International assignments continue to rise as providers keep a watchful eye on strategies for reducing cost.
By Catherine Tooher
As businesses continue to adapt to rapidly changing patterns of global market demand and emerging sources of supply, ensuring that talent is located where it is most needed is vital to taking full advantage of growth opportunities. Many companies rely on sending employees outside their home country on international assignments to transfer key skills and resources essential to driving their businesses forward. So how are companies working to increase the value of global mobility to their business?
The 2013 Global Relocation Trends Survey from Brookfield Global Relocation Services reports the overall volume of international assignment activity is rising, with 54 percent of companies saying that the number of their international assignees increased last year.
An increasingly complex global economy also means a growing number of destinations for assignments. “Companies continue to send international assignees to an ever more diverse group of locations,” confirms Michael Gorski, Brookfield’s vice president of global marketing. South Africa, Qatar, Poland, Austria, Sweden, and the Philippines emerged as top destinations in this year’s survey; the number of assignments in Africa and the Middle East was boosted by energy sector growth. Meanwhile more established locations continue to require significant resources. European assignments rose, says Gorski, indicating the continued importance of the region in companies’ long-term business strategies despite the financial crisis in the Euro zone.
Although the current growth figures are strong (54 percent), they are below the level anticipated by the 2012 survey, when 63 percent of companies expected further increases in their assignee numbers. Furthermore, the number of companies reporting a decrease in their international assignments more than doubled to 24 percent in the 2013 survey.
Lower than expected growth may partly reflect changes in the scale of expansion opportunities in key assignment destinations. For example, while China continues to be a leading destination for international assignments, it was less prominent in 2013 than in previous years as economic growthslowed. As a result, some organizations scaled back their assignee populations.
Cost, which emerged as the key global mobility challenge in Brookfield’s 2013 survey, is also a key factor affecting the rate of international assignment growth. Transferring skills and experience to new markets can be an expensive process. “Generally international assignments can cost a company three to five times the assignee’s base salary,” reports Stefanie Exline, director of global mobility at Kelly Services, Inc. If the number of assignees escalates—especially with a large expatriate population—the issue of cost becomes increasingly significant. And as the number of destinations proliferates, coordinating different visa, tax and payroll documents, and managing vendors becomes more complex, further increasing global mobility costs.
As well as easing back on the number of new assignments, companies are also tightening up their global mobility policies to help control costs. “Due to the current economic climate, costs in many areas have been heavily scrutinized and global mobility policies are no exception,” says Exline. “As a result, assignment allowances and incentives have been scaled back or eliminated.” Companies are using alternative or modified cost of living tables or introducing a more stringent approval process for policy exceptions.
Some employers have been considering whether different types of international assignments could be more cost effective. “Many companies are looking at alternatives totraditional long-term assignments,” says Exline. “We have seen an increase in short-term [less than 6 months] and project-based assignments over long-term [one year or
more] expatriate assignments.” In some cases, companies have found that carefully planned short-term assignments or business travel combined with increased utilization of technology are able to meet business needs while minimizing costs. Companies trying this approach include those affected by housing market issues in the United States and U.K. which have made home sale assistance and buyback programs more difficult to manage.
However, cost reduction measures through policy changes have to be balanced with the need to ensure employees in critical roles continue to have a positive experience. “Assignment policies should be written to where an employee will not feel a negative impact, financially, in the new location over their home location,” says Stephen C. McGarry, director of global mobility at WPP. “So when we review policies, we need to be able to cut company costs, while still keeping our employees ‘whole’.”
Localization: Friend or Foe?
The 2013 Brookfield survey found that 41 percent of companies are considering implementing policies for converting international assignments to local status. Are companies using localization to move experienced expatriate employees onto less expensive salary and benefits packages?
“I have not seen an increased use of localizations as an alternative to international assignments,” says Exline. The cost and complexity of transitioning an expatriate to a local package can outweigh the benefits. Pension and retirement contributions are an example of the difficulties companies can encounter. “The employee may be contributing to multiple country systems and may not meet vesting or participation requirements,” she says. “If you have a large, highly mobile population, an international retirement plan may solve these challenges, but implementing and maintaining international plans can be costly.”
Transitioning to a new tax system can also be an issue requiring “advance planning and consultation with tax professionals to ensure a seamless transition,” she adds. Localization is more often determined by where opportunities are located and how individuals want to develop their careers than simply to the need to drive down costs. “Costs have nothing to do with employees going local,” says McGarry. “It is more a situation of the job is in that location, and, for the foreseeable future, this is where you will be.”
Employer and employee attitudes toward internationalassignments—and the kind of packages assignees are looking for—are changing. Whereas in the past, generous expatriate packages included incentives to accept appointments, says Exline, incentives increasingly recognize that “the assignment experience itself provides inherent benefits to the employee and career development opportunities.” The knowledge of new or emerging markets, wider networks, broader insights, and heightened global awareness are all increasingly viewed by assignees themselves as enhancing their future leadership potential.
Brookfield’s 2013 global mobility survey revealed trends in assignee demographics reflecting these changing attitudes: Single status assignments are increasing; and the 30 to 39-year-old age group had the highest share of international assignments. “It may be that family demands such as schooling are less problematic for this group,” says Gorski, “but it may also be driven by the desire of this demographic to seek the international experience that will enhance their career prospects.” Ambitious employees in their early to mid-thirties are actively seeking international roles: “As assignments become more formally recognized as part of the career path for leadership positions, we expect this trend to continue.”
Brookfield is continuing to research how Gen Y or Millenials could impact on international mobility.
The Need For Alignment
Exline thinks companies could do more to increase the alignment between global mobility and business strategy. “Succession planning should be tied to the goals of the business and should be incorporated into the assignment process from the outset,” she says. “The company will make a significant financial investment and should be focused on retaining international assignees.” Not all companies take this approach, says WPP’s McGarry. “Some companies have their employees go on assignment as part of succession planning. For others, it has no role in choosing one employee for an assignment over any other employee.”
Deloitte’s 2012 survey Strategic Moves identified a gap between the potential strategic value of global mobility programs and the way organizations are using them in practise. On the one hand, respondents almost unanimously agreed that mobility is a key tool in addressing top strategic business issues including emerging geographical markets, increasing globalization, and greater competition. At the same time, however, a minority said that their organization currently uses mobility to address those issues in practice.
Exline observes that more employers are trying to improve the value they gain from international assignments by better integration of global mobility and other areas of talent management. “We are seeing customers wanting global workforce solutions that include not only mobility as part of their talent supply chain but RPO, MSP, workforce planning etc. It is taking a look through this broader lens that will ensure companies are successful and deploy strategies to attract and manage an effective workforce.”
Many global mobility services providers are trying to address the needs of clients who have growing assignee populations in more diverse locations by partnering with local and regional specialists to supplement their in-house capabilities. “There has been a trend of companies offering different mobility services merging or partnering with a focus towards one-stop shopping and offering a variety of services as an integrated solution or an ad hoc basis. I can see this trend continuing over the next couple of years,” says Exline. Brookfield’s Gorski expects to see “consolidation of relocation players— specifically global providers acquiring smaller, local resources with specialised market knowledge.”
Gorski also thinks that suppliers will play an increasing role in helping to reduce assignment costs. “As the need for cost containment strategies is not lessening in importance, we expect companies to continue to look for cost effective solutions from their suppliers.”
He adds that in his view, suppliers will be presented with greater opportunities to engage with their client companies at a more strategic level and to provide data and consultation to global mobility and human resources leadership as well as to other senior corporate leaders. “In response, we expect emergence of product offerings beyond logistical support including cost tracking/ROI calculators, enhanced business intelligence tools, and advisory services.”
McGarry suggests clients preparing carefully before approaching services providers. “Before you contact any suppliers, first you need to know exactly what you want.
You also need to have some kind of policy in place that they can work from, and, more importantly you can work from in the procurement of these providers.” He adds that although many providers have policy consulting teams, it is often best for clients to carry out benchmarking research themselves first if policy is needed, if need be using an external specialist consultant.
Over the next few years, movement of talent between global locations is likely to increase, with new patterns of international mobility becoming increasingly common. On the one hand, companies will look for the most cost effective ways of achieving skills transfer to ensure that they have the right talent in the right location, for example through shorter project-based assignments. At the same time, there will be a higher number of people who are interested in longer term global mobility, in many cases to enhance their career advancement prospects.
“People will move around more and more [i.e. from the U.K., to China, to Tokyo, to New York] instead of U.K. to China for three years and then come home, and the time people spend in each location will begin to increase,” says McGarry. As more individuals actively seek global mobility, companies will be able to offer different kinds of incentives than traditional expatriate packages—McGarry suggests there could be a rise in ‘local plus’ salary and benefits.
And, more companies will integrate international assignments into their talent development and succession planning to ensure that the right skills are in place not only to meet immediate business needs but also their future leadership requirements.