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Danger Below! Spot Failing Global Assignments

November 1, 1996
Related Topics: Expatriate Management
Trancas B. (not his real name) always wore his cowboy hat and boots. He spoke a bit loudly, but was very personable, even charming. Sure, he might offend the local Japanese business community and those on his construction crew, but he felt he'd earned the right to wear what he desired and speak however he wanted. After all, at 53, he was one of the most successful builders in the western United States and had amassed quite a fortune already. Besides that, he'd been handpicked by his company's president to supervise the construction of the office tower in a Tokyo suburb. He'd do just fine.

Trancas also was newly married. A few years back, he'd remet his high school sweetheart and they'd married just before he left the United States. He'd given her power of attorney, and she was supposed to finalize their financial matters in the States and then follow him to Japan. But she never did. Three months after his arrival—in the middle of the night, Tokyo time—the HR manager in the United States received a phone call. Tearful and overwhelmed, Trancas explained that his wife had drained two of his bank accounts. He was terrified she was going to sell his home and cars and make off with the cash. The manager spent hours talking with him and involved the legal department to take care of the mess.

Meanwhile, Trancas—distraught and distracted—decided not to leave his assignment before he finished the tower. He wouldn't admit failure. Overstressed, he couldn't control his Japan-bashing, and he spent hours on the phone with the HR manager. But even more troubling was his management of business activities. Consequently, the project slowed down. Months later, Trancas was in the midst of a divorce.

Although the HR manager stopped the hemorrhage of cash from Trancas' personal fortune, he couldn't moderate the slowdown in production, the Japan-bashing and plummeting employee morale. Moreover, the HR manager couldn't get the attention of senior management—even though he knew that better selection and early preparation could have prevented this debacle.

Global HR managers and researchers have attempted for years to document the failure rate of international assignments. Try as they may, they can't—not with any precision, anyway. The idea of failure is subtle and difficult to quantify, let alone identify. But statistics scream out, "Pay attention! Your business may be in danger."

Expatriates who return home early are the typical examples of a failed assignment, which various researchers (and conventional wisdom) peg at anywhere from 6 percent to 10 percent. But returning early is only the most obvious, not the most likely, sign of failure. The deadlier killers to the business aren't just the early returns. They're the Trancases—handpicked individuals who have technical expertise but who become the walking wounded and who dangle in the international destination wreaking havoc on projects along with the morale of subordinates and co-workers. Other failures include underproductive assignments—assignments for which high performers simply don't do the job well. Failures also come in the form of unaware managers who bungle business deals and mismanage government and customer relationships.

These failing performances may not be as obvious as the early returns, but they'll leave silent wreckage in their wake just the same. Global HR managers need to recognize the signs of potential failures and their impact on the business and long-term objectives of the organization. They need to monitor assignments and intervene when they see problems in the making, so they can prevent corporate disasters whenever possible. Of course, they can advocate early on to influence the selection of the best candidate, create realistic expectations for the expatriate and his or her family with sufficient cross-cultural orientation, and ensure strong communication between the sending organization and the manager in the host country.

"The obvious failures—the visible mistakes—represent a small number of assignments, yet these are the ones that corporate personnel still refer to when they talk about failed international assignments," says Rita Bennett, managing partner of Chicago-based Bennett Associates Inc. "As long as companies focus on that, they're not recognizing where the real failures are, and they're in danger of neglecting the real problem. Those early returns may be costly, but we're more concerned about the people who stay on assignment and do damage, disrupting relationships with local nationals and other co-workers."

The number of failed assignments is large. Researcher Rosalie L. Tung is often credited with citing that failure rates, in the broadest sense of the word, range from 20 percent to 40 percent of all assignments. And a 1995 study by Foster Higgins, a Washington, D.C.-based benefits consulting firm, concurs. The expense is substantial. International assignments cost three- to five-times the expatriate's annual salary, according to a 1993 survey by the Washington, D.C.-based Employee Relocation Council. And a survey by the National Foreign Trade Council and the St. Louis-based firm, Selection Research International (SRI), (cited in "Expatriate Failures: Too Many, Too Much Cost, Too Little Planning," Nov/Dec 1995, Compensation & Benefits Review), says that poor staffing decisions can cost the company anywhere from $200,000 to $1.2 million.

Obvious failures affect the bottom line immediately.
Although costly, often the quick, early repatriated employee is preferable to the hidden failures, says Steve Ruffing. As global assignments consultant for Minneapolis-based Medtronic Inc., he has years of experience with international assignments in a variety of companies. When he worked at Northwest Airlines, a young, computer networking employee was chosen for an international assignment. He was selected for his technical training, but he also seemed eager and went through the company's cultural orientation. All seemed well, says Ruffing, who actually sat in on the sessions. Although the young man had met a woman and had fallen in love, he still decided to accept the assignment. However, after six months abroad (and after having taken several trips back home already), he decided to return to the United States to marry his girlfriend.

"I was surprised because there was no warning," says Ruffing. "But I think the understanding and flexibility of the senior vice president of International was exceptionally astute. He simply decided to repatriate the man and cut the losses quickly. He realized there had been no way to prevent the failure and comprehended it was already a difficult situation that didn't need to be exacerbated." This assignment failure spurred the organization to reassess the job definition and to fill it with local employees rather than expats. The expat helped in the transition and didn't suffer shame or embarrassment, which would have transmitted a negative signal to other would-be assignees.

In most situations, however, assigning managers are reluctant to bring home an unhappy expatriate because of the cost the company already has incurred. But they might be better off to view these obvious problems as warning signs of further disaster down the road. Although the dollar figure is exorbitant for obvious failures, these are strictly the visible costs, says Reyer (Rick) A. Swaak, senior consultant for New York City-based ECA Windham. It's the unseen ones that should concern managers, as well. "Line managers will talk about the hidden costs, about the long time it takes to develop a relationship with a host government official that may be jeopardized when expatriates don't have the so-called relationship building skills," says Swaak. "I'm not talking about bribing or doing things against the law. I'm talking about building—and maintaining—relationships. For example, no government official is going to say, 'We just have a very poor relationship with this individual.' In fact, it sometimes takes two or three years to find out that an assignment is failing."

"People don't want to admit they've failed at anything," says Beverly D. Mayhew, principal of Orientations Inc., a destination services company in Singapore. "If someone is having a hard time, is on the brink of failing, he or she isn't going to broadcast it. It's human nature." The person may reluctantly admit failure if it is because of the family's inability to adjust to the location, but otherwise, will be hesitant to do so. And since there are so many different forms of failure, they're really difficult to acknowledge and detect. Cues the organization may have in a start-up operation or the early phases of production (such as trouble meeting financial goals and time lines), are far more difficult to determine in a more mature situation. There are more variables that can account for the difficulties in a division and more ways to mask the problems. For example, HR may have to evaluate whether high turnover is due to location problems or just a fluke. Also, one must learn how to measure the impact of the assignee on local nationals.

Ensure the right person has the right skills.
The idea of underproductive assignments concerns Tom Mullady, adviser, international compensation for Memphis, Tennessee-based Federal Express Corp. He has yet to find a system that measures the effectiveness of an employee on international assignment—in terms of performance ratings and turnover (especially after repatriation).

For example, if an individual was an excellent employee in the United States, and performs just average or slightly above average while on assignment, is that underperformance? Or is it a result of not making the transition into the assignment in sufficient time? Is it getting off on the wrong foot with the supervisor, the family not adjusting or simply a bad fit of an assignee and the position? Is it because cultural adjustment isn't included as part of the performance appraisals? These are the questions Mullady poses.

"We don't have direct line-of-sight to this information," he explains. Federal Express, therefore, is discussing the attributes of a database of historical experiences with expatriate assignments (showing people who have turnover problems, how many return from assignment and take successive assignments, how many leave the company after repatriation and so on) which might also serve as an overall selection pool for additional assignments. However, this information is not currently in place.

Failed assignments may occur if an individual has technical skills, but lacks the ability to manage subordinates, recruit and develop local nationals and communicate effectively, says Barry Kozloff, managing partner of SRI. Without the appropriate qualifications, the expat won't be able to meet the original business objectives. For example, if the company's goal is to have the expatriate hire and train a local national to replace his or her position—and is unable to do so—there's potential loss of morale among local nationals. Why? Even though it may be the failing of the individual expatriate, locals may perceive a company policy exists that says locals can't rise on the corporate ladder. In addition, customer goodwill and future business opportunity also will suffer.

In fact, says Bennett, companies are starting to become more aware of this issue. They see the length of the assignment is less relevant than if the individual is able to work effectively as a member of a cross-cultural, cross-functional team. "Were they able to transfer technology in an efficient effective manner? Were they able to translate the corporate vision, mission and values in an impactive way?" asks Bennett. "Were they able to build those positive relationships that enabled the job getting done?" Many times people stay the length of the assignment but don't represent the company in a way that enhances the company's image in the local setting. Because assignees are so visible and so linked to their company's name, if they're having difficulties, they're seen as just another person from headquarters who will damage the company's image. This scenario can have profound impact on the successors to a location.

On the one hand, the new assignee may have far more difficulty being successful in the destination because of the previous relationships with the local nationals—who may already have negative expectations.

On the other hand, when employees return from assignment, they send out powerful messages to other potential assignees. They can be positive messages about the company (as in the case of the Northwest employee who repatriated early), or they can be angry, disgruntled interactions. If employees feel positive about their experience, they serve as ambassadors; if they feel the company treated them unfairly or didn't prepare or support them adequately, or they had trouble with the local national community, they may broadcast that negative message. Finally, with attrition rates occurring at 13 percent within the first two years after repatriation (according to the "Global Relocation Trends 1995 Survey Report" by Windham International), other would-be assignees will get the idea that an international assignment may be a ticket out of the organization—voluntarily or involuntarily.

What HR can do.
One reason this situation exists is that organizations frequently have no operating definition of assignment success or failure. For one thing, there's no empirical measurement of failure that would uncover the more treacherous difficulties. Moreover, several factors can lead to an early repatriation: another job opportunity, a spouse or family issue, a health issue. Finally, many business failures are blamed on a variety of issues other than on the very real possibility that the wrong people were selected to manage the operation. Equally consequential, few companies exert an effective effort to evaluate completed assignments to determine their level of success or failure.

Federal Express attempts to alleviate a few of the reasons for failure by easing family transition problems, by assisting with assimilation into the new culture, and by providing as much information as possible about the financial package so the employee can make an informed decision. Global managers also attempt to help transferring employees reach full productivity as quickly as possible. To do this, the company provides a full orientation and briefing that's specifically designed to help candidates realize what the personal circumstances and career objectives will be, and whether or not the assignment is good for him or her to accept.

"We provide candidates with a four- to six-week time period during which they receive information, go on a house-hunting trip and determine whether or not to take the assignment. We encourage them to take a hard look at the assignment and to refrain from accepting the position if they don't feel comfortable," says Mullady. "If they decline, there are no negative career implications." In fact, there are people who have declined one year and later have gone on assignment when the timing was better, he says.

Mullady would like to establish an additional program that links the assignee back to the home country. He envisions a performance rating system that's integrated—meaning both sending and receiving managers execute performance appraisals based on objectives they set. He also wants to track what happens to the expats after they return—from their first, second, third assignments—and what's the return on investment for the company. Before coming to Federal Express, Mullady worked for an international computer manufacturer that was smaller and more manageable in terms of expatriation. There, the home-country managers would sign off on the expatriate's assignment letter and share responsibility for performance evaluation with the host-country manager who was the sponsor. They watched the employee's progress and achievement of the business objectives.

As Mullady and others in his position can attest to, assignment difficulties aren't going unnoticed. Many companies are beginning to reassess and redefine assignments to meet the business objectives. Careful monitoring is one way. Better planning early on is another. According to Mark Allen, practice director of international compensation for Stamford, Connecticut-based Watson Wyatt Worldwide, most assignment breakdowns occur prior to the actual relocation. In other words, "They're caused by poor planning at the outset either in selection of the expatriate (because he or she may have certain family or personal conditions that would make him or her a poor choice to send to a foreign country) or because it was the wrong position for the individual."

Jane Malecki, senior manager at Price Waterhouse LLP in Morristown, New Jersey, has been actively involved in the reengineering of several assignments. Companies do so for several compelling reasons. Because of the cost and the impact on the overall business, they want to be sure the expatriate position not only maximizes their investments, but also makes sense in terms of business goals. These companies are aware they may—or may not—have systems in place to measure the value and success of international endeavors. Reevaluating the assignment provides the opportunity to see what's working and what can be improved.

Clearly, international postings are fraught with potential problems that are severe enough to undermine business objectives, personal goals and interpersonal relationships—and create a collision course that can lead to corporate calamity. Although many assignment failures can't be prevented, HR's proactive role in predeparture strategy, preparation of the expatriate and family, and continuing vigilance in monitoring and appraising performance, will help avoid long-term disaster. But it all starts with recognizing what failure is.

Personnel Journal, November 1996, Vol. 75, No. 11, pp. 78-85.

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