Multinationals plan more expat tours

Although most multinationals anticipate major global mobility challenges over the next two to three years, a new survey from Towers Watson and Worldwide ERC found that nearly half of them expect to increase traditional international assignments over the same period.

While survey respondents in all regions anticipate increased cross-border moves, on average, U.S.-headquartered multinationals anticipate transferring more employees internationally, compared to those headquartered in Europe or Asia.

The Towers Watson/Worldwide ERC 2012 Global Talent Mobility Study found that 45% of global multinationals expect traditional expatriate assignments to increase through 2014, while only 18% expect them to decrease. More than half (54%) of those headquartered in the U.S., 43% of those headquartered in Asia and 26% of those headquartered in Europe said that they expect these assignments to increase.

However, European multinationals remain cautious, with 40% anticipating a decline in international assignments. These findings come at a time when challenges to global mobility abound: Almost seven in 10 (69%) cited prohibitive costs as a major challenge, while more than half cited high housing costs (55%) and high cost-of-living allowances (51%).

“Having a fluid and flexible workforce is a key competitive advantage for multinationals operating around the world today,” said Peggy Smith, chief executive officer of Worldwide ERC. “Particularly in a shaky global economy, companies will benefit from being able to transition smoothly to newer, untapped markets. This driving business need is the reason why we are seeing more multinationals turn to, rather than shy away from, developing an effective cadre of internationally mobile employees (IMEs), despite barriers of culture, language and cost.”

The most frequent reason cited for international assignments was business expansion overseas, named by 87% of multinationals. The second most cited impetus was knowledge transfer (65%), followed by career development (47%). While the reason behind increased expatriate moves seems to be strategic, the policy followed for making these moves is sometimes not: Only half (50%) of the respondents use a planned talent management process for making international assignment decisions, and 47% assign primary responsibility for talent management to the HR department only. In addition, more than a quarter (27%) do not have a global approach at all. For Asia, the number is even higher – almost half (49%) say they do not have a global approach.

Other difficulties stand out: When selecting candidates to be transferred, business needs are consistently cited as the most popular criteria. While this is a significant standard, multinationals may be overlooking equally important, but “softer,” criteria. For instance, only 16% of companies consider family circumstances, despite the fact that family/personal situations and a family’s inability to adapt to the host country culture – cited by 57% and 21% of respondents, respectively – are reported as the primary reasons for failed assignments.

“As mobility becomes more significant for companies, it is important for them to consider all facets of an international assignment,” said Steve Kueffner, senior international consultant at Towers Watson. “Taking a stand-alone approach will not allow multinationals to compete effectively in the war for talent – they would benefit from having an integrated talent management process, which involves all stakeholders (including the individual to be transferred, who is sometimes excluded, as well as senior business leaders in the home and host countries), rather than just HR. Without this integrated process, companies run the risk of overlooking key issues that might impact the success of the assignment and also not realizing the full potential of their highly skilled IME talent. Given the significant cost of these assignments, these are not issues that multinationals can afford to overlook.”

Other key findings from the report include:

60% of Asian companies and 40% of U.S. companies transfer traditional expatriates to China, while their European counterparts prefer to transfer within Europe, particularly the U.K. For short-term assignments, China remains the most popular, followed by the U.S.

Roughly two-thirds of companies report spending about two to three times the assignee’s annual salary on each traditional expatriate assignment. The U.S. has the highest percentage of companies (54%) with an average expenditure of about three times an assignee’s annual salary, while Asian companies overall have the lowest average expenditure for a traditional expatriate assignment, with over half (53%) spending twice an assignee’s annual salary.

Traditional expatriate assignments continue to dominate: More than half (53%) of international assignments are traditional, followed by short-term assignments, representing 18% of assignments. Localizations are currently the least popular (7%), but while, in practice, multinationals are still reluctant to enforce localizations (particularly for critical talent), the global financial crisis has encouraged more organizations to introduce or consider a formal localization policy to manage the transition of assignees away from a traditional expatriate package.