Alternative Policies for International Transfers of Managers

By Edstrom, Anders; Galbraith, Jay | Management International Review, Annual 1994 | Go to article overview

Alternative Policies for International Transfers of Managers


Edstrom, Anders, Galbraith, Jay, Management International Review


The Policy Problem

Should MNCs use expatriates or nationals in management positions or rather what is the appropriate mix of nationalities? This question has been given a lot of attention by both researchers and practitioners[1]. The discussion has revolved around the pros and cons of the different organiza ideals identified by Perlmutter[2] which seem to guide the actions of MNCs and in particular their international transfer of managers. The implications of the ideal for management transfers is in short that an ethnocentric company will tend to use expatriates in key positions abr A polycentric company will use nationals wherever possible and a geocentric MNC will use a mixture of nationals, expatriates and third country nationals. Most MNC managers claim they hold a geocentric ideal and a number of companies have also tried to design a transfer policy which is consistent with this ideal.

The management of one MNC in the heavy manufacturing industry, for instance, decided that approximately 10% of the managers of all the companies in the group should be non nationals. It was consistent with top management's attempt to implement a new organizational ideal. One did not succeed, however, to establish the close cooperation between the different personnel departm which was a prerequisite for realizing the objective. The attitudes toward receiving managers from other countries were not at all as favorable as one had expected. In addition the compensation plan did not equalize the after tax income which made certain types of transfers very uneconomical from the individual's point of view. In addition expatriate service was not particularly stressed as a ground for development and promotion. Many managers thus saw expatriate service as too risky in view of their career aspirations. In short the company had not been able to translate the organizational ideal into more specific purposes which could motivate individual managers and groups to engage in transfers.

In another MNC, a large petroleum company, one had for a long time been transferring managers on the belief that expatriate service was a good broadening experience. The international transfers had not really been under much scruteny as to their role in the company. Under pressures of economy the company started to analyze the costs and use of international transfers more closely. One came to the conclusion that there were two viable motives for transfers -- getting a job done and staff development. In view of the high costs involved one proposed a better-control system. One required an assessment by the individual's present management of his potential, a clear statement of their career plans for him and, in particular, as definite a statement as possible of the responsibilities which he will assume when the overseas assignment is over. In addition one requires a clear definition of the individual's development/training needs, defined in terms of his present experience and knowledge and what he needs to develop his career as planned. There is a request to consider alternative means of staff development. Through the new control system the company expects to be able to use transfers more effectively. The company did not explicitly relate their use of transfers to an overall organizational ideal. They were hence not able to see the potential of transfers in this broader perspective.

During our interviews with a number of MNCs we encountered examples of more specific dilemmas or issues in the international transfer of managers. The length of time for an expatriate assignment was one such dilemma. Some managers felt that two years was a reasonable period of time in order for an individual to get a sufficient experience of the foreign working situation. Others, however, preferred a longer time period in order to minimize transfer costs and get a higher return on the investment in the fixed cost of a transfer. Many expatriates felt that "out of sight, is out of mind" and wanted to return to their home country after a fairly short time. …

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