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Case analysis 1
Problem Identification
The traditional expatriate package that is utilized throughout the case study is primarily based upon the balance sheet approach. Under this approach, the objective is to keep the expatriate universally content through all aspects of life (compared to that of PCN co-workers) by maintaining home-country living standards and offering financial investments (Dowling, Festing & Engle, 2017). The Balance sheet approach has been successfully used to in many home to host combinations (ARINC, 201967). The balance sheet approach removes barriers and for this reason, nearly 80% of all global firms use this approach (ARINC, 2019). Akiko’s company took the balance sheet approach by making her “whole” while she was on assignment. In other words, her company-maintained relativity to her and her family and compensated her for the cost of the international assignment. The overall end-state of the balance sheet approach is to link the expatriate’s salary to the salary structure of the parent country (Dowling et al, 2017). Throughout the case study this is exemplified in Akiko’s, a 40-year-old Tokyo born MNE employee, previous assignments where purchasing powers from home countries were maintained throughout host countries. Allowing purchasing powers to remain centralized within the home country enables the expatriate to focus on work, due to the company facilitating generally everything involved with the moving process.
Although many benefits are seen within the traditional package, the company does not want to link to the home country, as well as trying to detract from advocating for home country nationals being the only ones to learn more on the job (rather than both HCNs and PCNs). The company wants to act as one entity, however the difficulties associated with this concept arise from the challenge to work with three sectors that are very different. This gives life to the need for change. Specifically speaking, the traditional package can create very prevalent disparities between PCNs and HCNs, as well as general culture discrepancies. Explained by Puja Malik, the company HR manager, paying staff different wages, regardless of the country of origin, for performing the same types of duties will result in increased tension between the host and parent country. For example, if Akiko were paid a different salary simply due to her stature within the company, compared to that of a Singaporean HCN, the company would face a plethora of fairness and equality complaints.
As previously mentioned, and essentially the largest limitation the company faces, is the inability to manage three very distinct and very independent sectors of the company. HCNs are quite reluctant to except the salaries offered by the host country because in this package the HCN identifies with the host country; ultimately leading to complexities arising in sections that are greatly intertwined with both private and government fund transfers (Dowling et al, 2017). Because this company employees hundreds of thousands of people with more than two thirds of its employees working outside of Germany, global expansion has drastically diversified the product line. In turn, the decentralization of the company has called for decentralized control of a regiocentric methodology (Andresen, 2013). This makes it very difficult for the company and its HR personnel to implement a consistent Balance Sheet Approach. The differences in host/parent countries throughout the multiple countries in which they operate within cost more time, money, and resources to restructure tarnished host country relations and job unattractiveness to HCNs.
Analysis
For most companies, the main goal is to reach cost effective efficiency. This remains true for the German multinational company that Akiko Nishimura worked for. Akiko’s company sent her to New Delhi for opportunity to gain international experience and gain additional personal talent. Akiko was sent to New Delhi on the standard home-based expatriate package that every expat in the company used since the 1970’s when the company of about 300,000 employees started shifting talent within. During that time period the of growth and product diversity, the company began branching off into smaller more manageable sectors that eventually became very independent of each other. Akiko’s company is now faced with the challenge of becoming more effective and efficient by moving towards becoming one company. A significant part of this change process meant that the company needed to rethink the costs involved with their employee who are going abroad. This has a direct effect on longer term associates, including Akiko. This is where the company faces challenge; however, cost-effectiveness is crucial to the company’s ultimate goal-which is to cut costs and increase profits. Because this company employees hundreds of thousands of people with more than two thirds of its employees working outside of Germany, global expansion has drastically diversified the product line. In turn, the decentralization of the company has called for decentralized control of a regiocentric methodology (Andresen, 2013). This makes it very difficult for the company and its HR personnel to implement a consistent Balance Sheet Approach.
The biggest issue concerning existing expatriate employees is that by accepting international assignments to lower income/lower social security countries will leave them poorer than staying where they are (Dowling et al., 2013). The poorer status produced by Local
International policy results from the assimilation of expatriates into local workforce systems. This means equalizing compensation within the company between local and international talent (Dowling et al., 2013). While it seems logical that all staff employed by the same company should receive equitable compensation, regardless of if the person is a local or international hire, the company is not taking into consideration key differences between the local and the international talent.
Options
The first difference the company needs to recognize relates to available personal resources. Local employees have spent a lifetime building and acquiring personal resources that support their functionality and prosperity based upon local compensation standards (Dowling et al., 2013). For example, local talent already is on the property ladder within their market or already has accommodations, they have friends and family that are available to support and help them when needed, and the local talent already knows how to function in the market. Conversely, international hires must make several expensive purchases just to start up a household in the new market (Dowling et al., 2013). This includes securing a place to live, obtaining a vehicle or transportation, paying for international school, buying/renting furniture, and moving furnishings and family members to the new market. These upfront costs are extraordinary for the foreign talent.
Another difference the company needs to recognize is that international talent must relocate the entire household, and not just a single person (Dowling et al., 2013). This adds stress and costs to the equation. If the employee’s family is not provided with some benefits that secure their safety and happiness in the new location, it will have a negative effect upon the employee’s performance.
Finally, when moving an international employee to a new location under the Local International policy, all of the risks are assigned to the employee (Dowling et al., 2013). Additionally, most of the benefits of the move are assigned to the employer. This is an out-of-balance arrangement that will likely lead to the loss of key talent.
Recommendation
To create a better Local International policy that fosters cost saving efficiency and effectiveness, the framework should include: considerations for the duration of the assignment, if the move is employee-directed or employer-directed, the family influence factor, what risks are associated with the transfer, and what benefits the company will reap from the talent in question over the lifetime of his/her career. In this particular situation, it is possible that the associate may not have considered being transferred if there were job-hunting assistance offered to the employee’s spouse. This benefit may have aided in the employee’s spouse with obtaining a job either externally or internally and Akiko would have likely transitioned to a localized associate with usable international experience and personal talent.
Once the policy is established, it is important for the employee to clearly understand what assistance and benefits are offered, who they benefit and for how long. However, employees also need to recognize that if they request a transfer to a new market, the employer is not obligated to provide a lucrative expatriate package, especially if the move has no strategic value to the company.
Assumptions Made
The assumption was made that Akiko’s husband was not offered employment services.
References
Andresen, M. (2013). Local and International? Managing Complex Employment Expectations. International Human Resource Management (6th ed.) No. 5. Andover: Cengage Learning
Case analysis 2
Problem Identification
Due to changes in the economy, employers are focusing on a more cost-effective approach as it relates to expat assignments by decreasing the cost related to benefits and incentives. This change has decreased the willingness of expats wanting to travel and take on additional assignments. This change affects employees who have been with the company for numerous years. By the organization using the balance sheet approach, it can reduce costs by offering inexpensive international policy. The traditional expat package provides benefits to employees, such as housing assistance, and ensure that salaries are not adjusted when they take a different international assignment. Many employees have been in the same country for years on an expat package and are no longer expats. The organization is forced to go through and analyze their current policies as it relates to international mobility. The limitation of the contract is that it can be expensive and cannot be used by the organization to handle the emerging needs concerning the transfer of knowledge and gaining international experience among employees. The contract also does not motivate expats to return to their countries, which denies new hires an opportunity to gain international experience. There is also a lack of continuous communication between HR and the employees with regard to policies and feedback. The employee clearly states that the lack of information was affecting her greatly. There is a clear break down in communication.
Analysis
Aiko is an employee of a German multinational manufacturing company. She is currently two-years into a talent expatriate assignment in New Delhi. Her husband and two children currently reside with her and recently her husband found a new opportunity in Singapore. Aiko is interested in pursuing a new assignment in Singapore with her family. After connecting with her HR manager, she finds out that the company’s policy around oversea assignments has changed. The company no longer provides assistance around house hunting, pre-assignment visits, school search, obtaining visas, and any financial support would end after two years (transition to local contract). Another critical variable to consider would be the pay cut that Aiko could possibly experience once the local contract ends. In addition, Aiko has to consider how this move will impact her family. The stress of relocating one person can be extremely taxing let alone uprooting a whole family. It is imperative to have a great deal of support when making major lifestyle changes. Therefore, having the family participate in cultural awareness courses, language classes, and also having support services that assist with other miscellaneous tasks can make the transition smoother for everyone. Although, the move to Singapore would allow both Aiko and her husband to provide for their household, the benefits that she is forfeiting by transitioning to local international assignment results in an even greater loss of salary and benefits.
Options
The company could choose to do nothing. The company is transitioning to a way to save money on expatriation. Cutting down on these contracts is a beneficial way to accomplish this goal but there may be multiple issues. This could lead to dissatisfaction with working for the company. This would greatly affect retention. Not only would the company lose a highly valued employee, but they would also lose an asset in training other expatriates and global employees.
One option is to increase practical assistance. Practical assistance includes preparing visas, shipping goods, and moving expenses such as getting utilities started (Dowling, Festing, & Engle, 2015). Along with this assistance, the company could enforce a mentor program. The Sponsor/mentor program is beneficial for the employee because it allows the employee to have a line of communication for issues and adds to the employee’s support system. A company named Monsanto incorporated a policy that starts three to six months out (Black & Gregersen, 1999). Human resources meets with the employee’s supervisor to discuss future assignments and skills that the expat has developed. The expat also writes a report on themselves based on what they feel they have learned. Then, the three of them get together and discuss assignments that the company and the employee can benefit from. This approach has greatly improved the turnover numbers. It will give the employee someone to ask for help with understanding policies and work-related issues. It will also be a way for the company to monitor how the employee is coping in the new position and country.
Another option is to change the policy to include a preliminary visit and assistance in finding suitable housing and domestic issues for the family (Dowling, Festing, & Engle, 2015). This option would be effective in helping the family in choosing where to live and what schools to attend. Because preliminary visits typically occur before the position is accepted, this could affect the acceptance of the position if the family does not like the area. The company could also incorporate more help with spousal relocation, such as job acquiring. Additional training could also be added for families. If this situation becomes too pricy, the company could outsource training (Black & Gregersen, 1999). Outsourcing allows other companies to share the costs associated with training.
Recommendations
To improve the application of the local international policy, the company should focus on cost reduction as well as the impact of the policy on pay and performance. The company should provide expats with the opportunity to reduce their living costs. This can be achieved by sharing the cost of necessities, such as housing. The local international package would be less expensive than the expatriate contract. The performance of the expats will also improve since additional support will be provided from the company, which would likely boost their morale.
Due to the company’s assumed lack of communication, the company should invest more in training and development. Expatriates need to have continuous communication and a sense that they are valued by the company. In the case study, the employee was the most upset with the lack of communication. Had she had clear information about the company’s new policies she would not have been upset. The mentor/sponsor program can help with this situation and can be utilized with the current performance evaluation program. Also, the company should look into the possibility of moving expatriates who are not meeting goals. Return to the home country should be part of a progressive discipline system. If they are not meeting the needs of the company, and the situation cannot be rectified, they should be returned to their home country. This will help the company reduce the number of “permanent” expats, that are not being productive and costing the company money with no return on investment. When she approached HR with her intentions, the HR manager should have put her in touch with a sponsor for her proposed new location. That person would have information that she was looking for such as where she should move, where she should send the kids to school, etc. This would be a form of practical assistance. The companies with the most successful repatriation utilize three practices, creating knowledge and development of global leadership skills, cross-cultural training to go along with technical acumen, and preparing people to transition to their next assignment (Black & Gregersen, 1999).
References
Black, J. S., & Gregersen, H. (1999). The Right Way to Manage Expats. Harvard Business Review.
Dowling, P., Festing, M. & Engle, A. (2015). International Human Resource Management. Andover: Cengage Learning.
sample response
Excellent case analysis, Team 3. I want to elaborate more about international/global mobility. International/global mobility is an opportunity for both employees and employers as the employees always seek new opportunities on shore or offshore and the employers are always on hunt of special talent across worldwide. There are some challenges also that both the parties face. For employees, shifting a whole family and settling out in new place is always a critical decision whilst many challenges waiting on the door. Also, the education of the children, language barriers and cultural differences are always a hindrance in smooth settlement. For employers, the extra cost burden, adaptation of employees, reluctant behavior of the local employees and other organizational issues pose some challenges to the employers, though not at par of what is being faced by the employees. Catering to all such challenges and difficulties, following are the needs of both employers and the employees regarding international mobility on a local international contract.
References:
Dowling, P., Festing, M., & Engle, A. (2017). International human resource management (7th ed.). Cengage Learning.
Vorhauser-Smith, S. (2013). Global mobility: A win-win for you and your employer. Retrieved November 22, 2019 from