Many traditional employers of expatriates are cutting back on overseas postings and candidates are thinking long and hard before they go. Malcolm Brown reports on the causes of this change in attitude tudes attitudes.
Trevor Doust is not angry or resentful, just a bit bewildered. Last year he was the high-flying executive vice-president of a joint venture company set up in Japan by John Crane International, the world's leading manufacturer of engineered sealing products. Today, at 50, he is back in the UK and unemployed. He didn't do anything wrong. His only mistake was being out of touch on the other side of the world when his company decided to rationalise and make changes at the top. 'If you are reasonably high up the tree,' says Doust, 'then even in a very large corporation there's a very small group back at the ranch who can be of any use to you. If they change while you're away the new guys don't know you, and if at the same time they retrench a bit you have got a real problem.' This particular problem is becoming quite common. Expatriates are returning home to find organisations which, because of downsizing or restructuring, have changed beyond recognition while they have been away. Even those who aren't made redundant may find themselves being 'warehoused', or sent off on a 'project' while the company finds an appointment for them.
Ten, even five, years ago expatriation was regarded as unequivocally 'a good thing'. Companies saw it as an efficient way to manage overseas operations and employees who were offered a foreign assignment regarded it as a feather in their cap. Young men welcomed tough foreign postings as an opportunity to show they were made of the right stuff. Older executives, like Doust, who were put in charge of key foreign operating companies, rightly regarded such jobs as a prelude to bigger things back home.
Today things are very different. Many companies are re-assessing their need for expatriates and there is increasing evidence that candidates for expatriation are thinking longer and harder before they accept foreign assignments. The old certainties seem to have vanished.
Some of the sidelined returnees are victims of purely temporary blips in their companies' fortunes, but there is growing evidence that many more of them are losing their jobs because of deep, structural changes in the expatriate world. There is something odd here. Nobody knows exactly how many executives UK industry sends overseas - around 35,000 is probably a reasonable estimate - but most experts in the field will tell you that, whatever the total is, it is rising rather than falling. But if that is so why are so many former expats now kicking their heels? The explanation seems to be that there has been a significant change in the sort of companies which are doing the expatriating.
The traditional employers of expatriates, the big companies and multinationals, are cutting back on the numbers they post overseas, while many more small and medium-sized companies, as well as those new to expatriation, are using it to internationalise their once purely domestic operations.
Among the fastest growing of the new expatriators are former public utilities like the water authorities. When North West Water was privatised in 1989, for example, it quickly decided that, since there was not much room for expansion in the UK, its best policy would be to sell its expertise to other countries. The company has already won major contracts in Australia, Mexico and Malaysia, says John Wareing, personnel manager for North West Water International. At the moment there are about 50 people overseas, of whom around 25 are on assignments of more than 12 months. Another organisation still relatively new to expatriation is the cellular phone company Vodafone. It started as a purely domestic operation in the 1980s but now has joint ventures in more than a dozen countries from Australia to Greece. It currently has about 50 staff on expatriate assignments. Expatriation is an effective way of internationalising the group, says personnel director Phil Williams. Vodafone doesn't believe in sending people overseas on a long-term or permanent basis, 'but what we do need to do is enable the transfer of know-how to take place in the first year or so. That involves starting the company off and then getting it going, particularly if there's an existing competitor in the local telephone company.' In contrast, multinationals and other traditional expatriate employers are cutting their rosters. Professor Chris Brewster of the Cranfield School of Management, a leading authority on expatriation, says there are probably two main reasons: 'First, the large, very experienced multinationals tend to be based in the countries of the old British Commonwealth and many of those countries are now insisting on using their own nationals.
'The second thing that is happening is they're finding it incredibly expensive (see table ). Expatriates will cost the company three or four times what a British person operating in Britain costs, and probably 10 or 20 times what a local man would cost. If you're a company like BP, which is cutting a huge chunk of people out of headquarters in London, it makes very little sense to then be spending as much as you would for a floor full of people in London to send three people off to run an office in Sydney. Why not just get an Australian to do it?' If Brewster is right then expatriation is likely to become a much more uncertain way of life than it has been in the past. On the one hand the relative security that the multinationals used to provide - many expats spent their whole career with one company - will have gone, while on the other many expatriates will now be employed by organisations with little international know-how and little expertise in the area of expatriation.
Confronted by this uncertainty, the attitude of potential expatriates is also changing. A life of gin slings and sunshine is no longer so enticing. 'People aren't seeing it as a great liberation and joy to be allowed to go and spend time in Nigeria or wherever,' says Brewster. 'They're becoming more picky, more difficult to send abroad.' Shell, which has more than 5,600 men and women in foreign postings (2,100 of them British), began to realise two or three years ago that feelings about expatriation were changing. There was growing anecdotal evidence, says human resources manager Mike Cloughley, that the prospect of expatriation might no longer be as attractive as it once was and that staff mobility in general might be becoming increasingly restricted. 'That was of concern because of the fundamental importance to us of internationalisation and expatriation - they're basic to the way we do our business - so we decided to take a look.' The company used an independent research organisation to poll present, former and prospective expatriates and their spouses. It sent out 17,000 questionnaires last summer and got more than 11,000 detailed replies. Analysis showed that while the vast majority of staff and spouses were satisfied in broad terms with the experience, many of them had reservations about particular aspects of it. There was increased concern, for instance, about things like packing children off to boarding school for their secondary education and many spouses - in Shell's case mostly wives - had strong feelings about having to subordinate their own careers to those of their partners.
Julie Opie, 31, partner of Trevor Doust, went on two foreign assignments with him, the first in Chicago, the second to Kobe, Japan. While she managed to find work in Kobe as a freelance software trainer, she was unable to work in America because of the employment legislation. 'What really helped me enjoy Japan was the combination of using my brain and learning the culture,' she says.
While going away has always been recognised as problematic, realisation that all is not rosy for returnees is making would-be travellers think twice. There is now evidence that returning expatriates can experience 'reverse culture shock' and other problems of adaptation.
A survey of more than 120 'returnees' by Dr Nick Forster of Cardiff Business School showed that many of them faced difficulties in terms of their career prospects, psychological well-being and general adaptation to life back home. The biggest problems occur when there is a mismatch between people's expectations prior to repatriation and what they actually encounter when they return home, says Forster. His sample consisted largely of senior managers who had spent five or 10 years abroad.
'When many of them went away, it was the candy-floss Thatcher era. The economy was moving ahead. Now they are coming back to the aftermath of recession and in almost all cases their companies have experienced rationalisation, downsizing, massive redundancies.' Many of the sample group, who had worked in industries like engineering, construction, chemicals and retailing, reported being very satisfied with their career progression prior to their last job move, the one which brought them home. Seven items were used to assess this - things like interest and variety in jobs held, challenges at work, and recognition received at work. The mean score at that stage was 4.23 on a five-point scale. Measurement of career development after repatriation produced a mean score of 2.33.
Another factor adversely affecting enthusiasm for expatriation, says Shell's Cloughley, is 'a sense of increased individualism'. People want more say in their own destiny, much more control over their own lives. 'There's more short-termism in their thinking and less of the long-term approach of saying, "I'll do what you want me to do today because it'll give me a good career at the end of it". Individuals' expectations have changed. They have different value systems. In the past young people were much more prepared to subjugate family values to work values. Now they're looking for more balance between family and careers.' If potential expatriates have good reason to weigh the pros and cons of the move, companies too have greater cause to measure the value of the enterprise. Below standard or failed performance, due to reasons as diverse as culture shock to family breakdown, can be a serious and very expensive setback for the employing company.
Brian Hurn, director of programmes at the Centre for International Briefing in Surrey, says that if failure goes as far as repatriation the company can face a bill of anything up to £200,000. That is what it costs to bring the employee home, find him another job and train and send out a replacement. 'But repatriation figures alone tell only half the story. Unsatisfactory performance from people who refuse to admit they are not functioning well can go undetected, creating a trail of havoc that can be even more damaging to their companies.' The actual level of failure among expatriates is a matter of controversy. The Centre for International Briefing reckons that one in every seven Europeans sent abroad fails to adapt to the new culture, and one much quoted study suggests that as many as 40% of US expatriates don't make the grade. Cranfield's Brewster is sceptical of these figures. His own contacts lead him to believe that two or three per cent may be nearer the mark.
As the gloss of overseas appointments wears off for both the posted and the posting, alternatives to expatriation warrant closer examination. Some companies which used to send executives overseas on one-or two-year contracts now find it cheaper to keep them in perpetual motion, commuting regularly to America or Europe, but based in the UK. In Europe, some of the more radical companies, such as 3M, are developing a cadre of Euromanagers who live in one country but are peripatetic and operate across national boundaries.
Another alternative is the greater use of locals, but that kind of substitution has definite limits. In an ideal world, says John Coleman, group personnel manager for ICI, which has around 450 expatriates on its books, one would develop and train local people. But in the real world, markets often expand at rates which simply don't allow for that sort of organic development. 'If you are operating in an area like the Asia-Pacific region, for example, where growth rates are very high and expansion rates fast, the business timescale is much shorter than the human timescale it takes to grow managers into jobs. You're almost always driven to using a judicious mix of expatriates and local staff. In more developed areas there are less expatriates and more developed staff. In rapidly changing and expanding areas the balance is the other way.' There are two situations, says Howard Russell, team leader at BP Oil, where there is no alternative to expatriates: 'One is where there is absolutely no local resource available. If you're doing exploration work in Papua New Guinea, for example, you're just not going to get a local drilling engineer. The other situation is where people are being groomed for international management and need hands-on experience of foreign operations. There, we might put an individual into a role where we could have recruited a local.' Expats are used for control, for the transfer of technology, for spreading and sustaining the company culture. International companies cannot do without them. But finding willing victims could prove increasingly tricky.
The cost of an expatriate assignment.
Married couple with 2 children US Germany Hong Kong
(Los Angeles) (Frankfurt)
Salary for equivalent UK post £35,000 £35,000 £35,000
Cost to the employer:
Equivalent grss salary* £58,335 £67,675 £52,084
Local rented accommodation £19,867 £16,000 £51,107
(3 bedroom detached)
School for one expatriate child £4,304 £5,600 £3,578
Miscellaneous expenses £17,697 £17,750 £20,842
(fares to/from assignment or leave;
removal of personal effects;
insurance - property, life,
Total costing £100,203 £107,025 £127,611
Cost of living index (UK = 100) 120 149 139
Exchange rate 1 = US$1.51 £1 = DM2.50 £1 = HK$11.74
*This covers employee tax liability including tax on benefits in kind and
social security; the sum needed to maintain a home-cuntry standard of
living; sum to cover expenses back home (mortgage payments etc); and
incentive component to persuade employees to accept overseas posting.
Source: Employment Conditions Abroad.