Global Mobility, Talent Management, and Return on Investment (ROI)
Introduction: Expatriate ROI and the Psychological Contract
In a 2016 monograph*, Yvonne McNulty and Helen De Cieri explored the impact that global talent-management practices have on three aspects of return on investment (ROI) and their relationship to expatriate attitudes and behaviors regarding employment by multinational companies. The three aspects explored were corporate return on investment (cROI), individual ROI (iROI), and expatriate ROI (eROI).
To set the stage conceptually, the authors defined these three aspects of return on investment by using them as constituents in a brief equation, namely: cROI + iROI = eROI. Here, cROI and iROI are viewed as inputs to the resultant eROI:
- Corporate ROI (cROI is the net benefit that accrues to companies from an assignment.
- Individual ROI (iROI) is the net benefit that accrues to individuals from an assignment. It includes the professional (or career) impact of the assignment and the personal impact (on the individual and on the individual’s family).
- Expatriate ROI (eROI) is the net long-term benefit that accrues to employers from cROI and iROI as inputs. This eROI contributes to the outcome of global talent management and consequently to global mobility over time, which differentiates it from cROI. It also is important to understand that eROI differs from cROI because eROI incorporates the expatriate’s long-term professional and personal goals.
By acknowledging the contribution of corporations and employees to eROI – and addressing their correspondingly distinctive viewpoints and goals – the authors believe they have identified a better way to explain employee attraction (or lack of it) to international assignments, their development (or lack of it) as globally mobile employees, and the causes for attrition during and after an assignment. To accomplish this, the authors adopt psychological contract theory and explored its impact on eROI.
The psychological contract emphasizes the mutual nature of employee-employee relationships – the unwritten, informal, mutual obligations, promises, and expectations of employees and employers. Furthermore, it is an important predictor of an expatriate’s commitment to an organization in terms of intent to leave, job satisfaction, and the adjustments they are willing to make. In particular, expatriates are likely to feel that their expectations have not been met if there is a conflict between their goals and those of their employer. The implication is that the global talent marketplace requires multinationals to consider how an assignment meets the long-term personal and professional goals of an employee in order to accurately calculate eROI.
Need for a Strategic Approach to Global Talent Management in Today’s Talent Marketplace
To understand how eROI fits into the current global talent marketplace, it is important to acknowledge how that marketplace has evolved over the past several decades. Companies use international assignments to fill positions where qualified locals are not available, to manage development, and to transfer corporate culture. These international assignments, however, no longer fit the stereotypical model of a single, long-term, there-and-back-again assignment. The global talent marketplace now encompasses a larger, more varied population of potential employees and a greater variety of employment relationships. Consequently, the talent managers of multinational companies must ensure that their talent-management initiatives properly align with the factors that have the greatest impact on expatriate return on investment (eROI).
For example, the global talent pool now includes global careerists who string together a series of concurrent or separate assignments that meet their long-term personal and professional goals. Moreover, these careers cross both national and organizational boundaries. As a result, the concept of who is (and who is not) an expatriate now includes the following types at a bare minimum:
- Assigned expatriates (AEs) – employees assigned by a corporation to a host location (the traditional expatriate)
- Self-initiated expatriates (SIEs) – individuals initiating an international work opportunity (e.g., locally hired foreigners or permanent one-way movers compensated on local terms), who may not be committed to a single employer in the long-term
- Expat-preneurs – self-employed individuals working outside of their host country location
- Foreign executives in a local organization (FELO) – foreign executives who are locally recruited to run part or all of a host-country organisation
In the past, company interests dominated the expatriate employment relationship. But now, because globally mobile employees own their careers as active, self-guided participants, multinationals must adopt a more strategic, long-term approach to their mobility – one that acknowledges all aspects of eROI. It is important to remember that the ROI will be quite different for an individual (iROI) than for a firm (cROI). Since iROI emphasizes the employee’s "career capital" (their valuation of the career as an investment), multinationals must respond to the factors that influence expatriate's intention to share their career capital for the betterment of the organisation (and not just for themselves).
The Evidence of Two Studies
Two large studies captured the different perspectives of mobility managers (cROI) and expatriates (iROI) as well as the factors that influence expatriate attraction, development, and attrition.
- A cROI study conducted with global mobility managers shows that most companies do not have formal procedures to measure eROI. Instead, mobility managers capture short-term cROI informally. As a result, there is a misalignment between the intended purposes of expatriation and the ability to achieve long-term global talent management goals. These defects are exacerbated by poor recruitment and selection “fit” for an assignment, poor assignment planning and management, and a failure to align compensation and benefits to expatriate performance.
- An iROI study conducted with assignees reveals frustration with short-term corporate processes that fail to calculate the overall long-term value gained from international work opportunities. These processes amount to 'unmet expectations' and include lack of assignment justifications, poorly designed performance appraisals, ineffective approval processes, and an overwhelming reliance on financial measurements of value. Potential breaches of the psychological contract for expatriates ('breaches' being more serious than 'unmet expectations') includes adhoc changes in compensation packages that are poorly communicated, and ongoing concerns about long-term career management that are not dealt with. As a result, about one-third of respondents seek external employment with competitors during assignments, and about one-quarter actively transition out of their organizations.
Conclusion: Implications for Talent Management
There is a misalignment between mobility managers’ emphasis on transactional, short-term financial processes (cROI) and expatriates’ preference for long-term, personal career enhancement (iROI). Current corporate practices simply do not comprehend that expatriates accept international work opportunities predominantly for career development and personal/ family opportunities, not financial gain alone. Consequently, existing talent management approaches seem unable to foster the long-term commitment that multinationals need from expatriates to optimize eROI. Moreover, multinational interests no longer dominate the expatriate employment relationship as in the past. Expatriates have now recognized the new environment and are responding to the corporate over-emphasis on financial value by adopting the same increasingly short-term, transactional, free-agent mindset that then impacts negatively on their organizational loyalty. In other words, expatriates' loyalty to their organisations is waning and more are leaving, even during an assignment abroad.
Multinationals and talent management professionals can improve eROI in the following ways:
- Adopt alternative, more dynamic forms of global staffing and employment that respond to the dynamic, more independent pool of global talent.
- Focus on career-management support and appropriate compensation that result in outcomes that expatriates value highly (iROI). This approach can be applied to traditional assigned expatriates (AEs) as well as to the external pool of talented independently motivated candidates (SIEs, FELOs) that place a high value on iROI.
* Note. This article summarizes selected highlights from the following monograph: Yvonne McNulty and Helen De Cieri (2016), “Linking global mobility and global talent management: the role of ROI,” Employee Relations, Vol. 38, Issue 1, pp. 8-30. Permanent link: http://dx.doi.org/10.1108/ER-08-2015-0157