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Expatriate Programs

As recessionary forces grip the globe, firms cut the fat from international staffing plans

by Susan J. Ainsworth
April 6, 2009 | A version of this story appeared in Volume 87, Issue 14

Discriminating Deployment
Credit: AstraZeneca
At AstraZeneca's Charnwood, England, lab, chemists conduct respiratory and inflammation research. The company is working to make smarter decisions about "who goes on assignment" within its expatriate program.
Credit: AstraZeneca
At AstraZeneca's Charnwood, England, lab, chemists conduct respiratory and inflammation research. The company is working to make smarter decisions about "who goes on assignment" within its expatriate program.

IN HER PREVIOUS JOB as ACS's director of international activities, Tamara Nameroff encouraged chemistry professionals to pursue international experiences to increase their value in the job market and build global networks and collaborations. Now, in her role as manager of environmental and product health (EPH) for Shell International in The Hague, "I am practicing what I preached," Nameroff says. "I am thrilled with this opportunity and can see that it is already opening doors for me."

Unfortunately, chemists and other professionals may find it increasingly difficult to land lucrative, career-enriching international positions in the midst of the deepening global recession. And those who are already serving in those roles may face the prospect of lower pay, reduced benefits, and fewer opportunities for a new job as their assignments wind down.

Although many companies recognize that international assignees will remain critical to their businesses, they are cutting unnecessary expenses from their international programs in the same way that they have slashed costs and jobs across all facets of their businesses.

Chemical and pharmaceutical companies are among those reevaluating the size, structure, and value of their expatriate programs, in which they temporarily send employees to key global markets. Increasingly, expat assignments will be reserved for employees who are qualified to contribute critical skills or transplant important elements of corporate culture.

Companies are becoming more conservative in their governance of expat programs, comparing the high costs of securing visas and compensating the employee against the benefits the company will reap from each individual assignment, says Roxanne Gilbertsen, a senior consultant and North American leader of global mobility consulting at Hewitt Associates. Companies first want to be sure that they can't hire a local national to accomplish the same goals, she adds.

At AstraZeneca, "our recent focus has been less on reducing numbers of international assignees and more on making the right decisions about who goes on assignment; why they go; and perhaps most important, how the skills and experience gained abroad will be leveraged in their next role, postassignment," says Ashley Daly, senior manager of international assignments for AstraZeneca in the U.S.

AstraZeneca's international assignee population is currently just under 350, including full, short-term, and commuter assignments, as well as globally mobile hires, Daly says. Employees are focused in Belgium, the U.S., and the U.K., but they "also have a significant presence in the Asia-Pacific and Latin America regions," she adds.

Inspiring Vistase
Credit: Erik Hagen
Nameroff's expatriate position at Shell International in The Hague has opened up fields of opportunity to her.
Credit: Erik Hagen
Nameroff's expatriate position at Shell International in The Hague has opened up fields of opportunity to her.

At DuPont, the number of expatriate employees has remained steady for the past couple of years, and it is not likely to grow this year "due to economic conditions, which appear to be longer term," says Kathy Walz, global rewards compensation consultant at DuPont. In addition to its 40 short-term assignees, the company has 390 active long-term assignees who are concentrated in the U.S., Switzerland, China, and Brazil.

Even while they hold the number of their expats steady, many companies are beginning to cut back on the number of "classic expats—those they send from their home country for three to five years," says Cheryl Spielman, a partner in the human capital practice at Ernst & Young, an accounting and tax services firm.

Instead, companies are sending employees on shorter assignments in an effort to cut costs, Spielman says. "These expats will operate under a different kind of policy—a short-term policy or a commuter policy," which is prevalent in Europe due to its open borders, she adds. For example, AstraZeneca has sent some of its expats on short-term assignments as a way to mitigate costs, specifically tax costs, Daly says. However, "short-term assignments are not appropriate in every situation, especially where family is concerned," she says.

In another cost-cutting effort, "we are starting to see a rise in what we are calling the accidental expat—a person going to the same location on successive business trips that keep getting extended," Spielman says. However, this strategy has its pitfalls. People on these assignments sometimes "trip a tax wire or an immigration wire, which could then expose the organization to violations or cause the employee to lose the right to go in and out of particular countries to do work," she says.

RECOGNIZING the importance of sending at least some longer term expatriates into key markets, companies are questioning the traditional policy of offering them lucrative salary and benefit packages aimed at compensating them for what was always considered a hardship assignment, Spielman says. With so many qualified candidates looking for work, companies are simply not as concerned that program cutbacks will upset expats, she adds.

"Companies that took a one-policy-fits-all approach to assigning expat packages are now considering separate policies" tailored to the type of role expats are performing and the benefit the company reaps from the assignment, Spielman says. Expats who are "very key players—people who are being groomed to assume the top posts in an organization"—are likely to enjoy richer packages than an expat serving in a developmental assignment, where the employee benefits more from the assignment than the company does, she adds.

As companies restructure expat packages, they are also focusing on elements of policies that have never been touched before. In particular, companies are changing the housing allowance for expats, "who, traditionally, have lived pretty nicely in some overseas locations," Spielman says. Under many new policies, an expat may end up with a smaller place or he may need to live in a less expensive area that requires a longer commute, she adds. In addition, employers "are even kicking the tire on benefits like paying for private education for children of expatriate employees—something that has historically been an entitlement," she says.

To partly compensate for program cuts, some companies are allowing employees the freedom to choose which perks and benefits they want to keep, Spielman says. "We are seeing a resurgence of lump-sum policies," where expats are given a comfortable amount of money to spend on housing, education, travel, or other assignment-related expenses, she adds.

In addition, "as companies reevaluate the value of international assignments and look to reduce costs, localization discussions are at the top of everybody's list," DuPont's Walz says. "Other than the standard approach of closing out home benefits and compensation and reverting to host benefits and compensation, we do have an optional provision to assist the expat into the local housing market." This might involve counseling on the current market or additional financial support.

"Companies are even beginning to localize employees in China, and that is something that they've never really done before," Gilbertsen says. "It has everything to do with the fact that expats are expensive and the economy is not great anywhere in the world right now."

Still, cutting expat program expenses can be a slippery slope. Companies must preserve salary and benefit packages that will attract specialized talent that is in short supply in some overseas markets. In China, for example, "they still don't have enough highly skilled managers to meet demand," Gilbertsen says. "And in many markets around the world, there's still pressure to find people who have experience in certain technical areas or who have a specific mix of managerial, operational, and technical expertise."

Shell's Nameroff, for example, was recruited directly into her position "because of my previous work experience at the interface of science, sustainability, and public policy and because I worked previously in an international context," she says. "Shell needed someone who could take on some large, critical projects, including helping the EPH team navigate through a new European Union chemicals testing law and through an international initiative led by the United Nations to harmonize classification and labeling of chemicals globally."

With experienced hires in place, compensation packages must be hefty enough to support the expats' success.

"Expat programs are a key vehicle for development and life-cycle management of a global talent pipeline."

"Although cost is a critical consideration, especially in the current climate, an international assignment cannot be viewed solely as a dollar proposition," Daly says. "Certain elements of expat packages, such as robust destination support and educational counseling for expatriate children, are critical to ensure an expatriate family is able to comfortably settle into the host location," she reasons. Without this kind of support, "it's highly unlikely that an expatriate employee will be able to focus on the new job, thus jeopardizing the return on investment for the company," she adds.

Right now, there's a growing tension between reducing the costs of expat programs and developing and retaining the talent that defines a strong international company, says Carolyn Buck-Luce, the head of Ernst & Young's global pharmaceutical practice. "At a strategic level, company leaders know that they will win the war for innovation only if they win the war for talent, which means having a robust pipeline of the best people. Expat programs are a key vehicle for development and life-cycle management of a global talent pipeline."

AS THEY SEEK to improve the efficiencies of the international programs, many companies need to set up or strengthen policies that harness the skills and experience that their expats bring home from high-dollar overseas assignments.

Many companies still don't set up repatriation plans with employees because they fear that they will be misconstrued as a promise of a job at the time of repatriation, Gilbertsen says. Although companies certainly can't predict what positions might be open three to five years into the future, they can and should explore possible roles where the skills they will develop on the expat assignment might be applied later, she says.

Daly agrees. "From the outset, if there is not a clear sense of how the international assignment experience can be applied at the end of the assignment term—at least in broad terms—the business should strongly consider whether an international assignment should even move forward."

Current expats who have left without the benefit of this kind of planning are probably experiencing "a high level of anxiety about repatriating," Gilbertsen says. "Being gone right now could make repatriation more difficult, because you are likely to lose a lot of your connections to the company" as companies lay off large numbers of employees, she says.

Nameroff echoes this point. "The current economic environment makes it very important that you have a strong commitment from your employer about the duration of your assignment and, if possible, to work out possible options for reentry when the assignment concludes."


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