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Expatriate Management in MNCs as a Form of Knowledge Management and its Applicability in Reduction of Soaring Turnover Rates: a Case Study Approach
This dissertation in International Human Relations addresses the potential of expatriate management as a tool of knowledge management and its applicability to the reduction of turnover rates in a global economy. Companies today cannot survive and prosper without some form of globalisation.
When an appropriately planned expatriate program is utilised, the flow of information supports knowledge transfer, which can enhance the entire functionality of the company. The specific vehicle for knowledge transfer will be cross-cultural training, with its generalisable lessons for the global corporations.
In this research, the case study approach is utilised along with the study of archival materials. After extensive research into the United States Peace Corp and its handling of expatriates, Tyco Flow Control/KTM Company of Japan and Electrolux of Sweden, supported by an extensive review of current literature, this dissertation reaches the conclusion that the decision on whether or not to use expatriates and in what fashion they should be used must be based on a combination of the needs of the company and the company's organisational structure.
Expatriation is expensive and companies should plan for success if they intend to utilise an expatriate program. However, the knowledge gained from the study of expatriate programs can be successfully utilised to mange the spread of knowledge throughout the organisation and to develop interventions, which will lower the overall rate of turnover within an organisation. Certainly, we cannot afford to ignore these lessons.
Chapter One - Introduction
1.1 Chapter Introduction
There are a number of challenges involved in the development of multi-national corporations (MNCs) in today's era of globalisation. Increasingly the trend has been for companies to utilise expatriates on tasks that are critical to the company's operation or continued success. MNCs use expatriates for a number of reasons. In general, the perception exists that it is easier to control an employee from the 'home office', carefully chosen and indoctrinated in the company's culture.
Thus, the concept of corporate control plays a large role in the selection and the use of expatriates, but it is certainly not the only reason. Many times, expatriates have specialties that the company believes it can export when developing the global market. In addition, expatriates who have been thoroughly trained in the company's procedures can be very valuable during the process of entering new markets and setting up the office and administrative under structure that inevitably follows such expansion.
Human resources management inevitably becomes more complex in an international venue. Companies must consider not only the corporate culture and the national culture of their home country, but also the national culture of the country or countries which they are expanding into. Expansion into other nations also brings with it a myriad of laws and regulations that may well conflict with the home country's laws or rules. The situation becomes more complex with each additional field office or subsidiary that the company acquires or develops.
There is a great deal of research that suggests that the way companies manage their human resources contributes to whether or not the company will succeed or fail (Tung, 1984). International human resources management can 'make or break' a new expansion, and poor management of expatriates within established MNCs can send the company into a crisis. Companies must be able to communicate with their employees and to coordinate actions, activities, and regulatory compliance between a number of corporate and governmental entities. Failure to do so successfully can affect the bottom line of any multi-national corporation or company, and can destabilise a company that is not experienced in dealing with international human resources.
Financially, there is a great deal at stake for the MNC which utilises expatriates. The obvious cost, of course, occurs if the project that the expatriate is assigned to fails. Such a significant financial blow can, as pointed out, destabilise a company. There are many other costs associated with expatriate management, however, that may not be obvious on the surface. Employees must be recruited into the programme and trained. Their families should receive training regarding the area of assignment. Moving or relocation costs are significant even if the family "travels light".
Many companies provide housing assistance in the country of assignment, and trips back to the home country on a scheduled basis. All of these expenses add up. One additional expense that must be considered is the replacement of the employee who enters the expatriate programme. If the employee is already a member of the organisation, his or her transfer to a foreign office will leave an internal position that must be filled. MNCs must also consider the ramifications to the company if their expatriate behaves in a fashion that the host country members consider improper.
The amount of ill will that can be generated throughout the host community can be nearly incalculable. Even though it is an indirect cost, it can be as devastating as a more direct financial loss. Even in the "best" of cases, when the expatriation fails without loss of business and the expatriate returns quietly to the home base, the expatriate may leave the company. When this happens, the company loses a valuable employee and the investment that went along with that employee's training.
When the problem of failed expatriation is looked at from these perspectives, it becomes clear that the financial repercussions may be greater than they appear at first glance, but the loss of money is only a small part of the overall problem of expatriate loss. Indeed, the operation of the entire organisation can be threatened, along with the investments from the company's stakeholders and employees. This provides a great deal of impetus for investigation of the issues related to expatriate management and reduction of turnover both nationally and internationally.
In the past, one might make the argument that expatriates and local employees are not in the same category. After all, expatriates face other cultures on a routine, day to day basis. As a matter of fact, they are immersed in their home culture. As Hofstede (2003) points out, every culture defines its own version of being socially correct. These constraints govern how cultures do business. It has become "big business" to help companies and individuals understand the different ways that host companies interpret what we may consider average, day to day gestures. The various governments recognised this concept long ago. Virtually every country provides some form of training in culture applications for ambassadors and members of the state and foreign service divisions. Nevertheless, business has been slow to adopt that concept.
Even when MNCs recognise the need to provide this training, they may not fully understand the impact that the difference in culture has on the employee. The employee generally travels with family, and it is as important to acknowledge that family members and their success at adaptation have a large input into whether or not the employee adapts successfully. Thus, MNCs that fail to include all the family members in a culture immersion programme fail in their handling of expatriates.
Today, all companies operate in a multi-cultural environment. Even small "mom and pop" operations are exposed to customers, suppliers, or regulators who are from other cultures. Nearly every country is now a cultural melting pot of residents, and those that are relatively homogenous still have influx from visitors and tourists. While it is easy to downplay the importance of a single tourist who has wandered off the beaten path, it is impossible in this day and age of modern technology to estimate the importance of that single customer.
Placed in context, an unfortunate interchange with an individual who turns out to an important stakeholder in his or her professional community can be devastating. Attitudes of employees to customers or suppliers can cause supply chains to dissolve, large numbers of customers to disappear, or contracts to be cancelled. In a sense globalisation has caused a return to "small town front porch" mentality where everyone either knows everyone or knows his or her cousin. The Internet and global communications offers such anonymity that it is now possible for a company's largest customer to conduct a surprise visit and not be recognised. Given the right – or wrong – circumstances, the impact on business can be devastating.
It is this concern, the concern for the international aspect of all business today, that ties together large MNCs and small, at-home operations and cautions us to develop a greater understanding of other cultures, whether we manage expatriates, or merely serve customers in our tiny walk-in.
How a company treats its customers and stakeholders affects the survivability of the business, and retention of well-qualified and well-trained employees is part of that survivability, especially when it relates to cultural aspects of functionality. This paper, then, addresses the system of business that relates to intercultural communication and impacts management of expatriates as well as the home office.
At the present time, there is a great deal of research that shows the difficulty that expatriates face on assignment and on repatriation, and there is significant research that indicates that cross-cultural training offers possibilities for helping these employees adapt. There is a gap in the research between these issues and the types of cross-cultural training that may lead to a decreased turnover rate. Additional research may be most helpful.
When we review what types of cross-cultural training may be most useful, there is also indication that successful expatriates who return from assignment and remain with their companies may be able to add to the knowledge base of successful adaptation. It is this concept that successful expatriates contribute to knowledge management that I address in this research. Successful management of this knowledge may contribute not only to a lowered turnover rate among expatriates, but may offer suggestions to how business can lower the turnover rate overall.
I suggest the concept that expatriate management tends to overlook one extremely important concept: that turnover EVERYWHERE is extremely high, and it will be no different in the expatriate population if we treat regular employees in the same manner that we treat expatriates, assuming the expatriate programme is successful. Thus, development of a plan to manage and retain expatriates has great generalisability for the company's population as a whole with regard to retention. This concept has been touched on in the available research but is not fully developed. A work developing this concept can truly add to the field.
1.3 Aims and Objectives
The aims and objectives of the research will be to explore why some MNCs are successful at increasing retention of expatriates and what role cross-cultural training plays in that success; to explain the steps that successful MNCs take in utilising the knowledge they gain in working with expatriates as a form of knowledge management, and to describe how this information can be utilised by other companies to lower the overall general turnover rate.
A number of research questions evolved that will be useful in determining why some companies are so successful with expatriates while others are not. The questions will guide the research:
How do some MNCs lower the rate of turnover of expatriates?
How do companies that lower the rate of turnover of expatriates utilise what they have learned as a form of knowledge management?
What role does cross-cultural training play in successful retention of expatriates?
What is the generalisability of the success of expatriate management in the MNC as a form of knowledge management and its application to the reduction of soaring general turnover rates?
The overall turnover rate of employees throughout the world is soaring. The problem is particularly high in America. The cost to companies of employee turnover is so high that one sometimes wonders how the companies stay afloat. At the same time, there are a number of difficulties with expatriate management.
As the rate of expatriate attrition increases, so does the cost to the multi-national company in both financial terms and in terms of morale. In researching problems with international human resources management, particularly problems associated with the management of expatriates, a link between increasing rates of general expatriate turnover and generally high rates of employee turnover seemed to present.
Gaps in the research indicate there must be more research into the process of repatriation and knowledge management, for this is the point at which the greatest knowledge exchange back to the company in terms of cultural knowledge should occur. Research must determine what contributes to success repatriation and why some expatriates choose to terminate contracts early. All of these areas will be investigated.
The next step, then, is to investigate why some companies seem to manage expatriate programmes successfully, and why some programmes fail. By reviewing successful expatriate management, we may learn general lessons of human resources management that may well contribute to the base of knowledge for the reduction of overall turnover rates throughout the working world.
Qualitative research seeks to address the "why" and "how" of occurrences, making it ideally suited for a project of this nature. Though there are many forms of qualitative research, two forms seem particularly applicable to the nature of this investigation. A literature review will be conducted, of course, to place the state of the knowledge of expatriate management in the context of general management of human resources. An archival investigation, however, will take and utilise the literature review as a starting point. Through a thorough investigation of archival materials available, additional research information will be gleaned.
The case study method will also be utilised to investigate three specific multinational companies or organisations that have had a great deal of success with the expatriates that they managed. Case study approach allows me as the researcher to concentrate on details that might otherwise be overlooked in a traditional literature review. Archival review materials will also contribute to details of the case studies.
1.6 Chapter Outline
Chapter One of the dissertation consists of an introduction to the study and places the study in context, the aims and objectives, rationale, and methodology of the paper are reviewed.
Chapter Two reviews literature related to the topics of international human resources, expatriate management, turnover, and knowledge management. The literature review presents various perspectives of the research topic and reveals how previous researchers have investigated the topics. The literature review is expected to reveal gaps in the research and suggests areas that this research will explore. It is guided by the aims, objectives, and research questions, but can also provide an indication for modification of those aims, objectives, and questions if changes are needed. Finally, the chapter provides a framework for the overall research.
Chapter Three discusses methodology of the research and details the strategies that were undertaken during the research, including data collection methods and methods of analysis. Methodology describes methods that were utilised to conduct the research and defines the reasons they were selected.
Chapter Four provides the analysis or the synthesis of the research. It ties together the research questions, the theories behind the research, and the methods of doing the research. Finally, in a good research project, the analysis will actually raise questions that will be guidelines to future research in the field.
Chapter Five details the main findings of the paper, gleaned from the analysis, and describes how the results are similar to prior research, but also how they differ. The contribution of the research to the knowledge base of expatriate management and reduction of general turnover rates will be provided, and the limitations of the research will be defined. Suggestions for future research will be provided and ways to reduce limitations of future research will be discussed in the context of the experience of myself as the researcher for this project.
The paper will be concluded with a bibliography of works utilised in the preparation of the paper, and if necessary, supporting materials will be provided in appendices.
1.7 Chapter Summary
This chapter has set the stage for the research project and dissertation. The subject matter was introduced, and the study was placed in context of international business and human resources. The aims and objectives of the research were described and the rationale for the dissertation was produced. A summary of the methodology of the paper was provided, and a chapter outline of the work was also presented. In summary, Chapter One set the stage for the research and provided an overview of the project.
Chapter Two - Literature Review
2.1 Chapter Introduction
Today, all companies have retention problems (Ramiall, 2004). In 2005, the United States had an overall turnover rate of employment of 23%. Companies face fierce competition in the quest to retain employees (Mitchell, Holtom, and Lee, 2001). Hay (2002) reports that in the past 10 years, employee turnover increased by 25%, making the problem of retaining employees the number one employment problem in the United States (Kaye & Jordan-Evans, 2000). With a shortage of potential labour until approximately 2012, the pool of qualified and available labour is small, making the problem of retention much more intense. Clearly a need exists to lower the rate of turnover in companies. While the presented references above are in evidence of a turnover rate in American companies, the issue is global, especially in this day of large multi-national companies.
The problem is, perhaps, even more pronounced with expatriates due to the large amount of money it takes each MNC to recruit, train, and support expatriates and their families. A retained expatriate can be an asset to the company; a 'lost' expatriate represents a significant financial drain. It makes sense, then, to explore how expatriates can be retained, and to utilise the knowledge gained to lower the overall turnover rate of the company, thereby increasing retention and decreasing costs. Retention of expatriates contributes to the company's knowledge management capacities and to retention of trained employees in the MNCs, and cross-cultural training seems to offer one of the most promising avenues to encourage retention of qualified employees.
The literature review served as a basis of study during the preliminary phases of the project and was supplemented a great deal in the final paper. As the research developed, it was clear that there were many avenues that needed to be explored to gain a holistic understanding of the issues relating to international human resources management and successful administration of expatriation programmes. Through the course of the initial review of the literature, a link became clear between lessons learned by companies that have successful expatriation programmes and companies that could utilise this knowledge in lowering their turnover rates. All businesses today, it is clear, have a multi-cultural aspect that must be addressed. The issue then becomes how multi-culturalism will be addressed and how knowledge gained from successful expatriation can contribute to the overall knowledge of successful MNCs (Sizoo, Plank, Iskat, and Sernie, 2005). This project will help bridge the gap between large MNCs with offices in other nations, and smaller companies that may benefit from their knowlege.
2.2 Importance of International Human Resources Management
Tye and Chen (2005) state that capturing and maintaining a competitive advantage is not the most important issue for many organisations. At its lowest common denominator, the purpose of business is to make a profit. Friedman (1970) even argued that business has a social responsibility to make a profit for its investors. Friedman argued that business leaders needed to do 'whatever it takes' to acquire and maintain that profit. Tye and Chen (2005) point out that there is now a general consensus that larger companies must operate successfully on a global level in order to capture and maintain the competitive advantage which leads to profit.
As businesses have an increasingly international role, how to manage the people in the business on a global scale becomes a huge challenge (Lee and Liu, 2006). Businesses cannot operate without people, despite an increasing dependence upon technology. In order to retain people, there must be adequate human resources management systems. For large international companies, then, the human resources managers and their systems must aim towards acquiring and maintaining people who are competent not only in business, but in functioning in the international environment (Liu and Lee, 2006).
For many years, the tendency was to believe that management was the same whether the company being managed was in the manager's home country or a foreign land. This universal approach to management is considered an ethnocentric approach (Dowling and Welch, 2004), in which the values established in a corporation's home country are the values that predominate through every field office. In this form of management, all of the practices of the business stem from practices and values of the home office, and all of the employees that become managers in field offices are hired and trained at the home office. While this approach offers certain advantages (for instance, the level of corporate control), it is not the most beneficial model of operation if one hopes to expand the business significantly in the targeted areas of other nations (Kuhn, 2000). Indeed, as Kuhn points out, ethnocentric organisations have essentially no advantage in local market areas.
What difference is there between a human resources manager that deals with employees within the bounds of one nation, and one that deals with international situations? The basic difference is that when dealing with international human resources issues, the level of complexity between the rules, regulations, and operating mechanisms between different countries can be overwhelming, especially when more than one group of national workers is involved (Dowling and Welch, 2004). The difference may well be less pronounced in the nations of the European Union, where laws and operating regulations have been standardised to a degree, but national identities of workers complicate the issues. Indeed, even strong cultural identification roles can impact the path that international human resources managers must take. In addition, employees who will be fulfilling an expatriate role must be carefully matched to the job.
In 1998, Stone suggested that the selection of expatriate employees is much more difficult than selecting personnel who will remain in the home office. This contention, however, is one of the concepts that will be investigated in the research. While Dowling and Welch argue that the selection of expatriates with personal issues such as low capacity to adapt, poor emotional stability, or bad attitude leads towards failure of the match to the expatriate's job, one might argue just as easily that a bad attitude, immaturity, and refusal to adapt are indicative of poor selection of any employee, not just an employee who will be expatriated. It may seem simplistic, but a good, stable expatriate employee will make a good employee. On the other hand, a good employee will not necessarily make an adequate expatriate. It is this "rule" that led to my decision to explore a potential link between expatriate retention and retention of the average employee. Sizoo et al. (2005) concluded that adequate cross-cultural training of any employee in a MNC greatly increases employee effectiveness and can lead to increased promotions and pay raises, which cut turnover rates. The argument could also be made that the same would apply in smaller companies, especially those in areas with a high cross-cultural population component.
An expatriate who has negative attitude, poor emotional stability and maturity, lack of language ability, and a low level of adaptability also is a poor choice in host nations, where the chance of culture shock already exists (Dowling & Welch, 2004).
Today's companies are faced with the prospect of continually replacing employees who have left the company. The cost of turnover is high both in direct turnover rates related to the physical process of hiring and firing and in the indirect rates of education, checking of the references, and so on. The costs are even higher if the member that leaves is a member of the expatriates, or if the member has recently repatriated at cost to the company. Thus the company cannot afford to keep replacing employees from a financial cost and a morale cost.
Some turnover is caused by tension with management while other turnover is caused by having unclear job expectations. Increasingly in the international arena employees leave because they do not understand what they have to do to get ahead, or they feel they followed the company's directions and are still not appreciated for the service they have rendered.
Peter Senge has identified three types of leaders: the peer leader, the line manager and the executive. Each one works to help build collaboration, to educate staff, and to strengthen the company culture. Teamwork and teaching should be utilised as a method of advancement (Senge 1990, 1996) and it is in this way that the expatriate can be particularly utilised. These employees can become leaders, and be promoted to management in the future.
2.4 Four Approaches to Management Orientation
What exactly constitutes a multi-national company? Loosely defined, it is a corporation or large company that provides goods and/or services in more than one country. The MNC may have operations in a fair number of other countries. To be able to supply goods or services across national lines, the company must have significant resources. Thus, MNCs by their definition have access to a great deal of money or financial backing. The company is financially able to acquire the goods, services, and personnel acquired to function at a high level. To put it bluntly, companies with large budgets can purchase the best; few people would argue that a multi-national company as large, for example, as Wal-Mart, will have an operating budget larger than some small companies.
Given that many companies have budgets that can buy "the best", why is the expatriate failure rate so high? Black and Mendenhall (1990) pointed out that over 40% of all assigned expatriates return home early, and the expatriates that remain in the host nation, only 50% function effectively. Does the failure of the expatriate lie solely in the personality and training of the individual expatriate? Some evidence suggests that failure may be associated with the approach to management that the multi-national organisation chooses. Management approaches in multi-national companies can be polycentric, ethnocentric, geocentric, or electocentric. Each of the four models is discussed briefly below.
The polycentric approach to management utilises the belief that managers in host countries know the best way to approach work within their country and are the most familiar with effective ways to manage businesses within their country (Banai and Sama, 2000). Companies that adopt this attitude have generally concluded that all countries are different and that local subsidiaries should adopt policies and practices that are appropriate locally and are under the direct supervision of local managers from the local area (Banfield, 1998). Kuhn (2000) states that polycentric organisations offer the greatest local control to subsidiaries, which can be a tremendous advantage when the local manager is effective and savvy to local culture, customs, and business operations. Polycentric models are sometimes referred to as multilocal models, or even a multidomestic organisation.
As pointed out earlier, ethnocentric management embodies the concept that the home office manager knows best, regardless of the circumstances or culture of the host office. Dowling and Welch (2004) characterise this as a 'universal approach to management' and believe that the main advantage of this form of management is the level of control it offers the MNC. Another advantage of this mode of operation, however, is that it presents the company with a more homogenous approach to business: no matter which office one is in, things are done the same way; managers are selected for the same reasons regardless of the location, and promotional paths remain the same regardless of where one transfers. Kuhn (2000) states, however, that this mode of operation is a distinct disadvantage if one a company wishes to expand operations in the host company. It offers no benefits when dealing with the local population, and may well be a disadvantage in terms of understanding local procedures and cultural impacts to business.
In the geocentric mode of operation, the company makes the decision that no one culture or organisation is better than another. Instead, the company concentrates on operating in as culture-free a manner as possible. Every effort is made to have a central control system, combined with a high level of standardisation. The organisation itself encourages all office to participate in decision-making based on a global rather than local context (Myloni, Harzing, and Mirza, 2004). Geocentric organisations offer one huge advantage: they are able to hire the best person for the job, without regard to nationality or national location. According to Kuhn (2000), the geocentric mode of organisation offers the best local advantage, along with the polycentric mode. Companies that embrace the geocentric view are sometimes referred to as borderless, or transnational.
Electocentric / Regiocentric
This model, also known as transregional model, is a model of globalisation that combines the geocentric model with the polycentric model. Companies that adopt this model of operation will frequently develop into a global or geocentric model of operation. In this mode, managers are hired locally and may be transferred within a general geographic region. The region tends to be fairly independent of the home company and does enjoy a certain amount of autonomy. This mode offers most of the benefits of the geocentric model.
2.5 Other Views of Management Approach
Goshal and Bartlett (1998) present a different few of management approaches of multinational companies. They define the approaches as multinational, global, international, and transnational. In their definition, multinational companies decentralise and tend to regard their overseas offshoots as separate business acquisitions with their own autonomy. Global companies, they believe, have a central hub where assets are centralised. The local companies form a pipeline for business acquisition. International companies have decentralised assets but are controlled by a central organisation. Finally, transnational organisations are the equivalent of geocentric organisations; they distribute control through all of their asset companies and have little "central" operations.
Companies that are in need to respond quickly to local market conditions and the culture of the local customer, tend to have localised and decentralised control. While in some cases, the host nation may require MNCs to hire and manage locally. An example would be China. On the other hand, companies that need a large flow of information and economy of scale to serve various multinational customers may do better with centralised control.
2.6 Which Approach is Best?
The approach of the company will need to vary with what the company aims to achieve. As mentioned earlier, some decisions will need to be made based on the information flow, the types of clients, or economy of scale. There are certain advantages and disadvantages of utilising each model of organisation, particularly as the organisation emphasises on human resources and the utilisation of expatriates. These advantages and disadvantages are listed and compared in Table 1.
By comparing the management perspectives it is clear that some of the organisations are easier to administer than others, and that some of the models of organisation utilise expatriates far more often than do others. Expatriates will be utilised extensively in the ethnocentric system and to limited degrees in the geocentric and regiocentric models. Companies that utilise the polycentric model rarely, if ever, utilise expatriates.
- Many of the problems associated with having to utilize expatriates are eliminated
- By avoiding the use of expatriates, the company avoids having to acquire work permits
- The hiring process is less expensive (Scullion 2001)
- The local residents perceive they have an investment in the company
- The company may avoid the political implications associated with being based in another nation
- In general, managers stay longer
- Host country laws and regulations are more easily detected and complied with
- Fewer language difficulties are encountered (Schaffer and Rhee, 2005)
- Without expatriates it is more difficulty for offices in the host nation to understand what the company wants
- Home office managers are less likely to gain foreign office experiences and thus less likely to make good decisions regarding foreign offices
- Without expatriates, the culture of the host nation is more likely to be misunderstood by the company as a whole
- Some employees will have more faith in decisions that do not come from host country managers
- High level of control
- Forced compliance with corporate policies
- Management and employees well qualified and experienced
- Managers who expatriate learn about the host company and can bring this knowledge home
- Many problems with expatriates
- Expatriate managers may alienate host nation employees if they do not understand the culture
- Expatriates are expensive (Laabs, 1991)
- Expatriate managers may be resented by host nation employees
- The level of control may be resented by host nation employees
- There may be political resentment in the host nation
- Host nation employees may be resentful of expatriate's salary and benefits
- Administrative issues associated with permits, etc for expatriate
- Best localization advantage, along with polycentric
- Best view of globalization
- Host nation employees feel empowered
- Host nation residents are more likely to feel a sense of ownership of the company
- Administrative issues associated with permits, etc for expatriate
- Employees from outside of the host nation and primary nation must be documented and administratively correct for the assigned nation
- Staffing is difficult due to logistics and expense of relocating and moving employees
- High training cost
- Compensation schedule is complicated
- Centralized staffing is expensive
- More back-and-forth interaction at the regional level between employees and primary nation
- Sensitivity to local culture, mores and laws
- Better in an unstable political environment
- Staff is less expensive (Laabs, 1991)
- Benefits are less expensive
- A "practice run" for companies that may become geocentric
- Keeps the company from global actions
- Limits international assignments while increasing local assignments
- Political difficulties can result from moving employees around (demands for paperwork, passports, and so on)
- More administrative considerations
Table 1. Advantages and disadvantages of management models (Dowling and Welch, 2004)
2.7 Why Does Expatriation Fail?
In order to plan for expatriate success, we must first understand why expatriation may fail. There are a number of reasons that any specific expatriate may fail to achieve the performance levels that were expected of them. Failure may be complete, and actually endanger the project the expatriate was assigned to; it may result in early return of the expatriate, or it may just result in an unhappy expatriate completing the assignment with the minimum possible level of effort. These expatriates may even leave their company after returning home.
Much of the available literature on expatriate failure stresses that expatriation fails when the expatriate fails to adapt to the culture of the host country or does not understand what is expected from him or her from a cultural standpoint. (For the purposes of this research, the words "he", "him", and "his" will be utilised in the future when referring to the expatriate; there are very few female expatriates at this point.) While failure to adapt to the culture is certainly a large part of the reasons that expatriation fails, it is certainly not the only reason.
Tung (1982) found four main categories of reasons that expatriation fails: lack of technical competence at work, issues related to the expatriate's personality traits or ability to relate to others, lack of the expatriate's ability to cope with various issues relating to his environment, and issues related to his family situation. Dowling and Welch (2004) expanded the general category of 'issues relating to the environment' to include eight categories: lack of technical competence at work, difficulties within the new working and living environment, inability to cope with the larger job responsibility with international facets that is now required, general inability to adjust as a manager, personal or emotional problems that arise, immaturity, inability of the spouse to adjust, and other family reasons (aging parents, being a single parent, etc.). Many of these "categories for failure" also exist in the typical, everyday employee of any company. The sections below explore various reasons for failure of expatriates.
2.7.1 Inability to Adapt to Cultural Differences
Wederspahn (2002) states that the failure to establish a common ground between the expatriate and the country of assignment is a sign of impending failure of the assignment. He emphasises that cultural differences can result in a "deal breaker". Beadles (2002) also stresses that entire projects can fail when the expatriate cannot or will not adapt to the people and the habits of the host country.
2.7.2 Spouse or Family's Inability to Adjust
Adjustment can be hard for anyone. We have seen that expatriation can be difficult for the most educated adult, who understands the reasons for the assignment. Consider how difficult it must be for the pre-teen who may find him or herself in a country where few speak their language, where technology may be behind that of their home nation, where school requirements are considerably different, and the clothing may be different or even oppressive.
Mendenhall, Dunbar, and Oddou (1997) stress that training for successful expatriation must also include the children and the spouse of the expatriate. The need to understand the culture of the host nation goes far deeper than just the need of the primary expatriate. Scullion (2001) states that issues range from children who are not mature enough to deal with cultural change to language training that the family needs but does not get, and to the simple inability of the husband and wife to adapt to live together in a completely different arena than their home nation.
Bauer (2001) believes that family issues relating to cultural adaptation are a primary reason that expatriates leave their assignments and return to their home nations prematurely, a conclusion reached by Tung (1982).
2.7.3 Immaturity of the Manager
Immaturity of a manager can appear anytime, anywhere, and when it does, it is an impediment to the success of the company. People who work together have differences. When the people who work together are from different cultures, there will be more differences, related to the way of doing things and to the meaning that the individuals attach to gestures that may mean something completely different. A mature individual will take this in stride; an immature one may sabotage the project either deliberately or inadvertently. Upon occasion, behaviour may be so bad that the company ends the expatriate's tour and returns him to the home country.
2.7.4 Inability to Adjust to New Job Responsibilities
Inability of the manager to adjust to new job responsibilities with international overtones is a combination of failure to adjust to the cultural and environment combined with feeling the weight of responsibility in a position as a manager far from home. Clearly this difficulty would be more pronounced in ethnocentric organisations where the manager felt as if they were functioning alone.
2.7.5 Personal or Emotional Problems
Personal or emotional problems can arise with any problem and anywhere. Some problems, however, are more easily solved than others and some problems may be spotted before the expatriate is settled, if the company investigates the potential employees thoroughly and conducts testing (Tung, 1982).
2.7.6 Other Family Reasons
Some family issues are foreseeable. Single parents may face challenges in foreign assignments that they might not expect in their home nation, where their support system is already in place. Aging parents can suffer accidents that cause them to require care prematurely. Unanticipated illnesses occur, and children of deceased family members must be cared for. Some of these issues are foreseeable and should be addressed prior to placement as an expatriate; some must be dealt with when they occur. According to Dowling and Welch (2004), the more support that is available for the family early in the placement consideration, the greater the family's ability to deal with these situations will be. It may be that perceived support is a necessary factor in adaptation: the idea of knowing that people are 'there' for the expatriate. This correlates with Tung's (1982) observation that the larger the expatriate community, the greater the chance of successful completion of the assignment.
2.7.7 Technical Incompetence
Technical incompetence must be detected prior to placement. Adequate interview and testing process ensure that the expatriate has adequate job skills before assignment.
2.8 Expatriate Selection
In 1983, Chaganti and Phatak reported that very few multi-national companies seem to have a clear-cut method of selecting staff for international assignments. Borg and Harzing (1995) even went so far as to suggest that some companies have nospecific method of selecting a good candidate for foreign assignment, though others make a selection based on a review of the individual's past performance, interview with their supervisors, and/or a battery of tests. As we examine the list of failure factors detailed above, it becomes clear that more work needs to be done during the selection process of expatriate candidates. The situation is complicated by the very nature of business: jobs in the same job category may have certain core job skills that are necessary for success, but every single job will have slightly different operational needs that may impact on the success of the chosen candidate. Still, it seems that the individual must, first and foremost, have basic technical job competence for the position. Without this competence, there is no reason to even consider the person for an overseas assignment! It is noted that this concept, while eminently logical, and again, appears to be self-evident, must not occur to all recruiters. The need to select individuals for jobs who have a basic technical level of job competence is an issue that undoubtedly impacts on the general turnover rate in companies, as well as turnover rate of expatriates. This concept will be explored further in Chapter Four, Analysis.
Tung (1982) suggested that human resources experts in MNCs concentrate on hiring expatriate candidates who have technical competence at work, personality traits/relational abilities, ability to cope with environmental variables, and favourable family situation, since they are factors that signal high rates of failure. Teagarden and Gordon (1995) organised the selection factors more generally, suggesting that recruiters concentrate on the candidates' technical skills, skills relating to dealing with people, their motivation, and their family situation.
Teagarden and Gordon ranked the selection criteria for a successful expatriate candidate in the order shown in Table 2, below, adapted from Teagarden and Gordon (1995). Based on the table, it is easy to see how Teagarden and Gordon (1995) arrived at their four general areas of concentration for international human resources selections for expatriate positions. The authors go so far as to suggest that any successful expatriation must include interviews with the candidate's family. Unfortunately, the more intense the selection process, the more expensive it becomes per candidate, and the higher the rate of rejection of the candidates, increasing the cost of selection.
Selection Criteria in Order of Importance
Sensitivity to culture of others
Interest in working in another nation
Adaptability and enthusiasm of family
Stable family relations
Support from family members
Perception of the assignment as a positive career move
Knowledge of the host country's language
Active interest in the host country's culture
Table 2. Selection criteria for a successful expatriate candidate
In somewhat of a paradox, Latta (2006) has suggested that a typical 'tour of duty' for an expatriate can cost nearly $1,000,000 USD. The high cost of the expatriation appears to make companies reluctant to spend large amounts of money on their selection when the process would lead to large numbers of rejections.
Dowling and Welch (2004) have pointed out that the cost of expatriation is high, and significant indirect costs are associated with failed expatriation. They suggest that the indirect costs may actually be much higher than the direct costs. If the expatriation fails, the company's reputation may be in a shambles; they may lose market share; local employees lose morale and productivity falls; home office employees may lose morale; the host nation's government may look on the company with less favour, and the expatriate himself may face loss of reputation with the home company's headquarters. At a minimum, his career with the company will be affected; it is quite possible the company will lose the employee entirely.
Thus, though it may be extremely expensive to interview, test, and thoroughly investigate a number of candidates and their families before selecting an expatriate, it may more appropriately be regarded as a cost-saving method.
2.9 Training of Expatriate Staff
A tremendous amount of information is available on training of expatriate staff, but much of it concentrates on the cross-cultural nature of the assignment. Mendenall and Black (1990) state that the failure rate of expatriates is high unless they have received effective cross-cultural training prior to the beginning of their assignments. They stress that nearly 40% of the assigned expatriates return early, but the ones that remain on assignment, only 50% function effectively unless they are thoroughly prepared prior to departure. Peppas (2004) points out that much of the cross-cultural training received is not adequate for assignments, contributing to project and expatriate failure. He also suggests that shorter assignments need more intensive pre-assignment training as there is no time for the assignee to acclimate during a short assignment; the expatriate must "hit the ground running" and so has no time to adjust.
Littrell and Salas (2005) emphasise that cross-cultural training must be effective in order for assignments to be successful. They also stress that 'completion' of an assignment is not the same as being successful. They state that even if expatriates complete their assignment, the assignment is not necessarily a success for the company, and even if they compete the assignment, many expatriates leave the company after their return to their home nation. Mendenhall, Dunbar, and Oddou (1997) point out that by far and large, expatriate training programs do not meet the needs of the companies that source them, or of the employees who are expatriates. They stress that cross-cultural training must take place, and it must include the spouse and children of the expatriate if adaptation is to be successful.
Sizoo, Plank, Iskat, and Sernie (2005) encourage companies to provide intense cross- or inter-cultural sensitivity training to all employees, not just expatriates. "Regular" employees may come into contact with members of other cultures. In this day and age, this category would encompass most employees of MNCs. The authors conclude that adequate cross-cultural training greatly increases employee effectiveness and can lead to increased promotions and pay raises, which cut turnover rates in both expatriate and home nation employees.
2.10 Current Cycle of Repatriation
Based on the information acquired in the literature review, the current cycle of expatriate employment is presented in Figure 1. While the figure is based loosely on materials by Dowling and Welch (2004), significant changes have been made.
2.11 Case Study Materials
The literature review has addressed the academic literature relating to the role of international human resources in the recruitment, training, and management of expatriates. We now turn to three case studies that will be utilised as examples of companies with successful programmes of expatriation. The United States Peace Corp, while not a company-for-profit, is a non-profit organisation that cannot, by the nature of its mission, function without expatriates. It provides, therefore, an excellent case study for success of the expatriate. Tyco Flow Control of Japanand Electrolux of Swedenhave also been selected as case studies. The approach of all three companies to expatriation will be provided in the case study materials.
2.11.1 The United States Peace Corp
Members of the United States Peace Corp Volunteer organisation sign on for a 27 month commitment. Each year, the Peace Corp repatriates over 3,500 Peace Corp members who are returning from assignment in a wide variety of foreign nations. The Peace Corp serves 139 nations and has over 190,000 alumni. The company has three primary goals: to help train people of other nations, to help citizens of the United States understand citizens of other nations, and to help citizens of other nations understand the citizens of the United States (Peace Corp, 2008). Applicant must be a citizen of the United States and the age range of the volunteers is from 18 up, with the average age of 27 and the median being 25. As of this date, the oldest working volunteer is 80. 95% of the volunteers have an undergraduate degree and 11% have an advanced degree. However, local language skills are a plus but are not required in all positions.
Recruitment: Volunteers are recruited from all races, ages, and walks of life. After an extremely brief initial (online) screening, potential recruits fill out an application and are contacted by a recruiter. The evaluation process takes from 9 to 12 months and includes medical clearances, educational reviews, skills reviews, and psychological reviews. The medical review is very thorough and certain conditions are excluded, including certain psychiatric conditions (Peace Corps, 2008a).
Benefits: Peace Corp members do not receive a salary. Instead, they receive a stipend that covers basic living expenses that will allow them to live at the same standard as local residents. After successful completion of duty, the volunteer receives $6,000 to assist with reintegration into the community. Volunteers receive 48 days of vacation time during their 24 months overseas, but if they choose to return home for a visit they must pay for the travel. Student loans can be deferred during service and can be cancelled at the rate of 15% per service year. Full medical insurance with 100% coverage is provided for free to the volunteer, and reduced price health insurance is available for 24 months after the volunteer's return. Medical benefits cover vision, dental, medical care, and medicines. Many universities will combine Peace Corp service with credits, and several programs exist to provide Peace Corp students with reduced price tuition upon return. The Peace Corp provides job transitionassistance for repatriates looking for work. Finally, repatriates who wish to enter Federal service can do so without competition provided they meet minimum job standards(Peace Corp, 2008b).
General Training: The Peace Corp emphasises that it takes an integrated approach to volunteer training. Through language, cross-cultural, and health and safety instruction, training is designed to raise the Volunteer's awareness of their new environment, build their capacity to effectively cope with the many challenges they will face, and provide the tools the Volunteers need to adopt a safe and appropriate lifestyle(Peace Corps, 2008c).
A complete list of training materials is provided in Appendix B, but they are so numerous that it is impossible to discuss them all here. Two programmes that are of particular interest to the topic of this dissertation are discussed here: Building Bridges: A Peace Corps Classroom Guide to Cross-Cultural Understanding, and Culture Matters: The Peace Corps Cross-Cultural Workbookand its accompanying Culture Matters Trainers' Guide. These programmes form the core of the Peace Corp experience and are instrumental in its success as expatriate managers. The Peace Corp also asserts that cross-cultural training and understanding is absolutely key to safety in assignments.
Over and over, the Peace Corp emphasises the value of learning local customs and blending into the community, while treating residents with respect. The concept, as they express it, is that "local community members" will be their primary support system during their expatriation. The Peace Corp places members with local families for 2-3 months before putting them out into the community on their own (Peace Corp, 2008d), again to foster the sense of community in a foreign culture.
Cross-Cultural Training: The Peace Corp guide Culture Matters makes the point that "cross-cultural exposure is not cross-cultural knowledge" (Peace Corp, 1999: 1). In other words, just because you know about something does not mean you will truly understand it. The cultural training by the Peace Corp teaches how other cultures view the "self", emphasises how diverse Americans are, points out that some societies are oriented to self and others to the collective (a theory shared by Hofstede), and emphasises how very differently cultures can view time, place, and locus of control. Relationships, whether business or personal, are emphasised; the process of adjusting to a new country is reviewed, and other resources materials are provided. The teacher's manual that accompanies the training provides field exercises so that members can face simulated situations. The teacher's manual does note at points that new Peace Corp members may be reluctant to believe that situations described in the materials actually occur, a sure sign that there are indeed cultural issues.
2.11.2 Tyco Flow Control / KTM of Japan
Tyco Flow is a business unit of Tyco International, which is a MNC headquartered in the United States. Tyco Flow specialises in the manufacture of industrial valves. Their Japanese subsidiary, KTM of Japan, frequently transfers information to one of the company's sites in Taiwan (Kohlbacher and Krahe, 2007). KTM then utilises information it receives from Taiwan to revise the knowledge base and update information to other subsidiaries. The process is complicated by the multi-national nature of the work and the fact that information, or knowledge, must flow quickly. There is no time for misunderstanding or misinterpretation. Cultural difference, or lack of cultural understanding, has even been described as the barrier that prevents the flow of information to and from the market. Thus, placing communication in the correct cultural and technical context is essential.
Schulz and Jobe (2001) point out that MNCs can actually achieve market advantage by having a good knowledge transfer programme in place. In the case of Tyco, rapid knowledge exchange between the multi-national subsidiaries allows the company to adapt its product to local market requirements and conditions and thus gain advantage. Without a high level of communication, this adaptation would not occur. Schulz and Jobe (2001) go so far as to point out that this knowledge transfer is the only thing that allows a multi-national company to acquire advantage over a more local organisation.
Several years ago, Tyco Flow of Japan acquired KTM and the Taiwan Valve Company (TVC). At the time both Tyco Flow of Japan and KTM had manufacturing operations, but they manufactured different valves. The parent company determined that transferring all manufacturing to KTM could help to save money. The development and administration of the valves that Tyco Flow had manufactured was kept at Tyco Flow. This set up a situation where information needed to flow, and flow rapidly and accurately, between Tyco International, Tyco Flow, KTM, and TVC, an operation that involved numerous employees and the Japanese, English, and Chinese languages and cultures.
In beginning the transfer of knowledge, the company sent many of its engineering materials, including drawings, to TVC to be translated into Chinese. The documents were transferred back to KTM, where employees checked for errors and for technical correctness. Once corrections were made, they were sent back to TVC to be incorporated. Comments and additional clarifying information had to be translated into both a language and a cultural context that would be both acceptable and understandable to TVC's employees. TVC, which was the cost expert, helped KTM understand cost factors while KTM engineers imparted technical and engineering information to TVC. Complicating the issue was the fact that the home office also wanted everything in English. Again, not only was technical translation involved, but cultural translation.
According to Kohlbacher and Krahe (2007), one of the glaring cultural differences in the organisations was the difference in the structure of "work" between Japan (Tyco Flow and KTM) and Taiwan (TVC). In Japan, workers tended to spend their entire career in a single company, sometimes on a single project. Many of KTM's employees had worked for the company for over 20 years. The entire work culture was built around the concept of company loyalty. In Taiwan, however, employees had no loyalty and frequently switched jobs and companies. Japanese workers were simply not exposed to other ways of doing things. One of the first things that Tyco and KTM did was to send Japanese workers to TVC to observe their manufacturing process. Kohlbacher and Krahe reported that this was the first time many of the Japanese workers had ever seen another work operation.
Another cultural issue faced was that Japanese workers had internalised the drive for perfection. Thus, they did not consider their work in Taiwan was done until the Taiwanese workers were able to produce a number of absolutely perfect valves. They also did not understand the concept that they were teaching the company to produce a good product, because in Japan knowledge and skills belong to the individualand not the company. Skills are transferred one on one, and teaching one person on a shift to do something did not mean anyone else would find out about it. Further complicating the situation was the Japanese tradition that one had to not only acquire perfection, but also do it several times, before the act could be moved to the production line.
Given the tight time constraints with the production schedule, the KTM insistence on repeated perfection was quite an issue. TVC wanted to concentrate on meeting scheduling requirements. Another difficulty was that once the local organisation reached a decision as to how to pursue production, the central office could override it. The cultural complications, then, made production very difficult. Eventually, however, all of the organisations came to understand that when dealing with an American governing company (Tyco), their goals had to prevail, and adjustments were made in both TVC and KTM to accept that concept.
The most important facet of the case, however, was the understanding that by working together and sharing the knowledge, the two companies of KTM and TVC could indeed work together to accomplish the goal the Americans wanted: very high production, on schedule, with less emphasis on perfection (Kohlbacher and Krahe, 2007).
The complex of information exchange between the three companies is indicated in the figure below. The letters "J", "C", and "E" represent the languages of the interchanges of information.
2.11.3 Electrolux of Sweden
Electrolux is a MNC based in Sweden. It sells more than 40 million appliances of various kinds each year and spans 150 national markets. Sales in 2007 surpassed 105 SEK. At the present time, the company has 57,000 employees (Electrolux, 2008). Electrolux actively seeks candidates with "international profiles" and has what they term a "mobility programme." They recommend that individuals interested in working globally apply to Electrolux in their home country and then ask for international assignment (Electrolux, 2008a). Truly pushing the envelope on the concept of being a multi-national company, Electrolux has become part of the first zero-emissions project in Antarctica by providing appliances guaranteed to work at -50C (Electrolux, 2008b).
At any given time, Electrolux has approximately 200 employees that are expatriates (Gustavsson and Peszkowski, 2007). Electrolux prefers to fill expatriate positions from within, because they want expatriate employees with a strong knowledge of the company, however they will recruit outside the company if necessary to fill open positions. Electrolux sometimes sends employees in certain career paths abroad simply to broaden their knowledge of the company and of the way that international business works. This is typically done if the individual has been identified as having a long-term career possibility at Electrolux. The company also sends managers to other companies to be what they term "agents of socialisation" or to impart company values in areas that may not be up to par. Electrolux places a great deal of emphasis on corporate culture. They may also send senior employees abroad to help organisations that are in stress or are having problems with manufacturing or operational processes. Occasionally younger expatriates are sent abroad to assist with start up networks so that they understand the process and can utilise it later (Gustavsson and Peszkowski, 2007).
Kjelldorff, one of Electrolux's human resources managers, has pointed out that they sometimes find that field offices believe that expatriates are sent out as corporate spies. Though expatriates are never sent out as what she terms "agents of control" they are empowered to correct operational issues by taking control and teaching local employees how to work within Electrolux's global perspective (Kjelldorff, in Streling, 2008).
Recruitment: Expatriate vacancies that occur within the company are generally handled one of two ways: the job is posted internally and is competitive, or the company has already identified a candidate and interviewed their supervisor before they are approached with the possibility of filling an expatriate position. The latter method is normally used when individuals have been identified as having long-term career potential at Electrolux. According to Kjelldorff (in Streling, 2008), in the past most expatriates were senior career workers but now they are sending out many younger expatriates.
There is no specific selection panel nor is there specific selection criteria because Electrolux believes that they must tailor each expatriate selection to specific job needs and requirements. Thus, when a panel meets, it meets with people who know the candidate and can give input on the suitability for job requirements, rather than with the candidate themselves. Formal testing of the candidate is not done but past job competency is closely scrutinised. Families are not interviewed, and not all expatriates choose to take their families. In some cases, the family remains near the home office and the expatriate returns to visit. The company insists that it works with the candidate to develop a 'family solution' and that there is no one solution for every family.
Criteria: According to Kjelldorff (in Streling, 2008), successful expatriate candidates must embody Electrolux's core values, and they must be able to participate in knowledge management by providing their expertise and by learning how other offices handle their issues. They must have a high potential within Electrolux and have a reputation as being a person who 'gets things done'. Kjelldorff (in Streling, 2008) characterizes many of them as being "driven" and with an ability to look at situations from the company's strategic perspective.
The candidate must have a great deal of technical expertise, but may have broad knowledge and be sent out to acquire specific knowledge, or have specialised knowledge and be sent out to acquire general knowledge. Candidates must speak English and the company reviews their cross-cultural suitability but it is not a main criteria. The family issue is reviewed after selection and each post is tailored to the individual family rather than interviewing the family before the candidate's selection.
The main criteria appear to be the ability to speak English, to understand and espouse the Electrolux values, technical expertise, be a "high performer" and have a reasonable personality and interpersonal skills.
Repatriation: There is no set period for expatriate assignments and there is no defined repatriation program. However, expatriates are always welcomed back into Electrolux in their home country and they know they always have a job to return to (Kjelldorff, in Streling, 2008).
2.12 Chapter Summary
A wide variety of literature was covered in Chapter Two. The chapter began with a discussion of the importance of international human resources management and the four approaches to management orientation in a multi-national corporation. A discussion was conducted of the reasons that expatriation fails. Information on the selection of expatriates was provided, and the training and repatriation of expatriates was reviewed. Finally, case study materials for the United States Peace Corp, Tyco Flow Control/KTM of Japan, and Electrolux were provided. The Peace Corp was chosen for its approach to cross-cultural education; Tyco Flow Control/KTM was chosen for its utilisation of knowledge management, while Electrolux was chosen because of its method of selection of expatriates. In Chapter Four, the materials gained in Chapter Two will be analysed. Chapter Three, however, will provide a discussion of the methodology of the research.
CHAPTER THREE – METHODOLOGY
3.1 Chapter Introduction
In establishing how to conduct research, I selected a philosophy, approach, methodology, method, and type of research. Each of them is described below.
3.2 Research Philosophy
There are three philosophical approaches to research including positivism, interpretivism, and realism. According to Riley, Schouten, and Cahill (2003), positivismseeks to apply scientific research methods to studies that involve social phenomena, in an effort to uncover general explanations for why things happen, in a value-free and unbiased way. Interpretivismattempts to interpret why and how individuals behave in certain fashions, and how their actions will affect different situations. Saunders, Lewis, and Thornhill (2003) state that "the business and management world is far too complex to lend itself to law like generalizations" (pg. 84). The process of interpretivismprovides qualitative results by the process of understanding the actions of individuals, interpreting their intentions, and determining motives. Realism, according to Sauders et al. (2003) "is based on the belief that a reality exists that is independent of human thoughts and beliefs". Saunders et al. believe that social forces affect how people interpret behaviours, even though they are not aware of it. People have perceptions and behaviours, and these perceptions and behaviours affect their interpretations of other phenomena. Thus, according to the authors, studies of people must be treated in a different manner than studies of the natural sciences. In some research realism would be appropriate as it shares many tenets with positivism, but it also recognises that people themselves are not objects that are easily studied, similar to interpretivism (Saunders et al., 2003). The philosophical approach of positivismhas been chosen for this project as being most suitable to the study of business phenomena and the people in the business.
From the ontologicalposition, it is clear that problems with the turnover rate of expatriates do exist. From the position of epistemology it is clear that the cross-cultural issues involved in the lives of expatriates are both real and relative. The approach being taken in the research is that of constructionism, which reflects that people construct reality as they learn about the world around them. Finally, the research is approached from the perspective of relativism and social interactionism: meaning is derived from social interaction, but that meaning is constantly growing and changing as society and the person's place in it changes. This perspective is particularly relevant to the expatriate, who is being forced to view a different ("new") society and can have great difficulty interpreting that society based on the "rules" of his or her old society.
3.3 Research Approach
When a researcher speaks of methodology, the methodology is generally separated into a qualitative, quantitative, or mixed approach. Quantitative research seeks to quantify data and generally asks "how much". Quantitative research generally involves the use of statistical abstractions to prove the researcher's point and can consist of the database of answers to surveys or numerical studies (Malhotra and Peterson, 2006). Qualitative research, on the other hand, is a more holistic approach to the acquisition of data of various types, and generally seeks to answer questions about what is being accomplished, what needs to be accomplished, or how to accomplish it. Simply put, qualitative data research asks "how". Research for this project will address risk factors of business as it relates to international human resources management, with an emphasis on the cross-cultural training component as a form of knowledge management that can be utilised to lower the overall rates of turnover in multi-national corporations. The research is expected to reveal how the use of cross-cultural training components as knowledge management can be utilised not only to lower the turnover rate in MNCs, but in any company; the research is expected to be generalisable. In this project, I ask what needs to be accomplished, how it is being accomplished, what needs to be changed, and how the changes can be harnessed to benefit business overall.
3.4 Research Strategy
In the final analysis, surveys and other field research methods were rejected as being too expensive and time consuming, as well as being fraught with privacy issues and potential instances of deliberate dis-information. Two forms of qualitative methodology, the case study and archival research studies, were chosen as the primary research materials for this project. Both methodologies are discussed briefly below and will be expounded upon in the actual study.
3.4.1 Case Study and Archival Research
Feagin, Orum, and Sjoberg (1991) recommend case study as a methodology when an in-depth investigation is needed. They are especially valuable when the materials involve a wide variety of topics or materials, as in this case. When care is taken to utilise the robust procedures that have been developed, the case study will stand up to rigor. One of the most useful facets of the case study is reported by Stake (1995) who believes that case studies can ferret out information that the individuals being studied might have a vested interest in hiding. Hidden information can sometimes be revealed by pursuing and studying the case from different perspectives.
Yin (1984) believes that case studies are more appropriately utilised when the researcher wishes to focus on exploratory information, the explanation for the information, or the description of the information. Case studies concentrate on the actions involved in the case, rather than on the people; as such they concentrate on the issues that underlay the system rather than the individuals in the system. Yin states that case studies may actually be more generalisable than research that is based on statistical analysis, since statistical analysis is only limited to a specified set of variables.
In this study, the case study method was chosen because it allows in-depth investigation (Feagin et al., 1991). More, it allowed me to focus on exploring the subject of expatriatism while search for explanations for the information (Yin, 1984), and can reveal hidden information (Stake, 1995), such as the early termination statistics that the United States Peace Corp do not typically release. This combination of criteria made case study a good choice for this study. By combining case study with additional secondary research in the form of archival research, even more information was developed on the subject matter. The wide range of subjects made a flexible research method desirable and the combination of research methods listed here provided that necessary flexibility.
Archival research is another form of secondary analysis, examines existing data. In the context of this project, archival research will be conducted to access a very wide variety of information needed for the interdisciplinary nature of the project. Though I may utilise various materials acquired during the study, the primary intent of the archival research in this case will be to utilise data base searches to locate materials, studies, and supporting information. The materials can be utilised in developing a research question, clarifying the question, or answering the question. A number of databases will be consulted, including Google, Google Scholar, EBESCO, ERIC, Bnet, and Questia. The search method was based loosely on the concept of a data tree; each search suggested other searches which might be fruitful. Thus, an initial non-specific search on "multi-national companies" led to the addition of the term 'knowledge management', 'turnover', 'retention', and other related searches. Many of today's databases have a 'saved search' feature, which allows the researcher to save previous searches and modify them based on the string that the researcher begins to type. Most databases today also provide search suggestions based on other researcher's searches, and this facility was utilised in developing the search for appropriate archival information.
The three cases that were chosen were selected because of their widely differing approaches to expatriate management. Each of the companies professes to be 'known' for differing things: the Peace Corp, for their in-depth understanding of other cultures; Electrolux, for their presentation of the expatriate program as a desirable assignment given as reward for service to someone who is believed to be career material, and Tyco Flow, who believes that the only important thing is that their employees accomplish their assigned mission. Each of the companies is perceived to have a great deal of information to give regarding the handling of foreign assignments.
3.5 Research Method
Secondary analysis was chosen for this project because of the large variety of available materials. It is also very cost effective and can be adapted to tight constraints making it a good method for this project.
3.6 Type of Research
The research conducted for this project is both exploratory and descriptive. Clearly, problems with the turnover rate of expatriates do exist in the global business world. It is apparent that the cross-cultural issues involved in the lives of expatriates are both real and relative. Expatriates are being forced to view a different or new society and can have great difficulty interpreting the new society based on the rules of his or her old society. The overall framework of exploratory and descriptive study allowed for wide latitude to explore venues that presented themselves during the research.
3.7 Method of Analysis
Content analysis was conducted on all the collected materials. The process of analytic induction was utilised during review of the archival literature and the case materials. Broad investigatory threads appeared during review of the materials. Subcategories of the information were developed; sub-themes evolved, and information on three primary fronts was realised: turnover after expatriation (or during, in the case of the Peace Corp); utilisation of expatriates in the transfer of knowledge or knowledge management, and cross-cultural understanding.
Finally, the information on the three cases was compared in order to determine if any contributions to the knowledge base could be made by the information garnered during the study. Generalities were made, and the information was reviewed for validity.
3.8 Chapter Summary
In this chapter, the philosophy of the research, the approach, methodology, method, and type of research for the study have been established. Each of the methods was chosen for a particular reason and the reason has been defined. In the next chapter, the methods are utilised in the analysis.
CHAPTER FOUR – ANALYSIS
4.1 Chapter Introduction
Chapter Four will provide an analysis and synthesis of the materials that were reviewed during the course of the literature review and of the case studies. Related theories will be compared to practice and the three case studies will be reviewed to determine how well the three chosen multinational companies meet their objectives in the utilisation of expatriates. The research questions will be reviewed and the literature will be examined to determine if a link between increasing rates of general expatriate turnover and generally high rates of employee turnover is present. The literature review will be used to determine why some companies manage expatriate programmes successfully, and why some programmes fail. General lessons of human resources management that may well contribute to the base of knowledge for the reduction of overall turnover rates throughout the working world will be determined.
The analysis will be guided by the aims and objectives of the research: to determine what role cross-cultural training plays in that success; to explain the steps that successful MNCs take in utilising the knowledge they gain in working with expatriates as a form of knowledge management, and to describe how this information can be utilised by other companies to lower the overall general turnover rate.
During the process of investigating expatriate management and cross-cultural training in the multi-national companies (MNCs), the concept of utilising expatriate management and experiences as a basis for knowledge developed. Certain companies have been successful in lowering the rate of expatriate turnover and increasing retention in expatriates who return home. Given the steadily increasing rates of turnover in companies and businesses worldwide, we cannot afford to overlook the success of these companies in utilising expatriate management as a form of knowledge management with applicability to reducing soaring turnover rates. This project is based on the success of these companies as exemplified in case studies of the United States Peace Corp, a vast multi-national company (albeit a non-profit organisation), Tyco Flow of Japanand Electrolux of Sweden, supported with archival research. Each of the case studies exemplifies a different positive factor of international human resources and their handling of expatriates.
At the same time, each of the programmes has not performed as strongly as some might like in the field of expatriate management. Where possible, weaknesses in the handling of expatriates have been pointed out so that the readers can benefit from the negative experiences as well as the positive ones.
The United States Peace Corp was chosen for its exemplary programme that exposes workers to other cultures through a combination of training and on-site immersion. Tyco Flow was chosen for its emphasis on knowledge management to and from the parent company through the utilisation of expatriates. Electrolux of Sweden was chosen for the manner in which it hires its expatriates. Each of these case studies provided information that can be utilised in the development of international human resources programmes. In addition, the lessons learned form these companies are generalisable to companies that are not multi-national but still have a multi-cultural component. Today, it is difficult to imagine a company that does not have to deal with multi-cultural issues in some fashion. By adapting the lessons in expatriate management learned from the United States Peace Corp, Tyco Flow of Japan, and Electrolux of Sweden, human resources managers may be able to decrease the rate of turnover in all companies.
The literature review began with the statement that capturing and maintaining a competitive position (Tye and Chen, 2005), and making a profit, is the most important issue in many organisations (Friedman, 1970). Increasingly, competing on the global market provides the method of capturing and maintaining market position (Tye and Chen, 2005). In the three cases that we reviewed, Tyco Flow/KTM has maintained its strong position by utilising an advanced form of knowledge management between its home nation company, host nation company, and third party companies, spanning three languages and cultures. Though the study was only conducted on Tyco Flow/KTM Japan and TVC of Taiwan, the company as a whole is so successful that we can surmise they utilise the exchange of knowledge in their other operations as well.
The United States Peace Corpis a non-profit governmental agency that is designed specifically to utilise United States citizens as expatriates to develop a flow of technical and cultural knowledge from the United States to other nations and back again.
Electroluxutilises its expatriate programme to exchange knowledge in several ways. It provides knowledge from the central office to field offices and sends knowledge from the field offices to the main office. The relationship between the expatriates and their home office is so tight that they are frequently accused of being corporate spies. At the same time, expatriation fulfils other functions: to provide field offices with a stronger sense of corporate values, and to strengthen the knowledge base of individual, hand-picked employees. As the case study pointed out, some employees have broad technical knowledge and are deployed to learn to be experts, while some employees are sent out as experts to acquire a broad base of knowledge. In the study, Kjelldorff (in Streling, 2008) made it very clear that the knowledge goes both ways i.e. both the field offices, the expatriate, and the main office benefit from the exchange. In the next section, we look at analysis of the three cases of The United States Peace Corp, Tyco Flow/KTM, and Electrolux. Each case will be analysed based on the research questions: lowering the rate of turnover of expatriates, utilising expatriate learning as knowledge management, and the role of cross cultural training. Later in the chapter, we will look at the generalisability of success of expatriate management in the three MNCs as a form of knowledge management and its potential application in the reduction of soaring general turnover rates in business today.
4.2 The United States Peace Corp
The Peace Corp is a voluntary organisation. Applicants volunteer to get in and they go through a lengthy and daunting application process. Unlike the movie "Shallow Hal" (2001), the hero cannot decide to join the Peace Corp, be sworn in, and be on his way to a foreign nation with the love of his life all in the span of 30 minutes of paperwork. The Peace Corp application process takes up to a year and the application can be rejected outright or deferred a number of times for more input or for the applicant to correct existing medical, dental, legal, or technical problems that the Corp believes will interfere with the applicant's proposed service. Becoming an expatriate associated with the Peace Corp does not happen to someone, it is a voluntary action initiated by the applicant specifically for the purpose of becoming an expatriate. While a recruiter will be in touch with each applicant once he or she indicates to the Corp that they have an interest in joining, this is not the Army. There is not a recruiter on every block, and they do not mislead applicants to get them in. The Peace Corp is brutally frank. Nevertheless, as we will see later, there are still problems with failed expatriations.
The Peace Corp works very closely with the U.S. Embassy to share information, develop strategies, and coordinate communications in a crisis. If a situation arises in country that poses a potential threat to Volunteers, the Peace Corp will immediately assess the nature of the threat and respond in a manner that ensures the Volunteers' safety and well being. If the decision is made to evacuate Volunteers from a country, the Peace Corp will commit every resource at hand to safely move each Volunteer and staff member out of harm's way. Although the Peace Corp does not automatically contact family members in all crisis situations the Peace Corp will, in the event of an evacuation, initiate calls to the emergency contact persons each Volunteer has identified (Peace Corp, 2008e).
Shallow Hal and his desire to be with his girlfriend aside, there is no romance in the Peace Corpand they clearly are not 'twisting the arm' to get applicants to apply. The question arises: does their attitude impact the applicants? This will be discussed in the next section.
4.2.1 Turnover of Expatriates
A blog posting by Nick2800 in Denver will give some perspectives of how Peace Corp applicants look at the prospect of becoming an expatriate.
As excited as I am to begin my service, I'd be lying If i said i wasn't nervous from time to time. Its funny, you have some days where your totally amped and others where you think holly shit Iv committed to really go thru with this. My current thoughts are centered around the culture in which I will be serving. I'm going to the Islamic Republic of Mauritania (The only Islamic republic Peace Corps goes to). From what Iv read and from the RPCV'S Iv spoken with, Mauritania is one of the toughest, most hardcore countrys that Peace Corps sends volunteers. Being a strict Muslim country none of the locals drink alcohol, woman are treated lower than second class citizens, along with the many rules concerning apparel. Its odd, Iv got no problem living in one of the filthiest Citys in West Africa (Nouckchott), Ivgot no problem living without electricity or running water, and Im fine with the idea of eating bland, shitty food for two years. But Im nervous about being judged by my Mauritanian counter parts if Im seen having a cocktail (Nick2800, 2007).
It is clear from the blog that Nick has an excellent academic understanding of what the conditions will be in the post he accepted. It is important to remember that once the Peace Corp accepts an application, they match the person's skills to available openings in the same way any MNC would. They then formally offer a job by sending a letter to the person with the location of the proposed job and the job's details. The Peace Corp does not reveal proposed assignments over the phone, only by mail, and they provide a great deal of information on the country and the situation in the country to the applicant in the packet. How accurate is the information? Consider a later post from Nick2800, after he has been deployed to his location.
The past 4 weeks have been some of the most exciting, challenging and toughest weeks of my life. Its 120 degrees average in Kaedi, our traning site. No running water or electricity in my home stay village. We eat Goat and sheep almost every night with the occasional brain thrown in there. One of my bags got lost coming over from Newyork, still has not shown up, and it won't. I live, sleep and eat in animal shit (litterally). There is no concept of hand washing and trash is every where. Alcohol is illegal. I Spent the last two nights in the hospital shitting and puking my brains out from salminial poising, passed out in the bath room and craked my head (Nick2800, 2007a).
Lest readers wonder how Nick2800 is posting without electricity, remember that he is posting from the hospital. It appears that Nick2800's posting pretty clearly reflects the conditions that his 'offer letter' told him to expect: no alcohol, no electricity, no running water, and, unfortunately for Nick2800, "bland, shitty food". Though the Peace Corp specifically states on its website that they offer 100% medical, free hospitalisation, and medical evacuation, we do not know if Nick2800 had to take them up on that benefit; he has made no additional posts.
The possibility of acquiring an 'exotic disease' in the Peace Corp is such a part of popular culture that Razzi (1998) even lists it as a possible benefit of joining the Peace Corp in a 1998 article for Kiplinger's Personal Finance. The author points out that one of the benefits may even be "a hard-won immunity to an exotic tropical disease" (pg. 1). Clearly, if applicants enter the Corp already aware that they will be facing what can only be described as torturous conditions, including tropical diseases, for a period of two years, then there must be something motivating them to stay, something over and above the good living conditions that job applicants, even applicants in altruistic organisations, traditionally hope for.
What exactly is the rate of failed expatriation in the Peace Corp? The statistics are closely guarded, but Peace Corp Wiki group acquired them via the Freedom of Information Act. All of the statistics presented in this section are from the 2006 Quantitative Early Termination Report produced by the Peace Corp Office of Planning and Analysis in May 2007 and were intended only for internal use (Peace Corp, 2007). The latest statistics available are for the year of 2006. They show that the rate of failed expatriation is only 8.9%. Another 11.2% of the Peace Corp volunteers are administratively terminated for one reason or another. Administrative terminations can occur because the volunteer failed to follow the rules, are medically discharged, or have interrupted service. Members with interrupted service are separated for reasons beyond their or the Peace Corp's control and these members are eligible to return. The number of resignations is clearly linked to time in service, with most resignations occurring either in the beginning months of service, or at the end of the first year.
Resignations also vary by region with Swaziland having the highest resignation rate both in the African Region and worldwide. They also have the highest early termination rate. Chad had the second highest rate of both discharges. In the European, Middle East and Asian regions, Jordan has the highest resignation rate; East Timor has the highest rate of administrative discharge. Bangladesh had a very high rate of discharge related to political conditions, and the Ukraine had a high percentage of medical discharges. In the South American and Caribbean region, Belize had the highest number of both administrative discharges and resignations. Honduras had the highest number of medical discharges for the region, followed by Kiribati. The Peace Corp has subsequently closed its posts in Chad, East Timor, and Bangladesh, leading one to the conclusion that the areas may have been unstable and unsafe for workers. This, in turn, would justify workers' refusals to comply with the rules and stay in the area.
Worldwide, females are more likely to be administratively discharged or to resign, and there is a clear link to age and termination. Volunteers who are less than 20 have a high rate of discharge and resignation, as do workers in their 40s and 60s. The rate of loss for workers in their 70s is the highest, but there are very few workers in this age group. Nearly a third of them were administratively discharged, and 28% left voluntarily. Out of 32 workers in their 70s, 19 of them left the Peace Corp via termination or discharge in 2006. Much of this loss is attributed to medical reasons. Racially, Native Americans have the highest rate of administrative discharge and resignation, with all other races approximately equal. Workers who are married, widowed, or divorced are much more likely to leave the Corp than single workers who have never been married. In general, workers with less than a bachelor degree and students participating in graduate programmes are more likely to be administratively discharged or to resign.
Workers in youth and community development are the most likely to resign or be terminated, which workers in non-specific jobs or environmental work are the least likely. The highest rates of resignation and loss are from recruits from the Dallas office, while the lowest are from Minneapolis. Workers in predominately Muslim posts resigned or were terminated at a higher rate than non-Muslim posts.
After extensive statistical analysis, the Peace Corp concluded that the most likely factor related to termination and resignation is age. Both the very old and the very young are more likely to be terminated or resign. Association testing showed that the other variables were related to age, with the exception of country correlations. Individual host country conditions can be hostile enough that they may be out of the control of the Peace Corp; this is what led to the closure of Chad, East Timor, and Bangladesh. The Peace Corp also concluded that the first four weeks of service are critical; over half of all resignations occur during that time. They suggest that improvement in recruitment, training, programming, and in-country support is needed. They also suggest a great deal of more research in this area.
4.2.2 Utilising Expatriates in Knowledge Management
How well does the Peace Corp utilise knowledge management? The entire programme is based on the exchange of knowledge, either technical or cultural. Peace Corp volunteers take other nations' social, technical, and educational knowledge, along with a view of what Americans are like, from a cultural perspective. In return, they bring knowledge of other nations and cultures back to America, along with bits and pieces of knowledge and new ways of doing things.
The Brookings Institute (Rieffel, 2003) has studied the issue of knowledge management and information and exchange and has recommended that the Peace Corp begin accepting volunteers from other nations to come to America and do similar projects in the United States. They suggest that an excellent application would be to alleviate teacher shortages in high schools by utilising foreign volunteers to teach second language classes and geography lessons. This would make the cycle of knowledge management more complete as it allows for a more balanced exchange of knowledge as well as culture.
4.2.3 Role of Cross-Cultural Understanding
The role of the Peace Corp in cross-cultural understanding is preeminent, both in its early training programmes and in its operational role in the field. The programme has three main goals, and two of them relate to cultural understanding i.e. helping Americans understand other nations, and helping other nations understand America. It is, then, of no small concern that rates of administrative discharge and voluntary resignations are higher in high-Muslim nations: Albania, Azerbaijan, Burkina Faso, Gambia, Guinea, Jordon, Kazakhstan, Kyrgyzstan, Maui, Mauritania, Morocco, Niger, Senegal, Tanzania, and Turkmenistan (Peace Corp, 2007). Given the concerns of terrorism and the fragile state of world politics, this would seem to be the group that the Americans need to most understand and be understood by from a cultural perspective. Nevertheless, the organisation should be considered a success at imparting, receiving, and distributing cultural knowledge.
After reading the Peace Corps internal analysis, it became clear that the cultural programme designed to help recruits understand what life will be like in a foreign culture is not as successful as I had anticipated when selecting the case. The Peace Corp's public information appears to deliberately pass over this fact. The high rate of expatriate failure in the first four weeks, when recruits are being trained in villages in their service area, indicates that the initial information fails to help recruits truly understand what the conditions will be like. It is a weakness of this study, however, there is no way to determine if the resignations, which tend to be among the young, especially women, are due to cultural difficulty or physical hardship.
4.3 Tyco Flow Control/KTM
Tyco Flow Control/KTM does not, from a strict perspective, use expatriates. They do, however, send employees to other nations frequently to learn techniques, to teach techniques, and to exchange information. The company appears to be organised on a regiocentric model: local offices enjoy a great deal of autonomy, although, as we saw in the case materials, the home company requires that documents to be sent to it in English. The home company also notified the local companies that their priority was speed when the conflict between speed and perfection became an issue with the regional companies.
4.3.1 Turnover of Expatriates
The company has no expatriates to lose, since employees are temporarily deployed but still assigned to the home office. However, in the cultural context of KTM, even if the KTM employees were directed to expatriate, they would follow directions and do so regardless of how it affected them personally. As Koshiro (1984) points out, lifetime employment is a cultural directive in Japan (though it is now becoming passé with the spread of MNCs). We can tell that the more traditional ways of doing business were still in place at KTM when the company took over TVC, because the employees still wanted to do personal training rather than sharing knowledge, and they also insisted on practiced perfection. Thus, we can conclude that they simply would have gone along with expatriate assignments.
TVC, however, is a different matter; we have no way of knowing how employees there would react to expatriate assignment other than, as the case pointed out, the employees did not have the high level of company loyalty that KTM employees had, and they tended to switch jobs. They, then, may or may not have been amendable to being expatriated.
Nevertheless, with the regiocentric way the company seems to operate, this is unlikely to be an issue.
4.3.2 Utilising Expatriates in Knowledge Management
One thing that Tyco Flow Control/KTM and TVC have learned is to cross cultural bridges in whatever fashion they needed to in order to facilitate the management of knowledge between different branches of the company. Like a benevolent parent who is tired of the squabbling of siblings, Tyco International finally reached the point where they simply told KTM and TVC to "figure it out" and to ensure the deadlines were met. Though this was a daunting task, the two companies accomplished it and set precedence within the company for the internal exchange of information.
To do so, the workers had to overcome a number of odds. They spoke different languages and were from different cultures from the home company, and they used completely different manufacturing processes. Though it was necessary to handle a number of translators, they were even able to meet deadlines and still get their documents transferred into English as well as Japanese and Chinese (at the result of the home company).
Sizoo et al. (2005) pointed out that adequate cross-cultural training of any employee in an MNC greatly increases employee effectiveness and can lead to increased promotions and pay raises, which cut turnover rates. Tyco International took a completely different view of cross-cultural "training"; they tended to simply tell workers to 'figure it out'. Nevertheless, it is easy to see that increased cross cultural awareness and increased language skills would make the working situation much easier in situations such as the one faced by KTM and TVC, regardless of the organisation of the parent company. If offices in different countries must work with each other, they need a basic level of understanding about the other company's culture in which to have a context to exchange the information.
As the case pointed out, when KTM employees set out to train TVC employees on how to produce a particular valve, they wanted to train the employee and not share the knowledge with the company. They also wanted the trainees to demonstrate skills that reflected 100% perfection before beginning production, something that was unheard of in the Taiwanese culture. Undoubtedly the workers encountered other situations in the period immediately following the acquisition.
4.3.3 Role of Cross-Cultural Understanding
The role of cross-cultural understanding in this case is very clear, and has been discussed in conjunction with the exchange of knowledge. This case is somewhat unusual in that the parent company did not provide any cultural training, preferring to direct the subsidiaries to figure it out themselves. Again, this would most likely not have worked in any culture other than the one that had been established in KTM (and other Japanese companies). This is a case where everything worked out all right in the end, but would have been much easier and smoother had the parent company acknowledged and assisted with cross-cultural training.
4.4 Electrolux of Sweden
In the case on Electrolux, we reviewed the methods that the company utilised in selecting their expatriates, the applicability to knowledge management, and Electrolux's role in creating cross-cultural understanding. Electrolux is a well-known name throughout the world, under its own brand name and that of its other brands, Eureka and Frigidaire, among others. Melki (in Gustavsson and Peszkowski, 2007) states that 8 percent of returning expatriates resign, while 14 percent are terminated, for a total expatriate loss of 22 percent. The significance of these figures will be addressed in the next section.
4.4.1 Turnover of Expatriates
Earlier, we discussed the concept that Electrolux had no hard and fast method that they utilised when selecting employees for the expatriate programme. Streling (2008) had reported that there were several reasons that Electrolux sends employees abroad: to increase career knowledge and to increase their value to the company, to impart corporate values in the field, to help local offices, and to learn new processes. Streling reported that the company denies that it sends expatriates out as agents of control, but Melki (in Gustavsson and Peszkowski, 2007) insists that this is one of the primary reasons. At this point, Electrolux is very decentralized and might be considered organized on the geocentric model. All of the sites are equally important and expatriates travel other sites to gain a global perspective of the company, as well as to fulfil the other functions listed above.
At the present time, expatriates take most of the responsibilities for their careers, for planning, for adaptation, and for their families. Electrolux outsources the actions that do need to be taken. As a result, one problem has arisen that presents a tremendous issue: the expatriate is dispatched by a particular office to a particular location, and if the expatriate fails to stay in touch, the dispatching office tends to forget about them (Gustavsson and Peszkowski, 2007). Though this seems to be an unusual type of problem, it does explain Melki's comments that employees from other offices tended to be regarded as snitches since they communicated with the home office so frequently. Thus, by failing to adequately plan for the expatriate and his or her return, the company ends up alienating workers in the location in which they place the expatriate. This defeats a large part of the reason for utilising the expatriate in the first place.
Reportedly, Electrolux is working on a new expatriation plan that will regulate how expatriations are planned, how expatriates are selected, how expatriates are assigned, at what point repatriation is planned, and so on. According to Gustavsson and Peszkowski (2007), there is a current drive to take the company from a global model to a "one company" model, and the change in the expatriation plan is part of this drive.
Melki (in Gustavsson and Peszkowski) points out that if the employee fails to return, must be terminated, or returns and quits, the company has lost a great deal of knowledge that they have paid for, and paid for dearly. She reports that one of the reasons returning expatriates seem to quit is that no one pays any attention to what they may have learned; they are never asked directly what they learned, what happened, and so on. She states that the company does use the information, and to a large degree, but they do not let the repatriates know this. Expatriates also reported that when they tried to use the outsourcing company to ask questions, it was very difficult to get an answer as the questions had to be so carefully framed. Overall, the expatriates that quit after the assignment were those that felt neglected or that no one cared about what they learned after their return.
4.4.2 Utilising Expatriates in Knowledge Management
There seems to be no question among the management at Electrolux that they do indeed utilise knowledge provided by expatriates, both the knowledge as it was being gained in the field and again after they had repatriated. The repatriates themselves, however, feel differently. They feel abandoned during their assignments and afterwards they feel as if no one cares what they learned. The net effect is very demoralising, and results in the 22% loss of repatriates. There is no information available publicly on early termination of expatriate contracts.
Because there is no formal debriefing upon their return, repatriates assume that the knowledge they acquire is not being utilised. The company's contention, however, is that the repatriates integrate the knowledge into their own work and thus broaden the company's perspectives. Clearly the company needs to work on the perception that they do not care what the expatriate learned.
4.4.3 Role of Cross-Cultural Understanding
At this point in time Electrolux sadly lacks in preparation for expatriation. Assistance of some types is available through their outsource company, and some language programs are available, but that is the extent of the training. The new plan is expect to concentrate on supporting spouses, helping with career planning, and on mentorship (Gustavsson and Peszkowski, 2007). Though the concept of classes that relate to cultural understanding is still lacking, some of the slack should be taken up with the establishment of a good mentorship programme.
It is clear from the literature review and the case studies that all three multinational organisations have work to do if they plan to improve their knowledge transfer programmes, and the international human resources department should be at the centre of the changes. The change is especially critical in the case of Electrolux, who seems to lose more than 20% of their repatriates simply because they feel unneeded in one way or another.
The Peace Corphas an excellent cultural training programme but has discovered that very old and very young individuals do not work out. However, they do an excellent job of knowledge transfer and cultural understanding. Tyco Flow/KTMdoes not seem to have an expatriate programme per se, though they do send employees to other working nodes on a temporary basis. The Japanese and Taiwanese nodes of Tyco International have worked out knowledge exchange and cultural exchanges, but not without some very rough moments. They could surely have benefited from help from the home office and from formal cultural training in what to expect culturally when mergers and acquisitions occur. Finally, Electrolux has a programme in which the acquirement of knowledge is one of the prime reasons to send employees out as expatriates. Yet, they lose the knowledge the employees bring back by failing to ask what they learned and leaving all impetus up to the employees. A significant portion of the employees, more than 20%, simply walk away in frustration, defeating the whole purpose of the foreign assignment.
Several things are clear, however. First, there are not as many critical factors for success in a multi-cultural environment as many theorists believe. The Peace Corp gleaned the understanding that maturity is critical in an expatriate assignment. Support from the home office is critical. All three case studies clearly showed that the more support that individuals involved in multi-cultural opportunities have, the easier the assignments are. All three cases clearly supported the concept that knowledge management is a valuable part of the expatriate process, although Electrolux did so in the negative manner.
Turnover After Expatriation
Utilisation of Expatriates in Knowledge Management
Cross Cultural Understanding
Table 3. Comparison of Elements
Electrolux's goal was to reward employees with expatriate positions when they seemed to have career potential. Electrolux management felt that by sending them abroad and letting them see other parts of the operation, they could learn from the other Electrolux branches and the other branches could learn from them. However, soon after transfer reality sank in: there was no clear path back, no clearly defined job overseas, and no guarantee they would be given a similar job when they got back. Electrolux's concept was excellent, but their method of implementation left much to be desired. They have realised this, and have now begun to change their programme into one that is more profitable to the company in terms of distribution of knowledge.
The Peace Corp, too, is under pressure to change their programme and their internal materials indicate they will be searching for ways to lower the attrition rate of volunteers right at the beginning of their stays. They have made some changes by closing outposts that were simply too inhospitable to the goals of the Peace Corp and to the presence of American citizens. They plan to continue to explore ways to lower the return of volunteers in the beginning of their commitment.
Tyco Flow continues to grow and expand and has not announced any plans to change the way they do business. However, with the traditional Japanese business culture on the wane it will be interesting to revisit Tyco in five years and see if they still believe that employees must simply "get it done".
I began this investigation with four research questions. Three have been answered, but the fourth still remains: What is the generalisability of the success of expatriate management in the MNC as a form of knowledge management and its application to the reduction of soaring general turnover rates?
In answering this question it is important to remember the definition of a multinational company, given earlier: it is a corporation or large company that provides goods and/or services in more than one country. Thus, any MNC needs to have employees that understand how its employees, suppliers, and customers in other countries and geographic areas feel, react, and understand what they are saying. It does not matter if the employees are expatriated or not; any employee in a MNC needs to be able to communicate with any other employee or customer. Further, even small companies that are not multi-national still encounter individuals every day from other areas and cultures.
In this day of globalisation, employees must be able to communicate with respect and understanding to a wide variety of customers, suppliers, and other employees. The lessons learned from expatriate programmes point the way clearly to reducing soaring general turnover rates. If MNCs and even small companies follow the lessons taught in the study of the Peace Corp, Tyco/KTM, and Electrolux, they will be able to reduce general turnover rates to some extent. By utilising in-depth cross cultural education as the Peace Corp has done, by insisting on knowledge management and the adaptation of a learning culture as Tyco/KMT has done, we can reduce turnover rates in multi-national companies. One lesson that can be learned from Electrolux is that employees will perform better if expatriation is presented as a career move and a desirable action, rather than an obligation.
4.6 Chapter Summary
This chapter has synthesised the literature review, archival materials, and case studies, and answered all the research questions. In the next chapter, recommendations will be made.
CHAPTER FIVE – DISCUSSIONS AND CONCLUSIONS
5.1 Chapter Introduction
In this chapter, the analysis of the previous chapterand the main findings will be discussed and summarised. In turn, contributions to the research will be discussed; recommendations will be given as ways to improve the turnover rates within MNCs. Recommendations for future research will also be provided and the limitations of the research will be reviewed.
5.2 Main Findings
The decision on whether or not to use expatriates should be based on a combination of the needs of the company and the company's organisational structure. Expatriation is expensive and companies should plan for success if they intend to utilise an expatriate programme. Expatriates offer an excellent way in which to mange the spread of knowledge throughout the organisation, if they are properly utilised. A successful expatriate management programme will provide benefits to the company and can help ensure the company's survival in a global competitive environment. An unsuccessful programme, however, is little more than a drain on the company's resources.
Several ways to avoid the risk factors involved in expatriation presented themselves during the course of the research. Companies who utilise expatriates are well advised to expand their cross-cultural training programme for those who will relocate abroad. The Peace Corp provides a two to three month in-country transition period before the worker travels on to final assignment. During this time the worker lives and works with a local family. This method of local mentorship and residence might be one that companies would want to adapt. It allows the worker to acclimate to local customs before going on to an assignment in which they will directly represent the company, thus providing a cushion for the company that does not now typically exist.
Overall the research determined that expatriate programmes as a whole tend to provide little cross-cultural education to the expatriate, and those programmes that provide the training tend to ignore the family. In a typical expatriation program, families travel with the staff member (the Peace Corps, of course, is an exception). By failing to provide intensive training to the family members, companies risk failure of the entire assignment.
We saw in the case of the United States Peace Corpthat an effective cross-cultural training programme greatly increases the ability of the worker to encourage and implement the exchange of knowledge. Given that exchange of knowledge is one of the main precepts of an expatriate programme, companies should make every effort to utilise this undeniable asset. At the present time, the research reveals that most companies fail in this effort.
Electroluxemployees who returned from expatriate assignments repeatedly mentioned that they were taken aback over the lack of attention to their return and that they received no acknowledgement of their accomplishments or what they had learned. This caused a fairly high rate of attrition afterreturn of expatriates. This is very self defeating for Electrolux since they only send employees abroad when they believe the employee will be a 'career employee'.
In Tyco Flow/KTM,we saw a company that does not utilise expatriates but has a very active interchange between employees of differing racial, ethnic, and language backgrounds who must work together to accomplish the company's goals. The goals, established by a large MNC, which appears to be ethnocentric, have been very difficult to attain. The analysis of the case led to my amazement that the workers had managed to meet the company's requirements, combined with the enlightenment that is was only because of the traditional work ethic of the Japanese workers which allowed this attainment to be successful. The corollary to this, of course, is that without these dedicated workers, who tend to stick with a company for years, the company's goals would not have been attained. To a great extent, the Tyco Flow/KTM case provided a striking example of "what not to do, and how to do it".
Lastly, the factors that cause expatriate programmes to fail such as lack of cross-cultural training, lack of exchange of valuable information and knowledge, and lack of acknowledgement of accomplishment of the expatriate, provide great information for any organisation today that is involved in a cross-cultural situation. With the globalised and heterogeneous nature of society today in nearly every nation, and with the global nature of nearly every business via the Internet, "local" companies who wish to decrease their rate of turnover and increase the rate of employee satisfaction must also learn these lessons.
The nature of the research, which studied three vastly different multi-national companies, led to a synthesis of knowledge gained that would not have been possible with only one case study. This is, then, how the current research varied from what is presently available. I studied one successful case (the United States Peace Corp), one case in which no concern was paid to the employees or to cross-cultural needs (Tyco Flow/KTM) and one case in which the expatriate programme was faltering and in the process of being revised to better meet the needs of the employees (Electrolux). This unique combination of case studies representing differing phases of employer enlightenment provided a perspective that has been lacking in other research to this point.
5.3 Contributions of the Research
There are two significant contributions to current research. The first contributionwas defined in the previous section: the combination of the case studies in different phases of employer enlightenment led to a perspective that has been lacking in other research to this point. The conclusions that were reached would not have been possible had the case studies been more heterogeneous.
The second and very significant contribution to the body of research is the linkage between companies that have an expatriate programme (and how the expatriates can stimulate knowledge exchange) and the realisation that companies who are not multi-national can achieve the same thing with a cross-cultural programme. The link is the fact that the employees are intensely exposed to different cultures, not the mechanism by which it is done. In other words, an employer in Brooklyn whose employees encounter customers from a vast array of countries and ethnic backgrounds can benefit from knowledge exchange as much as a company that utilises expatriates, and the Brooklyn company needs the same tools to do so: intense cross-cultural training.
Other factors that contribute to attrition of expatriates: lack of exchange of knowledge or training and lack of acknowledgement of their accomplishments, also are likely to contribute to the high turnover rate in companies that do not use expatriates, as the basic human motivations are the same in both cases. Understand this fact is a significant contribution to the research.
The study has contributed to my own academic understanding of the process of expatriation and the possible function of expatriates in the context of the knowledge management and retention of employees in the MNC. My belief is that this research provides a solid base for venture into international management.
Ways to Improve/Reduce Turnover Rates
Place emphasis on technical job skills and maturity when selecting candidates for overseas assignments
Provide multi-cultural training to the employees and to their families e.g. information on what to expect in the country in terms of living conditions
Provide field exercises in cultural behaviours
Develop a clear programme of career planning with de-briefing and repatriation actions upon the individual's return
Plenty of Support
Provide plenty of support during expatriation, for instance, develop a system of support in their new community e.g. a corporate mentorship programme
Clear Plan of Repatriation
Make expatriates aware that there will be cultural re-adjustment upon their return
Ensure a clear career path upon the employee's return
Utilise the knowledge gained through the programme to better each employee and to improve technical process
Have repatriates assist with expatriation training
Table 4. Ways to improve/reduce turnover rates within MNCs
The following recommendationsare made to improve the turnover rates within MNCs. The recommendations can be adapted as appropriate for companies, which do not utilise expatriates but have multi-cultural clients and/or employees or anticipates having them in the future. The research suggests that these recommendations will help to cutthe rate of turnover.
Companies must place emphasis on technical job skills and maturity when selecting candidates for expatriation. At the same time, there is a need to provide multi-cultural training to the employees and to their families as well. The training should emphasise what to expect in the country in terms of living conditions, as well as providing field exercises in cultural behaviours. If expatriates truly understand what to expect, they will be more successful and more valuable to the company.
Once companies decided to use expatriates, they should develop a clear programme of career planning and cultural training, with de-briefing and repatriation actions upon the individual's return. If the expatriate does not quit upon return, this lowers the turnover rate. In addition, companies need to provide plenty of support for the employees during expatriation. To do so, they need to emphasise and develop a system of support in their new community. As part of this, they can develop a corporate mentorship programme as one way of helping employees develop a system of support in their new community. In general, expatriates who feel supported are less likely to quit early or to sabotage the company's programme overseas.
Companies must have a clear plan of repatriation for the expatriates before their departure and make expatriates become aware that there will be cultural re-adjustment upon their return. More, companies need to ensure a clear career path upon the employee's return.
However, multi-national corporations should always utilise the knowledge gained through the programme to better each employee in the company, as well as improving technical process. To assist in this goal, they may consider having repatriates assist with expatriation training.
5.5 Research Limitations and Future Research Directions
Additional research must be conducted into the process of repatriation, for this is the point at which the greatest knowledge exchange back to the company occurs. The link has been made between expatriation and knowledge management, and linked the two to increased cultural understanding. Now, research must be conducted to determine what will ensure the greatest chance of a successful repatriation. An additional area of research is the study of early termination of expatriate contracts. How often does it occur, and why? Are the terminations done by the employer, or the expatriate? What are the repercussions? All of these areas are ripe for future research. In addition, in-depth research should be conducted utilising focus groups or case studies and concentrating on the ways that employees perceive that expatriates can be utilised to increase the knowledge base of the company. Finally, it would be interesting to see a statistical study of the numbers of expatriates who actually stay with the company and rise in the ranks of the organisation.
The information acquired in this study was both somewhat subjective, and secondary. A great deal of information was gathered, but it is subject to that limitation. There is also a tendency on the part of companies to decline to reveal true issues. An example of this was the Peace Corps' reluctance to provide their early termination information. Thus, the study is limited by those constraints. Future researchers will need to consider carefully steps that they can take to avoid these limitations, but how they can do that is not clear to me, as a company's instinctual drive is to hide information it believes may be harmful.
5.6 Chapter Summary
In this chapter, the main findings were summarised, conclusions were given, and recommendations were made for future research, suggestions for improvements to expatriate and multi-cultural programmes were provided, and limitations of the research were discussed. Overall, the goals of the dissertation have been met.