How Is Expatriate ROI Defined In Global Companies ?


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Because of the financial crisis, the C-suite executives’ salary, benefits and advantages have been on intense scrutiny lately.  For expatriate executives, the costs can be three to four times the costs of local employees.

From a HRM point of view it might be tempting to cut the expatriate’s benefits and hire local talent which might not be possible for some senior executive positions such as country managers in China, Brazil or Russia.

In fact more and more global companies are sending expatriates not only to share knowledge but also to build global teams with local understandings of market constraints or regulations to define competitive global and local strategies.

When the corporate culture is very strong like for Coca Cola, L’Oreal or GE,  it is important to have expatriates moving every 3 to 5 years with some returns to the HQs’ home in between for developing “third cultures”. ” Third cultures” means people who think and act “glocally” and share strong corporate values.

Even if more and more people work in  a “virtual” environment, the physical presence of a human is necessary to build such “third culture teams”. If you are familiar with expatiate topics then you know that it is the same for children of expatriates who are called the “Third Culture Kids” or TCKs.

Many HRM in global companies want  to measure the return on investment (ROI) from expatriates to define global HRM practices and measure performance. However they might be a disconnection with business managers who do not see the value of such indicator.

ROI can be defined as “value the employee brings”/ total costs (direct and indirect)

If costs are relatively easy do determine, value can be short-term or long-term and a part of it is subjective such as the impact of the executive ‘s network. and his/her personal reputation.

Yvonne McNulty from Department of Management, School of Business and Economics of
Monash University conducted in-depth interviews with 50 mobility managers in global firms over a 2-year period from 2004 to 2006.  I highlighted her main findings but you can find the full report at the end of this article.

Our findings suggest that firms do not have formal procedures in place to measure expatriate ROI and instead rely heavily on informal practices that are seldom aligned to a global strategy

This is not really surprising because of the diversity of expatriates profiles, roles and impacts on the entire organization vary greatly from one individual to another and change with countries.

International assignments are considered a necessary cost of doing business for global firms, how expatriates are managed in terms of the HR practices that support their activities and how the outcomes of those activities impact broader firm performance may be important concerns

Even if it is important for HRM to have standards and guidelines, if a company wants to attract global talent willing to relocate and make sacrifices both from family, spouse and career points of view, flexibility is required and even today with 10% unemployment rate in the USA it is still hard to find good executives willing to become expatriates.

Based on evidence that the nature of expatriation is rapidly changing, we conclude that expatriate ROI remains a challenging and complex process that managers in global firms are currently not well-equipped to address

Reference: http://www.thetrailingspouse.com/docs/Industry_Report_May_2010.pdf


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3 thoughts on “How Is Expatriate ROI Defined In Global Companies ?

  1. Marilene GARCEAU September 15, 2010 at 4:30 pm Reply

    Anne,

    Thanks for this article, very interesting.
    Not only are firms not well-equipped to address ROI, there is a real need to understand the value of actions that are not directly linked to the expatriation but that have a real impact on its success : proposing additional services for the spouse and kids, making sure that all the conditions are still favorable to the success of the expatriation a year after the initial move, validate that contracts with suppliers are still adapted to the expatriation situation post financial crisis and to the needs of the good executives that are willing to become expatriates, …

    Marilene

    • Anne Egros, Global Executive Coach September 15, 2010 at 6:05 pm Reply

      Hi Marilene,
      Thank you for stressing the importance of following-up and collecting feedback. Too often people get the “standard relocation package” including some vague cross-cultural training and tons of practical information they don’t really need after six months. I don’t know any expatriate manager and family who did not suffer of culture shock, even happy expats have the emotional roller coaster. So starting by measuring the ROI of services provided is much easier than trying to evaluate the total value that expats bring to the company. A simple satisfaction survey should be used for each service provider both internal and external ones.

  2. […] Egros, A. (2010). How is expatriate ROI defined in global companies? Zest and Zen International. Retrieved from https://zestnzen.wordpress.com/2010/09/15/how-is-expatriate-roi-defined-in-global-companies/ […]

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