The High Cost of Expat-Lite Programs

M.C. ESCHER (Dutch, 1898-1972), Rind, 1955.  

Current economic conditions have forced companies to take a look at their policies to see what can be trimmed.  For expatriate programs, corporations that did not already have a pared-down assignment program may be interested in incorporating one now as a result of an effort to introduce across-the-board austerity measures.

But to incorporate expatriate programs with a reduced benefits structure may actually increase the number of assignees that you probably wouldn't or shouldn't have sent in the first place and thereby inadvertently increase the overall cost of your international assignment program.

As many have learned the hard way, an attempt to save money while sending people on assignment almost begs to be thwarted.  In the end, what you may find is that you've done is actually introduced a more expensive program to move individuals who might have otherwise accepted a local package.  Also you may risk adding to the administrative costs of managing your assignment program.

Before outlining a stripped expatriate package, examine the reasons you are seeking to offer a reduced package.  Are there candidates that you would gladly send on assignment if only it were more affordable?  

Generally, it's not a bad idea to have an expat-lite program as long as you are looking to move more talent internationally -- not to move the same talent at less cost.  These programs may be right for lower level employees, or for those who have elected for themselves to go on assignment.  But don't expect that typical candidates for full assignment packages will be interested in (or even should) accept an expat-lite program, though.

MBA rotational programs or leadership development programs can work well if implemented as their own separate and distinct programs.  However, keep in mind that newer and lower level employees may have difficulty obtaining host country work authorizations in some locations.  Especially with some countries moving to tighten their borders to shore up the loss of local jobs.  Examine the candidates, their capabilities as well as likely home and host combinations ahead of time.  As with assignments, the selection of these candidates should be nominated by the company and not be open to 'volunteers' without a business case to send them.

If there is a strong desire to move talent that you may not have a solid business reason to justify one (meaning a temporary assignment with a plan to return or go onto another locale) then consider moving that talent on a local basis.  You may consider spending the time on defining a standardized local-to-local package that works.  It may be the standard local offer that includes international move benefits, language and cross-cultural support.  Key benefits to keep transferees (and you) out of trouble.

While some companies think of bringing back a deceptively simple lump sum (bucket o' money laissez faire) approach to international assignments.  Some companies are moving in quite the other direction.  They notice that offering a housing allowance rather than a housing reimbursement may encourage assignees to live in a cheaper area that could have safety issues.  Reduced oversight and management of assignment benefits may in effect 'buy' more trouble.

Wiechert Realty in their 2011 Trends report observed that some companies are incorporating a tiered approach to managing assignment benefits.  A cafeteria program that sometimes referred to as a 'Flex-patriate' assignment.  All assignees receive core benefits such as immigration, travel to the new location and tax equalization - while all other assignment benefits are optional and determined on a case by case basis.  I could see that such an approach may lead to more lost time in negotiating and then having to administer each package one-by-one.

At the same time, companies would do well to avoid the trap of sending persons who should go on a full assignment package on a local-to-local basis.  If there is a real intention for that person to return home, then to send that person on a local basis may experience costly tax implications.  In addition, employees may experience potential adverse hits to nationalized benefit programs.  The company should also clarify its approach company retirement programs as well as the tax treatment of and payment of long-term incentive plans for which this group may be eligible.  Well-run assignment programs foresee and address these issues - local offers will not.

There is either a business case or there is not - and the expatriate program is generally designed to foster international mobility.  The benefits are not offered arbitrarily and without good reason.  Paring them back in a vacuum may have unexpected implications.

A clever man commits no minor blunders. 

- Johann Wolfgang von Goethe

Interview: Challenges for Expatriates in Saudi Arabia

In researching challenges for energy companies into key markets I had the benefit of being introduced to John Douglass, SPHR, CCP who was, at the time, head of compensation and benefits for Tatweer Petroleum.  I'd sent him some questions by email and though he was in the final weeks of his assignment in Bahrain he took the time to provide compelling and informative answers.

John Douglass, SPHR, CCP

John Douglass is an experienced human resources professional with significant expertise in leading Mideast organizations compensation and benefits strategies.  He is known for his development of domestic and international compensation and benefits programs, as well as his leadership and succession planning, and manpower analysis and planning skills.   A scholar of the region, he leverages his HR expertise with an understanding of the local language, culture, and religions in the Mideast region.  He may be contacted through his LinkedIn profile:  http://bh.linkedin.com/pub/john-douglass-sphr-ccp/4/4b4/ba5

Below are my questions to Mr. Douglass and his answers.  I am very grateful for his assistance in providing me a real and first-person account of what it's like to be assigned to the middle east and the challenges faced by companies in supporting assignments during the Arab Spring of 2011.


LS:  According to HSBCs survey of expats regarding their assignment conditions, they indicate that Expats into Saudi Arabia rate it as #1 in the way of financial advantages of that location - however, it rates as the least desirable location from an assignment experience perspective.  What are your thoughts on this?

JD:  Most Saudi employers have reasonably well-developed HR functions that allow them to understand compensation trends throughout the ME region.  They know that for expats from western cultures the leap to the Saudi culture is a long one, so they normally incorporate a premium for this in their cash compensation packages.  Most expats have no home country tax obligations – the tax break is less favorable for Americans and Canadians.   

The other positive financial factor is the propensity to save since there is little else to do during off-duty hours.  A lot depends on the social inclinations and family situation of the expat in question.  The single expat that likes the social scene after work and on weekends would find the KSA scene a chore.  Likewise the Saudi environment is no longer a great place for a married person to bring up/educate children. 

For the expat who is comfortable with compound living, the friendships made within a closely knit expat community can make the Saudi experience a positive one.  I have found the female spouses, with all the Saudi restrictions that apply, to be very special people – they tend to get together with other women and be determined to turn the overall experience into a positive one.

LS:  Do you think it's more difficult to get an American or European to accept assignments in the middle east?  Or, is it not a factor as most who are offered such roles have been there many times as business travelers and so by the time they get an assignment offer - they are not afraid of the location and have no issues with accepting?

JD:  It’s generally easier to attract Europeans with good English skills.  Skilled American workers who have not been in an expat role tend to believe fictional stories about the Middle East and look for higher compensation packages.   

Additionally, it’s just a shorter trip from Europe than from North America – flying home for the weekend is a realistic expectation for the European – and as my good friend, Paul Diggins, says:  “…it is also a lot longer plane ride here from Kankakee than from Kaiserslautern…”.  Recruiters indicate they generally have difficulty getting job offer acceptances from Americans and Europeans when they are misinformed about the region (often) and/or have had a bad experience here (rare).

LS:  We've seen a lot about the Arab Spring's effect on assignments into countries like Egypt and Syria.  An article published by SOS (an emergency evacuation company) indicates there were a record number of evacuations following these events.  Do you think these evacuations were really necessary?  

JD:  Those of us who were in the region during the “Arab Spring” found the coverage by the international press to be abysmal.  The press had the opportunity to investigate the nature of the unrest in a number of nations and educate our friends/families/colleagues in the West about the nuances and cultural differences here and blew it.  They wanted to paint a picture of a wide spread movement of democracy and the ouster of cruel despots – indeed, there was some of this, but each of the situations in the different countries was different and far more complicated. 

Evacuations in Libya and Syria have been necessary given the level of violence in the unrest.  The instability of these populations and governments made the conduct of business impossible and rendered moot the need for employees on the ground.  In other places like Bahrain where I was, the press completely misrepresented what was going on and grossly exaggerated the time and level of violence.   

While there were some evacuations in Bahrain, most of us believe they were generally knee-jerk reactions on the part of a few risk averse companies (and individuals in some cases).  The reality is that expats on the ground know exactly how dangerous things are and the areas they should avoid when they are hot spots.  Bottom line:  evacuations not necessary in large part and somewhat damaging from a business, economic, and employee psyche standpoint.

LS:  What would you say are the biggest challenges that energy companies in particular face in sending assignees into the middle east?  

JD:  The first concern is for the cultural differences.  The oil and gas companies tend to send expats who have been working the fields primarily in North America and the North Sea area.  They do so all too often without first orienting them to the significant changes in local customs, culture, religion, and language.  For many expats this is a much larger leap than they expected and the result is a poor ambassador for his/her home country and company. 

Another challenge is mercurial and unpredictable nature of local companies and their managers when it comes to expat employees and their roles in the organization.  Expats have to understand that “nationalization” takes priority and they will always be treated as temporary workers or visitors.  Multinationals that deploy many of their top people to joint ventures in international locations have to ensure that proper repatriation is incorporated into the career development and succession planning of the global company.  Local ME oil and gas organizations are often joint ventures that include national government entities, multinational professional staff, and high-level local national managers; getting everyone on the same page in this environment can be challenging to say the least.

Many thanks to Mr. Douglass for taking the time to work with me and provide me with these thoughtful answers.

Nine Global Assignment Success Factors

There are some factors that facilitate a successful expatriation experience that workers can directly influence.  But then there are factors over which one has limited control.  Rather than focus on the problems that people experienced while on assignment, I would like to hone in on nine common traits shared by persons on assignment who enjoyed a positive experience.

1. Career:  Strong home and host company sponsorship for the assignment.
2. Career:   Invested in personal development and active in managing their own succession planning.
3. Career:   Rationale, goals and next steps after the assignment were well planned and articulated at the start.
4. Personal:  Handles unexpected challenges with calm resourcefulness.
5. Personal:  Strong level of emotional intelligence and strong intuition in working with others.
6. Personal:  Highly adaptable and flexible individuals who are grounded realists rather than idealists.
7. Family:  Uncomplicated and/or stable family situation.
8. Family:   Preschool children or young (and adaptable) teens.
9. Family:   Relatively unencumbered lifestyle, e.g, no animal menagerie. 

Some of these points cannot be easily influenced by the employee alone.  For example, certain factors like having to work out something like shared-custody of children has nothing to do with one's suitability for an assignment from a career/capability standpoint.  Personal factors are something that makes candidate selection so challenging for corporations.  Management, supervisors and human resources professionals, are required to focus solely on work competencies in candidate selection.

Do you have the right stuff?

Another factor that is beyond the control of an employee is being selected for the assignment in the first place.  Truth is, from my standpoint, nothing is more off-putting than someone who is campaigning heavily for an expatriate assignment.  There was a situation where an individual at one place I'd worked arranged their own interview for an assignment in a foreign office when there was no open position nor business rationale for an international assignment.  What a colossal waste of time for all involved!

Sometimes the best decision may be to not go on an assignment.  This is why I recommend open access to tools to help employees to make an early and informed decision about their own foreign assignment suitability.  Without access to such resources, countless hours are wasted on inappropriate candidates or failed assignments.  There are platforms available through most firms that offer cross-cultural training to run self-assessments to determine one's own capacity for an international assignment.  Avoiding one failed assignment could justify access to such a platform.

Three mindful suggestions in being selected:

• Assess personal and family readiness;
• If the timing is right, then make openness to international assignment known;
• Be patient for the right opportunity.

Remember that (like many things) offers of a foreign assignment is not something that can be made to happen if it's not meant to be.  And, if an individual is successful in pushing for an assignment that's lead by personal desire over true business need, then the justification will be too weak to sustain overall career continuity - if you know what I mean!

Expatriation Commando-style

If someone has a strong desire to work internationally, there's absolutely nothing wrong with this.  If that person is impatient for an international opportunity to happen, then my recommendation would be to look for open and posted positions at foreign offices in target locations.  If there is a good fit, inform management, apply, interview and, if offered, then accept the role as a 'local' hire.  Expect that the standard (rich/costly) international assignment benefits will not be included.  Among the many factors to be considered, the following should be anticipated:

• Relocation benefits may not be included;
• Nationalized pension schemes (e.g., social security) contributions will not continue;
• Prepare for double-taxation - no tax equalization benefit;
• Foreign work authorizations will have a time limitation to them, and options for permanent residency are often limited by the nationality of the employee and the country being entered;
• International school fees, language training and settling-in services would likely not be included in the offer;
• If things don't work out, the position is eliminated or immigration options are exhausted, there is no corporate sponsor to ensure a return role or to cover repatriation expenses.

As technology brings the world together and companies require those in leadership roles to have demonstrated global working experience, the number of assignments are only expected to increase according to a recent study by Towers Watson.1  I would advise people starting out to include some type of overseas exchange, internship or assignment to their early on in their experiential history.   The later in the career, the higher the stakes for the company and employee.

"Knowing others is intelligence; knowing yourself is true wisdom. Mastering others is strength, mastering yourself is true power."
- Lao-Tzu

The Global Mobility Identity Crisis

Often, the international assignment function seems to suffer from an identity crisis.  I began to notice that colleagues managing this function seemed to vary in terms of the departments to which they were aligned.  Though each alignment presents it's own challenges, I would recommend each organization to look inward and examine if the international assignment program is located to best achieve internal goals.

"Self-portrait" 1861 Henri Fantin-Latour

Resourcing Alignment

I have observed cases where the global mobility program may belong, from a reporting standpoint, to the recruiting function as some of the tasks (e.g., relocation, immigration, on-boarding) seem to relate to bringing in talent to various areas within the company.  However some issues may be present with this alignment, for example:

• Separation from talent management and succession planning function:  resourcing is more concerned with filling gaps than planning next steps for successful candidates.  
• The tendency for recruiting to 'bend the rules' to attract a candidate could lead to more policy exceptions which in turn can make running a consistent program a real challenge.

Tax Concerns

This group is concerned with tax compliance.  Though this is an aspect of assignment management that is growing in importance, it is not the end all and be all.  Allowing audit-fear to run an international assignment program may be a 'safe' approach, this alignment may not enable a corporation to get the most out of its assignment program.  Instead of reporting to tax, or assigning a tax professional to the function - there should be a strong partnership to leverage the support-strength of the corporate tax function.

Reporting to Compensation and Benefits

Compensation professionals have an affinity for creating global alignment between job descriptions, and they may view the expatriate program as a series of perquisites or benefits enjoyed by an elite population.  Though this alignment will enable better connection to things like bonus, multi-year incentive programs, stock options and deferred compensation program - this alignment may lead to the expatriate function moving from strategy to more of an analytic support function.  

Connection to Talent

Though not often seen, I feel that the best alignment may be to the talent management function.  I feel that an expatriate program, at it's best, is a development program for the high-potential employees within an organization.  The talent group has a strong investment in retaining key talent and planning for key leadership positions within the organization through succession planning.  Often persons feel lost at the end of the assignment in terms finding a good fit for their next role (or worse, no role at all). 

Who owns the international assignment function communicates where the values of the company are focused in terms of the benefits expected from the global mobility program.  Consider the benefits of aligning to talent management and succession planning if developing and retaining key talent is your ultimate program goal.

“You are never too old to set another goal or to dream a new dream.”
― C.S. Lewis

For more on the topic of global mobility alignment, check out this white paper written as a result of my collaboration with Mobility Services International. In the article behind this link there is a further exploration of the link to global mobility alignment and program goal achievement (see pages 5 and 6).