Have International Assignments Lost Their Luster?

For potential expatriates, the prospect of an international assignment historically evoked pride and a sense of "having arrived" professionally. While they might have had some reservations-particularly if the assignment was to be somewhere with a very different culture-most paid more attention to securing the most attractive compensation package possible.

By Timm Runnion
President and Chief Executive Officer
Mobility Services International

For potential expatriates, the prospect of an international assignment historically evoked pride and a sense of 'having arrived' professionally.  While they might have had some reservations-particularly if the assignment was to be somewhere with a very different culture-most paid more attention to securing the most attractive compensation package possible.

Corporations, for their part, used international assignments to develop rising executives and promising new hires and to share knowledge throughout far-flung organizations.  For many years, the cost scrutiny applied to other employee benefits was largely absent, as companies showered employees with salary and perquisites to persuade them to pull up stakes.  Some executives were so richly rewarded that they were able to take early retirement upon their return.

Obviously, the world became a more difficult and complex place after 9/11.  Security concerns always existed, but mostly in regard to a few global "hot spots."  Today, anywhere can be a hot spot... even locations previously viewed as "safe", such as New York and London.  Rising tensions in the Middle East and Asia, executive-targeted crime and kidnappings in parts of Latin America, and truly random terrorist actions spreading worldwide are blurring the distinction between "safe" and "unsafe" locations.

Just as the world was becoming more global than ever, there seemed to be a great temptation to recoil from the unfamiliar and frightening and to embrace the safe and comfortable: family, friends and a secure, locally-based career.  As if this weren’t enough, health scares, including SARS and avian flu, added another reason for concern.

So how are employers, potential expatriates and their families viewing international assignments today: coveted plums or unacceptable risks?

International Assignments Continue to Grow
After a slight, post-9/11 retreat, the number of global assignments has continued to grow.  Companies continue to deploy senior managers to lead international operations, new MBAs for career development and technical specialists to lend their expertise.  As one example, while technical expertise is readily available locally within Asia, the supply of talented senior managers is not sufficient to meet the needs of rapidly growing Pacific Rim economies.  Many of these more seasoned managers must come from the US and Europe.

US-inbound assignments are growing rapidly as well, despite initial concerns about more stringent immigration controls expected after 9/11.  For corporate blanket-visa holders, immigration has proven to be a minor nuisance at most.  US companies continue to bring in vast numbers of technology professionals, for training and to contribute direct expertise.  For example, at MSI, we have facilitated rotational assignments in the US for entire teams from Korea and Taiwan.  

Corporations Take a More Measured Approach
While international assignments are still considered essential, companies are giving more thought to the process and the associated costs and risks.  Decision-makers are more selective in who they choose to send abroad, conducting a careful candidate assessment that frequently includes the family as well.  Recognizing that up to half of all expatriates leave their employer within one year of repatriation, the more savvy companies are also embracing repatriation programs and clear career-mapping well before departure.

Moreover, many previously black-and-white policies now allow for shades of gray.  Rather than showering a few senior management expatriates with bonuses and undirected allowances, employers more carefully assess the employee’s unique concerns and how they might be addressed: security, spouse/partner needs, schools, medical care and more.  The goal is create an appealing professional and financial package-not to make the expatriate financially secure for life.

Employers are also grappling with recent US tax law changes will result in more than 300,000 US expatriates paying over $2b in additional taxes over the next decade.  While the law expands the exemption for foreign-earned income from $80,000 to $82,400, it now taxes housing, education and other allowances, effectively pushing employees into higher tax brackets.  Americans working in areas with relatively low local taxes but high housing costs (and typically, large allowances), such as Switzerland, the Middle East and some Asian countries could face a substantial tax increase.

Since many companies subsidize extra taxes incurred by expatriates, it is safe to assume that they will be looking for cost-saving alternatives.  These could include using more indigenous workers, selecting more expatriates from countries that do not tax income earned overseas (including Canada and Australia) or making greater use of commuter assignments, effectively reducing allowance costs.

More Short-Term, Commuter and Rotational Assignments
To contain costs and meet employees’ personal needs, companies are turning to short-term, commuter and rotational assignments-not just traditional, two- or three-year commitments.  In fact, some studies suggest nearly half of all current assignments are shorter-term.

In MSI’s experience, the most successful short-term assignments have involved field engineers who are training clients or offering technical expertise.  These projects include specific goals and timelines and strict budgets.  Many of these specialists are single, highly flexible and interested in exploring local culture on a first-hand basis, rather than duplicating their typical lifestyle.  Other short-term assignments-those with loose parameters and timelines and budgets based on wishful thinking-invariably take longer and cost more than expected.

Similarly, planned rotational assignments are popular for new MBAs and high-potential employees.  Well-managed programs are carefully planned to allow employees to get a more complete grasp of company operations, for a short-term and at a relatively low cost.  Frequently, a destination tenancy management firm can arrange very attractive terms on long-term corporate housing to support these rotations.

More companies are allowing employees to choose a traditional, longer term assignments or a commuter arrangement.  Commuter assignments reduce family concerns and upheaval-spouse/partner issues, schools and security-at least directly.  Some employees who are unwilling to consider uprooting their families or moving them into more questionable security environments will happily accept a commuter alternative.  These assignments can be effective, though the typically frequent trips home can become costly and reduce productivity-especially for those employees commuting continents away.  They can also produce family wear and tear and fatigue, even though no move is involved.

International Assignments Necessary for Career Success?
Potential assignees are giving more careful thought to assignments themselves, though few question their importance.

The 2006 Worldwide ERC® Global Benchmarking study surveyed 150 human resource professionals at Worldwide ERC benchmarking conferences in Amsterdam, Chicago and Hong Kong.  Two-thirds of the respondents said that international assignments are essential for career growth within their companies, and of these respondents, nine out of ten said that international assignments have become even more essential to career growth in their organizations during the past five years.  Nearly half of the participating companies formally channel their employees into one or more senior global assignments as part of the career path.

While excited about the potential career boost an international assignment can provide, most assignees today approach assignments with a bundle of reservations centered on compensation, living arrangements, security, spouse or partner’s career, schools, language and more.  With the Internet and other resources, they are much more savvy about what they are being asked to undertake, and are taking a balanced look at the entire experience-and whether or not to accept it.

From the outset, more employees will ask their HR representative what is in the assignment for them: "What will happen when I come back?"  "How will this assignment enhance my career?"  They are also asking hard questions about security, emergency evacuation and worst-case scenarios.  More and more must consider the sidetracked career and lost income of their spouse or partner-particularly when a substantial raise is not part of the assignment package.

Younger, Single Employees More Enthusiastic
With fewer attachments, lower expectations for creature comforts and the derring-do that comes with youth, younger employees are often eager to undertake international assignments-even in more problematic locations.  Companies have recognized this willingness to relocate abroad, and welcome the lower costs associated with these moves: more modest housing requirements, no spousal employment or school considerations and smaller allowances.  More attuned to the adventure aspect of an international assignment, younger employees also seem to have more modest expectations for an immediate career boost upon their return.

Still, career mapping and a well thought-out repatriation plan is no less important for these assignees.  It is not uncommon for initial enthusiasm to wilt under the light of harsh reality.  A young person who finds himself in an unfamiliar location, without friends, family and familiar activities can become disenchanted fairly quickly.  It’s important to know what lies ahead and how the assignment fits into a total career plan.

The Challenges of Emerging Markets
Increasingly, international assignments are not to New York or Paris but to emerging markets.  These assignments present challenges for assignee and employer alike.  Spouse/partner assimilation can be extremely difficult: with spouse employment generally impossible and the assignee frequently working long hours, the adjustment can be difficult, indeed.  For children, international schools may not be available and public schools may be poor.

China presents a particularly interesting story.  Many American expatriates are eager to add experience in China to their resumes.  And while the cultural and language differences are daunting, these concerns are somewhat counterbalanced by the perceived secure and orderly environment.  At the same time, Western-style housing can still be difficult to find-especially outside of Shanghai and Beijing.  International schools are at a premium.  Immigration is complex and banking is Byzantine.  And the supply of quality destination service providers does not approach the demand.

Employees considering assignments in emerging markets feel freer to drive a hard bargain.  For those who choose to move their families, they generally request hardship pay (which had largely disappeared) and other consideration.  Others decide that no amount of compensation will make up for the family disruption (and in some areas, security concerns) and agree to take on these assignments only on a commuter basis.

International Assignments are Here to Stay
International assignments continue to be important for employer and employee alike.  Employers need to deploy employees freely to support increasingly global businesses.  Employees recognize that a well-planned international assignment can significantly enhance their career.  Both sides, though, are viewing international assignments through a much more sophisticated lens, balancing employees’ family, career and security concerns with employers’ business objectives and budgets.  This more thoughtful approach will likely assure both continued growth in international assignments and more flexible, creative assignment models.