When an employee is assigned to a position abroad there is always the possibility of failure and early repatriation. Since this can result in extra expense and business disruption, companies will want to find ways to mitigate the primary causes of expatriate failure.
The Impact of International Assignment Failure Rates
International assignment failure rates will depend on the country and challenges presented to the expat. One study estimates employee assignments to developed countries will have a failure rate of 25% to 40%, and in under developed countries the rate jumps to 70%.
The impact for a multinational is both financial and business related. Direct costs of a failed assignment can range from $250,000 to $1 million, and the annual cost of failures to all US companies is estimated at $2 billion. In addition, a foreign company can face damaged client relations and problems with local business and government. The employee upon repatriation may suffer a loss of self-esteem and professional standing.
These very real effects on international business success make expat failure an important metric to track for HR departments. There must be data acquired on the factors that trigger assignment failure.
What Factors Define Expatriate Failure?
International assignment failure is when the goals and objectives for an assignment are not met in some ways. “Failure” occurs when:
Early Repatriation: The assignment does not last for the planned duration, which is the most frequent and costly type of assignment failure.
Reasons: Cultural challenges, family issues, illness, unsuited for position
Post-Assignment Changes: The expat makes a position or job change following the assignment, and the company loses human capital investment.
Reasons: Finds opportunity abroad, burnout, seeking advancement with assignment
Unmet Objectives: Business goals are not achieved, which may be the most important business metric to measure the assignment failure’s effect.
Reasons: Local market conditions, lack of performance, unsuitable skills
Excess Cost: The assignment cost is higher than projected, which undermines the ROI for the assignment, and is a ‘stealth’ form of assignment failure.
Reasons: Family expenses, housing, security, extra resources, training
Expat Dissatisfaction: Even if the assignee does not repatriate, they are not satisfied in the position, location or duties.
Reasons: Cultural and language differences, homesick, excessive workload or responsibility
Once a company knows the primary areas of expatriate failure, then they can take a strategic approach toward mitigating the causes.
Tracking and Monitoring: How to Mitigate the Causes of Expatriate Failure
One of the best ways to avoid expatriate failure is to track the elements that are primary drivers of failure. This can be done in concert with host country management and the HR department at the home office, allowing opportunity to correct any issues before they develop.
Expat Satisfaction Surveys: One easy tool for avoiding expat issues on assignment is a satisfaction survey. This can be administered regularly to identify any problems that could lead to early repatriation or poor performance.
Budget and Expense Monitoring: Unusual or excessive expenses can be avoided by monitoring the assignment budget at least monthly. While some costs are fixed, others are subject to variation and can impact the overall ROI of the assignment.
Assignment Duration: If an assignment is more than a year, or open ended, there should be periodic tracking of expat performance and effectiveness. If a decrease is noted, it may be necessary to adapt the assignment duration instead of risking failure.
Business Objectives: One of the more obvious metrics to measure assignment success is whether the business goals are being met on assignment. Even if the expat is happy and costs are contained, there remains the risk of failure due to business reasons. The goals for the assignment should be tracked with milestones and numerical targets.
The GEO Solution: Using a Local Employer of Record to Support International Assignments
Companies that do not have the resources for a full host country subsidiary, will turn to a GEO solution to handle the employment of their assignees. The GEO service is comprehensive, and includes all immigration, employment and payroll requirements in the foreign location.
The GEO becomes the local employer of record, and works with partners in the country to ensure compliance. A GEO supports all aspects of the international assignment, and can be helpful in detecting and avoiding some of the primary causes of assignment failure. With experience in international employment, the GEO can monitor employment conditions and help avoid expat failure, and provides a third party resource to handle any remedies.
Also, if early repatriation required, the GEO will make sure that all host country rules on notice, termination and severance are followed, so there are no issues with authorities. Shield GEO offer clients an end to end employment solution to support international assignments in 89 countries, and can assist companies with finding the optimal methods of payroll and assignment structure.