Measuring Return on Investment

By Solomon, Charlene Marmer | Workforce, March 1999 | Go to article overview

Measuring Return on Investment

Solomon, Charlene Marmer, Workforce

Do you know what your international assignments are worth?

Peer behind the walls of today's corporations and you're likely to find executives analyzing and scrutinizing a constant stream of bits and bytes from their spreadsheets. As they sift through return on investment and net margins, long-term debt and capital expenditures, they struggle for ways to eke out ever-greater profitability and productivity. Managers know the value of their assets; they know the worth of their capital expenditures. They can print out simple arithmetic equations that show measurable results. They can produce clear statements about performance objectives.

Yet when the topic turns to international assignments, it's as if someone has pulled the plug. In an era in which everything needs to be value-proven and cost-justified, many corporations don't even know the number of international assignees they have. Nor do their HR managers track the real costs or know the value contributed by these international assignees. So, who cares? Senior managers do. And they're putting pressure on HR. As greater sales are generated by companies' global operations senior managers will watch more carefully the revenue generated by these transferees.

It's clear that international assignments account for an evergrowing portion of today's corporate growth. The "1996 Global Relocation Trends Survey" by the National Foreign Trade Council and Windham International (both based in New York City) suggests that 43 percent of corporate revenue is generated outside of headquarters' countries. But it's not enough to examine and cut expenditures, and it's no longer adequate simply to guess that assignees are accomplishing the business task at hand. Today's HR managers face a more complicated job: determining whether international assignments are yielding a positive return on investment (ROn.

The critical first step is to assess and assign value and expense. Next, HR must weigh the value against the cost. But caution. We're heading into uncharted territory. The process is likely to require a paradigm shift supported by a combination of hard, quantifiable data, technology, and good, old-fashioned intuition and management experience.

Quantify the retum.

Assigning a dollar amount to the value, or the return, from an international assignment is the greatest return-on-investment challenge facing global companies. It's a tough proposition because companies and consultants are still struggling to create systems and standard processes to assist with calculating value.

"It's difficult to measure value if you take an isolated view. You need to take a holistic viewpoint across your corporation," says Andy Johns, head of expatriate employment policy and services at Shell International in The Hague, Netherlands. For one thing, departments that incur the costs don't necessarily acquire the value. Costs are immediate, and value is derived over the long term. Furthermore, costs are visible; value is intangible. For example, to groom an individual as general manager of a large European operation, it's common practice to develop that person first with an assignment in a smaller operating company. Most often, that employee is charged to the operating company for which he or she currently works, although that unit is only accruing part of the value. The value attained by other parts of the company needs to be accounted for as well.

Add to that the challenge of attributing value in such situations as when you send "Employee Jim" to establish the marketing of a new product in Poland. How do you quantify Jim's marketing expertise, his flare or his management capabilities? How do you decide if you really need to have an expatriate in the location or if a business traveler or a long-distance "virtual expatriate" would be equally effective? You can collect data, you can use past experience, but at some point, you must rely on judgment and intuitive sensibility. …

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