The Key to Expatriate Success
Up to 40 percent of U.S. "expatriate" managers fail in their overseas assignments. The missing link is preparation. Here are some guidelines for success.
Overseas operations are big business for multinational corporations, or MNCs. In one recent year, Exxon, America's largest MNC, produced overseas sales representing 72 percent of the company's total revenue and almost 75 percent of its total profit. Given the revenue at stake, it is to any company's advantage to staff overseas foreign divisions with effective expatriate managers.
Unfortunately, many companies do not realize the potential bottom-line impact of expatriate success and fall short in their efforts to prepare expatriates for their assignments. Overseas assignments are notorious for their high failure rate. An article in the Academy of Management Review estimated that from 1965 to 1985, the expatriate failure rate fluctuated between 25 percent and 40 percent, with an average cost per failure to the parent company of $55,000 to $150,000.
What is the missing link? One significant consideration is a lack of understanding of the new country's culture and a lack of "acculturation" --that is, efforts to adopt the cultural traits or social patterns of the host country. Acculturation can mean the difference between a profitable success and a costly failure. "The inability of expatriate managers to adjust to the host culture's social and business environment is costly in terms of management performance, productivity in the overseas operation, client relations, and operations efficiency," say the authors of the Review article.
How important is acculturation to expatriate success? A survey of expatriate managers representing 40 multinational corporations in Japan identified some key factors contributing to expatriate success.
The managers said that the most important qualifications were an understanding of the firm's mission, leadership ability, an understanding of the host nation's culture, communication skills, and overseas business experience. The managers ranked formal degrees and military experience as least significant.
The impact of acculturation should not be underestimated. Different expectations in the unfamiliar culture can make a manager's leadership and communication styles obsolete. When that happens, the expatriate must be able to understand and respond to new situational demands. Research shows that flexibility in leadership and communication styles is necessary for managerial effectiveness. Expatriate success requires that managers not only understand the unfamiliar culture, but also be able to use that knowledge to adapt their leadership and communication practices to the particular company, employees, and environment.
The survey results suggest that a combination of reliable selection and training strategies increases the potential for expatriate success. First, companies seeking overseas managers should select them from within the organization. All of the Japanese expatriates in the study were chosen from within their companies. Companies that select from their own ranks are more likely to choose managers with corporate knowledge, skills flexibility, and adaptability. A manager's effectiveness in previous managerial roles implies that he or she has the leadership and communication skills needed for success abroad. Broad organizational experience will enhance the manager's ability to understand fully the corporation's goals and objectives. The managers surveyed cited "broad business perspective" as one advantage of selecting expatriates from within the domestic managerial force.
Companies should carefully integrate selection and training. The survey also shows that although none of the companies required predeparture language training, 88 percent offered voluntary language programs. Sixty-three percent of the respondents received …