This essay discusses about expatriates and their pros and cons. It also is an attempt to ascertain whether MNCs really have the need for them. We start with the definition of expatriates and why they are needed. Furthermore, we have described as to why MNCs use expatriates for their international assignments in spite of the exorbitant costs involved. The advantages and disadvantages of expatriation and repatriation in today’s global world have also been pinpointed. We have also discussed whether MNCs should continue using expatriates in their international assignments.
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In today’s global world, most big companies have their offices or business in many different countries. This results in more and more foreign assignments for the workforce and new challenges. Thus, there is a need for expatriation. International Human Resource Management (IHRM) has gained utmost importance in recent years due to the hiring of a multi-cultural staff. Domestic HRM wouldn’t be effective because expatriation involves different cultures and procedures altogether. MNCs have resorted to expatriates and have realised their importance in organisations. But, there are two sides to a coin.
MNCs also have to deal with the problems that come along with the advantages. So, what do we mean by the term ‘ expatriate’? An expatriate is an employee who has been assigned an international assignment and has been working and living in a foreign country. (Dowling et al. 2008) A typical successful expatriate will have traits such as empathy respect, interest in local culture, tolerance, flexibility, initiative, open-mindedness, sociability and positive self-image. (Grove & Hallowell 1998) There is a growing acknowledgment that the success of MNCs is determined by the recruitment of specialised managers. Stahl & Bjorkman 2006) Expatriation is a common way of getting specialised employees in today’s world. The expatriate has many roles to play in the MNC. If the MNC follows an Ethnocentric approach, there is lack of qualified Host Country Nationals (HCNs). Parent Country Nationals (PCNs) occupy all key positions in the foreign operation, which means that the subsidiary is highly dependent on the headquarters’ decisions. Some drawbacks from this approach could be limited promotion opportunities for HCNs, income gaps between PCNs and HCNs, and that PCNs cannot be involved in local matters.
In a Polycentric approach, HCNs occupy positions in the foreign subsidiary. Some transfers of HCNs to headquarters also take place. The approach eliminates the language barriers, and typically HCNs are less expensive. Some drawbacks from this approach could be communication problems between headquarter and subsidiary and limited career opportunities for HCNs as they cannot be promoted to headquarter. In a Geocentric approach, the best people are selected for key positions regardless of their nationality. Nationality is not taken into account and a worldwide integration of employees takes place.
In this approach an international team of managers is developed. Some drawbacks from this approach may be related to situations, where host governments prefer employment of locals because of i. e. labour issues. In a Regiocentric approach, a company’s international business is divided into international geographic regions (for example within a continent). The staff can only transfer within these regions. Therefore, according to the staffing approach of the MNC, the expatriate’s roles and opportunities are determined. (Dowling et al. 008) An expatriate is a very huge investment and requires to be chosen very carefully. An expatriate assignment cost is estimated to be in the range from $300, 000 to $1 million annually. (Vance & Paik 2006) IHRM needs to conduct selection, preparation, management, and repatriation of their personnel. (Anderson 2005) There are many advantages of using expatriates despite of the huge investment costs to employ them. So, why do MNCs select expatriates for foreign assignments? What are the reasons and advantages of hiring expatriates?
Firstly, in some countries, there might be a shortage of qualified local country nationals. Thus, there is a need for expatriates who are highly qualified and specialised in their respective fields. (Stahl and Bjorkman 2006) Secondly, MNCs are aware of the fact that expatriates have a tendency to be more well-known and trusted at the Headquarters of the MNC because of their experience. Also, according to a survey conducted in 2002 by a consulting firm, GMAC GRS, the most common reason MNCs employ expatriates is to fill a skills gap. (Dowling et al. 008) This means that there is a position vacant for an extremely skilled employee. Because of lack of skilled professionals, MNCs need a proficient employee who can fill in the gap. An expatriate is the answer! Another reason is for developing individual employees. (Stahl and Bjorkman 2006) Employees need to be exposed to the global competitive world and need to gain experience apart from just the home country. They might be skilled in their home country role, but, when they take the role of expatriates, they are in a different role, work culture and employees.
In short, they act as testing grounds for the senior managers. Expatriates develop very valuable managerial skills on their assignments abroad and these skills can be significantly useful to their development of successful senior managers. (Mendenhall & Oddou 2000) Apart from the various advantages of and for expatriates, there are also certain disadvantages when they leave for abroad. There are also many consequences of repatriation- the process when the expatriates have to return to their home country after the completion of the assignment.
The foremost issue associated with expatriates is the amount of investment needed. As pointed out earlier, the estimates are huge and can go up to or even more than a million dollars annually. To top that up, there is a risk involved because of the pre-mature return of the expatriates. The pre-mature return is as a result of inability to adjusting to the foreign culture. The expatriates experience a cultural shock and feels like an alien in the foreign country. (Hofstede 1991) This can also be explained with the help of a diagram: In the above figure, on the vertical line, the feelings of an expatriate are plotted.
Horizontally, the various stages of an expatriate are mentioned. These stages are typical in case of an expatriate going to a foreign country. After the expatriate passes through all the stages of the acculturation curve, he/she might feel like an alien where the positive feelings experienced in the initial stages, turns into negative. Hofstede argues that culture shocks have immense effects on the expatriates which might lead to the termination of the international assignment, ill-health, homesickness or even worse, lead to suicide. Hofstede 1991) Other disadvantages include culture training, communication/language skills training, arranging travel, accommodating, and providing additional support to the expatriates. (Fontaine 1989) The expatriate is completely new to the foreign culture. He/she notices considerable differences in the behaviour, language, dressing etc. The expatriates need special training to educate them about the culture, communication and language skills of that particular country. This training is expensive and futile at times. Arrangement of travel, accommodation and support for the expatriates is another tedious task for the IHRM department.
They have to consider the time and cultural differences of the expatriate. Travel, accommodation and support are the least emphasised aspects of international assignments. (Fontaine 1989) Adjustment of the expatriate to the foreign work culture is disadvantageous too. The expatriate may take a long time to adjust or may not adjust at all. Adjustment to work can be achieved if two conditions are met; first, the expatriate’s abilities have to match to that of the workplace requirements and second, the expatriate’s needs have to be fulfilled by providing recognition, awards and reinforcements by the organisation. Beirden et al. 2006) If the expatriate’s skills and abilities do not match to the MNC’s objectives or requirements, the expatriate would not adjust to the work culture. Also, the employee needs to be shown recognition from time to time regarding his achievements and be rewarded. Another overlooked and important aspect of expatriates and international assignments is Women Expatriates. They face different conditions and challenges as compared to the male expatriates.
This is because throughout the years, women have been stereotyped as not being able to be as successful and also that they are unable to handle managerial and leadership positions. (Vance & Paik 2006) Women face barriers such as the willingness to relocate and balancing of personal and professional life. (Stahl & Bjorkman 2006) Women are seen as emotional beings and are less mobile than men due to factors like birth of a child, family issues and taking care of the home. (Hofstede 1991) If a woman is offered an international assignment, she thinks about her family and then herself.
This reduces her willingness to move and this why the number of female expatriates remains low in spite of the increasing demand for expatriates. (Stahl & Bjorkman 2006) Factors like staying away from family and friends, residence rights for spouse and also worries about loss of residence may affect the expatriate’s performance. (Sophie 2008) These are emotional factors which take toll on the expatriate and he/she may feel isolated and face emotional and physical problems. One last obvious disadvantage of not hiring expatriates is that the MNC would lack specialised senior managers.
They might not get the right person for the right job. Repatriation is when the expatriate is moved from the foreign country back to his/her home country and company. (Dowling et al. 2008) After completing the international assignment, the repatriate is on his/her way back home. Sometimes, repatriation can be a greater shock than the initial shock experienced by the expatriate in the foreign country. (Vance & Paik 2006) There are many consequences in the repatriation phase. The experience gained from the international assignment may not necessarily be useful back in the home country.
This means that the expatriate has to wait for an appropriate position which can utilise his/her knowledge and skills. (Vance & Paik 2006) This may result the repatriates to leave the organisation. A ‘ competency-based’ view of the repatriation phase can be useful to avoid problems. In this view, the top management and the IHRM department are committed to pursue flexibility and adaptability of the organisation through the integration of knowledge and develop learning capabilities. (Stahl & Bjorkman 2006) This will enable the organisation to be flexible and develop a competitive advantage.
Researchers have shown determined that the repatriation process plays a very significant role aiding the expatriate in re-entry adjustment. (Harvey and Novicevic 2001) There should be a repatriation plan for every expatriate. This helps the expatriate in re-entry and avoids the reverse culture shock. The only solution for the MNCs is to plan and implement a repatriation process for every expatriate. MNCs need to establish practices that would assist effective professional and social repatriation. This would incredibly benefit the MNCs from their investments on expatriates. Vance & Paik 2006) ? Conclusion This essay has been concerned with the negatives and positives of expatriation and repatriation. MNCs are also faced with a dilemma of employing an expatriate or not. After intensive analysis, we can conclude that a MNC should be considering expatriates for international assignments in the next decades. Despite the high investment costs and other issues involved with expatriation, expatriates are needed to complete international assignments because of their exceptional skills. In the world of Globalisation, a MNC can’t afford o assist unskilled and unqualified employees for important assignments. They have to look for someone who is highly qualified and can do what is expected of him/her. Even though there are high expenses involved, an expatriate is worth every penny invested. If the expatriate faces problems in the foreign country, he/she should be provided support. Repatriation could prove to be another expensive process for the MNC, but it would benefit the MNC to avoid loss of the repatriates due to unavailability of the right jobs.
The MNC should follow the competitive strategy mentioned in the essay and try to get everything right for the expatriate. The expatriate should also try to adjust to the culture of the foreign country and not entirely hold the MNC responsible for the inability to adjust. To conclude, MNCs should be considering the exercise of expatriates in the next decades provided that the MNC is following the right expatriation and repatriation processes. This would assure the MNC that there is no loss or dissatisfaction among the expatriates. Words: 1992 (without citations) References Andersen, B. A. (2005) ‘ Expatriate Selection: Good Management or Good Luck’, The International Journal of Human Resource Management, 16(4): 567-583 Beriden, O. , Mohr, A. T. & Mirza, H. R. (2006) ‘ An Empirical Test of a Correspondence Model of Expatriate Managers’ Work Adjustment’, The International Journal of Human Resource Management, 17(11): 1907-1925 Dowling, P. J. & Festing M. & Engle, A. (2008) International Human Resource Management: Managing people in a multinational context, 5th edition, Thomson Learning, London Fontaine, G. 1989) Managing International Assignments: The Strategy for Success, Prentice-Hall, New Jersey Grove, C. & Hallowell, W. (1998) The Ideal Expatriate, (02-05-08), http://www. grovewell. com/pub-expat-assess. html Hofstede, G. (1991) Cultures and Consequences: Software of the Mind, McGraw-Hill, England Mendenhall, M. & Oddou, G. (2000) Readings and Cases in International Human Resource Management, 3rd edition, South-Western, Canada Sophie (2008) ‘ Expatriates Moving Back Home’, (01-05-08), http://www. associatedcontent. com/article/417806/expatriates_moving_back_home_the_pros. html? page= 2&cat= 16 Stahl, G. , K. & Bjorkman, I. (2006)