“If multinational firms are to prosper now and into the future, they must develop people who can successfully function in a global context – formulating and implementing strategies, inventing and utilizing technologies, and creating and coordinating information. International assignments are the single most powerful means for developing future global leaders.” – Globalizing People Through International Assignments
This quote helps to explain why organizations are investing so heavily in effectively managing international assignees and in ensuring their international assignments are productive.
A successful international assignment can be defined as one in which the assignee performed well during the assignment, stayed for the full duration of the assignment, repatriated or was reassigned successfully into a role where what was learned on the assignment was utilized, did not subsequently terminate voluntarily and benefited from the assignment from a career perspective. Regrettably a small minority of assignments are viewed as successful if these criteria are used. A number of studies have suggested that more than two thirds of international assignees feel the assignment had a negative impact on their careers and a significant number leave their organizations shortly after returning from the assignment. Much of the difficulty with international assignments is caused by a lack of adequate preparation for dealing with cultural differences, spousal or family difficulties and poor repatriation planning. But failures have also been attributed to poor definition of performance expectations, poor performance management and remuneration issues.
The reasons for posting an employee to an international assignment vary widely, but they are most often:
- to set up new operations
- to solve operational problems
- to bring expertise lacking locally and to train local personnel to manage operations
- to develop the assignees so they can become part of a global cadre
The reasons for the assignment should certainly influence the selection of the assignee but they also should help to define the criteria that will be used to evaluate the performance of the assignee and to reward her or him. And it is critical to ensure that both the headquarter and local managements agree on the assignment objectives. Lack of aligned expectations can cause frustration and confusion for the assignee and can cause conflict between the sending and receiving parties.
Performance management systems must address the challenges associated with developing performance criteria, standards and processes that are effective and acceptable across cultures. Some of the issues include:
- who appraises the performance of the employee
- what criteria will be used to define and measure performance
- how the performance rating will impact the person’s compensation and career progression.
Some international assignees report to and are supervised by local management, while others are supervised by their headquarters manager. And some have a dual reporting relationship. When the local manager is involved it can present cross-cultural challenges, the magnitude of which will largely depend on how different the cultures of the two parties are. An employee’s effectiveness is bound to be impacted by factors such as the degree of cultural adjustment, the attitudes of those the employee works with and how well the employee’s capabilities are suited to the assignment. And these factors may be largely out of the employee’s control, which calls for consideration when appraising the results produced. The bottom line is that the criteria used to evaluate performance should reflect the nature of the assignment.
Compensating international assignees is often treated as a highly technical issue and as being totally unique to this category of employee. Certainly there are legal, taxation and technical issues that must be adequately addressed but there are also principles that should be developed that will guide the remuneration strategies utilized for international assignments.
If an organization decides an assignee should have an “equivalent” package to others at the same level or performing similar jobs then it is reasonable to use balance sheet techniques to provide the assignee the same level of real income and purchasing power as those similarly situated and to ensure any special circumstances are considered. People leaving their families behind or going into dangerous situations may reasonably be compensated for making the sacrifice or taking the risk. Those going to locations where it is more costly to live in the same manner they are accustomed would expect to be given allowances that adjust for the additional cost. And economic considerations such as taxation rates and currency fluctuations should be addressed. There are numerous sources that deal with these technical issues. But it is important to know that “doing things right”can be different than “doing the right things.”
Other Remuneration Issues
In addition to maintaining equitable and appropriate direct compensation packages for international assignees there are issues associated with indirect compensation (benefits). Depending on the country to which the person is assigned there may be great differences in the way benefits are handled. Benefit programs can be government provided, government mandated or voluntarily provided by the employer. International assignees are often desirous of not having temporary (albeit extended) stays in another country impact things like health care, retirement programs and participation in stock programs or other forms of long-term incentives.
Certainly the balance sheet approach to “making the assignee whole” can be used to accommodate any variations in taxation levels, currency rate exchange, mandated contributions to local country social programs or even time-off policies. But it is critical to understand the differences in advance, to determine their impact on the assignee and to reach a mutually acceptable way of adjusting for these factors.
International assignments are a natural byproduct of globalization. Trying to conduct all aspects of a business out of the headquarters country may not be feasible. And if operations are established in more than one country it may be necessary to send people across borders to ensure the right people are in the right place with the right skills.
How effectively and appropriately performance is defined, measured, managed and rewarded will have a major impact on the effectiveness of international assignees. Legal, economic, social, logistical and cultural differences between countries often make it necessary to locally customize performance and rewards management systems. But guiding principles should be established to ensure practices are consistent with each local context and with the values of the organization.