As the working population in many developed nations marches toward retirement, the need for greater workforce mobility is on the rise. One-third of companies expect international assignments to increase in 2012, according to a survey of Canadian companies earlier this year by the Canadian Employee Relocation Council (CERC).
Transnational companies require a global workforce that can respond to business challenges and opportunities. They have to have the right people in the right place at the right time. But is money being put to the best use when companies send employees overseas?
The simple answer: We don’t really know.
In survey after survey, the number of companies tracking return on investment (ROI) is in the definite minority. Just four out of 115 participating companies said they tracked ROI, according to CERC’s 2011 Employee Relocation Policy Survey.
Most employers are not able to accurately measure ROI, according to a 2008 International Assignments survey from Mercer. Similar findings are reported in the Brookfield Global Relocation Services 2010 Survey that reported only eight per cent of participating companies track ROI.
Why is it so difficult? Part of the answer may lie in the fact assignments come in all different shapes and sizes — they involve different locations and personnel at various levels.
Despite these difficulties, there is an opportunity for HR and relocation professionals to find tangible measures of ROI that can guide strategic talent management planning.
In considering ROI in its simplest form, we should be able to look at the costs of an assignment and track those costs to the outcome of the assignment. And most companies do a good job — close to 90 per cent reported tracking the assignment costs, found CERC.
For example, sending an engineer on a three-year assignment to complete a project in China could be measured by whether the project was on budget and completed on time. This, in turn, could be compared to the costs of the assignment. Those costs could top almost $1 million for an engineer earning $150,000 per year, accompanied by a family. (See sidebar.)
What employers really need to consider are the components of the costs, which vary depending on the nature of the assignment. There are basically four reasons for assignments that will add varying degrees of value to the bottom line: volunteer experience, career development, skill need and new market development.
The value of the assignment to the business and the location of the assignment often determine the benefits provided.
As one company noted in the 2012 CERC survey: “We measure the billable/revenues that are generated as a result of the person being on assignment plus the intangible benefits of the employee being closer to the client (such as the success of the implementation) versus the total cost of the assignment.”
One of the best predictors of ROI is candidate selection. Does the candidate have the requisite hard skills and, equally important, the soft skills to adapt to new cultures and circumstances?
The company should also consider whether the assignment is necessary or if hiring someone locally may be a better option.
The supports at the pre-assignment stage are also important to the success of the relocation, especially when moving into new cultures, and that’s where the help of intercultural training can deliver significant benefits.
“If the position requires negotiating with clients or colleagues from other cultures, then cultural tools and strategies to leverage differences in thinking and communicating style in order to achieve a win-win will be incorporated into the training,” says Natalie Richter, a Toronto-based expert in intercultural management.
Family and spousal issues are the number one reason why employees decline assignments, found the 2011 CERC survey.
“One has only to look at the figures for failed assignments. Senior managers know they have an automatic life ready when they land in a new country, but not so the spouse. If the spouse is not on board with the assignment and prepared for the new location, neither is the family and the assignment is at risk,” says Richter.
The repatriation process can also deliver significant ROI to an organization’s investment in a three-year assignment, and it’s something employers need to pay more attention to. Just one-third of employers in the 2011 CERC survey had a formal repatriation program in place.
Elements of such a program would typically include an outline of career options together with counselling for the employee and family. Employers should provide full details of the program during the pre-planning stage to ensure expectations on both sides are clear.
Companies that have repatriation programs in place typically have higher rates of retention among the assignees, according to the 2006 study Measuring the Value of International Assignments by PricewaterhouseCoopers.
Successful assignments deliver fairly immediate and measurable results to the bottom line, as in when a project is delivered on time, within budget. It’s the longer-term benefits to an organization’s growth that are difficult to measure, such as leadership development, market growth, enhanced reputation and global presence that, in turn, open more opportunities.
These are just some of the factors that should be considered in determining whether or not to provide benefits such as private schooling, spousal supports and other soft services.
“An international assignment is the single most powerful experience shaping the perspective and capabilities of effective global leaders. It also happens to be the single most expensive per-person investment that a company makes in globalizing their people,” said the authors of the 1999 book Globalizing People Through International Assignments.
“It is unfortunate that most firms are getting anemic returns on this substantial investment.”
Little has changed in measuring the return on investment since that time, presenting a significant opportunity for HR and relocation professionals.
Stephen Cryne is president and CEO of the Canadian Employee Relocation Council (CERC) in Toronto, an organization dedicated to improving talent mobility for its members. Cryne can be reached at firstname.lastname@example.org.
Costs for relocation from Canada to China
(assuming salary of $150,000, excludes provisions for tax)