http://goliath.ecnext.

com/coms2/gi_0198-476990/Challenges-facing-expatriate-performance-
abroad.html

Goliath Business Knowledge on Demand

Copyright © 2008, The Gale Group, a part of Cengage Learning, All Rights Reserved

Challenges facing expatriate performance abroad.

Ads by Google

Free Life Coach Training UK wide 2 Day Coach Training Course Was £500: Now Free - Book
Today!

UK & Global IT Moves Managed IT Relocation Services Data Centre & Office IT Networks

HR Certificate Online HR Management from eCornell Save 15% in Sept.. Don't Wait!

Article Excerpt
ABSTRACT

Multinational corporations (MNCs) seem to be paying little attention to international training and
management development for new expatriate assignments. Effective training of expatriate
employees is needed for the success of any MNC. The literature review provides the view that more
sensitivity needs to be paid to the intense training needs for the benefit of MNCs, expatriates, and
family members. It also provide a better understanding to the merits of the unique experiences of
expatriate managers in international assignments adjusting to the cross-cultural conditions on global
tours and confronting the challenges affecting their career goals. In order to succeed in a globally
competitive environment, MNCs need to effectively train expatriates in international capabilities,
including fluency in foreign languages and in the ability to adapt to different cultures. Those
international assignments can lower the probability of expatriate failure through training programs.
This paper has been developed from the same tradition that the expatriate assignment is often poorly
performed in international business operation as a result of deficiencies in training and learning. It
focuses on ways to improve and foster knowledge acquisition for expatriates in MNCs' training and
learning programs.

INTRODUCTION

In an increasingly changing business world, MNCs establish foreign-owned subsidiaries and enter
into joint ventures and strategic alliances to create a presence in international competition and to
take advantageous production resources. Many opportunities and challenges of the globalizations
processed are creating the need for expatriates to locate managers and skilled workers in
international locations. However, the task of expatriate employment is complicated by profound
differences between countries in labor markets, culture, legal and economic systems (Hill, 2007). In
this international environment, the quality of expatriate employees and management seems to be
even more critical than in domestic operations. MNCs of all sizes (small, medium, or large) that have
subsidiaries in foreign counties are facing the problem of training, selecting, compensating as well as
the reintegrating expatriate managers. Despite the problem, these expatriate managers are
contributing significantly to the achievement of the MNC's goals and as a result, their importance
should not be overlooked (Treven, 2003). Expatriates are citizens of one country who are working
and have subsidiaries in foreign countries. Inpatriates are also used to identify a subset of
expatriates who are citizens of a foreign country working in the home country of their MNC employer
(Hill, 2007; Harvey & Fung, 2000). These expatriates are sent to a foreign country by MNCs with the
intent to control their operations and to provide technical and administrative services (Jun, et al.,
2001).

A common feature of the literature is to focus on managerial employees, reflecting the assumption
that MNC training and development efforts have tended to be focused on a small cadre of
international managers. These cadres are mainly drawn from the home country. However, there are
some suggestions in the literature of widening international training and development cadres among
MNCs in their global operations (McPherson & Roche, 1997). An increasing number of MNCs are
acknowledging the importance of providing training for all categories of expatriate employees. In
order to have access to qualified staff at the time and place required, more MNCs are becoming
aware of a need to develop international experience across a wider range of employees, from host
locations as well as from the home country (McPherson & Roche, 1997). Expatriate employees need
to be selected not on technical expertise alone, but also on cross-cultural fluency in order to
maximize the expatriate's effectiveness and efficiency working in a different culture (Hill, 2007;
Scholes, 2003). Therefore, it becomes necessary to train the new expatriates to perform the goals
and objectives set by the MNCs. The purpose of this paper is to illustrate the importance of training
and learning in order to reduce the direct and indirect costs of expatriate failure rates by improving
selection procedures.

DIRECT AND INDIRECT COSTS OF EXPATRIATE FAILURE

Global business frequently requires the expatiation and repatriation of managers and skilled workers.
Employee satisfaction with expatriation and repatriation is critical to the success of MNCs because
these employees often play a pivotal role in managing and coordinating the operations of the
extended enterprise (Morgan, et al., 2004). The decision of MNCs to participate in international
competition raises a host of human resource issues. One must consider whether a particular location
provides an environment where human resources can be successfully acquired and managed. One
important issue that has been recognized over and over the past few years is the set of problems
inherent in selecting, training, compensating, and reintegrating expatriate managers. The importance
to an MNC's profitability is making the right expatriate assignments. A prominent issue in the
international staffing literature is expatriate failure--the premature return of an expatriate manager to
his or her home country (Hill, 2007). Expatriate and their families suffer high rates of poor
performance and failure, each loss or failure can be extremely expensive in direct and indirect costs.
The total financial costs associated with expatiation as well as premature repatriation stints are
estimated to be between $2 and $2.5 billion (cited in Jun, et al., 2001).

The expatriate failure rate is an important indicator for measuring the effectiveness of expatriation
management. Results showed that the costs of expatriate failure are high and involve both direct and
indirect elements. In the case of expatriate recalls, the direct costs include salary, training costs, and
travel and relocation expenses (Shen, 2005). In addition to finances, the early returns can be also
costly for MNCs with respect to good will and reputation (Dowling & Schuler, 1990). In many cases,
this high failure rate of expatriate managers is becoming a persistent and recurring problem in the
MNCs.

One of the difficulties encountered by expatriates has been blamed on inadequate training programs
before departure to the host country. On the other hand, the indirect costs may be considerable and
unqualified. Indirect costs may include damaging relation with the host country government and other
local organizations and customers. Also, indirect costs include loss of market share, damage to
corporate reputation and lost business opportunities (Shen, 2005).

The use of more effective training programs is to improve the expatriate's performance in an
overseas environment, thus minimizing the incidence of failure (Shen, 2005). Because of the
increasing pace of global challenges in the workplace environment, employees may have to attend
training and development programs offered by their employers on a regular basis (Rowold, 2007).
For example, Honeywell surveyed 347 managers who lived abroad or traveled regularly and found
that increased training was critical for executives and employees for international assignments. It is
also noted that cross cultural training has been found to reduce the severity of culture shock and
reduced the time necessary or expatriate managers to adjust to the culture, reach a level of cultural
proficiency, and become effective and productive in their international assignments (Ronen, 1989).

THE NEED FOR EXPATRIATE TRAINING AND PREPARATION

An analysis for the needs of expatriate training analysis has attracted considerable attention in the
international literature of expatriate failure. Expatriate failure is always regarded as a result of lack of
adequate training for expatriates and their spouses (Shen, 2005). Reviewing of the literature led the
authors of this article to propose that training methods and MNC's support "both have an impact on
the process of training and learning acquisition (Rowold, 2007). Training aims to improve current
work skills and behavior, whereas development aims to increase abilities in relation to some future
position or job, usually a managerial one (Shen, 2005). Training can involve the changing of skills,
knowledge, attitudes, or behavior. Also, training may mean changing what employees know, how
they work, their attitudes toward work, or their interaction with their co-workers or supervisor (Treven,
2003). An emphasize is put on the importance of training and educating for expatriate managers in
preparation for MNCs to minimize culture shock and maximize the manager's effectiveness and
efficiency while working in a different culture (Scholes, 2003). In her area of concentration, Scholes
also provided a brief overview of the current practices of MNCs based in South Korean culture and
suggested for further improvement in cross culture training and education for MNCs to become
effective and productive in the global market. In fact, training characteristics (methods) and MNCs
characteristics (management support) impact on the process of training and learning acquisition
(Rowold, 2007).

Training should be considered as a life-long endeavor to learn about other cultures due to the
increasing use of expatriate assignments by MNCs. A successful expatriate manager must be
sensitive to the host country's cultural norms. Also, this expatriate must be flexible enough to adapt
to those cultural norms, and strong enough to make it through the inevitable culture shock. In
addition, the expatriate manager's family must be familiarly capable of adapting to the new culture.
To adapt to this new culture, MNCs will have to invest more heavily in international training programs
(Aycn, 1997; Tung, 1998; Boles, 1997). The key to successfully competing in the globalization
business may be staffing by key expatriate positions that has accomplished leadership (Harvey,
1996). These expatriate managers must have technical competence in the area of operation;
otherwise, they will be unable to earn the respect to subordinates.

Technical competence has been almost the sole variable used in deciding whom to send on
overseas assignments, despite the fact that multiple skills are necessary for successful performance
in international assignments (Mendanhall, et al., 1987). In fact, expatriate failure is seldom a result of
a lack of technical skills (Shen, 2005). Greater technical sophistication of the MNC allows for less
reliance on language and culturally based norms that make international assignments difficult and
confusing (Morgan, et al., 2004). In fact, the expatriate's material life dissatisfaction is strongly
associated with turnover tendencies (Jun, et a., 2001). With an appreciation of the role of culture in
organizations comes a better understanding of management and organizational behavior around the
world (Treven, 2003). Thus, U.S. firms have begun to realize that to be successful in overseas
operations, they need to prepare their expatriate employees to work in international assignments.
MNCs that are serious about succeeding in international business are providing intensive training to
achieve the desired level of performance. Companies such as AMP, Texas Instruments, Procter &
Gamble, Bechtel, and others with large international staffs prepare employees for international
assignments. The biggest mistake expatriate managers can make is to assume that people are the
same globally. An MNC that makes a concerted effort to train its employees to understand and
respect cultural differences will realize the impact of its effort on its sales, costs, and productivity
(Kemper, 1998; Kaeter, 1995).

THE IMPORTANCE OF TRAINING FOR INTERNATIONAL ASSIGNMENT

Training and orientation for international assignments are more common today. It is estimated that 50
percent of companies who sent employees overseas were conducting pre-training and orientation
(Training, 1997). Other countries, such as Japan, are more committed to the importance of training
for international assignments. This may explain the low (less than 10 percent) failure rate cited for
most of Japan's MNCs. In Japanese firms, international training is typically conducted over a one-
year period where expatriate employees are taught about the culture, customs, and business
techniques of the host country (Hogan & Goodson, 1990).

A growing number of MNCs have also shown a strong commitment to international training and
orientation (Lubin, 1992). More increasingly companies are also outscoring expatriate training
(Allerton, 1997). Federal Express sends future expatriates and their families on "familiarization" trips,
which also serve as "realistic job previews." Over 70 percent of companies now pay for similar trips.
Gillette is a leader on familiarization trips for international assignments as a part of its junior trainee
program. This program is aimed at building careers with a global perspective and experience (Lubin,
1996). American Express provides U.S. business...