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EXPATRIATE

“An expatriate is an employee who is working and temporary residing in a foreign country” (Dowling and Welch 2004 p.6). The employee is sent abroad to designate a company project, which can have many different aims such as being an agent of direct control, as an agent of socialization and/or sent for an assignment to a specific task. FinCorp as a successful business established in the UK, its entry on the European market has its reservation. The organisation “lack of a global oriented culture…” consequently does not have the strategy, approach and/or strategy as multinational national corporation. This is due to its dimension and the level of business performed outside the UK, therefore it is important to be different on its approach in order to meet FinCorp strategic aims and enable them to successfully penetrate the European market.

Globalisation was not part of the company culture as a result they entered EU market with no planning on how to adopt a global approach, global strategy as well as the organisation policies therefore lacking on the global oriented culture. FinCorp employs around 12,000 people in the UK and their actual number of expatriates is 30 individuals in their overseas operations, which means that only 0.2% of FinCorp employees are used as knowledge transfer. FinCorp expansion and its drive to became a global player had a major key influence on the “…business strategy regard to its home market as Europe rather than merely in the UK.” In order to compete successfully in a global market FinCorp needs to focus on managing expatriates. The HR strategy was aligned with the overall business strategy. Due to inexperience, it is apparent from the case study that FinCorp, operated on an expedient basis. Expedient is the approach used by organisations to enter a new market in the process of developing practices and policies regarding to international management and expatriation (Dowling and Welch, 2004).

FinCorp lack experience on expatriates’ management reflects on their need of personnel planning recruitment. According to Festing (2005) business strategy should be design according to the FinCorp issues, aims and a specific situation in the subsidiary country. Therefore with no experience what so ever on entering a new market as well as no acknowledge on assignees administration , the case study mentions that “there is not a perfect candidate” to fulfil the vacancy of an international assignee. Thus FinCorp basic guidelines to recruit expatriates were based no specific business skills, develop managers in order to become self-sufficient in the subsidiary country and also to keep control of overseas operations. Over the years the organisation framework has changed, they still focus on specific business skills but FinCorp aims to widen the expatriates’ subject. Next FinCorp framework in recruiting expatriates as agent of direct control, as agent of network builder, as agent of knowledge transfer and as an agent of socialisation is going to be critically analysed in comparison to a Multinational Enterprises.

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EXPATRIATES AS AGENT OF DIRECT CONTROL

A FinCorp approach to stuffing is ethnocentric where subsidiary have any independent strategic decision therefore key positions are held only by headquarters personnel. This approach to decision making it becomes a weakness in the entering market where host countries expatriates often take too long to make decision ending up with poor or wrong decision. Contrasting it with geocentric Multinational Enterprise which uses a global approach on its business operation where head quarters and subsidiaries make a unique contribution therefore fast decisions are made (Dowling and Welch, 2004). FinCorp uses expatriate as agent of direct control for instance MNEs use expatriates as a way to make sure subsidiaries are complying with the organisation policies. The case study makes a reflection of FinCorp using expatriates “…to install values and philosophy.” According to Harzing (2001) is there two dimensions control: direct versus indirect and personal versus impersonal, the table below illustrates the two dimensions.

By entering a new market FinCorp is being characterised by their control on the firm operations this is done through socialisation and networks. According to Harzing and Pinnington (2011) expatriates are employed by FinCorp to provide a business persona culture which is controlled in an indirect way in order to complement or replace headquarters decision making this is done through socialising, sharing values and informal communication.

EXPATRIATES AS AGENT OF NETWORK BUILDER

Network builder would be one of the most important roles for FinCorp expatriates. Not all expatriates will be capable of creating an important network with vital contacts for the organisation but if they would be capable of doing it this could become FinCorp key alliance. For FinCorp and MNE is not always possible to train employees to crate relationship which later might become a strong network builder such as getting strong connections with suppliers, customers, host government officials and other but this does not only depends on the company. Building a network of connection will only be possible if FinCorp send expatriates for a long term assignment giving them time to understand the local need culture and important connection which in a later stage can be used (Dowling and Welch, 2004). The expatriates will be capable of doing this if they are reliable, skilled to build up contact over the period spent of the assignment, meeting important people in several key operations also a need to know how they operate and also what is vital to them. It is crucial for the interpersonal linkages that the expatriates are credible and would help them when the opportunity taken place.

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EXPATRIATES AS AGENT OF KNOWLEDGE TRANSFER

It is important to the success of an international organisation the capability of its employee. Employees play a very important role therefore FinCorp expatriates’ competence is referred as the knowledge, skills and abilities needed on an experienced work performance which is essential to its administration viability (Fang et. al. 2010). FinCorp does not have an expatriate strategic planning process where they can forecast employee development, future challenges qualifications needed as well as having a managerial staffing targets. The case study mentions that “(…) to establish a clear, manageable selection process… is not easy to develop formal procedures to measure and evaluate such qualities” Baruch et al 2002. This reflects the lack of research, experience, planning and other viable options when entering a new market which FinCorp does not know anything about it. However evaluating MNC expatriates and their personal planning shows a much bigger understanding of the all ideology of an expatriate in subsidiary as well as their experience therefore reducing the chances of an assignee failure which has a rate of over 5% of UK and Irish multinational (Dickmann et al. 2008). The table bellow illustrates the MNE managerial requisites to provide the organisation with assured process and capabilities therefore becoming a resourced competitive advantage.

Figure 2

Factors affecting the global work environment (Dowling and Welch, 2004)

MNE uses expatriates as a key tool which allows the communication between subsidiary and other member of the MNE network therefore resulting on a high level of knowledge exchange between the parent company and its subsidiary (Bresman et al., 1999). Expatriate manager is positioned to serve in relation to its permanent committees and situation because occupy a very important managerial position and is in charge to plan and execute the firm’s internationalisation strategy (Lenox and King, 2004).

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EXPATRIATES AS AN AGENT OF SOCIALISATION

The skill of an expatriate to develop the level of socialisation between subsidiary and parent company is reasonably replicated on the importance of qualified influence of assignees on the international subsidiary. This establishes the development of informal and formal communication channels between the two (Fang et al., 2010). FinCorp is using expatriates as a key tool on beliefs and value transfer’s. Thus the transfer of the business corporate value will only be possible if FinCorp creates an international development strategy which the business lacks on such as corporate value, common work practices, no long term strategic planning activities in other words is there no standardized key business operation. Therefore with the challenges faced by FinCorp makes the transition from a national to an international organisation complex (Baruch and Altman 2002). Expatriate who transfer beliefs and values are known as “Bumble-Bees” to realise control based on the creation of informal communication networks (Harzing, A. 2001). Harzing & Pinnington (2011) mentions that bumble-bee’ role is important on the young stage of subsidiaries however only if high level of responsiveness is required. Having in consideration FinCorp early stage of their international subsidiary the bumble-bee role applies to them.

EXPATRIATES COST

When establishing compensation policy MNEs take into consideration cost of living, the time will take to execute the assignment, the expenditure between foreign and home country such as inflation discrepancy. For instance to establish the cost of an expatriate assignment is difficult therefore MNEs use the specialised service of Organisation Resource Counselors. ORC provides MNEs information on cost of living allowance on a global basis (Harzing and Pinnington, 2011). The aim to attract individuals to go and work abroad is by offering an attractive salary, keeping the same standard of living on country of origin compared to where they going to be working, covering the cost of the trips back to home country in order to expatriated to renew business and family ties, education allowances for expatriates children which can cover school kids uniform, transportation, language classes, enrolment fees and others Fang, Y. et. al. (2010).

MNE take into consideration the purpose of the long-term assignment balancing their cost and benefits whether the cost of sending an expatriate to a subsidiary will benefit their internationalization. For that to be possible MNEs identify non-financial and financial benefit and expenditure on using expatriation rather than hiring local people (Harzing and Pinnington, 2011). Consequently MNEs conduct the calculation of investing on an international assignment which consequently includes expatriate cost of living on a subsidiary country, salary, housing issue among other things at a specific time having in consideration the assignment purpose. FinCorp has the same aim as MNEs in offering the people they employ a good package where their guide line established was to “…keep people at a similar level in terms of standard living, accommodation, savings, pension schemes…”. FinCorp uses a balance sheet approach (which is explained bellow) to calculate the organisation HQ disposable income and applying to the local cost of living. Thus FinCorp does not

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acknowledge the full extent to the expenses of expatriates. The table below illustrates the expenses that MNEs take into consideration when choosing whether to use an expatriate or employ local people regarding their assignment purpose (Dickmann et al, 2008). Therefore FinCrop should consider MNEs approach in order to calculate expatriates cost (investment versus return).

ASSIGNEE FAILURE

It is very important to give a definition of expatriate failure to understand the reason behind it. Dowling and Welch (2004, p.86) defines expatriate failure as “… the premature return of an expatriate …before the period the assignment is completed”.

Cultural difference The aim to expand abroad requires the organisation to investment on expatriates through training which will help assignees to overcome future cultural barrier. For that reason the environment where expatriates operate are important by being a key factor for successful performance (Dowling and Welch, 2004). The attributes of an international assignee for successful performance are maturity, emotional stability, positive approach, language skills, international relations, adaptability as well as culture understanding. However the values carried by people are different therefore

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cultural dimension and the management aspect not always work (Harzing and Pinnington, 2011). Meaning that the expatriate adjustment was not successful this because of the lack of managerial commitment, hostile attitude from the organisation which reflect on strategic misfit, employee motivation leading to incompatibility in a structural operation. This consequently crates symbolic boundaries between HQ and subsidiaries leading to a creation of different groups. The table below illustrates the influence of culture on managerial approach.

Home and family A traditional expatriation assignment has duration of 1 to 5 years (long term), FinCorp in order to achieve their aim which is to expand abroad successfully is best for them to use long term assignments. However a long term assignment has its implication reflecting on the expatriates’ management performance. Therefore home and family play an important key role on expatriates’ performance. Where if balanced out properly with job rotation and regular visits to home country. As well as providing a family orientated package, so the assignment is completed and FinCorp does not have premature returns (Baruch & Altman, 2002).

Since FinCorp is in a changing process expatriates anxiety can be exacerbated through communication with colleagues who informing the individual about the organisational changes on the HQ. This can lead to raise the levels of uncertainty leaving the assignees stranded or force an early repatriation which consequently was not planned. For this reason is very important to create an assignment rotation where expatriates during the long term period are able to go back their national

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country in order to see spouse, partner and family, therefore reducing that chances of an assignee failure. One other point FinCorp did not have into consideration been the fact they might end up employing someone who had a family. Not ever looking to the implication on employing someone with a family, special the importance spouse have on the success of the international assignment. According to Fang, Y. et. al. (2010), Multinationals prioritise expatriate performance in subsidiaries therefore investing in the interaction between expatriates family members, spouses and partners. Thus because of the cultural shock and the problem of adjustment it can lead to couples wanting to go home prematurely.

REFERENCE

Dowling, P. and Welch, W. 2004 p.6). International Human Resource Management, Managing People in a Multinational Context, 4th Ed., Thomson Learning, London

Harzing, W. (2001). ‘Who’s in charge? An empirical study of executive staffing practices in foreign subsidiaries’, Human Resource Management, Vol. 40, pp. 139–58.

Harzing, A. and Pinnington, A (2011), International Human Resources Management, 3rd Ed., Sage Publications Ltd, London

Fang, Y. et. al. (2010), Multinational Firm Knowledge, Use of Expatriates, and Foreign Subsidiary, Journal of Management Studies, Vol. 47

Baruch, Y. and Altman, Y., (2002), Expatriation and Repatriation in MNCs: A Taxonomy, Journal of Human Resource Management, Vol. 41, No. 2, pp. 239–259

Dickmann, M. Brewster, C. and Sparrow, P. 2008, International Human Resource Management, A European Perspective, 2nd Ed., Routledge, New York

Baruch, Y., Steele, D. and Quantrill, J. (2002). Breaking out: From the province to the globe. International, Journal of Manpower, 23(6).

Lenox, M. and King, A. (2004). ‘Prospects for Developing Absorptive Capacity Through Internal Information Provision’. Strategic Management Journal, Vol. 25, pp. 331- 45.

Festinger, L. (2005). A theory of cognitive dissonance, Stanford, CA: Stanford University Press.

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