Critical HR Actions by Multinational Corporations to Facilitate Expatriate Adjustment - Essay Example

? Analyze the Critical HR Actions Multinational Corporations Should take to Facilitate Expatriate Adjustment Submitted By Introduction With recent onset of globalization what we observe is extensive mergers, acquisitions and the companies which were formerly growing from national to international are now moving from multinational to transnational global companies. In order to gain competitive advantage and operate profitably all over the globe what companies require is global value chain. This global value chain demands changes in operations, marketing, supply chain distribution, HR in short in all departments of the organization. Whenever a company grows from national to multinational (MNC) to global it has to face new challenges such as organizational culture, workforce diversity, expatriates etc. These issues are unavoidable, inevitable in fact they need to be welcomed and handled properly and effectively for the overall growth and benefit of the company. This paper aims at exploring who exactly are expatriates? Are they really unavoidable and irreplaceable with the local talent? What difficulties expatriates face in acclimatizing and proving their worth? What are the chances of success? How enticing and lucrative it is to take expatriate assignment? Do the benefits outweigh the difficulties? Do only expatriates need adjustment or their fellow local colleagues as well? Why many multinational companies opt for Expatriates instead of hiring new staff in the foreign country? What steps the HR department can take in order to help facilitate the expats adjustment to the new culture, country and way of life. What is the role and responsibilities of HR in making this adjustment as quick efficient and effective as possible? It also includes a study of expatriate cycle which typically includes selection, assignment and repatriation, remuneration and evaluation of their success and failure. Expatriates why are they needed? Whenever a company decides to operate in foreign lands some very obvious differences arise between domestic HRM and International HRM. One very important aspect of international HRM is moving staff across national boundaries with international assignments in various roles to firm’s foreign operations. Such foreign employees are called expatriates. An expatriate can be defined as a individual residing and working momentarily in a country other than their resident nation, employees who have been shifted out of their home base into some other area of firm’s foreign operations. There are three categories of employees in international firms: Host country nationals (HCNs) Parent country nationals (PCNs) Third country nationals (TCNs) PCNs are always expatriates and TCNs are also expatriates but HCNs can become expatriates if they are transferred into parent company operations outside their home country. 1(Peter J 2008) International Assignment creates expatriates HCNs HCNs National border PCNs PCNs TCNs National border The need for expatriates is not questionable for most of the MNE’s . Expatriate have the required technical skill, knowledge and expertise to supervise, assist and monitor local operations. Most of the negativity associated with expatriates is because of the high cost involved. Still most of the MNE’s believe in the cadre of high performance expatriates and are in search of people who are ready for an international business career. What they need to do is to motivate these people to perform well and while capitalizing on their skills improve their outlook and prepare them for their foreign assignment. 2(Daniels, 2007) Foreign assignments can be beneficial both for the person and the company. For the individual the following benefits can be seen. 3(K. Aswathappa, 2008) Increased experience of working with different cultures, personnel and work / life styles, this will make the employee more marketable and will improve his outlook. The expatriate is most likely to benefit from tax reductions. Most organizations offer their employees an expat package which is quite lucrative in terms of money and other services. It include car and accommodation, health, security, children school fee, displacement allowance, inconvenience allowance, taking care of employee’s requirements in a foreign land so that he/she can maintain the same life style which was maintained at home. These packages reduce his/her costs significantly. Workforce diversity helps improve managerial skills. The chance to live in a far more advanced country than one own homeland. MNE’s also reap financial as well as other intangible benefits by sending expatriates that is why they are willing to bear this extra cost incurred on them due to expat package. The benefits they reap outweigh the cost. Some of the benefits are discussed below. 4(Charles M Vance, 2010) Better coordination of activities between the parent and subsidiary companies ensures best practices are shared. The multinational company will be able to establish itself as a global giant and enhance its reputation and image. It allows transfer of knowledge, skills and expertise of the experienced senior expat from parent to subsidiary company. It even helps in reducing costs in a way because the expats can train and develop the local existing staff. Increasing popularity of expatriates is another practical proof of their being beneficial both for the company and for the individuals themselves. Mercer conducted a survey on ‘expatriates and globally mobile employees’, which revealed that 47% of companies have increased deployment of expats and there has been an increase of about 90% of employees on international assignments. 5(Mercer, 2008) Expatriate Assignment Cycle There are many standard theoretical perspectives available supplemented by research findings that give a broad, international viewpoint of internationalization and resultant consequences. One of the major issues for HR regarding internationalization is management of people across borders or management of expatriates. Internationalization is a vast topic which includes topics such as linkage connecting strategy, structure and HRM in MNCs, role of HRM in M&As i.e. mergers and acquisitions, comparative HRM, and comparative and international industrial relations. Our focus here is expatriates management. Expatriate assignment cycle consist of four stages. 6( Anne-Wil Harzing, J Van Ruysseveldt, 2004) Pre assignment stage Early assignment stage Late assignment stage Post assignment stage Pre assignment stage includes assignment offer, decision making process and eventual selection of employee for the assignment; prepare the employee for the assignment, shape expectations and movement of employee. This requires a great deal of effort by HR. The first for successful assignment is to select right candidate and prepare him accordingly which includes training about language, culture and customs, laws, ability to deal with workforce diversity etc. HR should also work in creating the right expectations and keeping the employee motivated to take the challenge. They should also take care of all the logistics, boarding and lodging etc in foreign land. Early assignment stage includes movement, setting in period, acculturation process including possible cultural shock. HR can play an effective role in smoothing the process. Late assignment stage includes decision making on life design after assignment expiry, repartition, preparation and move. Post assignment stage includes movement, reintegration into home country life or next host country life including possible reverse culture shock and career change. The prime hurdles in expatriation includes work life balance, social network, adjustment process, spouse and family issues, intercultural communication, language barriers, leadership and repatriation. The potential for effective cross culture working demands all these challenges to be handled carefully by HR. 7(G. Hollinshead, 2009) The Adjustment Cycle or Cultural Shock Cultural shock is one thing that each expatriate faces. It is described as the physical and emotional stress and discomfort that an expatriate experience by living in a foreign culture and society. Cultural, societal, religious values life style, regulations, traffic rules etc. can be very different from the home country so much so that what is considered normal in your home country may not be acceptable in the foreign land. All these differences are apart from the obvious language and cultural differences which an expat expects. The cultural shock usually follows the pattern of u shaped curve. 8(Mark E Mendenhall, 1995) The expatriate assignment is a major life decision, so it presents the same mix of excitement, stress, exhilaration and exhaustion associated with any big life changing experience. Research and experience have shown a typical pattern of behavior with its highs and lows which is reflective of not all but most of the expats behavior. This behavior pattern is called expatriate adjustment cycle or cultural shock. All expats may not follow the same behavior pattern because it depends on many factors ranging from personal to professional factors such as individual behavior e.g. proactive and adaptive to change, family support, better homework and preparation by HR. The stages in the first half of the cycle include preparation, Honeymoon, cultural shock, adaption and since the cycle is incomplete without the return of the expat to his/ her native country the cycle completes with repatriation or reverse cultural shock. 9(Charlene Marmer Solomon, Michael S. Schell, 2009) What HR Can Do to Facilitate Cultural Adjustment? In each of the stages of cultural adjustment HR plays a vital role in facilitating the expat into his/her new role and country. It is important the expat has a good knowledge of the different cultures he/she will find the cultural adjustment easier. HR can provide training programs tailored specifically to the assignment and country, this can also be provided for the family if applicable. HR would need to provide Cross Culture Training to facilitate the expat in his/her new life. Various training methods are suggested to prepare expats for foreign assignment. Particular training need and methods depends on individual need and organizational demand. Various training methods include lectures, written material, videos, films, books, case studies, cultural assimilators, role playing and other business games which better prepare employees in improving their efficiency and effectiveness, allow the expat for cultural emersion and to manage any conflicts which may arise from differing cultures. It has been observed that the effect of cross cultural training has been very encouraging. It has positive impact on adjustment, performance and development of cross cultural skill. 10(Michael Dickmann, 2008) Providing this for the spouse is also important as can be seen written in an article which goes onto state ‘the spouse’s adjustment to the new civilization may affect the manager’s performance 11(Maria Foley, 2010). According to the same article, 80% of the survey’s respondents count on cross-cultural training to better prepare their workers for a foreign assignment. Alongside the training sessions, HR should also conduct extensive knowledge transfer sessions on: language and common phrases, body, interpersonal and technical skills. These knowledge transfer sessions can be seen as a more informal way to pick up useful skills which will aid cultural emersion. It is observed that the success of the expat assignment depends a lot on knowledge transfer between the HR department and the expat. Expats are expected to be much better technically with sound knowledge over the subject. This upper edge of the expats is necessary to earn respect and credibility and hence success. 12(Bonache, Brewster, 2001) Another step of HR department is setting up of support group for all expats and their families, this support group provides guidance on a regular basis and counseling for any issues the new expat and family may experience, from expats who have settled in well and have many years of working in the new culture under their belts. This is a good forum which can be very informal and allows staffs who are experienced expats give their views on proceedings. HR should remain in touch with the employees to retain that contact with the home country and keeping the employee motivated as well as provide ongoing support to the expats and their families. 13(Briscoe D. and Schuler R., 2004) Additional HR Activities Responsibility of HR increases manifold with international assignment. IHRM international human resource management has to perform additional tasks along with usual HR activities. HR professionals has to perform additional tasks such as international relocation, orientation and preparation of employees, administrative services for the expats, industrial relations with host governments, international taxation and solving language issues. Expatriate relocation includes responsibilities such as travelling, boarding, lodging, medical, training and other needs of expats posted in host countries. Compensation benefit is another important additional duty of HR regarding expats. It includes finalization of compensation and other special allowances. The compensation benefit has to lucrative to attract and motivate employee for the discomfort caused by relocation. Modes of transfer of such payments to employees have to be determined by HR. Tax liability is another issue which needs to be taken care off. It is the responsibility of HR to ensure that employee doesn’t face double tax reductions usually expats get tax relaxation in host countries. There should be a defined policy available in the company to deal with such issue. 14(C. Brewster, P. Sparrow, G. Vernon, 2007) Case Study Now we will discuss a case study of ICAS Switzerland how they handled expat adjustment. They setup a 24-hour free phone service so that ICAS client organizations can call and request service round the clock. This is done in order to provide them some moral as well as physical support. Expats feel that they have someone reliable to turn to for their needs and problems. If an expat is having difficulty in adjusting it will affect his performance as well. From 24-hour phone service expats can request any information ranging from local legislation, health facilities, good schooling to petty issues such as how to find a good hair dresser. The day to day problems that expats face may seem mundane but they have a negative impact on their performance. Coping with such problems on a regular basis in an unknown culture can prove time consuming and stressful. According to a study conducted by the same company an Italian expat working in ICAS in his first month spent about 12 hours in a week in coping with day to day problems such as repair of dishwasher, which is seemingly easier task but is difficult due to lack of knowledge, driving family around because they are afraid of getting lost, how to buy bus tickets, finding child-minder etc. ICAS phone service now help resolve such issues and thus assists expats and their families settling down in foreign countries and cultures. In July 2001, ICAS also introduced another product for expat adjustment called Expatriate Connections. It is an assessment of the potential expat candidate about cultural awareness. Based on these assessments customized training are imparted to help them settle in foreign land. In addition to this ICAS introduced another product integrate, it integrates potential transferee and their families in their new life. Along with phone service they get a personal consultant who remains in touch with them to solve key issues.15 (Nina Jacob, 2003) Conclusion Research conducted strengthens our viewpoint that expatriates are inevitable in this global age. Internationalization and globalization demands many changes in human resource management as well. Expatriate management is one such demand. Role of HR is very important in IHRM, successful foreign assignment depends a lot on HR and hence achievement of organizational objectives. Role of IHRM is little different from domestic HRM it demands more involvement in the personal lives of the employees. It is the job of HR to select the right candidate for foreign assignment, prepare him accordingly with their training, motivate them, designing their compensation benefits, safeguard the rights of expats and assist them settling in foreign countries by providing them ongoing support and plan their readjustment in their homeland.HR has an important role to play in the success or failure of the expat. Bibliography 1(Peter J Dowling, Marion Festing, Allen D Engel, 2008, International Human Resource Management: managing people in multinational, London, Thompson Learning) 2(Daniels, 2007, International Business, 11/e, New Delhi, Pearson Prentice Hall) 3(K. Aswathappa, 2008, International Business, New Delhi, Tata McGraw hill) 4(Charles M Vance, 2010, Vance Charles M. Yongsun Paik, Managing a Global workforce: Challenges and opportunities in international human resource management, New York, M.E. Sharpe) 5(Mercer, 2008, Expatriate employee numbers double as companies see increased value in expatriate assignments, Available at http://www.mercer.com/press-releases/1326180 [Accessed 14th March 2011]. 6(Anne-Wil Harzing, J Van Ruysseveldt, 2004, International Human Resource Management, London, Sage publications) 7(G. Hollinshead, 2009, International and Comparative human resource management, Basingstoke, McGraw hill) 8(Mark E Mendenhall, Betty Jane Punnett, David A Ricks, 1995, Global management, Oxford, Blackwell Publishers) 9(Charlene Marmer Solomon, Michael S. Schell, 2009, Managing Across Cultures, New Delhi, Tata McGraw hill) 10(Michael Dickmann, 2008, International Human Resource Management: A European Perspective, New York, Routledge) 11(Maria Foley, 2010, Cross-Cultural Training is Essential for Expat Spouses, [online], available at: http://www.suite101.com/content/cross-cultural-training-is-essential-for-expat-spouses-a231900 [Accessed 14th March 2011]. 12(Bonache, J and Brewster, C, 2001, Knowledge Transfer and the management of Expatriation, Thunderbird International Business Review, Volume 43, Issue 2 pages 291 – 317) 13(Briscoe D. and Schuler R. (2004), International Human Resource Management (second edition), Routledge) 14(C. Brewster, P. Sparrow, G. Vernon, 2007, international human resource management (2nd edition), CIPD) 15 (Nina Jacob, 2003, Intercultural management, London, Kogan Page) Read More