ORGO DEV paper
- 1. ADMS 4460(M) – Winter 2014 Organizational Development with Professor Ron Alexandrowich York University - School of Human Resource Management Sabrina Yu {212515466} Friday, April 4th, 2014
- 2. INTRODUCTION The diminishing borders between the worlds and their cultures have facilitated cross-cultural commerce; organizations worldwide have realized and restructured their own operations to support their go-global intentions. Organizations that chose to embrace globalization and have fostered a global edge have begun to reap the benefits of international business. The need to develop global leadership and the growth of new commercial ventures abroad has initiated a rise in demand for global mobility. Now, international human resource management (IHRM) plays a crucial role for organizations to help them leverage their human capital and their organizations’ capability to bridge these cultural differences. The role of human resources (HR) due to globalization has evolved from a steward of human capital, knowledge facilitator, a relationship builder; into a rapid deployment specialist with an emphasis on seeking others’ adaptability, tolerance, willingness to learn, and their cultural thirst (Lengnick-Hall, 2003). PURPOSE OF THE STUDY To sustain global initiatives, organizations position their already developed, local leaders with years of expertise into a new, foreign area for job assignments. These high- caliber global talents, ‘expatriates’, are shown as critical persons for the expansion, development, and maintenance of international business activity—but selecting and retaining these individuals prove troublesome for many (IHR) professionals. The issue of globally mobile talent has brought forth several obstacles, in recent years, for organizations to support their global strategic initiatives. Nearly 9% of all Canadians, which is an estimated 2.8 million Canadians of the estimated 31.3 million international workers in 2009, are living abroad as expatriates (The Canadian Expat Association) (U.S
- 3. Department of Commerce, Bureau of Economic Analysis, 2001). Companies, here and abroad, are constantly seeking creative, proactive solutions to the high costs of international assignments through development and use of alternative approaches to global mobility. It is of utmost importance for global HR management professionals to reduce the direct and indirect costs inherent with expatriate failure—thereby bettering management to leverage their international competencies. This study focuses on the significance of implementing improved measures to select and retain top mobile talent in hopes of reducing organizational deficiencies and furthering the global mission sought by all winning organizations. STATEMENT OF THE PROBLEM Organizations have three concerns when it comes to expatriation: the performance of assignees are called into question, in particular their return-on-investment (RoI), their own selection methods to assign expatriates for future global opportunities, and finally if they can leverage the learning of assignees into their business after repatriation. Though expatriation is a sure-fire method to expand company’s unique assets abroad, it’s unfortunate that one downplays the many hidden downsides of expatriation. “10-20% of expatriates sent return prematurely due to dissatisfaction with their job, poor job performance, or the impact of culture shock”, (Black & Gregersen, 1997)—setting the stage for a host of losses through training costs, travel fees, relocation expenses, and their loss of foreign market share—all leading to a wavering RoI. The affiliated costs of premature return of employees and their RoI are determined primarily due to the selection of the individual chosen to represent the organization abroad. Thus, this issue of choosing a fitting selection method for suitable candidates to send abroad is typically the
- 4. premier topic of concern for organizations due to the high costs of improper selection. In addition, the third issue is expatriate turnover; several research findings indicate that 25% of employees want to leave their company upon return to their home country (Adler, 1991). It is said that a single repatriated employee has a cost estimated to be as high as $1.2 million. (Black, 1992). The loss of a repatriated employee amounts to a shocking amount due to the company’s loss in talent investment in addition to their loss of new expertise, intelligence, and expansion opportuities abroad. These three shortfalls of expatriation: the RoI, the selection processes, and the repatriate turnover is all cause of immediate concern and can truly differentiate the organization’s success from failure in the global arena. BACKGROUND OF THE PROBLEM A business expatriate, shortened to ‘expat’, was originally a term coined for individuals that were employed in a foreign area that was different than one’s upbringing. Now, during the 20th century, globalization has created a global market for skilled professionals and the term “expatriate” is now a term to describe skilled professionals sent by their employers to foreign subsidiaries. This had created a different sense of expatriate where commuter and short-term assignments are frequently used by organizations. This article focuses on the contemporary usage of the term “expatriate”. Organizations, Canada or abroad, most typically enforce similar expatriate management schemes, mostly emphasizing the attractiveness of the “expatriate” route to employees that may be less inclined to leave their homes. Procter & Gamble Co., also known as P&G, a well-known global goods distributer, is an American multinational, whose expatriate schemata can be analyzed as a leading example. Leading from Geneva,
- 5. Switzerland, their expat program encompasses a variety of incentives and measures to promote expatriation among Swiss employees. Their three-tier solution involves “convincing out, connecting in, and contacting back” (Forgas, 2010). The first stage involves incentives, ranging from a 3-5 year decision span, support for housing, medical, schooling allowances, in addition to acting as a career accelerator. Secondly, their connecting-in stage involves providing expats language lessons, orientation sessions, and relocation agencies, as well to giving consistent access to the company’s intranet the “P&G GenevaNet- Mr Clickit” throughout their deployment. Lastly, repatriation, otherwise known as “contact-back” encourages schooling in the home country’s language as well as a retirement scheme. Their three-step expatriate management system promotes the expatriation concept to employees, but does their human resource managers account for the employees’ wellness, repatriation, or integrating their knowledge back into the system? Does P&G Genva’s expatriate program align their program with P&G’s long- term global incentives? The three-step process of expatriation involves: selection and training of globally minded talent, their deployment, and finally repatriation. Each of these stages has their affiliated areas of concern. Rather than concerning themselves with the issues inherent with each of the stages, P&G Switzerland focuses primarily on the attraction of expatriation applicants by re-structuring the expatriation benefits associated with each stage, rather than the real underlying issues. Many of the issues instigated from expatriate failure encompass a broad number of themes ranging from premature return, low performance, or cultural adjustment problem. To spearhead all the issues at their root
- 6. cause, a re-evaluation of the three-part sequence is necessary to determine how to better our selection and retention of go-global company citizens. REVIEW OF RELATED INFORMATION The largest mental obstacle of expatriates living abroad is the possibility of ‘culture shock’—in the second stage of expat ‘deployment’. It is the deeper cultural differences in customs, interpersonal interactions, and mindsets that trigger this predictable phenomenon and turn every expat’s cultural transition into an emotional rollercoaster. Often over prepared by management and under looked by expatriates, culture shock is definitely a force to be reckoned with as it may be responsible for costly premature returns (Black and Gergersen, 1997). Depending on personality and circumstances, some people find it easier to adjust to another culture than others. A multitude of reasons can explain culture shock such as differences in languages, foreign service hardships, length of assignment, conflict with familial duties, living accommodations, in addition to lack of cultural adjustments made. Culture shock is the primary reason for premature return of expatriates. Repatriation, the third and last stage of expatriation, poses a whole set of challenges, similar to those you go through when moving abroad. Contrary to expats, repatriates will not be met with the same degree of acceptance and understanding when re-adjusting to their familiar home environment—resulting in ‘reverse culture shock’. Family, colleagues, and culture that seem all-too-familiar but changed upon their arrival, requires the repatriate to re-integrate themselves back into these environments. In addition, the largest obstacle for repatriates is their threat of employment stability—either a conscious choice to depart must be undertaken; an unfortunate pitfall of expatriation, or
- 7. a hopefully higher position on the corporate ladder is waiting for their return. Repatriation could lead to the international assignee to undergo a sudden loss of status, autonomy, career direction, and worst-case, a loss of promotional opportunity when the company undervalues their international expertise (Chew, 2004). Reverse culture shock leads to possible repatriate turnover and a loss of experienced incumbent knowledge to the firm’s future in the foreign arena—one of the three key issues. ANALYSIS OF THE SITUATION International HR managers’ first challenge is to plan for the selection for assignees sent overseas. Secondly, the return of expatriates must be attended and should be a priority for managerial attention; sadly, this aspect is overshadowed by the enormity of only “culture shock” rather than “reverse culture shock”. Essentially, the crisis management roles of HR professionals are to become a record keeper, crisis management team member, communicator, and writer to the emergency plan. Current expatriate management is mirrored by the three-fold crisis management—conceptualized as “preparedness, responsiveness, and recovery” stages (Smith & Sipika 1993, Hickman & Crandall 1997, Coombs 2001). These phases are all periods of preparing, addressing, and mitigating crises. The framework of crises management can reinforce how corporate HRM policies may facilitate better management of the premature return of expatriates— considered expat crises. This sequential phenomena, expatriation and crises management alike, once again display a reactive, rather than proactive, approach to handling potential premature return of expatriates. Research shows that expat recruitment and selection is typically carried under the pressure to fill an vacant position abroad; thereby appointing expats with the best
- 8. technical skills and seniority—dismissing all additional factors that could influence successful job performance when abroad. Without the proper assessment of potential candidates ability to adjust to foreign environments, the probability of premature returns due to culture shock can presumably become higher. The expat selection based solely on technical competence should be of less importance and the recruitment of expatriates should be formalized to encompass a variety of alternate deciding factors. The last stage of expatriation is to re-integrate the individuals back into their home countries. Organizations typically offer services to track career progression and shipment of the repatriates’ personal goods back to the home country. Unfortunately, studies have shown that majority of companies did not provide a formalized or separate unit for repatriation, leaving no post-assignment interviews, welcome-home events, facilitator to identify acquired knowledge abroad, nor career counseling workshops (Fieldman & Thomas, 1992). To mitigate reverse culture shock, it is unduly importance to communicate the repatriates’ best interests is indeed, the management’s priority, leading to enhanced commitment to the parent firm and the retention of these strategic human resource personnel. RECOMMENDATIONS The two following recommendations aim to directly mitigate the two issues of expatriation: improving selection methods of future expatriates and leveraging the learning of repatriates abroad. The implementation of both measures can in turn, alleviate the stressors of the third issue: the return on investment. Organizations must understand the façade of expatriation being a necessary but wavering investment is solely caused by the lack of proceduralized and consistent communications given to expatriates. The failed
- 9. assignments along with the repatriate turnover, the nightmares of IHRM, are due to the irregular communications, leaving the expat feeling alone and without support and guidance in a foreign country. These expats, throughout their assignment, will sense that their well-being is not of importance to the organization, leaving them to lessen the commitment to the parent company. These two recommendations should not only be implemented throughout all expatriation practices, but IHR managers should also stress continual contact throughout the entire process: with expats, in addition to repatriates. Expatriate failure is caused primarily by error in selection. As evidenced by the hasty historical methods of choosing candidates, a rapid departure has led to the selection based on technical competence while neglecting equally, if not more important, interpersonal characteristics. Studies have shown that though technical skills should be one of the dominant selection criterions, it has little relevance to a person’s ability to adapt to new cultures or adopt foreign norms—making them more susceptible to the possibility of culture shock and their hidden costs (Mendenhall, Dunbar & Oddou, 1987). Rather than a focus on technical ability and seniority, IHR managers should formalize recruitment policies for expatriates on the basis of Ronen Shefer’s theory. As the CEO of ROCG Global, a leading international advising firm on business transition strategies, Ronen’s theory pinpoints five categories of success attributes: job factors, relational dimensions, motivational states, family situations, and finally language skills. These success attributes include strong language skills, positive personality traits, mature emotional regulation capabilities, and great cross-cultural communication skills. These updated and comprehensive factors can be incorporated with HR as selection factors to better determine the ability of individuals’ cultural adaptability; rather than just their
- 10. technical competence. This recommendation is to implement a rating scale to concretely choose an expat based off seniority, technical competence, in addition to these other factors that determine cultural empathy. Then, a cross-analysis of all candidates and their scoring on all these dimensional factors can determine the most suitable candidate that not only encompasses technical superiority, but can also show increased success of integration into an ‘alien’ culture, lessening the chances of expatriate crises. The theory paired with previous selection methods can make for a comprehensive recruitment tool to find candidates that possess the best chance of completing the foreign assignment, returning to the parent organization, and passing on this key knowledge to more junior roles. Ronen’s success categories in conjunction with expatriate selection methods result in a modified and updated schema that not only accounts of organizational needs, but also the employee’s wellbeing. The repatriate turnover due to reverse culture shock is the third concern of organizations towards expatriation. In addition to altering the historical perspective of selecting expatriates, a second recommendation is to not only formalize the repatriation programs, but also to also keep repatriates aware of the benefits available to them back in the host country. This reverse culture shock experienced by repatriates is primarily caused by the lack of career advancement opportunities, career counseling, and social support policies that aim to ‘welcome’ the individual back into the parent country. To encourage retention of experienced expats, organizations must enforce mentorship programs, relocation benefits, and incorporating returning expats’ insights into training programs. All these measures, easily implemented to not only retain overseas talent, but it can guarantee the transfer of key knowledge to inexperienced expats, once again
- 11. furthering the organization’s original investment purpose: to continually expand abroad using their new overseas talent. CONCLUSION Organizations’ fail to understand the importance of a thorough expatriation process and continually repeat the same offences to expats and repatriates throughout the world. To leverage globalization, IHR managers and organizations must both realize the cost of investing in a thorough expatiation process proves necessary, in order to avoid the high attrition rate of repatriates and the losses incurred by failed assignments. By putting in place suitable selection and repatriation policies, IHR managers can more efficiently and effectively place human talent abroad and facilitate the knowledge transfer between cultures for years to come. A well-managed and proactive response to expatriation can alleviate the stresses of the modern expatriate problems—aiding employees that feel helpless abroad all while driving the organizations’ global growth.
- 12. BIBLIOGRAPHY McKenna, S. (2014). The big six rules fo global mobility (pp. 10-12). HR Edge. Chew, J. (n.d.). Retrieved from http://rphrm.curtin.edu.au/2004/issue2/expats.html Lengnick-Hall, M. (2003). Human resource management in the knowledge economy: New challenges, new roles, new capabilities. San Francisco: Berrett-Koeher Publishers, Inc. The Canadian Expat Association (n.d.). About cea- introduction . Retrieved from http://thecanadianexpat.com/index.php/about-us/about/about-us U.S Department of Commerce, Bureau of Economic Analysis (2001). Summary estimates for multinational companies: Employment, sales, and capital expenditures for 2009. Retrieved from website: http://www.bea.gov/newsreleases/international/mnc/2011/mnc2009.htm Black , J. S., & Gregerson , H. B. (1997). The right way to manage expats. (77 ed., Vol. 2, pp. 52-63). Harvard Business Review. Smith, D., & Sipika , C. (1995). Repatriation: Up, down or out? (26 ed., Vol. 1, pp. 28- 38). Long Range Planning. Hickman, J.R., & Crandall, W.R. (1997). Before disaster hits: A multifactor approach to crisis management. (March/April , pp. 75-79). Business Horizons. Coombs, W.T. (2001). Teaching the crisis management/communications course. (27 ed., Vol. 1, pp. 89-101). Public Relations Review. Adler, N. (1991). International dimensions of organizational behaviour. Boston: PW- Kent. Black, J.S. (1992). Coming home: The relationship of expatriate expectations with repatriation adjustment and job performance. (45 ed., Vol. 2, pp. 177-192). Human Relations. Forgas, M. (2010, March). Expatriates at p&g. Retrieved from http://www.iom.int/jahia/webdav/shared/shared/mainsite/microsites/IDM/workshops/mig ration_and_transnationalism_030910/Session4-Forgas.pdf Fieldman, D.C., & Thomas, D.C. (1992). Career management issues facing expatriates (23 ed., Vol. 2, pp. 271-293). Journal of International Business. Mendenhall, M., Dunbar, E., & Oddou, G. (1987). Expatriate selection, training and career pathing: a review critique. (26 ed., Vol. 3, pp. 331-345). Human Resource Management. Ronen, S. (1989). Training the international assignee (1 ed.) San Francisco: Goldstein.