Ebook: Management Of Expatriates : Contemporary Development And Future Challenges

The management of expatriates: contemporary developments andfuture challengesThe rapid growth of international business at a time when many multinationalcompanies (MNCs) are under increasing cost pressures has led theseorganisations to take a much closer look at their expatriation policies andpractices. Faced with unprecedented levels of foreign competition at home andabroad, firms are beginning to recognise not only that international business ishigh on top management’s list of priorities but that finding and nurturing thehuman resources required to implement an international strategy is of criticalimportance (Dowling et al., 1994). Much of the research on the management ofexpatriates currently available is drawn from research focused on NorthAmerican multinationals. Adler (1997) commented that most research oninternational human resource management was concerned with Americanexpatriates and continues to be written from an American rather than aninternational perspective. This introduction seeks to highlight the growth ofresearch into expatriation to set the context for the five papers in this specialedition that both add to some traditional areas of expatriate research and openup new fields relevant to this area of enquiry in international management andinternational business.An understanding of the management of expatriates is of growingimportance at the present time for a number of reasons outlined below (seeScullion, 2001): . As MNCs increase in influence and number associated with rapidincreases in global activity, so the role of expatriates in those MNCsincreases in significance (Black et al., 1999). . The effective management of expatriates is increasingly been recognisedas a major determinant of success or failure in international business(Black and Gregerson, 1999). . Research suggests that many international firms had experiencedshortages of international managers, which often acts as a significantconstraint on the implementation of international growth strategies (PriceWaterhouse Europe, 1997/1998). . The rapid growth of smaller and medium sized enterprises (SMEs) thathave internationalised their operations in recent years means that issuesof expatriate management are increasingly important concerns in a farwider range of organisations than the traditional giant multinationals(Brewster and Scullion, 1997). . It is increasingly recognised that the human and financial costs ofunderperformance/failure in the international business area areconsiderably more severe than in the domestic area. There is alsoevidence that many companies relatively new to the international sceneunderestimate the complex nature of human resource (HR) problems inthe international arena and that business failures in the internationalarena may often be linked to the poor performance of expatriates (Forster,2000). In general terms, the study of expatriation has followed the traditionalexpatriate “cycle” – selection, training, relocation and adjustment, pay andperformance and return, with early attention on the earlier stage of theassignment and a successively developing focus on the later and more complexissues of performance and repatriation (Scullion and Brewster, 2001). Baruchand Altman (1999) found that much research dealing with expatriation hasbeen concerned with individuals lacking in conceptual work at theorganisational or human resources operational level. Linehan (2000), Adler(1997) and Harris (1995) suggest that expatriate management has long been amasculine preserve in the USA and Europe, with little research conducted withEuropean female expatriates, mainly due to their relative scarcity. According toAdler (2002), as global competition intensifies, the opportunity cost of relyingon the traditional male expatriate escalates. Most global managers know theircompanies can no longer afford to ignore potential talent “simply because it’swearing a skirt” or because it holds a passport different from that of thefounding executives (Fisher, 1992). The empirical research on trends in international staffing policies, inaddition to identifying the reasons for employing expatriates, also revealedsome interesting differences between North American and UK firms with the latter using longer assignments and relying more heavily on expatriates tocontrol overseas operations (Scullion, 2001). Recent European researchhighlights the importance of country specific factors and points to thedifferences between countries in staffing practices. Harzing’s (1999) study, forexample, shows Japan and Germany at one extreme with a high level ofexpatriate presence while the USA was at the other extreme.Recent research has highlighted that not all cross-border business activitiesare staffed by “traditional” expatriates, that is, expatriates on internationalassignments lasting several years. Increasingly, purchasing and sales activitiesare conducted by people on short (often, literally flying visits). Thedevelopment of travel and technology is making such “substitute” expatriateactivities more common, particularly in Europe. Euro commuting or frequentflying is becoming increasingly common (Petrovic et al., 2000; Mayrhofer andScullion, 2002) and the increasing use of video conferencing and real timecomputer information from around the world has provided alternatives tocontrol by the physical presence of an expatriate. The implications of thesedevelopments for the management of expatriates remain largely unresearched,but they may have considerable implications for MNCs (Scullion and Brewster,2001).Research into the recruitment and selection of expatriates is often highlyprescriptive and has generally been focused on issues such as selection criteria.Recent European research, however, highlights that in practice decisions onexpatriate selection are usually taken by line managers – who often simplyignore the selection decisions espoused by the HR department (Brewster andHarris, 1999). Research also suggests that European companies pay closerattention to the selection of expatriates, perhaps reflecting the greaterimportance of international revenues for European MNCs relative to US MNCs.Also research suggests that international experience was more highly valued inEuropean MNCs, and expatriate assignments were regarded as high status andoften integral to the management development process (Price WaterhouseEurope, 1997/1998).Training and development programmes for expatriates are more common inEuropean than in US MNCs. Research shows that cultural awareness trainingremains the most common form of pre-departure training for expatriates butthat other forms of preparation – briefings, shadowing, look-see visits – aremore frequent than formal training programmes and may be more costeffective (Brewster and Scullion, 1997). A recent trend is that European MNCsare extending their pre-departure training programmes to include the partnerand children, reflecting the growing awareness of the link between expatriateperformance and family adjustment (Linehan and Scullion, 2002). Finally,several influential models of training and development for expatriatemanagement have been developed including contingency models whichconsider the task, the individual and the environment before deciding the depth of training required (see Black et al., 1999). Recent research, however, suggeststhat the development of international managers in the future will involve morefrequent cross-border job swaps, short assignments, or assignments to multiculturalproject teams (Forster, 2000).Issues of expatriate adjustment have been highlighted in recent research incentral and eastern Europe (CEE) which shows that local managers in thesecountries often resent the attitude of Western expatriate managers who areseen as unwilling to take into account the views of local people (Cyr andSchneider, 1996). Morley et al. (1997) address the extent to which frameworks ofinternational adjustment, developed primarily in the North American context,are applicable to the transition economies of the CEE. They suggest that adetailed understanding of the context of adjustment in each case is thereforeseen to be important in determining which variables are likely to causeproblems.The whole question of performance measurement and management inmultinational companies involves a complex range of issues, and research todate suggests that rigorous performance appraisal systems for expatriates arefar from universal (Schuler et al., 1991; Brewster and Harris, 1999). This isperhaps surprising given the high costs of expatriate underperformance andthe growing tendency to see expatriates as key strategic human assets (Blackand Gregerson, 1999). Research suggests that European multinationals aremore likely to pay close attention to this aspect of expatriation and tend toevaluate managers more on the achievement of long term goals than the shortterm measures used by US multinationals (Lindholm et al., 1999). In part thisreflects the growing use of international assignments for developmentalpurposes in European multinationals and the greater integration ofexpatriation into the overall career development process (Scullion, 2001).However, recent research highlights the considerable differences in the way theappraisal process is actually handled in different countries. Tahvanainen (1998)found that in Sweden and Germany, for example, it is normal for staff toparticipate in the setting of job goals, whereas in the USA setting job goals isthe priority of management. Also, problems in cultural adjustment which mayhave an impact on work performance should be considered when assessing anexpatriate’s performance in a new role (Lindholm et al., 1999).The repatriation of expatriates has been identified as a major problem forMNCs in Europe and North America (Black et al., 1999; Linehan and Scullion,2002). A recent study showed that a majority of US managers were satisfiedwith expatriation, while a majority were unhappy with repatriation (Tung,1998). Indeed, concern over re-entry was cited as a significant reason affectingexpatriate performance (Scullion, 2001) and North American academics havemade a major contribution to our understanding of repatriate adjustment (seeBlack et al., 1999). Many expatriates leave their company on return with theconsequent loss of investment and expertise. This loss of investment and international knowledge has led to calls for a more strategic approach torepatriation (Linehan and Scullion, 2002). Yet, while it is widely accepted thatthe costs of expatriate turnover are high, very few firms have effectiverepatriation programmes. Recent research shows that the management ofrepatriation is more complex in decentralised multinational companies andyields some insights into how the repatriation process can be used to developthe internationalisation of organisations (Scullion and Starkey, 2000). Researchevidence suggests that between 20 per cent and 50 per cent of all expatriatesresign – a significantly higher percentage than among non-repatriateexecutives (Black and Gregerson, 1998). In practice, many organisationscontinue to adopt an ad hoc, sink or swim attitude in relation to repatriation foremployees and their families, and many expatriate managers continue toexperience the repatriation process as falling far short of expectations (Strohet al., 1998).Finally, the handling of expatriation issues is a crucial role in thecompetitiveness of organisations. The traditional parameters of humanresource management may prove insufficient to deal with mobility needs orwith the willingness of managers to accept transfers. Vanderbroeck (1992)emphasises the possible effects on international mobility because of changingvalue systems in western countries. In most western societies the percentage oftwo-career families is high, and particularly when a transfer means that apartner must sacrifice a personal career, this can make recruitment quitedifficult. The recent fashion for “quality of life” issues over materialistic valuesmeans that organisations that make career success conditional on acceptance ofoverseas assignments might find it difficult to retain good talent. Similarly,when home-country organisations do not value expatriate experience and failto make positive use of repatriated employees, this can discourage newcandidates from accepting expatriate assignments.This special issue of the Journal of Managerial Psychology presents fiveselected papers that, in various ways, investigate aspects of expatriatemanagement that have been part of the mainstay of research in this areaheretofore, along with more recent developments that may acquire a pedigreein the field into the future.In our first paper, Vesa Suutari from the University of Vaasa in Finlandfocuses on global managers who are committed to international careers overthe longer term. The author starts from the premise that much extant researchdoes not provide empirical evidence on the careers of those who relocateinternationally on a relatively frequent basis. He notes from his trawl of theliterature that the focus of much of the research on international careers hasbeen on those expatriates who decide to repatriate permanently back to theirhome country following a period on foreign assignment. The central researchquestion being addressed here is what are positive and negative implications o Through detailed semi-structured interviews with 24 Finnish managers, theauthor presents new empirical evidence on the career orientation, career traits,life-style implications and the career commitment of these managers.In the career orientation sphere, the author identifies two different kinds ofmanagers, namely those among whom internationalisation has played animportant role in their career orientation and a separate group who in theirearly careers demonstrated no clear intention to seek out an internationalcareer. Common among both of these types however, was a generally positiveexperience on their first assignment. With respect to their career tracks, thedata demonstrate that assignees operate across several countries during theircareers, depending on emerging company needs. International careers amongthis sample were typically of two types, namely a group who alternate betweeninternational and home assignments and another group who typically movefrom one international assignment directly on to another international move. Interms of the impact of these international careers on personal and family life,the author notes that those in this sample typically report that personalrelationships are more difficult to maintain. So too, is striking the correctbalance between work and family/personal life and an ongoing requirement foradjustment by both the assignee and his/her family was nominated as animportant issue. Finally, in terms of their commitment to their internationalcareer, the majority of interviewees in this sample indicated that they wouldnot abandon the international dimension to their work and career. Rather theydemonstrated a high commitment to this international element of their careersand to its value as a means of securing organisational success into the future.The focus of our second paper in this issue switches from the internationalassignee to that of the local employee working for the international firm.Drawing on data gathered among 317 local managers at the Indian andPakistani subsidiaries of a British MNC, Carol Reade of the University of SriJayewardenepura in Sri Lanka focuses on what it takes to motivate such localemployees. The author examines the extent to which a number of variablesenhance the inclination of local managers to exert effort for the benefit of theMNC as a global entity, as well as for their local company. Here organisationalidentification, described as the psychological bonding between the individualand the organisation, is viewed as being of primary importance. Othervariables that are seen to buttress this are both supervisory support for thelocal employee and local employees’ perceived access to the organisationalhierarchy, regardless of nationality. From her review of the extant literature,the author notes that identification with the organisation has long been positedas an important determinant of the effort that one exhibits in the workplace tothe point where a perceived oneness with the organisation suggests a mergingof organisational and individual identities. This, the author notes, is in contrastto the situation where pragmatism or instrumental motivation are the order ofthe day. Despite its importance as a central tenet of organisational success,understanding the nature of the identity one has with the organisation in theMNC context is not straightforward. Indeed the author notes that research inorganisational identification is relatively sparse and applications to the MNCcontext are particularly rare. Here, Reade draws on social identify theory toillustrate whether local managers make a distinction between what they will dofor the “local subsidiary” and what they will do for the “global organisation”and she advances a set of antecedents of organisational identification in MNCs.The results of the investigation show a clear distinction between “effort for thelocal company” and “effort for the global organisation” with local managersperceiving a difference between their local company and the globalorganisation in terms of their willingness to exert effort. While in general,local managers were more willing to expend effort for the local company thanfor the global organisation, those at the Pakistani subsidiary did not appear tomake this distinction. A multiple regression reveals that organisationalidentification did have a significant impact of effort, with local identificationhaving a significant impact on local effort and global identification beingsignificant in the context of global effort. Beyond identification, the analysisreveals that local effort is positively influenced by, among other things, theprestige and distinctiveness of the local company and negatively impacted by apreference for cultural similarity in the workplace. Concomitantly, global effortis positively impacted by support of superiors at the MNC headquarters andnationality not acting as a barrier to promotion at the global level, whileinterpersonal relations with peers at the global level emerges as having apotential negative impact on global effort. Michael J. Morley, Margaret Linehan and Hugh Scullion Previously published in: Journal of Managerial Psychology, Volume 8, Number 3, 2003