signment has significant personal benefits and potential professional implications, For exam- ple, they believe that they gain a much more global perspective on the firm's total operations. Their communication skills are significantly en- hanced from their exposure to a different cul- ture. They report feeling more capable of mo- tivating people and of planning in a more complex environment. They feel better able to conceptualize apparently disparate events be- cause of their broader perspective gained inter- nationally. Expatriates also report greater con- fidence in themselves as a result of having to be quite resourceful in order to adapt and per- form well. ‘An additional, often critical benefit expa- triates gain is the intemational network of as- sociates. As their network grows, they are able to get more things done and to understand the perspective within the firm's sometimes far-fiung operations. Developing and maintaining regular contact with their colleagues abroad can be crit- ical to the firm's future successful operations in that country. The kind of development these internation- alists experience usually cannot be gotten oth- erwise. Also, having a cadre of individuals with such experience can be crucial to the firm’s fu- ture performance in the global marketplace. As the decisions in intemational and multinational firms must increasingly reflect a global perspec: tive, retaining these employees becomes a crit- ical HR issue. Accordingly, the most successful firms share the following two points with respect to their repatriate practices: + they begin the repositioning effort approx- imately six months before the expatriate re- turns + they make an organized, strategic, and con-certed effort to reposition the expatriate in a position that will both utilize his/her new skills and perspectives as well as one that will increasingly call for even broader de- velopment, Discussion Based on current expatriate research, itis clear that there are different types of expatriates, that firms allocate resources somewhat according to the status of the expatriate type, and that the career effects on the three types are somewhat different. It is also clear that while the career effects for high-potential expatriates are more predictable and more positive than for the other types, there is a strong need for all three types of expatriates. In addition, all three expatriate types tend to have somewhat different degrees of positive expectations from their assignment. Because the high-potential employee is sent on an international assignment expressly for de- velopmental reasons, and the other types are generally not, it is logical that the high-potential group experiences career benefits the others do not. But while the career effects for the inter- ested and willing and technical experts are more random and usually less positive, the need for such expatriates will remain strong. It is unrealistic to believe that only high- potential employees could fill all a firm's inter- national posts. Doing so would assume things that are not true: there will always be enough persons available to fill such posts; every inter- national position is predictable months ahead in order to allow for career planning and strategy; and the need for such positions is nearly always of a generalist nature. For these reasons alone, the technical experts and the interested and willing expatriates always will be needed and valued to at least a minimum degree. Numer- ous interested and willing repatriates report in interviews that even though their present firm might not value their international experience, they firmly believe that it will later or that an- other firm will in the future. This hypothesis re- mains untested, but the very possibility is en- couraging to this type of expatriate. Curiously, technical experts themselves often report they do not expect their intemational experience to be of significant career value. There is simply a need, in their view, for someone with their tech- nical qualifications and the assignment happens to be international and not domestic. Itis others in the company who lead them to believe the experience will have more far-reaching career effects than it typically does. Further, high-potential employees generally are MBAs who are either leaving a highly tech- nical area or never were involved in one. Con- versely, technical experts come from highly technical fields, are generally not routed for top management positions anyway, and are needed to respond to technical product or service ques- tions in these firms’ worldwide operations. In addition, the interested and willing expatriate can easily fill the roles needed intemationally that do not require a technical expert or are not filed already. Due to different levels of expectations and different intemational needs, the need for all three expatriates types will remain strong. The important issue is for the expatriate to realize which type he/she is and to adjust his/her ex- pectations accordingly. Of course, accurately portraying the appropriate expectations are, in great part, the responsibility of the firm, itself. Conclusion There will always be a strong need for ex- patriates—and expatriates of all three types. Al- though developed countries are supplying more and more of their own technical expertise, as new countries become part of the global mar- ketplace, firms tend to send their own person- nel overseas initially. The need for a crucial training ground for a firm's high-potential em- ployee will make international posts invaluable. Given that expatriates will continue to play a major role in firms’ HR practices, itis important, to carefully select employees among the pool of potential expatriates. Due to the high direct and indirect costs of expatriation, selecting the individual the most likely to succeed is more than half the battle. Based on an intimate MANAGING YOUR EXPATRIATES 307knowledge of what it takes to succeed overseas, { have included some straightforward criteria about an employee's domestic work perfor- mance which can be used to evaluate them for assignments abroad. While preparation is quite helpful, it does not appear to be the distinctive factor separating the firms that have extremely successful expatriate programs from those that do not; however, the reasons for this are not yet clear. Nevertheless, expatriates themselves make several recom- mendations to improve this aspect of their experience, thereby helping them be more suc- cessful overseas. Included in these recommen- dations are more language training, more time off to prepare for the move to the international site, a clarification of performance criteria, and consistent expectations between domestic and international site management. There are some simple things that firms can do to provide more effective overseas support for their internationally assigned personnel. Ini- tiating regular communications with the expa- triate, having assigned mentors, and providing a social network for expatriate families are some of the most important elements of this support. References Finally and most importantly, the most suc- cessful firms ensure the effective utilization of their expatriates upon reentry. They attempt to get the most benefit from their expatriates’ ex- periences and to further develop the expatriate in increasingly challenging positions through strategic HR management. In this way, the firm will eventually profit from the individual's broad experience by positioning him/her in strategi- cally important functions. Doing so means care- fully monitoring the individual’s progress over: seas and simultaneously planning for his/her return to domestic operations (or to another foreign site). Such planning means developing a sophisticated and strategic HR function within, the firm, The business world is continually increasing in interdependence and experiencing significant, Intemational expansion. Making decisions that reflect a sophisticated understanding of an in- creasingly complex world will be absolutely crit- ical to success in many industries. In others, it will determine whether the firm survives. Stra- tegically developing individuals with important intemational exposure will be the most critical element in realizing future success. Adler, N. Intemational Dimensions of Organiza- tional Behavior. (New York; PWS Kent, 1987). Bennett, A. “The chief executives in year 2000 will be experienced abroad.”” Wall Street Jour- nal, February 27, 1989, p. Al Black, J. S. “Work role transitions: A study of ‘American expatriate managers in Japan." Jour- nal of International Business Studies, 1988, 19, pp. 27-294. Black, J. S. and Stephens, G. “The influence of the spouse on American expatriate adjustment in Pacific Rim overseas assignments.” Journal of Management, 1989, 15, pp. 529-544 Black, J. S. and Mendenhall, M. E. “Cross-cultural training effectiveness: A review and a theoretical framework for future research.” Academy of ‘Management Review, 1990, pp. 117-143. HaNey, M, and Lusch. R. “Executive stress as- sociated with expatriation and repatriation.” Academy of International Business Proceedings, December 1982. Gary R. Oddou, PRD, is @ professor of management and mar keting at San Jose State University. His primary research inter: fests are in the international management and human resources 308 HUMAN RESOURCE PLANNING, VOLUME 14, NUMBER 4 Kobrin, S. J. Expatriate reduction and strategic control in American multinational corpora- tions.” Human Resource Management, 1988, 27, pp. 63-75. Mendenhall, M. and Oddou, G. “Acculturation profiles of expatriate managers: Implications for cross-cultural training programs.” Columbia Joumal of World Business, Winter 1986, pp. 73 79. Oddou, G. “Common expatriate practices in mul- tinational firms: The effective minority.” Paper presented at the National Academy of Manage- ment Conference, Washington, D.C., August 12~ 14, 1989. Stephens, G, and Black, J. S. “Dual career cou- ples and intemational transfers.” Paper pre- sented at the Academy of Management Na- tional Meeting, Anaheim, CA, 1988. The Wall Street Joumal Europe. Friday-Saturday, Sept. 29-30, 1989, pg. 13 ‘areas. He does consulting with interational firms to improve thei international human resource management practices.Copyright © 2002 EBSCO Publishing