Lately a lot is being said and written about the growing trend of sending international assignees to developing and emerging countries. In fact, emerging markets have remained a hot topic in the current year, and mobility specialists and relocation managers continue to point to the many challenges in developing destinations: Security issues, appropriateness of compensation packages, and less attractive living conditions are just a few examples.
However, given the business expansion and foreign investments into developing countries, assignees from developing locations are also on the rise. Such assignment types have been less common and hence are less known. Yet, the area demands more attention. A recent survey by Brookfield Global Relocation Services (BGRS) indicates that assignments from developing locations differ from other assignments, and brings up a host of new facets of challenges and concerns.
Following are the main findings from the relevant BGRS survey (2013).
Where do they come from and where do they go?
Although derived from quite a modest sample size in the survey, the main origin and destination locations of this assignment type are not surprising. Specifically, the main sources of assignees were developing economies such as India, Latin America and China, while the US headed the list of destinations with 70% of respondents citing it.
Why to recruit assignees from developing locations?
The majority of assignments from developing locations are educational and developing in nature, as managers of newly established companies want to send their local employees to be trained in other locations. Therefore, the main purpose is to develop talent from emerging locations. In case an assignee is transferred from the company’s subsidiary in a developing location to its headquarters in another place, such an assignee is termed inpatriate. According to my research, inpatriates have an important role of so-called linking pins between HQ and subsidiaries, and are meant to facilitate knowledge flows between these units. As such, inpatriates go to subsidiaries not only to gain knowledge, but should be valued also for sharing knowledge about their local market, which can help the company in improving business strategies and practices in expanding into new emerging locations.
The other two cited reasons for hiring assignees from developing and emerging countries concern serving the interests of the host location, as assignees are recruited either to fill a skill gap in the host location, or due to their lower labor costs compared to host location nationals.
What are the common challenges and solutions for assignments from developing locations?
According to Brookfield survey interviewees, the primary characteristic of a developing location is its lower wage level compared to the assignment destination. Hence, 85% of respondents perceived the main challenge to revolve around issues of appropriate compensation levels and their delivery.
In relation to compensation, survey respondents suggested using the home country balance sheet approach, which would allow maintaining the expatriate’s standard of living at the same level as it was in his/her home country throughout the assignment. Such maintenance of home country lifestyle is justified in case the assignment from a developing country is temporary, and repatriation to the home country after the assignment is planned. On the contrary, if the assignment is longer term and there is no intention of repatriation, it is better to level the salary with host peer salary. However, this alternative loses out on the possible benefits of hiring an employee from a lower wage location. More on the differences and challenges of different compensation packages can be read in an earlier blog entry of mine.
The third option is to combine the home country and host country approaches by using the balance sheet approach as a base salary package, while equalizing supplemental allowances with host location levels.
Another notion brought up in the survey is that contrary to the general expectation of low assignment costs, the actual spending on assignees from developing countries can be surprisingly high. As reported, business managers often do not consider relocation costs beyond salaries, as well as possible costs related to immigration difficulties.
- Family challenges
The family challenges common for such assignments are foremost related to the cultural peculiarities, as well as economic and governmental conditions of developing countries. Some of the drastic examples include employees that cannot relocate with a child because of foregoing placements in a school, having more than one wife in some cultures, as well as having large families, which are still more common for developing countries. Moreover, in poorer countries, taking the breadwinner away from the family may simply worsen the family economic situation.
To address the manageable issues with regard to assignee families, global mobility professionals look into flexible assignment policies, which allow for extra support benefits, such as provisions for families, return visits for the assignee, and allowances for international calls.
- Cultural barriers
Cultural challenges are closely related to the compensation and family concerns reviewed above. First of all, the differences in standards of living can trigger conflicts. As commented by survey respondents, executives from developing countries may be used to having a certain status and receiving many more privileges with their salaries back home compared to the host location. This can be explained by a bigger gap in salary levels between different positions and social classes in developing countries. As such, the compensation of some employees from developing countries can be actually higher than it is for their peers in developed countries. For example, an assignee from a developing country may be used to employing a personal driver, maids and nannies back at home, which may turn out to be very challenging in a developed country, even with an expatriate compensation package.
Moreover, general cultural norms in developing locations can be quite different. Clearly, when comparing an assignee from the UK going to the US with an assignee from India going to the US, the levels of required cultural adaptability and cross-cultural training would vary substantially. Plainly speaking, solutions for addressing these cultural barriers rest in good assignee selection and preparation. Potential assignees should be flexible and open-minded to adapt to the host-country environment, and their preparation should aim to place realistic expectations on the relocation, and explore the possible challenges and respective coping strategies to be used abroad.
Apart from the reviewed issues, BGRS survey respondents also indicated the challenges of host country language, immigration laws, talent management, and repatriation. These will be reviewed in my next blog post though.