Companies Losing Millions to Competitors in the Form of Trained Expatriates
"International assignments cost on average $2 million each," said Hal B. Gregersen, associate professor of organizational leadership and strategy at Brigham Young University and coauthor of the study. "So, in 100 assignments, 25 employees will go work for the competition within a year of returning home, which is the equivalent of letting $50 million walk right out the door. This turnover rate is double that of managers who stay at home."
Gregersen's coauthor on the study was J. Stewart Black, managing director of the Center for Global Assignments. Together, they have researched more than 750 multinational companies around the world in a series of studies on international assignments.
For their most recent study, the researchers interviewed 130 executives in 50 firms across Europe, North America and Asia.
"Would companies sit back and watch a $2 million piece of equipment walk out the door?" asked Black. "Our findings help companies avoid these substantial costs and at the same time reach higher returns."
The HBR report shows that between 10 to 20 percent of managers sent abroad returned home early at an average cost to their companies of $300,000 each for moving, temporary housing and lost business. Of the employees who stayed in their assignments, only one-third of them performed up to expectations.
"This wasted investment is a vicious, downward spiral for two reasons," Gregersen said. "First of all, the average person in an international assignment costs two to three times what he or she would cost back home. Also, it is a wasted opportunity. Of the executives we interviewed, eight out of 10 said an international assignment was the most powerful leadership development experience of their career."
Because 70 percent of U.S.-based companies make costly investments to send their employees on international assignments, Gregersen and Black said organizations should do more to ensure overseas placements are investments for their firms, not their competitors. The researchers divided their recommendations into three critical steps that will help companies extract every ounce of value out of their expatriate employees.
Step 1: Start for the right reason
"International assignments have served a variety of purposes," Gregersen said. "Some companies have used them as a dumping ground for the mediocre, while others have made international assignments a country club for their star employees. Leading companies know that the right reason for an assignment is sharing knowledge to accomplish business and development objectives."
The study found that three-fourth of U.S. firms sampled gave themselves below average to barely average marks when asked if they have a solid business justification for international assignments. The right reason for an international assignment should fit into the strategic plan of the organization, Gregersen said.
Step 2: Send the right person
"Companies must understand that the best person at home might not be the best person abroad," Gregersen said.
The study found that successful companies use some form of a screening device to determine who should go on assignment abroad. Some companies use formal tests for screening, others use informal observations.
"Many companies don't bother to assess the characteristics of their employees because they mistakenly believe that what makes people successful at home will make them successful overseas," Black said. "It won't."
Researchers determined that to be successful in an international assignment an employee must be culturally flexible, have the ability to resolve constant conflict, and have a leadership style that combines personableness with work effectiveness.
"I know few people who fail overseas because they are technically incompetent; it is usually because they are culturally incompetent," Gregersen said.
Step 3: Finish the right way
"Neither the company nor the employee expects coming home to be difficult," Gregersen said. "However, it is difficult. Both the company and the employee need to do what they can to make the transition as smooth as possible."
Employees should maintain contact with headquarters and have a clear understanding of the purpose of their assignment while they are away. Upon return, they also need training on how things have changed at home.
"These steps are simple, but to many companies simply aren't taking them," Gregersen said. "Companies can best prepare for the future by making the single largest investment in any employee's development--an international assignment--a success."
Contact: Hal Gregersen, (801) 378-2902
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