The purpose of this project-based learning (PBL) study was to address and examine the problem of expatriates and finding ways to solve the said problems. The company we will be dealing with in this discussion is the Mega International which is located in Australia. The project will examine the main reasons why expatriate employees come back home before the end of the assignment or refuse to go overseas for assignments. The study will also examine the suitable traits, training and family factors that an organization should look for when choosing an expatriate employee. The PBL will discuss Lily, a potential expatriate of an Australian company who has been chosen to go work in Japan as an expatriate and she happens to have all the requirements needed, but she has some issues which will be discussed herein.
The selection criteria used is quite important in choosing a suitable expatriate. The expatriate should also be able to easily adapt to the cultures and the environment of the expatriate country. Cultural awareness training is important in getting a potential expatriate ready for the culture and events. The study will further discuss the said training and its importance. In this case, the project will be discussing the cultures, events and norms of Japan which is the expatriate country in this study. Language training is offered not only to the expatriates but also to their family members in order to get them to easily cope with the changes.
The performance of the expatriates is quite important in evaluating the success of the expatriates. The study will analyze the variables that might affect the expatriates’ performance and the methods used to curb the problems in order to improve the said performance.
International compensation will also be discussed and the requirements that the host company must be ready to face including the tax issues and the compensation calculation methods.
The issue of repatriation is also highlighted where the individuals involved might be traumatized or unwilling to go back again; the problems that may arise due to repatriation and the methods used to curb the said problems.
The study will further analyze the factors that would encourage the potential expatriates to accept the overseas assignments and the repatriation plan design for the returnees. This way, the company will be able to make profits and at the same time retain its employees.
In the past decade, most companies have continued to grow and expanded to other countries, but they usually need some familiar people they could trust with the new branches overseas. Globalization is one of the most pressing forces that have influenced the companies to establish the said branches. Managing the new business in a foreign country becomes a major problem hence a strong demand for expatriates. Expatriation means sending some specific employees to another country to run a company.
The company highlighted in this study is called Mega International Company, which deals in engineering solutions, infrastructure projects and also does consultation services. The company originated in Australia, with head office in Sydney and has employed over 4,500 employees globally. Mega International has greatly expanded to other countries which include the Asia-Pacific region and usually sends expatiates to the said countries. Recently, the company has been facing some major setbacks of the expatriates being sent end up performing badly or coming back home earlier than expected but it still needs to send a head office manager for three years. This will be a senior operational role with budgetary and personnel management responsibilities. The expatriate that will be chosen, will be expected to also repatriate to another location after completion of the assignment assigned to him. The company will guarantee a more senior position.
It is important that the human resource management department at Mega International considers the issues that employees face while in overseas countries. This will help the department consider the key challenges in relation to expatriation, assignment management and repatriation of the employee, whether and how they can be successfully managed, and optimize the performance of the employees even while working outside Australia.
Before leaving to the expatriate country, the employees are subjected to extensive training to reduce chances of them experiencing culture shock (Dictionary of Human Resource Management 2001, p. 120). The employee in question needs the technical skills and the support needed to help in settling in new country in order to ensure success. The repatriation program involves the employees going back to the countries they have been sent before to continue working there (Stroh et al. 1998; Adler 1981; Tung 1997). Most of the repatriation employees tend to look for jobs elsewhere due to different reasons (Stroh 1995) we will discuss the reasons herein.
The focus of the studies that have been referred to is Australia and Japan, where the Mega International is planning to send an expatriate to Japan.
- Selection standard
The Head of Operations reminds our group in recent years there are many expatriate staff members have not adjusted the overseas life and come home early which problems are often regarded as expatriate failure so as to effect the development of overseas business organizations. Because the expatriate work versatility and expatriate failure effect of multiple factors make suitable selection criteria to select the expatriates is a very important problem. Selection is a process of two-way choice to individuals and organizations. Promising candidates due to personal reasons (such as family) or environmental factors (such as it is difficult to adapt to a specific cultural environment) and refuse assignment. In the selection of standard should not only consider the professional ability also needs to consider the cross-cultural adaptation ability, language, family factors and multinational enterprises (reference).
Professional ability and management ability is the most basic conditions. Consistent results show that, the Multi-National Corporation in the selection process of expatriates in the relevant professional level as an important factor to consider (32). For example, according to the early 2002 ORC Worldwide was found, 72% enterprises choose expatriates depends on the skill and ability of competition. Lily as the company’s senior staff, the ability to work without a doubt, participated in many large projects budget and project management. Expatriate candidate’s ability test at the same time, her performance is the best.
Next is the cross-cultural adaptation. The personnel work of the cultural environment is to determine their important factor of success (reference). In addition to obviously professional ability and management ability, also need to cross cultural adaptation of expatriates, so that it can better in the new environment in which to live and work. Multi-National Corporation in another country’s success depends largely on the ability to adapt to the culture of expatriates in the country. These capabilities include: adaptability, diplomatic ability, language ability, emotional stability and maturity (33). Lily’s university is in American completed, and in the university have the practice of Asia Pacific area short and life experience which can help her better and faster integration into the dispatched the state’s life and work.
In addition, family factors and language is not dominant aspect. She has three children, 18 months, 6 years and 14 years of age and her husband has a good job. According to claims that the education problem of children and family factor may lead to potential expatriates to international assignments. If the host country environment is not suitable for children to grow or need to elderly parents to take care of the factors may lead to the expatriate assignment ends earlier. Moreover, Second language ability is one of the important factors that influence the choice. Although she has good management ability and also once in the Asia Pacific countries had a brief internship experience, however, Japanese ability is far from reach skilled. Fixman(42) claims that foreign language skills stone important factors influencing international management success. Therefore, the company will aim at these problems in the next to provide training and guidance.
- Expatriate training
Effective departure training help expatriates to position overseas smooth transition, it includes, cultural awareness training, initial access, language training, practical help and family training (11). Cultural awareness training mainly refers to the cross-cultural training. As Earley points out, the main purpose of cross cultural training is to help people deal with new culture in events contrary to expectation (Earley). Expatriate managers must learn to adapt to, not to be isolated in the host country. Because it attempts to develop the expatriates to the host culture favors, the expatriate will choose an appropriate way to take time for exotic events. According to serve country, serve the time, different types of work before you leave the training also has a different type. Deng pointed out that if the differences in the degree of their culture and the culture of expatriates are low, then the training should focus on the tasks and work related issues. Conversely, if there is a huge difference between expatriates and host country culture, then the training should be developed emphatically in the intercultural skills and new task (12). The assignment of the country is Japan, and Australian culture has many different, so the development focuses on cross-cultural skills in training and new task. The uniqueness of Japan due to culture, language and racial homogeneity led to great differences with other country. Japanese cultural values have been as consisting of relatively high collectivism orientation, mansculinity, verticality, and uncertainty avoidance (Hofstede 1980). Verticality is refers to the level of relationship is certain, for example, according to age and gender (Nakane 1972). In a Japanese company verticality is reflected in the establishment of strict codes of behavior based on gender differences, the company and the superior and subordinate relationship. In addition, Caudill (1973) has pointed out that Japan does not have a personal identity but identify themselves mainly in terms of groups which is collectivism is displayed in group-oriented behavior. For example, this resulted in the team members will be treated differently, who get preferential treatment, who were treated with indifference and discrimination. The reasons for these cultural factors have been classified as expatriates shown in Japanese culture anxiety and depression. The training will pay more attention to the cultivation of team spirit and team members and how friendly. In addition, Japan is a patriarchal society; women’s social status is lower than that of men. Research shows that that “female expatriate frequently perform duties below their work roles and have difficulties establishing credibility, especially in the beginning of their assignments” (Napier and Taylor 1995, 2002). The training will focus on how to communicate effectively in the early stage and a host of male employees and can improve the work efficiency.
The host country language skills and adaptation. Expatriates if have the ability to speak a foreign language; he can improve his work efficiency and negotiation skills. Baliga and Baker pointed out, have the ability to host language enables managers to understand the economy of the host country, the government and the market information (29). Fluent Japanese expatriates can more easily living in Japan, such as access to information, reservation or asking the way. Basic language skills might further be important in Japan because Japanese are found to experience high anxiety in communicative interactions with foreigners (Gudykunst and Nishida 2001).Language training is also becoming important not only to training the expatriates but also training the family members. Multi-National Corporation rarely for couple or family provide before starting training (9). However, the interaction between before more and more expatriates performance and harmonious family children education, Multi-National Corporation need to expand to provide pre departure training programs for a spouse or child. This includes the basic language skills which help them in the host country better and faster integration into the local life and study. Training methods include, hire a professional teacher of Japanese life vocabulary training for the family, and can the basic vocabulary learning simple shopping and daily life. For expatriates, appropriate vocabulary training, involving business and its business and often need to use the vocabulary training.
In addition, before starting training another part is outwardly send personnel to provide more practical help, such as expatriates need to find suitable housing and schools, to provide a job for the spouses of expatriates, in a variety of medical insurance host management etc… Usually, the company’s human resources management, keep contact should be dispatched managers and foreign human resource department, to ensure to send personnel to provide practical help. Moreover, whether expatriates are willing and able to abide by the action of training received in the new environment, and the performance can be combined together, and connect them with the performance management system. Incentive can contribute to the desired behavior and performance improvement.
- International performance management
The performance of the foreign subsidiary is critical to the success of the whole multinational corporations (MNCs) in different countries (Gong, 2003). Amongst many factors could affect the performance of the MNC branches, top management of multinational company subsidiary is the main focus of our research. More specifically, by setting the Japanese background, we research the impact of human resource model for the performance of the senior management of multinational company subsidiary in Japan. Expatriates usually have rich experience in parent multinational corporations such as knowledge, skills, and abilities; they also are socialized the internalization of the value of parent multinational corporations (Black, 1988). On the other hand, the work of performance management is focused on the individual and focused on the performance appraisal (PA) on the personal level (Claus, 2008). Furthermore, performance management is the focus of the broader and the level of analysis is the organization rather than individual in line with the strategic human resource management (Davis, 1998).
Performance management in a multinational company is defined as the design, implementation and appraisal, for the purpose of the performance of the management so that performance at the individual and organizational level, the results in the realization of the overall performance of strategic goals and expectations (Claus, 2008). On the one hand, many variables affect expatriate performance. First, according to the subject of the early empirical studies is that the performance management is the context of human resources practice, and is heavily under the influence of culture and society (Aycan, 2005). Alternatively, most of the experience and concept of the articles are focused on the importance of culture and society in performance management of MNCs (Bai, X. & Bennington, 2005). In order to improve the performance of this effect, company will provide cross-cultural training before departure. For example, providing for training on how to speed performance from the perspective of local and global, and emphasizing the influence of the culture and cognitive process that could affect the process of performance management. Another variable of affecting the performance management is the host environment. Due to these differences in the cultural value dimensions, in order to make performance management process more effective, it must adapt to the characteristics of the host country environment (Claus, 2008). Differences between eastern and western culture and environment are listed in the performance management that is usually used company practices in Asian culture and the comparison of western culture (Bai, X. & Bennington, 2005). The researchers also studied the performance management practices increasingly convergence and easy to transfer if they adapt to the cultural localization (Claus, 2008). Therefore, in addition to training, subsidiary would also give some support and guidance to help expatriate to adapt to the host country’s environment.
On the other hand, the impact on the international employees is especially performance appraisal from three aspects that are respectively performance criteria, method of appraisal and performance feedback (Dowling, Festing & Engle, 2013). First, with regard to performance criteria, it is strict definite as task related to the ability, and higher performance in line with the cultural orientation, universality, and power distance (Aycan, 2005). Through the use of standardized appraisal system, it has an inherent assumption justice and fair because of using the same system (namely, standard, appraisal procedures, forms, the rating agencies, etc.). Next, performance appraisal methods include a variety of assessors, formal, systematic, objective and the characteristics of periodic evaluation (Aycan, 2005). Annual or semi-annual appraisal interview/conference is an integral part of the performance management process, therefore multinational companies usually develop and use of assessment tools. However, evaluation may be influenced by cultural factors. Finally, for performance feedback refers to individuals or organizations, clear and direct feedback is the characteristics of low context and high performance oriented cultures while the individual or organization, subtle, indirect and non-confrontational feedback (Aycan, 2005). Specifically, the main performance feedback of the subsidiary is that identifying different culturally appropriate method to provide continuous and careful performance feedback, and increasing the frequency of feedback (Dowling et al., 2013).
- International compensation
Cross-border transfers of executives is a very common phenomenon, and there are a lot of problems must be solved by the company that the globalization of capital and Labor is still going on. In addition, employers must learn more about mobile employees’ requirement, best practices related to welfare and compensation, and the influence of the relevant laws of Australia and Japan. Employers also must carefully arrange their compensation and unrestricted deferred compensation and may require the gap in compensation and benefits that may cause by transnational employment arrangements (Mcneil, 2013).
The first exploration situation is when an employees of an Australian company performs services for a foreign company that is affiliated to the Australian companies. For example, an Australian company executives may be transferred to Japan to perform services for a Japanese company which is affiliated with Australian companies. Australian company executive may become a Japanese company employee or may be subject to a rental agreement to provide services for Japanese company, but she is still an employee of the Australian company. If the executive became a foreign company employees, the executive should be paid by the company and could be eligible to participate in the company’s employee benefits plan. These benefits should be provided by the Australian company such as retirement and health benefits, because she will return after complete assignments and get promotion. Furthermore, according to this mission, the company will provide a bonus as reward.
In addition to the adequate benefits provide by a foreign subsidiary, there also are tax issues related to the benefits (Mcneil, 2013). As the rights protected by Japanese law, everyone who does not have a permanent residents live in Japan less than 5 years living, he/she shall pay individual income tax (Steiner, 1996). On its Japanese source income, he/she also should pay individual income tax while his/her foreign income or remit to the Japan (Steiner, 1996). Therefore, in order to keep the staff wages, employee will be protected from the influence of the non-Australian taxes and social security. Tax issues will be treated as below. Desire for equality of compensation among peers in the country. Multinational companies take tax protection for the employee. Tax protection is defined as the employee pays up to the amount of taxes he or she would pay on compensation in the home country (Dowling et al., 2013, p.228).
The challenges posed by international compensation calculation method transferring the employment of management for multinational companies are not easy to solve. There are two main kinds respectively going rate approach and balance sheet approach in international compensation approach (Dowling et al., 2013). Using going rate method, the basic wage for transfer is linked to salary structure in the host country. Multinational usually get information from the local salary survey and must decide whether to local citizens, foreign nationals of the same nationality will be the reference point. Second, the basic goal of balance sheet approach is to make foreign workers compensation is consistent with her colleagues in the home country, and add compensation that is the cost of the international office (Dowling et al., 2013). For expatriate will return to home company after three years, the MNC would take the balance sheet approach as her pay plans. This method makes the expatriate do not have material losses because of job relocation.
The repatriation is a new challenge for returnees in an expatriation mission; this challenge is called re-entry shock or reverse culture shock. People tend to be able to expect the different life in a different culture, but few of them prepared for the problems faced after returning home. As a result, the trauma experience by repatriation for returning expatriates even more severe than they encountered overseas. (2) From the company’s point of view, normally the repatriation is regarded as the last sector in the process of oversea assignment. The company must adopt a formal plan to handling returning issues, so that company could take the full advantage of new experiences and insights from returnees, while allowing expatriates to adapt to life back home and the company soon after (1). The method of multinational companies operate repatriation will affect the company ability to attract future diplomatic personnel (3).
Since company do have a rich experience on repatriation, it is necessary for us to understanding potential problems from the experience of other companies. The global survey of GMAC GRS in 2006 shows that the 23% of the returnees left their company after the first year they returned (10). The survey reported that, it was a huge challenge for those multinational companies been researched to retain talented personnel returned form oversea assignment. Base on this survey, employees with international experience are more likely to leave the company, and after leaving, most of them are pursue other overseas duties which beneficial for their career development. As another reason for their leaving, the position after return was not good as them expected, so them chose move to other companies and looking for better opportunities. Notably, in the GMAC GRS survey2006, more than 50% of the companies said they did not know the turnover rate of their expatriates (10). Although the rate of returnees stayed still higher than leaving in those companies, why more and more companies seem to ignore the career of the returnees? GMAC GRS explained the question in its report: Generally, when expatriates begin oversea assignment, they were noticed companies to make sure the salary and welfare system accord with requirements. Once expatriates completed their tasks and become returnees, companies lose motivation on track persistently (11). From above, the repatriation failure caused by company oversight will make returnees turnover and the brain drain; it is the key challenge for our company to avoid talents loses. Therefore, the following parts will analyze the issues factors by understanding the repatriation process form two perspectives: individual and company.
4.1. Individual responses to repatriation
Just like cross-cultural adaptation, as the process of repatriation is an interaction period between a numbers of factors, these factors are mainly grouped into two categories: work-related and social factors.
4.1.1. Work-related factors
There are two main reasons for expatriates to accept oversea assignment, they consider about their career development and earnings (12). Thurs concerns on personal career become a major factor leading to the repatriation problem. Such concerns may be happened a long time before the repatriation,- and impact work efficiency in last few months of oversea assignment. The expatriates’ concerns on career are mainly shown on the fear of no guarantee on future job position after their oversea assignment. From statistics, most of multinational companies are not provide the guarantee of future position after expatriation. For example, in GMAC GRS’s survey 2004, 68% multinational companies not provided guarantee on further job position (13). Due to the lack of job security, it makes the career concerns appear before repatriation. The uncontrived of future career development will slow to adaption after repatriation.
Black, Gregersen and Mendenhall believe that the work adjustment will have a major impact on the individual decision whether to stay in company (22). Generally, people think they will get promote in host country after they have good performance in oversea assignment, but if the prophecy not yet honored, anxiety will produce around expatriates. Stroh found that the best predictor of returnees’ turnover is whether the company has a career development plan, and the company is in turmoil or not. She believes those companies, which are willing to make career plans for the returnees and provide planning development, their turnover rate of returnees are relative lower (28). Meanwhile, from another perspective, a lot of returnees works with positions have no contact with their foreign experience, which may produce the undervalued feeling on their working ability.
4.1.2. Social factors
In repariation, family members will face when their own adaptability issues. For example, after Lily’s children returned, they facing the reaccepted by their classmates they may have not received the buzzwords and local fashion, it may lead issues in future. Lily’s husband will have difficulties in finding a job, during the period; some negative experiences will hurt self-esteem, plus with the process of re-adaptation, it may make tenser between the couple relations.
Reconstruction of social networks is another challenge. Expatriates may find their colleagues and friends have moved away. Many returnees report that people are not interested in their experiences abroad, and it makes their conversation a bit awkward (54).
4.2. Company responses to repatriation
For maximize the benefits of international work and creating a large enough internal labor market, company should pay attention to the management of the repatriation process, a well-designed repatriation process is very important for achieve the above purpose. There are two main reasons:
The method of companies treat with returnees will have a significant impact on the current and future personnel needs. The returnees’ promoted position shown how company emphasis on international experience. If the promoted positions are closely linked to the international experience, other members of company will think the oversea assignment is beneficial of career development. Instead, the company will hard to attract personnel to accept international assignment.
In the current international business activities, a general concept emphasized by company’s managers is to integrating ideas form different backgrounds and maintain it to a competitive advantage. International assignment is an important way to achieve this goal. As the report of PricewaterhouseCoopers summarized (80): Organizations must ensure that their business strategy is highly flexible and strategic supported. Without considering the country’s borders, the key staff in the course of business mobility, will increasingly become a key factor in the success of global organizations. At the same time, taking into account of the role and the cost of expatriates, company should strive to retain their critical employees, and fully use of their experience.
4.3. Repatriation plan design
Because there is no quick and easy solution for repatriation, it is important to make preparation for the returning of Lily and her family. The imbalance issue of returnee’s expected will be greatly concerned, and will include in training before repatriation, meanwhile the recipient department in home country will discuss this issue with Lily in the consultation meeting.
From understanding analysis above, a formal repatriation plan should include the following part: Preparation, re-adaptation and information conversion; help in finance and taxation; repatriation career guidance and career paths; reverse culture shock; children’s education and adaptation; training on stress management, and communication; change in workplace; networks building and help to create new social relationships.
Some companies will prepare a mentor to the returnees. Generally, this mentor has a higher position and known well of the expatriate. The mentor designed to send information and experience periodically to the expatriate, for example the company changes, allows expatriates to keep abreast of developments in their home countries, and relieve the pressure during the repatriation， Thus, the returnee will be able to make preparation before repatriation. On the other hand, the mentor should ensure that the company would not ignore the expatriate in major decisions about jobs and promotions (90).
Except mentors, there are some other methods been developed to help the resettlement of the returnee. For example, let the returnee as an important source of information to assist and the development of the assignment project and repatriation policies. This approach would have a beneficial effect on the readjustment of returnee; it let expatriates believe they can have an important contribution to the process of repatriation (94). In addition, it is important for a company to ensure fair treatment of local and expatriate staff.
There is a hard fact that when a company expatriates an employee, there is a very high chance of him coming back home (Vladi, 2008). Despite that, the companies will continue training expatriates due to the changing technological advancements. To reduce the chances of the employees coming back, the companies should ensure that the employees are well taken care of this reduces the losses incurred by companies due to loss of employees.
The companies should ensure that the potential expatriates are psychologically, materially and socially prepared for the move. Cross cultural management is the most important part of the expatriate preparation and should never be overlooked. The employer should always ensure that the potential expatriate employees achieve high level of satisfaction about the assignment overseas to avoid the last minute cancellation.
About the repatriation program, most companies assume that the employees will not have problems when they come back therefore not giving much attention to the repatriation process (Stroh et al. 1998). This is when all the specific expectations from their employers and if the said expectations are not met, they feel as if they have with the repatriates is that sometimes they feel alienated with the happenings of the company and the country at large therefore the organization should ensure they keep in touch with the repatriates abroad about the happenings in the head office. This way, they will not feel isolated hence concentrating more on their work overseas.
According to Lazarova & Caliguiri (2001), when the employees feel that the repatriation program is failing, in most cases they tend to resign.
This purpose of this study was to analyze the issue of repatriation program. Companies with higher turnover rates like the Australian Mega International, realize the need for the repatriation program. This way, the company will be able to retain the employees. A research has previously been conducted which stated that the turnover rate of a domestic employee was lower than that of an expatriate, which brings about the conclusion that resignation of an expatriate costs the company about thrice more than the resignation of a domestic employee (Black and Gregersen 1999).
There are a few recommendations that the Mega international can do to alleviate the above difficulties. The fact that they will be sending a female expatriate, they should not assume that she will be treated the same way the Japanese people treat their women (Grove & Hallowell, 1997). Making sure that Lily is competent enough and has enough psychological and physical preparation will make it easier for her to do expatriate assignments anywhere in the world (Grove & Hallowell 1997).
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