The Pros And Cons Of Hiring An Expatriate Management Essay

The Pros And Cons Of Hiring An Expatriate Management Essay In this assignment, the importance of cultural factors over past knowledge experience is highlighted with the help of surveys, case studys organizational examples. The meaning definition is explained followed by the reason that make cultural factors so important for the success of an international assignment. There is a comparison made in between cultural factors past knowledge experience with the help of some real organizational experiences which include a survey case study as well. Towards the end the advantages disadvantages of hiring an expatriate based on each factor is discussed followed by a conclusion. What is Culture? Culture is a term used to define a shaping process in which members of a group or society share a distinct way of life which has common values, attitudes certain behaviours that are transmitted over time. As per Phatak(1995) A person is not born with a given culture: rather she or he acquires it through the socialization process that begins from birth: An American is not born with an inclination towards hot dogs, or a German with a preference for beer: these behavioural attributes are culturally transmitted (Dowling, Welch, Schuler,1998). International Human Resource Management: Managing People in a Multinational Context, 3rd ed. Peter J. Dowling, Denice E. Welch, Randall S. Schuler REASON FOR CULTURE AWARENESS IN INTERNATIONAL ASSIGNMENTS: It has been a long time that most of the multinationals are not just confined to commercial and economical enterprises but they involve political, social, scientific, athletic, religious and cultural entities. This has caused cultural differences in MNEs among both their manpower and their customers. Diversity is a fact in todays life and no organization can ignore it. Organizations are working with employees and clients who have different functional, cultural backgrounds and assumptions about the ways of decision making and communication (Zahedi, 2000). Cultural factors play a major role in international assignments because every country has a different culture and if the business people lack knowledge or sensitivity for other cultures there can be mistakes in both personal professional interactions because of which there can be clashes. People going on international assignments always think that their own country provides the best way of doing business, they behave in ways and mak e decisions that alianate their foreign counterparts leading to business and/or personal failure. Simple things such as gift giving or introductions can also create problems in international business if importance of culture is ignored. Peoples varying beliefs, values and behaviour patterns are very important for the success of an international business, including activities such as cross national negotiations, sales interactions in between people from various countries, management of the performance of employees from different countries, the treatment understanding of contracts between firms from various countries. All these activities require a good cultural knowledge of the host country (Briscoe Schuler, 2004).International Human Resource Management, 2nd ed. Dennis R. Briscoe Randall S. Schuler. In the international assignments, individuals receive poor job performance evaluation from their superiors if they have a different cultural background they do not understand cultural differences in role expectations, and do not conform to the role expectations (Stone-Romero, Stone Salas, 2003). An expatriate going abroad experiences situations that show differences in language, dress, hygiene, food attitude towards time and such situations can be difficult which can even lead to expatriate getting a cultural shock- a phenomenon which is experienced by people who move across cultures. When an expatriate goes on an international assignment, the new environment requires many adjustments to be done in a relatively short span of time which can challenge an expatriates frame of reference to such an extent that their sense of self, especially in terms of their nationality culture comes into question. Cultural shock can also cause Psychological disorientation if they do not understand or misunderstand certain cues which can further lead to negative feelings about the host country its people and a longing to return back to the home country or in severe cases failure of the international assignment. For an international assignments success activities such as hiring, promoting, rewarding, dismissal must be determined as per the practices of the host country and should be based on a value system peculiar to that countrys culture. .(Dowling, Festing Engle,2008) International Human Resource Management, 5th ed. Peter J Dowling, Marion Festing, Allen D. Engle, Sr Past Knowledge Experience versus Culture Business people with international knowledge experience operate with the expectation that the business models methods they are used to will work well in business interactions in other countries, however companies with long experience in the international field suggest that there is hardly any such positive overlap. MNEs should understand that the core of success in international assignments is cultural awareness and understanding of effects of culture on day to day business operations. As per a survey done on executives from around the world, the importance of intercultural understanding was highlighted and it was shown that countries in which people have greater cultural understanding are the ones that have an advantage in international business. Survey: A survey of more than 3,932 executives from around the world, rated countries in between 1 to 10 based on how well developed intercultural understanding is there in their business. The higher the intercultural understanding the greater is the competency success. Intercultural Understanding: Switzerland: 8.02 Egypt:6.48 Hungary: 5.18 Denmark: 6.94 China: 3.10 Israel: 5.89 Russia: 3.10 France: 5.08 Singapore: 8.02 India: 6.23 Poland: 4.57 Spain:5.42 Australia: 6.15 Malaysia: 7.30 Mexico:4.65 Korea: 5.35 Germany: 5.95 Hong Kong: 7.37 Turkey: 5.89 Italy: 5.04 Ireland: 5.30 US: 5.22 Taiwan:6.44 brazil: 5.71 If a firm enters a new country and performs its activities based on prior knowledge experience, it can cause a significant lack of trust alienation in the host country, this can have further ramifications, like attaining a quality workforce (Dowling, Welch, Schuler,1998). Example to prove importance of Cultural factors over Past knowledge Experience: For international assignments, if a MNE decides to take the enterprise culture forward it can create certain problems for e.g., MNEs originating from US UK feel that women should be assigned senior management positions but they cannot carry this culture for an enterprise in a country that is against women empowerment for e.g., Saudi Arab. Similarly a MNE originating from Asia may give importance to group loyalty discussion, with deference to senior employees in their operation however same practice cannot be carried forward while starting an international assignment in countries where individual decisions are more important (Dowling, Welch, Schuler,1998). Case Study: Experience past knowledge that works at home does not necessarily work abroad In a South Korean textile firm a Vietnamese worker was once kicked and slapped by his South Korean boss because the worker did not respond as he could not understand when his boss told him that he was in the wrong place in the factory. In South Korea it is common for employers to scold beat employees if they make mistakes. But this home practice led to a mass retaliation in kind by ten workers and the manager was hospitalised. It further led to a four day strike pay rises of ten to fifteen percent for workers. So the textile firm had to pay a lot for not considering cultural factors in Vietnam.(Dowling, Welch, Schuler,1998). International Human Resource Management: Managing People in a Multinational Context, 3rd ed. Peter J. Dowling, Denice E. Welch, Randall S. Schuler As per a study done to determine the affects of cultural factors on job performance it was indicated that after accounting for control variables, gender, prior overseas experience, length of stay in host country and language fluency, Cultural factors significantly related to job performance ( Ang et al.,2004) Pros Cons of Hiring an Expatriate based on Culture over Past Knowledge Experience: Experience in home country If a MNE hires expatriates based on past knowledge and experience in the home country, it can be beneficial for the control maintenance of the policies culture of the parent firm however it can lead to high expenditure in foreign assignments, difficulty in providing adequate training for foreign assignments, problems with adjustment for the expatriate and his family, problem in dealing with repatriates(when expatriates return). Experience in some other country As per Searle Ward(1990) having host country experience or friendships with host nationals greatly improves the expatriates ability to learn social skills and behaviours. Greater experience with the host culture produces greater cross-cultural adjustment. The theorists state that prior foreign experience with the host culture is positively related to adjustment provided that the experience does not serve to foster negative, unrealistic expectations of the foreign culture. There is a direct relationship between prior experience and cross-cultural adjustment , it provides an accurate and realistic representation of the host Countries policies, customs, values, etc. There is very little evidence that previous experience abroad does not always facilitate adjustment to a new expatriate environment (e.g., Black Gregersen, 1991; Cui Awa, 1992; Dunbar, 1992; Selmer, 2002). The major advantages disadvantages of hiring expatriates with past experience (both domestic and/or international) are Advantages: It leads to organizational Co-ordination Control is better facilitated maintained. It also helps promising managers with past knowledge experience in home country get international experience. People with past knowledge prove to be the best people for the job because of special skills experience. It provides an assurance that during international assignment, subsidiary will comply with companys policies, objectives etc. It has been found that researchers generally consider previous international experience to be of advantage because such experience teaches an individual the ability to generate strategies for adaptation in new situations, so the chances of assignment failure are minimized(Tye and Chen, 2005 cited in Avril Magnini,2007) Disadvantages: The Promotional opportunities of host country nationals get restricted limited. Adaptation to host country may take a really long time. Parent company nationals may impose an inappropriate headquarter style. Compensation benefits for Parent company nationals Host country nationals may differ, causing conflicts. As per Gregerson Black (1990) One of the most important reason for the expatriates failure international assignments has been the use of technical skills, rather than intercultural skills, as the most important factor in US selection for overseas assignments (Stephan, Helms Haynes,1995) Hiring on the basis of Cultural skills: However, if cultural factors are given importance and for international assignments expatriates are chosen on the basis of their understanding of the host countrys culture it can result great success for the assignment. Hofstede (1980,p. 398) suggests that the key cross-cultural skills are the ability to communicate; The ability to be non-judgemental; The ability to accept the relativity of ones own knowledge and perceptions; The ability to display empathy; The ability to be flexible; The capacity for turn-taking (letting everyone take turns in discussions); Tolerance for ambiguity. As per Fishmayr (2004), all the attributes must be viewed in the context of the host countrys culture. Each culture has its own criteria of the importance of Characteristics required for success. The major advantages disadvantages of hiring expatriate with cultural understanding are Advantages: Language other barriers of traditions are eliminated. Hiring cost is tremendously reduced, no work permit required. Continuity of management improves as HCNs stay longer in position. No government interference as the host country gets employment opportunities. Morale dedication of expatriate increases as they see career potential. (Briscoe Schuler, 2004) The expatriates who understand the social cultural environment of the host country, will be more efficient in understanding the culture of the host company. For example in individualistic cultures the organizations give importance on rewarding individual contributions, whereas in collectivists cultures the shared objectives, common interests, interdependence and communication is given more importance(Chatman et al; 1998). Such demographic compositions affect expatriate performance, creativity, motivation turnover intentions and any other job related outcomes. Among these creativity is more tangible and employee specific resource of MNEs, lack of which, may retain multinationals from keeping in touch with technological changes and development in related industries. (Avril Magnini,2007) Disadvantages: Control co-ordination of headquarters may be spoilt. HCNs will have limited growth opportunities outside the subsidiary.Hiring HCNs may limit the opportunity for PCNs to gain foreign exchange. It can lead to a federation of national rather than global units. (Briscoe Schuler, 2004).International Human Resource Management, 2nd ed. Dennis R. Briscoe Randall S. Schuler CONCLUSION Thus it can be said that the role of culture is very important in the success or failure of an international assignment. If a MNE ignores this factor it has to face serious consequences, like failure of the assignment, bad reputation, financial losses so on. However, this fact cannot be overlooked that other factors like past knowledge experience are also important and they should also be considered while choosing an expatriate. The only way to ensure that an assignment gets successful is to make sure that the expatriate chosen has good knowledge about the host country, its culture, tradition, values along with some past knowledge experience. Q: In what way is repatriation proving to be a major problem for MNEs? Critically discuss what should be the essential features of an expatriate training programme designed to assist the western expatriates adjusting to life and work in another continent. A: PREAMBLE : In this assignment, the repatriation issue is dealt with in detail. The major problem faced by the MNEs is discussed followed by the problems faced by expatriates in detail, as the problems that expatriates face have a severe impact on the MNEs in terms of productivity and staff turnover. A literature review has been used to study the past practices of MNEs that made repatriation a problem. Later on, the essential features of an expatriate training program designed for western expatriates are discussed in detail like cultural training, language training, technical management training, the importance of including preliminary visits to the host country as a part of training programme has also been stated. In the end the critical review/conclusion is given reflecting the total understanding of the topic. Definition: Repatriation is a process of returning back home at the completion of an international assignment. (Rugman Collinson,2006) The major reason that repatriation becomes a problem for MNEs is the organizations belief that returning home of expatriates should not be difficult, but many researchers have found repatriation to be a really challenging and complicated process(Cox, 2004). The main source of concern for the multinational enterprises is the repatriation turnover i.e. number of repatriates leaving the job on return (Lazarova and Cerdin, 2007). The major concern for the MNEs is the attrition rate of their repatriated employees (Gregersen, H.B., J.S. Black ,1996) .Managers returning from an international assignment are more likely to resign and look for other employment opportunities as compared to other eecutives with same domestic experience ( Stroh et al, 1998) As per the Global Relocation Trends 2003/2004 Survey (GMAC, 2004) 13 percent of the US repatriates leave the company in one year after returning from an international assignment, another 10 percent leave the following year. Baruch and Altman (2002) found in their research that 50 percent of people left the company within a few years of their return from an international assignment. Bossard and Peterson (2005) argue that, if the repatriates get frustrated due to unfulfilled expectations and lack of appreciation, they will leave the MNE. The costs of pre mature repatriation also includes losses like damaged corporate reputation and lost business opportunities. If a repatriate leaves the home organization soon after coming back from an international assignment it causes a financial setback also forces the company to lose the repatriates recently developed international experience and competence (Hyder and Lo ¨vblad, 2007). LITERATURE REVIEW: International human resource development (HRD) researchers have recognized that organizational support and training are necessary for expatriates to do a good job in overseas assignments (Hurn, 2007; Osman-Gani and Tan, 2005; Selmar, 2005; Osman-Gani, 2000; Brewster, 1993; Harvey, 1989). However, the literature concentrated on the role of training and development for successful performance in foreign assignments, but little attention has been given to the repatriation aspect. Repatriation, which is the last step of the expatriation cycle, is an under-researched dimension of international assignments (Harvey, 1989; Black, 1992; Suutari and Brewster, 2003), although its importance has been repeatedly mentioned in international business and international HR literature (Allen and Alvarez, 1998; Caligiuri and Lazarova, 2001). (Ahad Hyder,2008, pp457) As per Black Gregersen, a multinational spends a huge amount of money on each expatriate over the duration of international assignment and if the employees exit the MNE within a short duration of time, it can result in huge financial human capital losses as the knowledge, skills experience gained by expatriate are scarce in the external internal labour markets. (Dowling, Welch Schuler,1999) International Human Resource Management: Managing People in a Multinational Context, pp 221 Repatriation is proving to be a major problem for MNEs because they do not have any plans or training programs to handle returning expatriates the expatriates face many challanges when they come back, some of them being: 1. Readjustment Problem: There can be a readjustment problem for expatriates as when they come back they might feel that the home office job lacks the high degree of responsibility authority that they had in the overseas assignment. 2. Delay in Career Progression: They can also start feeling that the MNE does not value their international experience and their time was wasted when they were on an overseas assignment in terms of their career progression. 3. Standard of Living: The repatriates when overseas enjoy generous living allowances benefits that cannot be matched when they come back home. 4. Reverse Culture Shock: Expatriates can get a reverse culture shock because of the change in cultural lifestyle back home. 5. Increased Prices of fixed assests: Expatriates who sell their houses when going on a long international assignment for two or three years find it very difficult to purchase a new house because of increased rate of property. 6. Technological Advances: When the expatriates are abroad numerous technological advancements keep happening in the head quarter which might make the knowledge skills of expatriates obsolete. (Rugman Collinson,2006) International Business, 4th ed., Alan M. Rugman Simon Collinson, pp345 7. Conflicts: Conflicts may occur because after gaining international experience, an expatriates way of working gets influenced by foreign culture and when he comes back home, conflicts can arise if he tries to work as per the culture of the foreign country to which he was sent. For example, an American expatriate who went to Indonesia, alters his participative managerial style to one that is authoritarian because of the subsidiarys requirement, however when the expatriate returns to America tries to be authoritarian in managing style, conflicts are bound to happen. 8. Role clarity Role discretion: Role discretion means the freedom to adjust the work role to fit the individual (repatriate), making it easy for him to utilise the past international experience familiar behaviour. For most of the North American companies, role clarity role discretion remains a major repatriation issue as they do not provide role clarity discretion to returning expatriates. 9. Social Factors: On return, life may seem unexciting or dull because the social ties that the expatriate made on the foreign assignment were broken when he came back home. Families who return to their previous domestic locations often find that their relatives friends have moved away even children find it difficult to adjust to new school friends. 10. Effect on Partners career: If the repatriates partner had never worked before in the home country but got some job when he/she was abroad with his partner on international assignment, it becomes really difficult to start the career from the scratch once again when the partner returns back to the home country. As a result of all these problems MNEs have started taking repatriation much more seriously. In 1989 Harvey did a survey of the members of the Institute for International HRM of the U.S society for HRM to determine U.S firms approach towards repatriation. It was found that 31 percent of U.S firms offer repatriation program to help the repatriates in dealing with numerous problems they face on return. (Dowling, Welch Schuler,1999) Peter J. Dowling, Denice E. Welch, Randall S. Schuler International Human Resource Management: Managing People in a Multinational Context pp211- 225 Essential features of an expatriate training programme As organisations are becoming globalised, there is an increasing challenge to send expatriates on international assignments to complete critical tasks (Gregersen Black 1996, Brewster 1998, Downes Thomas 1999). Multinational Enterprises (MNEs) use expatriates for corporate control and expertise reasons in major global markets also to facilitate entry into new markets or to develop international management competencies (Bird Dunbar 1991, Boyacigiller 1991, Rosenzweig 1994, Shaffer, Harrison Gilley 1999, Forster 2000). (Chew,2004) Janet chew,2004, Managing MNC expatriates through crises: A challenge for International Human Resource Management A western expatriate going to another continent finds it really difficult to adjust because of several reasons like climate, culture, eating habits of people from other continents so on. To cope up with all these problems it is very essential that the expatriate gets proper training before he leaves on the assignment. The different types of training programs required by a Western expatriate can be broadly classified as: 1. Technical Training: The technology used by western countries is not same as that used in other continents so the expatriate should be made familiar with the technologies used by that foreign organization to which he is going. He should also be briefed on the local attitudes of people over there towards technology innovation transfer. 2. Management Training: An expatriate sent to other countries on a specific project holds a particular designation so it is very important that the western expatriate is made aware of the administrative responsibilities for the post. a)He should also be made aware of policies regarding ethical issues. b)He should be told about the companys organizational structure, strategies opportunities for change, organizational climate, informal structures. c)He should also be trained on conflict management. d)The western expatriate should be trained on the business environment of the host country, a description of local international markets should be given along with information about competitors, distributors, tariff other barriers e) He should be well trained in marketing issues strategies, pricing strategies, advertising promotional strategies that work in other continents. f)The expatriate needs to have knowledge about human resource issues, labour relations policies, salary reward structures other policies followed in the host country.(Mead,1994) 3. Cross-cultural training : Such training aims at achieving three major outcomes (Black Mendenhall,1990) For western expatriates it is the most important part of the training as: a) It teaches them about the other culture, values practices within that culture. It also helps the expatriate his spouse in learning about different situations that they might encounter. It also gives them a knowledge as to how the culture is reflected in political, historical economic data. b) It also helps them to develop non-evaluative attitudes towards other culture, teaches them how to express cultural values in their behavior, this also helps them to predict when culture will be a factor in determining behavior. c) Cross-cultural training teaches expatriates how culture affects attitude towards work; motivation, organizational climate, degree of personal involvement etc. It teaches them how culture influences relations between organizations how it influences formal interactions.(Mead,1994) As per Treven (2003) the most important part of expatriate training is cross-cultural training. It helps to prepare expatriate managers to live, work survive in a different cultural environment. It is important as dealing with new culture surroundings appears to be even more difficult than the assignment itself. Treven (2003) also underlines that it is important to train managers their families both before leaving for the other country and during the assignments. Tsang (1994) identified six types of cross-cultural trainings, which are used by the US, European and other western countries. (1) Environmental briefings in order to provide information about climate, geography, housing and schools. (2) Orientation on culture in order to familiarize the expatriate with cultural institutions and value systems of host country. (3)Cultural assimilators using approaches aiming at exposing members of one culture to some basic ideas, approaches, role perception and habits of the other culture. (4) Sensitivity training to increase attitudinal flexibility. (5) Field experience, which sends the person to the country of assignment in order to help him deal with emotional stress of living and working with people who differ culturally. 6) Language training . 4. Language training: An important issue that Treven (2003) underlines is the language training for the expatriate family, as it provides the recognition of a new culture, including such a cultural elements as history, economy, politics, religion, social atmosphere and business practices. Without language training survival becomes difficult. (Karcz, Liu Adamska,2006) How to survive as an expatriate in china-A case study based on three companies IKEA, NCR Texol, 2006, Kamila Karcz, Rongzhi Liu, Joanna Adamska 5. Preliminary visits family considerations: One of the most important technique that is useful for western expatriates is preliminary visit to the host country. It serves to introduce the expatriate to the business context in the host country also helps in pre departure preparation and initial adjustment. As per Price waterhouse survey in 1997-1998, 53 percent of the MNEs always provide preliminary visits to its expatriates and around 38 percent use it in certain circumstances. This practice can become a bit problematic for expatriates as they find it difficult to reject the assignment in spite of not liking the host country because a huge amount of MNEs capital gets invested in the visit. (Dowling, Welch Schuler,1999). Family members must be involved in relocation decisions and preparation (Hogan and Goodson, 1990). Stress and culture shock can effect the family and if not addressed in time can become a negative force in an overseas assignment. Black and Stephens (1989) found spouse adjustment to interaction with the host-country was correlated with the expatriates intentions to complete the assignment. Researchers including Gregersen and Black (1990) stress the importance of developing the intercultural skills of both expatriates and their families. (Stephan, Helms Haynes,1995) CRITICAL REVIEW (CONCLUSION) As per research done by Gregerson Black(1996) there were significant differences in the motivation expectations of the expatriate those of the MNE. The expatriates accepted international assignments for career progression, compensation adventure however the MNE sought it as a means of transferring home corporate culture and expanding business in global markets. Most of the MNEs during the 1970 and 1980s were experiencing difficulty agreeing on the appropriate skills and competencies training that were required by western expatriates to be successful on an international assignment. The main points of disagreement were: Corporate leaders could not agree on the importance of prior international experience and expertise the expatriate should have before taking an international assignment. Some of them believed prior international experience was necessary, others felt that an employees success at the domestic level, rather than international experience, was the key predictor to being a successful expatriate. MNEs were struggling to discover an effective training and development model to help them in preparing expatriates to be successful in their overseas assignment. In 1970s and 1980s less than 30% of employees who were sent on 1 to 5 years assignments received some type of training before undertaking international responsibilities. Top management generally did not consider trainings importance in contributing to an expatriates successful performance. MNEs did not encourage the need of customized training programs for expatriates within the host country. Training received was generic in nature and mainly offered within the western countrys borders. MNEs, in mos