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Today’s Global Mobility Short-term Assignments and Other Solutions

July 1, 1998
Related Topics: Managing International Operations, Featured Article
The year: 1903. The place: A tiny converted wagon shop in Detroit, Michigan, U.S.A. The number of employees: 10, all domestic. The first international location: Ontario, Canada in 1904. It’s Ford Motor Company’s beginnings -- classic Americana that parallels the industrialization and the globalization of this fleeting century.Today, the world’s second largest industrial corporation employs more than 370,000 individuals worldwide and sells vehicles in 200 countries through a global network of 15,000 dealers. In 1996, the company sold 6.7 million vehicles. To accomplish such goals, the organization had to change its very structure, from a multinational corporation to a global one. This change required not only marketing and sales efforts, but itdemanded a workforce management strategy. Ford embraced a fundamental tenet of globalization: You must choose the best people for the task at hand from any place in the world you can find them.

People propel the global marketplace -- both international assignees and local nationals. Indeed, whether companies are seeking expansion or consolidation, joint ventures or new operations, employees make the vision a reality. And many times the employees you need to do the job are based somewhere other than where the job is. That’s why the estimate of assignees from U.S.-based companies still hovers at 350,000, even though a few years ago many experts predicted these numbers would decline. On the contrary, by all accounts most companies now expect their expatriate populations to continue to grow through the next few years.

“Today, I can hardly think of a client for whom we haven’t done a policy review or rewrite -- and it’s usually cost-driven.”

As companies continue to expand globally and their need for expats increases, several additional forces are converging. First, assignees are expensive, and organizations are increasingly cost conscious. Second, many qualified candidates are reluctant to go on assignment because of the disruption to their lives. And given the U.S. 28-year low unemployment rate (4.3 percent), these folks have many options. Third, as companies adopt a worldwide business focus, they’re identifying short-term transactional positions with greater frequency. Companies are beginning to recognize that if they look beyond their local workforce, they have the internal resources to fill these positions temporarily.

Because international activity is at an all-time high, companies are trying to answer these challenges with creative alternatives to traditional assignments. From short-term assignments and single-status relocations to frequent business travel, more and more firms view their global operations as an intrinsic part of their business. And they view assignments as one component that must be managed in creative, flexible and cost-effective ways.

Short-term assignments are a less expensive solution.
Just compare. In a 1992 survey of North American companies by New York City-basedOrganization Resources Counselors Inc., only 5.3 percent of assignees were on short-term transfers of less than 12 months. The 1997-98 survey revealed the number to be 16 percent. Likewise, in 1992, 55 percent of the companies had separate policies for such assignments. In the more recent survey, that number was 81 percent.

Says vice president Geoffrey W. Latta, “There’s been a substantial increase in short-term assignments over the last five or so years.” This interest is driven by several factors. First, by pure cost. Most HR managers would agree that the gains for the organization are greater if the assignment is longer because it takes time to become culturally astute, to learn the overseas operations, to become accepted in the new business environment and, therefore, to operate at the most effective level. But a shorter time frame can accommodate certain types of transactional and project-specific assignments while also saving money. There are also significant tax benefits with short-term projects.

“When I think back, I know that many people didn’t even really consider costs since expatriates were simply a necessity,” says Susan Evens, senior manager of international human resources consulting at New York City-based KPMG Peat Marwick. “You needed somebody in a specific job to help the business grow, and you sent somebody without too much focus on how much it would cost or if you were sending the right person to do the job. Today, I can hardly think of a client for whom we haven’t done a policy review or rewrite -- and it’s usually cost-driven.”

While most companies aren’t making wholesale switchovers from one kind of program to another, managers at some firms are considering more alternatives than in the past. They recognize that the shift toward flexible assignment structures is clearly more cost effective.

Sometimes employees are reluctant to be transferred internationally.
Three to five years -- many people just don’t want to be uprooted for such a long periodof time. Some of this reaction may be in response to the problems regarding repatriation and the fact that international assignments may not necessarily be career-enhancing because of the “out-of-sight-out-of-mind” syndrome. When the option is available, many individuals will gladly go on assignment for short periods of time, but not for years.

“Assumptions are changing,” says Evens. “I think you could make the argument that people are more traveled -- and also that companies expect employees to be prepared to take assignments. People don’t necessarily join organizations with the idea of being globe-trotters, but they’re finding themselves in jobs where being global is the way of the world. The expectation is that you will be prepared to move. One way of getting around this is reducing the time individuals have to be on assignment. If it’s only one year, it seems more attractive.”

The dual-career issue drives some of the additional interest in these short-term assignments. While this isn’t the biggest contribution to the change, Latta believes it is a significant one.

Many times a project will take a year or less to complete.
Sometimes the task at hand simply isn’t big enough to warrant a traditional assignment, but neglecting the project entirely would be shortsighted. For example, typically HR staff aren’t expatriated on traditional-length assignments. Latta reports, however, one company had an HR executive who had been on two six-month assignments for her firm: one to Hong Kong and one to Switzerland.

The organization had been looking for an individual to help with a specific human resources problem that could be addressed in a finite period of time. Because the company was willing to be flexible and look at this type of assignment, the woman with international HR experience was able to accommodate.

Another company in favor of flexible and short-term arrangements is Minneapolis-based Cargill Inc., an international marketer, processor and distributor of agricultural, food, financial and industrial products. It has 79,000 employees with 550 expatriates worldwide. Of those, about 220 are Americans, about 130 are people inbound to the U.S. from other countries, and the remainder are other international assignees located all over the world. Expatriates range from almost entry-level people, possibly on their second assignment, all the way up to very senior people who are running businesses and heading regions abroad.Bob Ernt, manager of Cargill’s international human resources department, says: “The number of assignments, the number of expatriates continues to go up. At the periphery there are more and more situations where people are going abroad for three, four or six months. I think that’s going to be a trend that will continue as well.”

Short assignments also work well when personal development is a key objective.
Just like with traditional assignments, when you assess the value of a short-term posting, it’s important to consider the assignee’s personal development. Ernt states, “Someone might say, ‘Gee, a three year assignment would be a great way to build understanding and expertise.’ But six months can do wonders in some cases.” Many scenarios carry a double benefit. Ernt explains: “[First,] the company needs someone to do something for six months whether it would be to fill in a position, install some equipment or work on a project. But we also look at it as a personal development issue.”

A good example occurred two years ago when there was growth in the business in Thailand and they needed HR expertise there. They recognized that it’s better to have a local employee doing an HR job because of all of the cultural, language and other issues, but again there was a skills gap. The posting read something like: “If you’re interested in devoting six months to living in Thailand to help organize HR, continue the current work in Thailand, plus hire and train someone local to work in that position, sign up.”In fact, there were several interested individuals. Says Ernt, “Clearly, ten years ago, when there was less interdependence and interconnectedness, my guess is that it never would have even been considered.”

Companies are beginning to develop the concept of a global workforce.
This interconnectedness and growing interrelationship between departments across the world has given companies today an enhanced global perspective. This new mindset has opened their eyes to a wider range of internal recruiting options. “The interdependency is getting greater and the ability to move people around interchangeably is greater,” explains Ernt.

He shares this example: “If there’s a financial trading function in London and somebody is poached by another bank and moves away creating a gap, there are different options.” He continues, “Now, while they’re training someone for [the job] there may be an individual in Minneapolis or Chicago who does pretty much the same thing. Rather than leaving the [London] desk vacant for six months until we get somebody [up and running] -- or rather than taking someone who isn’t fully trained and dropping him or her at the desk, hoping for the best -- the attitude is, ‘Let’s look in the organization and find someone who has the same abilities and does pretty much the same job, and drop him or her in there for three months or six months.’”

That way the short-term transferee could help train the new hire, fill the gap in the meantime and then return home. “Really there would be no need for someone to go over and do that job for two to three years,” says Ernt. “It’s much more of a temporary need, and therefore a temporary assignment.”

Start by reviewing your current processes.
When companies review their policies, they may decide to keep the status quo, tweak them just a little bit, or make changes. The review process alone encourages managers to assess the changes in their employees’ needs, the demographics of their international vacancies, and their company’s stated business objectives. Another primary consideration is cost. First, review your policies to examine what you already have in place. Then consider the following points as you evaluate whether a short-term assignment would work for your organization in some cases.

  • Outline the advantages to your business of structuring a particular assignment at varying lengths. Recognizing the long-term business benefits of three- to five-year relocations, overlay the potential benefits of structuring less traditional assignments.
  • Will your candidate pool increase if you can offer more short-term assignments? Survey high-potential employees who expressed disinterest in the past.
  • Do you have projects for which global teamwork can be done with extended, more frequent business trips?
  • Do you expect your company’s business objectives to change in the foreseeable future?
  • Involve repatriated families and line managers in the policy development process.
  • Conduct cost-benefit analyses on each option.
As you examine costs, remember that generally, short-term assignments have allowances that are less generous. Very often, these assignments allow the family to remain in the home country. As a result, the firm assumes the individual won’t need to buy a lot of the things they would ordinarily need if they were going for three or four years. Furthermore, home leave is reduced or is non-existent. When the company does provide occasional returns (some policies say they pay for a trip back every two or three months), the enormous savings on the children’s education offset the additional travel cost.

Our clients are asking us to supply them with core benefits that anyone who goes will receive and additional options based on the specifics.

Another indirect influence over cost is the trend toward a much wider range of job functions among transferees. “Now, it’s really a broad group of [job functions], from IT people to HR people, attorneys, accounting people, finance people, as well as the traditional engineers, commodity traders, senior managers -- a good cross section of the company,” says Ernt. It’s no longer the elite group of senior managers who are in and out of places. “That frankly has had a big impact on expatriate compensation. More people are going out for more reasons to more places, doing different things. And the traditional ‘we have one way to pay people’ starts to become less appropriate in that situation,” Ernt explains.

Evens adds, “We’re seeing a greater willingness to differentiate policies. The idea of equity is still important, but differentiated equity on the types of assignments and the level of the individual. A lot of our clients are asking us to supply them with core options or core benefits that anyone who goes on assignment will receive, and then additional options based on the specifics of the situation,” says Evens. In theory, it makes a lot of sense; implementation is not easy because it also creates an exception-based policy. From an administrative or HR point of view, it could be a nightmare.

Core benefits provided to all employees on assignment frequently include tax equalization (which kicks in depending upon the length of the assignment), housing allowances (although the level of housing will vary) U.S. medical benefits and contributions to 401K programs, social security and pension. Optional elements would be children’s education, home leave and travel for R&R.

As global business activity continues unabated, most firms are still employing traditional assignments. But, more and more are trying creative approaches to mirror the global marketplace that calls for flexibility and new thinking.

Global Workforce, July 1998, Vol. 3, No. 4, pp. 12-17.

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