The Cost Of Expatriate Failure Management Essay

Companies compete to obtain the best talented employees who have international experience and exceptional communication skills that will insure their success in foreign countries. This pool of employees is the strategic asset of rare sources for companies to acquire in order to gain a competitive advantage. (Tye & Chen, 2005). Researchers define expatriates’ success in three aspects: adjustment, performance, and turnover. “Many researchers try to predict adjustment of the expatriate to the new culture, to new work responsibilities, or to interacting with people from the host country.” (Tye & Chen, 2005). Treven (2006) gives six factors that determine the expatriate’s failure which are dual career, cultural shock, lack of cross cultural training, family problems, language different not enough direction or goal setting and finally using foreign assignments as a way to get rid of problem employees.

It has been established that the cost of expatriate failure is alarmingly high, thus it is imperative to understand its reasons. Although there have been suggestions made that expatriate failure is on the decline (Daniels and Insch 1998), many corporations still focus on the technical competencies required in the international assignment and overlook the significance of cross-cultural knowledge and the important function that the expatriate’s family plays. Sappinen (1993)

The growing internationalization of the world’s markets is drawing more and more players into the international business area. One of the results is that not only large multinational corporations, but also smaller and recently internationalized companies are encountering the problems associated with sending their employees, so-called expatriates, abroad. They may believe that their bigger brothers and sisters can provide answers to their practical problem, but in fact large multinational are themselves coping with trends such as a changing work ethos and dual career couples, all of which has made their employees less willingness to accept an assignment abroad (Shell,1993).

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Unfortunately, A major dispute in past and present literature on expatriation is about the definition of ‘expatriate failure’. This term is simplistically defined as “premature return” (Ashamalla, 1998; Fukuda and Chu, 1994; Naumann, 1992; Simeon and Fujiu, 2000). However, the concept of expatriate failure defined within these limits is far too narrow, as expatriate failure encompasses a great deal more (Harzing, 1995; Sappinen, 1993; Shaffer and Harrison, 1 998). The main flaw within this definition is that it implies that the expatriate assignment has been successful if the expatriate remains for the full duration of the planned stay. This does not occur in reality (Sappinen 1993).

Because of this, the reasons for expatriate failure will be discussed based on this definition. ‘Culture shock’ is a term used in differing contexts, occasionally with different meanings. However, when used with reference to expatriate relocation it refers to the process of coming to understand and adapt to differences in culture manifest through daily interaction and situations. Culture shock is a process that affects people of different walks of life. Apparently, this adjustment process sometimes goes wrong if the crisis is felt too strongly or if the expatriate is unable to recover from it for one reason or another. It seems that the culture shock or crisis usually occurs around 6 months after arrival in the foreign culture (Torbiorn, 1982), but everybody does not go through all the stages and some people do not experience culture shock at all. Hawes and Kealey (1981) did a study of Canadian expatriate in Africa and found that some of the persons who experienced culture shock were ultimately among the most effective. They tended to assume that different perspectives were simply wrong, and therefore they represent no threat to their identity. They were generally more inflexible, through and in the end some of them were less effective because they did not communicate well with the local

Looking into the problems of expatriates and companies who employ them agreed that adequate preparation of expatriates and their families may prove crucial. Most of the companies did not offer very comprehensive training, usually it consisted of short briefings about the country in question and some language training. Usually, the family did not participate. Family requirements are highly interrelated to the expatriate’s adjustments as well as their performance in the host country. (Dupuis et al.2008, p.276)   Adjustment of the family is a factor which companies fail to pay attention when sending an employee on a foreign assignment. Very few include family as a consideration in their selection and training process while others tend to exclude this as an important criteria would eventually leads to failure in the assignment. When an individual is on an international assignment, one of the major challenges he or she has to overcome is the cultural barriers between the parent and host country.   So the international manger needs cross-cultural competencies (skills, awareness and knowledge) in order to accommodate behaviours to fit into the new culture effectively. Personality traits have been widely regarded as among the most important potential factors leading to expatriate success or failure. (Mendenhall and Oddou, 1985, p.40)

It is important to realize those who pose certain personality traits unique to them would gain distinctive advantage over to others.   It has been researched and proven by many scholars, if the expatriate pose positive personality traits it will lead them to a higher degree of adjustment in work, interaction and general. (Huang et al. 2005, p.1656)

Expatriates play an important role in transferring knowledge to overseas operations and establishing headquarters policies in subsidiaries. That is why it is very important for the company to reintegrate their expatriates after completing their assignments overboard. Mayrhofer (2001) explain that companies who fail to keep their expatriates and integrate them into the company successfully, will lose the valuable experiences and knowledge that expatriates gained from their international assignments, and it can be transferred to competitors instead. (as cited in Fink & Rohr 2005).

Cross-culture training

Cross-cultural adjustment conceptualized as the degree of psychological comfort an expatriate has with the various aspects of a host culture (Black & Stephens, 1989; Gregersen & Black, 1990). Cross-cultural adjustment (CCA) suggested as a key determinant of expatriate success in their international assignments. Past research indicated that CCA is a temporal and primary outcome in an expatriate’s assignment that would influence the development of secondary or more distal expatriate adjustment. Among the spillover effects of CCA are strain (e.g., Hechanova, Beehr & Christiansen, 2003), job satisfaction (e.g., Takeuchi, Yun, & Tesluk, 2002), organizational commitment (e.g., Nauman, 1993; Shaffer & Harrison, 1998), job performance (e.g., Shay & Baack, 2006; Kim & Slocum, 2008), and premature return from assignment (e.g., Black & Stephens, 1989; Hechanova et al., 2003).

With aggressive competition going all around, multinational corporations around the globe has identified the increasing need for international managers to be equipped with skills on working hand in hand with people from various cultural backgrounds. It is also becoming of increasing importance to train all possible employees so that highly proficient staffs are available upon demand.

Many industries fear that investing resources in training staff in cross-cultural training might go to waste if it ends up in expatriate failure. As it is such, there is more demand for specialised training programs to cut costs and also provide the relevant skills needed for employees. Three specific areas of CCA distinguished in the literature (Black & Stephens, 1989): Adjustment to (1) general environment (degree of comfort with general living conditions, such as climate, health facilities, and food); (2) interaction with host country nationals; and (3) work (performance standards, job, and supervisory responsibilities). They believe that training can be a substitute for actual living experience in a foreign country. It is better that way rather than to be transferred into another culture and pose the risk of causing damage through cultural shock and misunderstanding. Furthermore, the cost of cross-cultural training is not much compared to the danger of sending inexperienced staff for international assignments.

Littrell et al. (2006) define cross-culture training (CCT) as educative processes that improve intercultural learning via the development of cognitive, affective and behavioural competencies needed for successful interactions in diverse cultures. Although CCT can be used for domestic employees, CCT in its traditional form is focused on preparing international assignees, and is more specifically designed for targeting cultural issues (Shen and Darby 2006). An important aspect in CCT is the need to have ethics and to create policies to help employees make decisions that have moral consequences. Without them, expatriates may perform poorly in foreign lands and end up reflecting badly on the image of their companies. CCT for expatriates aims to develop the awareness, knowledge and skills needed to interact appropriately and effectively with host-country nationals (HCNs) and third-country nationals (TCNs) (Black and Mendenhall, 1990; Shen and Darby 2006). Of the many reasons for a lack of crosscultural adaptability and premature repatriation, one of the most significant has been inadequate CCT (Dowling and Welch 2004; Edwards and Rees 2006). As Dowling and Welch (2004, 120) point out, ‘[W]ithout an understanding (or at least an acceptance) of the host country’s culture. the expatriate is likely to face some difficulties during the international assignment’. In their respective studies, Tung (1981, 1982) and Mendenhall, Dunbar and Oddou (1987) found a negative correlation between the rigor of a company’s pre-departure training and its expatriate failure rate. Accordingly, the higher level of rigor the CCT has, the lower is the expatriate failure rate. Many authors emphasize the importance of CCT for successful expatriation and argue that MNEs have paid insufficient attention to it (Davidson and Griffin 2006; Edwards and Rees 2006; Hodgetts, Luthans, and Doh 2006; Littrell et al. 2006; Shen 2005; Tung 1981, 1982). McFarlin and Sweeney (2006) recently estimated that 40% of MNEs provide no pre-departure CCT for their expatriates, and this figure is as high as 90% in small to medium-sized enterprises (SMEs).McEnery and DesHarnais (1990) revealed that between 50% and 60% of US companies operating abroad at the time did not provide any pre-departure CCT. Earlier, Tung (1981) had observed that only 32% of US companies, while 57% of Japanese MNEs surveyed provided some form of CCT to their expatriates. The 1997-1998 Price Waterhouse survey revealed that only 13% of European firms provided their expatriates with access to specific CCT programmes, but up to 47% did when the expatriate was assigned to a ‘culturally challenging’ posting (Shen 2005). Shen and Darby (2006) claimed that the majority of Chinese MNEs tended to provide only limited or ad hoc pre-departure training for expatriates. When training is offered in Chinese MNEs, its duration is usually short, a finding that is consistent with Baumgarten (1995).

However, as discussed earlier, past CCT research has focused on in-country training, but largely neglected the role of the short-term international assignment; a form of high-level rigor training. Consequently, practitioners might have been misguided in perceiving CCT as in-country training only when providing data to Human Resource Development International 373 researchers. The inadequate provision of CCT has been attributed to a variety of factors. One is the perceived ineffectiveness of CCT by practitioners (Ashton and Felsted 1995; Dowling, Festing, and Engle 2008; Shen and Darby 2006). However, it is unknown whether this kind of perception results from not treating short-term assignment as CCT. In Anderson’s (2001) study nearly all the expatriates in the private, public and non-government sectors indicated that their previous overseas experience obtained through field experience or the overlap of work, had helped them to adjust to their new environments.