Expatriate Success: Adjustment, Performance & Compensation
Expatriate Adjustment and Performance
Expatriate adjustment and performance are influenced by several factors:
- Individual
- Contextual
- Organizational
Effective preparation is crucial for success.
Individual Factors
Expatriate Profile:
- Career objective
- Education level
- Gender
Personality Characteristics:
- Big Five (extroversion, agreeableness, conscientiousness, emotional stability, openness or intellect)
- Stress tolerance
Partner Considerations:
- Dual-career couples
Prior International Experience:
- Know-how to cope and adjust to new work settings
Language Skills:
- Communication skills: interest in the host culture, build relationships, adjustment to cultural environment
Contextual Factors
- Length of assignment
- Cultural difference
- Social/family support
Organizational Factors
Job Variables:
- Nature of job
- Degree of interaction with host nationals
- Objective of assignment (technical, developmental)
- Type of assignment (short term, frequent flyers)
Organizational Support:
- At headquarters and in the host country
- Pre-departure preparation
- Support during an assignment
- Pre-return preparation
- Logistical help
Selection, Preparation & Training:
- To understand the clues and the cues being presented by the new environment
- To develop behaviors different to those that were “natural” at home
Training for Expatriates
Formal Training:
- Cross-cultural trainings
- Language training
- Willingness and ability to dedicate time and resources
- “Side conversations”
Alternatives to Formal Training:
- Informal briefings
- Look-see visits
- Overlaps
- Shadowing
- Self / e-learning
- Cultural coaching & mentoring
Pre-return preparation
International Compensation
Definition of Reward (or Compensation / Remuneration):
Extrinsic Reward:
- Tangible monetary and non-monetary payments (wages and fringe benefits)
- Bundle of returns offered in return for a cluster of employee contributions to the organization
Two Principles:
- “Keeping the expatriate whole”
- The intention is not to “reward” assignees as such, but rather to compensate them for a change in lifestyle, enduring “hardship”…
- “Going rate” approach
- Reflective of salary structures in force in the host country
Keeping the Expatriate Whole
- Home-based salary build up (or “balance sheet”)
- Pay package
- To preserve existing relativities with peers in the “home” location
- Purchasing parity
“Balance Sheet”
- Basic pay
- + “Foreign service premium”
- Salary adjustments to neutralize cost of living differences, i.e.: housing, children’s education costs
- Allowances for home leave, relocation, spouse assistance/dual career allowance, annual travel expenses for the home country…
- Tax equalization
- + Supplement to compensate “hardship”
- i.e.: working in remote locations, countries affected by political instability or with limited social infrastructure…
Compensation Scheme for Expatriates from a German MNC
“Going Rate” Approach
- The equity benchmark is between the assignee and local/regional peers, with the emphasis on integration*
- Although, if the location is in a low-pay country, the MNC usually supplements base pay with additional benefits and payments *Periods of work abroad may not be taken into account for the purpose of determining the pension payment rate in the home-country.
International Assignments are Important Investments
- The average cost per annum for an expatriate amounted to US$ 311,000 (Dickmann, PricewaterhouseCoopers, 2006)
- Direct costs:
- Salaries, taxes, housing, shipment of household goods, education assistance for dependents, spouse support, cross-cultural training, goods and service allowances, repatriation logistics and reassignment costs
- Administration costs:
- Home-based HR support, assignment location or host-based HR support, post-assignment placement costs
- Adjustment costs of the expatriates