International Assignments

International Assignments How to organize the international assignment management at Swisslog By Nicole Baumgartner 21 August 2009 Bachelor Thesis ...
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International Assignments How to organize the international assignment management at Swisslog

By Nicole Baumgartner

21 August 2009

Bachelor Thesis International Management Supervising lecturer: Prof. Dr. Anita Graf

International Assignments

Contact Details Client Bernhard Richard Corporate Human Resources Swisslog Webereiweg 3 5033 Buchs

Student Nicole Baumgartner Matten 10 5707 Seengen

Supervising lecturer Prof. Dr. Anita Graf Fachhochschule Nordwestschweiz Riggenbachstrasse 16 4600 Olten

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Declaration of Authenticity I, the undersigned, declare that all material presented in this bachelor thesis is my own work or fully and specifically acknowledged wherever adapted from other sources.

I understand that if at any time it is shown that I have significantly misrepresented material presented here, any degree or credits awarded to me on the basis of that material may be revoked.

I declare that all statements and information contained herein are true, correct and accurate to the best of my knowledge and belief.

Nicole Baumgartner 21 August 2009 ____________________

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Acknowledgment I would like to take the opportunity to thank everyone who supported me while researching and writing this thesis.

First of all, I thank Bernhard Richard from Swisslog who kindly provided the topic for my bachelor thesis. I also appreciate the valuable inputs and advices which he gave me during the project.

Then, I thank all interviewees who answered my questions and gave me insights in how their company manages international assignments. I am grateful for their openness. I also thank Swisslog’s international assignees who were available for short interviews and advanced their opinion about the current state of the expatriate management.

Finally, I thank Prof. Dr. Anita Graf, FHNW supervisor, for her helpful comments and project know-how which she brought in.

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Abstract The purpose of this bachelor thesis is to investigate how the management of international assignments is best structured and to give recommendations to Swisslog how to organize its expatriate management. The topics which are covered in the recommendations are general organization, international assignment policy and compensation and benefits. In a first step, international human resource literature was studied and important points of each element of the assignment life-cycle were summarized. It has been seen that assignments are very challenging for the expatriate’s family and that a detailed preparation is vital. Then, interviews with Swiss multinationals were accomplished in order to gain knowledge of how international assignments are managed in practice. The way international assignments are organized depends on the company’s size. Whereas international assignment specialists manage expatriate assignments in big companies, in small companies corporate HR, which is less knowledgeable, is responsible. Furthermore, big companies have detailed policies and processes in place, while the organization is less structured in small companies. As a last source of information, several Swisslog expatriates provided valuable inputs of what they expect from the company. Accurate information about legal aspects and assistance during the initial phase of the assignment are most important. Based on the results of the interviews and the literature review, several recommendations were made. It is recommended that one department is responsible for managing expatriates because of the complexity of the whole processes. Moreover, it is important that directives and guidelines are in place to ensure compliance and consistency. In terms of compensation, the assignee should not lose financially by accepting a job offer abroad.

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Table of Contents Contact Details................................................................................................................. i Declaration of Authenticity............................................................................................ ii Acknowledgment ........................................................................................................... iii Abstract .......................................................................................................................... iv Table of Contents............................................................................................................ v List of Figures .............................................................................................................. viii List of Tables................................................................................................................ viii 1

2

Introduction ............................................................................................................. 1 1.1

Problem Approach ....................................................................................................... 1

1.2

Objectives .................................................................................................................... 1

1.3

Methodology................................................................................................................ 1

1.4

Limitations................................................................................................................... 2

International Assignments...................................................................................... 4 2.1 2.1.1

Ethnocentrism.......................................................................................................... 4

2.1.2

Polycentrism and Regiocentrism............................................................................. 4

2.1.3

Geocentrism............................................................................................................. 5

2.2

Types of International Assignments ............................................................................ 6

2.2.1

Business Trips ......................................................................................................... 6

2.2.2

Short-term Assignments .......................................................................................... 6

2.2.3

Long-term Assignments .......................................................................................... 7

2.2.4

Transfer/Localization .............................................................................................. 7

2.2.5

International Commuting......................................................................................... 7

2.3

3

International Orientation.............................................................................................. 4

Reasons for International Assignments ....................................................................... 8

2.3.1

Company ................................................................................................................. 8

2.3.2

Employee................................................................................................................. 9

2.3.3

Demand-driven vs. Learning-driven ..................................................................... 10

International Assignment Life-cycle ................................................................... 11 3.1

Selection .................................................................................................................... 12

3.1.1

Selection Criteria................................................................................................... 12

3.1.2

Selection Process ................................................................................................... 13

3.1.3

Selection Methods ................................................................................................. 13

3.1.4

Failure.................................................................................................................... 14

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3.2 3.2.1

Language Training................................................................................................. 15

3.2.2

Cultural Training ................................................................................................... 16

3.2.3

Career Development Preparation........................................................................... 16

3.2.4

Family Life Preparation......................................................................................... 17

3.3

4

During the Assignment .............................................................................................. 17

3.3.1

Assistance.............................................................................................................. 18

3.3.2

Performance Appraisal .......................................................................................... 18

3.3.3

Compensation........................................................................................................ 20

3.4

Repatriation................................................................................................................ 20

3.5

Challenges in Assignment Life-cycle ........................................................................ 21

3.5.1

Family.................................................................................................................... 21

3.5.2

Language ............................................................................................................... 22

3.5.3

Women Expatriates ............................................................................................... 22

3.5.4

Lifestyle................................................................................................................. 22

3.5.5

Localization ........................................................................................................... 23

3.5.6

Career Development.............................................................................................. 23

3.5.7

Costs ...................................................................................................................... 23

Compensation ........................................................................................................ 24 4.1

5

Preparation and Training ........................................................................................... 15

Balance Sheet Approach............................................................................................ 26

4.1.1

Expense Categories ............................................................................................... 28

4.1.2

Cost of Living Adjustment .................................................................................... 30

4.1.3

Challenges ............................................................................................................. 31

4.2

Host Country Approach ............................................................................................. 33

4.3

Headquarters-based Pay............................................................................................. 34

4.4

Higher of Host or Home ............................................................................................ 35

4.5

Negotiation ................................................................................................................ 35

Benefits ................................................................................................................... 37 5.1

Hardship Allowance .................................................................................................. 37

5.2

Mobility Allowance ................................................................................................... 37

5.3

Schooling ................................................................................................................... 37

5.4

Home Leaves ............................................................................................................. 38

5.5

Housing...................................................................................................................... 38

5.6

Lump Sum ................................................................................................................. 38

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6

7

Swisslog’s Expatriate Management and its Challenges..................................... 39 6.1

Company Portrait....................................................................................................... 39

6.2

Expatriate Management ............................................................................................. 39

6.3

Survey Results ........................................................................................................... 41

6.3.1

Expat/Transferee Survey ....................................................................................... 41

6.3.2

Line Manager of Expat/Transferee Survey ........................................................... 43

6.3.3

Main Problem Areas.............................................................................................. 45

Interviews............................................................................................................... 46 7.1 7.1.1

Alstom ................................................................................................................... 46

7.1.2

ABB....................................................................................................................... 48

7.1.3

Holcim ................................................................................................................... 50

7.1.4

Synthes .................................................................................................................. 52

7.1.5

Straumann.............................................................................................................. 54

7.1.6

Schaffner ............................................................................................................... 55

7.1.7

Summary ............................................................................................................... 57

7.1.8

Interpretation of Results ........................................................................................ 58

7.2

8

9

Swiss Companies ....................................................................................................... 46

Swisslog Expatriates .................................................................................................. 59

7.2.1

Results ................................................................................................................... 59

7.2.2

Summary ............................................................................................................... 61

7.2.3

Interpretation of Results ........................................................................................ 62

Recommendations ................................................................................................. 63 8.1

Organization .............................................................................................................. 63

8.2

International Assignment Policy................................................................................ 67

8.3

Compensation and Benefits ....................................................................................... 70

Conclusion.............................................................................................................. 75

List of References.......................................................................................................... 78 Appendix 1 ..................................................................................................................... ix Appendix 2 ...................................................................................................................... x

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List of Figures Figure 1.1: Research Process.............................................................................................2 Figure 2.1: Country Clusters .............................................................................................5 Figure 3.1: Elements of International Assignment Life-cycle ........................................11 Figure 4.1: Categories in Balance Sheet Approach.........................................................28 Figure 4.2: International Spendable Income....................................................................32 Figure 6.1: Logo Swisslog...............................................................................................39

List of Tables Table 4.1: Different Payment Options.............................................................................33 Table 6.1: Delivery of Accurate Information ..................................................................42 Table 6.2: Role of HR .....................................................................................................44 Table 6.3: Factors for a Successful Expatriate Management ..........................................45 Table 7.1: Criteria List for a Successful Policy...............................................................59 Table 9.1: List of Recommendations...............................................................................76

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1

Introduction

Due to increasing globalization, many firms expanded their business activities worldwide. For many of those firms, international human resource management became crucial because they had to decide what people to employ in the new subsidiaries. In the past, employees from the head office were usually sent on international assignments to subsidiary operations. Today, international transfers from one company operation to the other take place.

1.1 Problem Approach The business expansion in overseas markets made international assignments vital for Swisslog, a medium-sized company located in Buchs, Switzerland. A few years ago, the company worked out international assignment policies to manage its international assignees. A recent survey under expatriates and line managers shows some weaknesses in the international assignment management.

1.2 Objectives The objectives of this thesis are: 

To describe the life-cycle of an international assignment (need, selection, preparation, compensation, performance appraisal, repatriation), including challenges that arise



To list possible compensation methods and benefits for expatriates and discuss their suitability



To establish suggestions for successfully managing the assignment life-cycle and to make recommendations on what compensation method to use and what benefits to pay

1.3 Methodology The theoretical part at the beginning of the thesis is based on literature review about international human resource management. Books, articles and surveys made by consulting firms were used.

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The empirical part starts with the identification of strengths and weaknesses in Swisslog’s current expatriate management. Research within the company was done. This included reviewing the existing international assignment policies and manuals and analyzing the Expat/Transferee Survey and the Line Manager of Expat/Transferee Survey carried out by Swisslog in May 2009. In a second step, semi-structured face-to-face interviews were accomplished with Swiss international firms. These interviews gave insights in how Swiss firms manage the assignment life-cycle, what factors determined their compensation strategy and how they anticipate or solve challenges. Short face-to-face interviews with current Swisslog expatriates were used to test statements made by the companies. Based on the literature review mentioned above and the interviews, suggestions for successfully managing the expatriate management and recommendations for a compensation package are presented. Figure 1.1 shows the research process.

Figure 1.1: Research Process input

Company Interviews

Theory

input

Expatriate Interviews

Recommendations

Source: author

1.4 Limitations The outcome of this bachelor thesis is a recommendation for Swisslog. The decision whether to follow the proposed recommendation and to put it into practice is up to Swisslog’s initiative.

The time to make research and to write the bachelor thesis was eight weeks. Due to this short timeframe, the effects of legal aspects such as taxes, social security and work permits will not be accounted for in the recommendations. Furthermore, only long-term assignments were closer investigated.

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Employees who relocate to another country have many different donations in the literature. In this paper, for simplicity reasons, the terms expatriates and international assignees are used. They refer to employees who are sent by their employer from their home country (place they are legally employed) to the host country for a defined period of time. (Ruch 2002) This definition includes employees from a Swiss multinational company moving from Switzerland to Canada, from Turkey to Switzerland or from Canada to Turkey.

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Theoretical Part 2

International Assignments

Over the last few years, international assignments for employees have gained in importance due to an ever increasing number of multinational and global companies. The following chapter describes three international orientation strategies and states why companies relocate their employees, even though such assignments are difficult to manage and are costly. In addition, different types of international assignments are listed.

2.1 International Orientation If companies expand their business activities by building subsidiaries or buying companies in other countries, they must decide how management systems and staffing policies are adopted to their new affiliates. According to the EPRG-model, introduced by Perlmutter in 1969, three international orientation strategies are available: ethnocentric, polycentric/regiocentric and geocentric. (Gmür and Thommen 2006) Depending on the approach, the company’s international assignments are managed differently. 2.1.1 Ethnocentrism Companies with strong corporate cultures and strong national identities often follow an ethnocentric strategy. Because of the strong identification with the home country, all management systems, which were developed in the head office, are copied to the subsidiary operation. This also implies centralized decision making and control in the home country. Concerning staffing policies, many international assignments are pursued because most leadership positions in the subsidiary operations are held by Parent Country Nationals (PCN) (i.e. employees from the home country) who have the required knowhow about the company’s culture and practices. (Gmür and Thommen 2006) 2.1.2 Polycentrism and Regiocentrism The polycentric strategy is the opposite of the ethnocentric strategy. All subsidiaries are managed independently which means that their own culture-based management practices and employment policies are developed. The head office’s function is only to coordinate business between parent country and host country. In this approach, the

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recruitment of Host Country Nationals (HCN) (i.e. natives of the host country) has a higher significance as most leadership positions are held by locals. (Gmür and Thommen 2006) The regiocentric approach is in its basic characteristics equal to the polycentric approach. The only difference is that management positions are not necessarily staffed with HCN but with people from the same cultural region (Kühlmann 2004). Figure 2.1 shows country groupings based on data from eight comprehensive studies about cultural differences.

Figure 2.1: Country Clusters

Arab Abu-Dhabi Bahrain United Arab Emirates Kuwait Oman Saudia Arabia

Near Eastern Turkey Iran Greece

Nordic Finland Norway Denmark Sweden

Far Eastern Singapore Malaysia Hong Kong South Vietnam Philippines Indonesia Taiwan Thailand

Germanic Germany Switzerland Austria

Latin American Argentina Venezuela Mexico Chile Colombia Peru

Latin European France Belgium Italy Spain

Anglo United States Australia New Zealand United Kindom Ireland South Africa Canada

Adapted from Snell and Bohlander 2007, p. 544 2.1.3 Geocentrism The geocentric approach is a mixture between the other three mentioned above. Although the head office holds again a dominant position, management systems and practices are not copied to the subsidiaries but they are developed to a best-practice solution which fits all or at least most cultures. Key management positions are either

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filled by PCN, HCN or Third Country Nationals (TCN) depending on skills, qualifications and experiences. (Gmür and Thommen 2006)

The international orientation depends on how long the company already operates internationally. In its initial position, the company favors the ethnocentric approach to execute power and control. As international experience increases, the company switches to a polycentric or geocentric strategy. (Briscoe et al. 2009) In practice, no pure strategy is implemented but rather mixtures between relevant approaches are adopted. (Gmür and Thommen 2006)

2.2 Types of International Assignments Different types of assignments can be used to fulfill an international human resource strategy. To characterize them, attributes such as duration, goal and legal factors are important. Typically, they are classified in business trips, short-term and long-term assignments, transfers, and international commuting. 2.2.1 Business Trips When an employee is sent to another location for a maximum of three months, it is called a business trip. The duration of business trips might vary depending on the company and the host country because it is often based on legal aspects (taxes, social security, work permit) which must be considered in advance. In general, the employees keep their domicile in the home country and their employment contract is not changed. Expenses for flight, hotel, food, etc. are reimbursed according to special policies. (Ruch 2002) 2.2.2 Short-term Assignments Short-term assignments usually last for up to twelve months. If the employee stays for a total of twenty-four months (maximum two years), it is referred to as medium-term. The employment contract will be continued and supplemented with a special agreement. Because the legal relationship between the employer and the expatriates is not changed, the expatriates receive their normal compensation package of the home country. Additionally, allowances (transportation, housing, etc.) are paid which might change

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corresponding to the employee’s hierarchical level or family situation. Legal effects on taxes and social security must be taken into consideration as their importance rises with increasing assignment duration. The goal of such a deployment is mostly project-based. (Ruch 2002) 2.2.3 Long-term Assignments Long-term assignments are used, for example, if someone is delegated to a new location for the penetration of a new market or the management of a subsidiary. They usually last between two and six years. It makes sense to prepare a new labor contract between the host unit and the expatriate and to agree on a new compensation and benefit package. (Different compensation methods for long-term assignments will be discussed in Chapter 4) The old contract is put on ice during the assignment. Specialist knowledge about taxes, social security and work permits in the home as well as the host country must be available to prevent any disadvantage for the expatriate. (Ruch 2002) 2.2.4 Transfer/Localization When the employee moves to another location for an unlimited period of time, a transfer takes place. The working contract with the home unit is ceased and a new contract between the host unit and the transferee is established. The transferee does not profit from any expatriate benefits (long-term assignment benefits) and is usually integrated into the pay system of the host country. (Ruch 2002) 2.2.5 International Commuting International commuting is a special type of employment. The employees work some days per week in their home unit and the remaining days in another location (foreign country). Such assignments are used if a department, for example marketing, is centralized in one location. All marketing directors of the different entities must travel regularly to the head office to coordinate the latest campaigns. International commuting also applies if employees work some days per week on a cross-national project or if regional managers frequently visit the different units in their regions. (Ruch 2002)

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2.3 Reasons for International Assignments 2.3.1 Company The frequency of international assignments clearly indicates that they bring additional benefits to the company. Although international assignments are very expensive, even small and medium sized companies will use them often. The reasons are discussed below. New Markets The increasing importance of global markets makes it essential to have basic knowledge about key country markets. Companies gain insights in these markets in that they send employees abroad to learn how to conduct business there. If new markets are penetrated by building subsidiaries, HCN are often relocated to the subsidiary’s country to learn fundamentals about the market and the customers and also to control and coordinate the establishment of the new operation. (Ruch 2002) Know-How Transfer Usually, know-how is generated at the home office and transferred to subsidiary operations. Thus, employees are deployed to foreign entities to deliver know-how. Departments with frequent know-how transfers are research and development, production, sales, customer service and controlling. The stream of know-how can also originate in host units and flow to the home office, although less common. (Ruch 2002) Labor Market Differences in labor markets are another reason. While developing countries have a labor surplus, many developed countries face a shortage due to the aging population. (Briscoe et al. 2009) Companies prefer to deploy their employees if no suitable candidates are available. However, the deployment is sometimes difficult as some countries have a foreign employee regulation policy which defines the maximum number of foreign employees allowed to work in a company. (Ruch 2002) Although there is a surplus in many countries, there is no guarantee that the available work force has the required skills. (Briscoe et al. 2009)

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Globalization Globalization does not only mean to extend the company’s business worldwide but also to globalize the work force by acquiring international experience. Therefore, employees are relocated abroad to make experiences and to open their minds. (Ruch 2002) Company Culture Every company has its distinctive corporate culture which is represented in its management practices and philosophy. Some companies demand from their employees to work at least once in another country if they want to be promoted to a higher position. This is stated in the company’s employment philosophy and actively supported by HR. The international assignment’s purpose is to enrich the employee’s knowledge and skills to successfully manage future subordinates and businesses. (Ruch 2002) Project Management Projects are more frequently done by global teams staffed with the best people in the company. These projects are mostly executed by short-term assignments or on commuter basis. (Ruch 2002) 2.3.2 Employee International assignments are not only beneficial for the company but also for the employees. They bring employees many positive effects, even though the relocation to another country is combined with several obstacles. The next section discusses motives for employees. Career Opportunities During the assignment, the expatriate develops competences and skills such as adjusting to a new environment, learning a new language, coping with unexpected situations, managing more responsibilities, etc. All together enhances the employees’ career opportunities within the company and their value on the job market. In addition to enhanced career opportunities, the assignment also enlarges the employees’ job perspectives due to more experience, higher motivation and more competences and skills. (Ruch 2002)

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Compensation The compensation package received by the expatriates increases to approximately twice the base salary at home. In addition to the salary, benefits are paid for expenses such as housing, home leaves, schooling, etc. The final compensation and benefit package can have motivational character for an employee. On the other hand, the assignment also contains risk (e.g. inadequate health care) which must be weighted against the financial benefit. (Ruch 2002) Living Conditions Employees may also accept international assignments because they expect better conditions of living in the host country. However, this reason is not paramount. (Kühlmann 2004) 2.3.3 Demand-driven vs. Learning-driven Typically, the purposes for international assignments are classified in reasons for the company and reasons for the employees. It is also possible to distinguish between demand-driven and learning-driven purposes. The first category includes international assignees who are sent for managing and controlling new subsidiaries and markets, transferring technologies, solving problems as well as performing accounting, sales and manufacturing tasks. Transferring know-how, developing managerial functions and teaching locals the corporate culture and values are summarized under learning-driven purposes. (Briscoe et al. 2009)

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3

International Assignment Life-cycle

After the company’s decision to relocate an employee, the international assignment lifecycle starts. It is a process with several elements. (see Figure 3.1) First, a suitable candidate must be selected and prepared. Then, the expatriate must be ministered during the assignment and after completion, repatriation must be planned.

Figure 3.1: Elements of International Assignment Life-cycle

Selection

Preparation and Training

Repatriation

International Assignment Life-Cycle

Assistance during Assignment

Compensation

Performance Appraisal

Source: author

Many multinational companies design an international assignment policy to manage their assignment life-cycle. According to Briscoe et al. (2009) the policy’s purpose should be ‘to ensure greater consistency and equity among international assignees and reduce barriers to global mobility’. A well-designed policy should contain rules and regulations for every step in the assignment life-cycle (i.e. selection, preparation, compensation, performance appraisal, repatriation), with a special focus on the

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compensation package and legal aspects. (Ruch 2002) HR or a special international assignment department is responsible for educating line managers and employees on the content and for ensuring that everyone is treated the same way. (Briscoe et al. 2009) In the following chapter important aspects of the different elements are discussed.

3.1 Selection The process for selecting international assignees has a high impact on the success or failure of international assignments. The primary goals are to ‘choose individuals who will stay for the duration of their international assignment and who will accomplish the tasks for which they were sent abroad’. (Briscoe et al. 2009, p. 179) If both goals are met, the assignment is said to be successful. The next paragraphs describe how expatriates are selected most efficiently and effectively in order to minimize the failure rate. 3.1.1 Selection Criteria Before anyone can be considered for an open position abroad, technical and cultural requirements of that position must be listed. This process can be compared to a normal job analysis when filling a vacant position in the home country. In a first step, the list of requirements can be compared to the profile of potential candidates. Important criteria for selection are: job suitability (does the candidate meet the requirements), cultural adaptability (is the candidate able to adjust while delivering good performance) and desire for foreign assignments (is the candidate and his or her family willing to adjust to a new environment). Job suitability is still named a key factor for selecting someone, although it is argued that cultural adaptability is at least as important. (Briscoe et al. 2009)

For managerial positions, specific skills necessary for completing an assignment successfully were identified. These skills are divided into core skills and augmented skills. Core skills, which are critical for a manager’s success abroad, include experience, decision making, resourcefulness, adaptability, cultural sensitivity, team building and maturity. Augmented skills include technical skills, negotiation skills, strategic thinking, delegation skills and change management. They are helpful for making efforts of expatriate managers easier. (Snell and Bohlander 2007)

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3.1.2 Selection Process A four step approach for selecting individuals is suggested. First, employees should make a self-evaluation about their career goals, nationally and internationally. This has the advantage that companies do not need to force someone to go abroad and risk a failure because they have a pool of candidates who are willing to go. Second, a candidate pool is created. Information about the candidate (availability, language, country preference, skills, experience) can be stored in a database. Third, the company can select potential candidates, based on the information in the database, and assess their readiness relatively to the technical and cultural requirements. In last step, augmented skills and attributes are assessed, for example the candidate’s willingness and ability to adapt to a new environment, communication and language skills, etc. Although a well-structured approach minimizes the failure rate, it is no guarantee that the international assignment will be completed successfully. (Snell and Bohlander 2007) 3.1.3 Selection Methods Different selection methods are available in small and medium sized companies. The tools used do not differ a lot from domestic staffing tools. Career planning, selfselection and recommendations from line managers or senior executives are often the basis for being considered as a potential candidate. After the acceptance in the pool of candidates, more standardized approaches are applied. Personal interviews and formal test are used most often. (Briscoe et al. 2009)

Personal interviews with the candidate and his or her spouse/partner are conducted very frequently. Besides the international assignment coordinator, the home country manager as well as a representative of the host unit should attend such. (Briscoe et al. 2009)

Formal assessments are also widely spread. To make the selection easier and more reliable, tests were developed by several companies and consultants. These tests rely on compiled profiles of successful international assignees. If a potential candidate matches such a profile, the chance of successful completion is relatively high. Included in the test are factors such as: experience, education, personal interests, family situation, signs of flexibility and desire for an international assignment. (Briscoe et al. 2009)

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BMW offers a two-day orientation workshop for potential expatriates and their families. The goal of this workshop is to familiarize the candidates with the requirements for such assignments and inform them what they can expect of an international assignment. After the workshop, the attendees must be able to make a decision on whether they are still interested or not. (Kühlmann 2004) 3.1.4 Failure The optimal outcome of the selection process are expatriates who fulfills their tasks and duties. However, mistakes made during the selection process can lead to the failure of international assignments. For example, the decision to relocate was made with too little lead time or the spouse/partner was not involved during the decision process. Failures can also originate in the expatriates’ inability to adjust to the foreign environment. Traditionally, three forms of failures are named. If the assignee returns home earlier than agreed it is called dropout. A brownout exists if the assignee performance poorly and uses ineffective practices in the host country. Turnover within one year after completion of the assignment is also counted as a failure, even though the whole assignment was completed. All of these assignment failures are very costly and may damage the relationship between the home and host country. (Briscoe et al. 2009)

In a global survey about international assignment practices conducted by KPMG in all industries worldwide in 2008, half of the total 430 respondents stated that only five per cent or less of their expatriates are dismissed or recalled due to ineffective performance. Twenty-five per cent said that none of their expatriates are recalled or laid off. Concerning the turnover after repatriation, in sixty-one per cent of participating companies, the turnover is less than ten per cent of the total number of expatriates returning home. The two most important reasons for turnovers are no appropriate job is available (36%) or a better job is offered in another company (23%). Unfortunately, one third of the companies do not know why their expatriates quit. (KPMG 2008)

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3.2 Preparation and Training It is suggested that preparing for an international assignment is at least as important for successful completion as selecting the right candidate. Expatriates and their families must cope with a new environment including a different culture, a different language, different habits and behaviors, etc. All of these aspects make a well-prepared training and counseling program vital prior to the assignment.

In general, it can be said that the training program should have the following outcomes: (1) Knowledge about the purpose of the international assignment, its specific content and the involved parties’ roles and responsibilities, (2) Knowledge about the host country including cultural, political, economic, business, legal and social factors, (3) Awareness of problems and difficulties which can appear in the foreign country. (Briscoe et al. 2009)

Knowledge about key points of the assignment is often delivered with counseling sessions. Home/Host HR or a separate International Assignment department discusses the assignment as well as the working contract with the expatriate. Topics such as compensation, benefits, taxes, social security, and repatriation are covered. (Briscoe et al. 2009)

In addition to the assignment information, at least the following areas should be covered during the preparation and training process: Language training, cultural training, career development preparation and family life preparation. (Snell and Bohlander 2007) 3.2.1 Language Training In the majority of cases, expatriates relocate to a country whose language they do not speak. Even though English is seen as universal business language, and those expatriates mostly speak English, knowledge of the host country language is also essential. (Snell and Bohlander 2007) However, speaking the language is not enough. Having the ability to read non-verbal communication signs (gestures, facial expressions, vocalization) is at least as important as verbal communication because ‘up to 93% of an oral message is communicated non-verbally’. (Beamer and Varner 2008) Therefore,

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expatriates and their families should receive holistic training in verbal and non-verbal communication.

Almost ninety per cent of the surveyed companies confirm that they offer language training to at least the expatriate, sometimes even to the spouse/partner or the whole family. The remaining do not provide language training. (KPMG 2008) 3.2.2 Cultural Training Culture has great influence on managerial practices and behaviors and what roles employees and managers play in a company. In one culture it is normal that decisions are made at the lowest possible level, in another decision making is centralized at the top level. Some cultures are more individual oriented with great competition between employees while others favor cooperation and group behavior. Because of these differences, it is vital to understand basic cultural assumptions of the host country. (Snell and Bohlander 2007) Cultural training should aim at (1) making expatriates aware that behaviors vary across cultures, (2) building a mental map of the new culture and (3) practicing the behaviors they will need. These objectives should be reached by doing more than just a familiarization trip to the host country. Case studies, behavioral simulations and cultural mentoring are effective means for successful training. (Briscoe et al. 2009) Even though cultural training is fundamental for an international assignment only two third (63%) of the companies offer it. (KPMG 2008) 3.2.3 Career Development Preparation Personal development is an important part of every international assignment. The expatriate makes valuable experiences and acquires new intercultural skills and competences. In order that the personal development has a positive effect on the career after repatriation, two questions must be asked prior to the relocation abroad. (A) Does the assignment contribute to the international success of the company? The assignment will be more rewarding if clear performance goals are set. (B) Is international experience required from the company to get a promotion or become a top manager? For the assignees it should be clear how the assignment contributes to their career opportunities within the company. (Snell and Bohlander 2007)

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3.2.4 Family Life Preparation The adjustment to the new environment for expatriates and their families is challenging. It is normally more difficult for the spouse or partner than for the expatriate because the latter has a job in a more or less familiar company environment. The spouse and partner, on the other side, often have no job, no friends, and feel alone in the host country (Kühlmann 2004). To minimize adjustment difficulties for the spouse/partner some companies provide Work Visa Assistance in the host country (29%), pay an allowance for upcoming expenses (job search) (28%), reimburse education expenses (22%) and assist in job search (19%). Only six per cent fully or partially compensate for the lost income of the spouses. Thirty-five per cent of the respondents still do not provide any assistance. (KPMG 2008) In addition to adjustment difficulties, many expatriates and their families experience a culture shock during the assignment. (Snell and Bohlander 2007) Culture shock is defined as ‘the set of psychological and emotional responses people experience when they are overwhelmed by their lack of knowledge and understanding of the new, foreign culture and the negative consequences that often accompany their inadequate and inexperienced behavior’. (Briscoe et al. 2009) Culture shock is not experienced at the beginning of the assignment because then everyone is still euphoric about the new challenge. Only after a while, the assignees and their families realize that they do not understand basic cultural rules and they begin to feel frustrated, anxious, angry and depressed. (Briscoe et al. 2009) To mitigate culture shock, cultural trainings such as mentioned in Section 3.2.2 and familiarization trips are helpful.

3.3 During the Assignment After the training and preparation phase, the expatriate is sent on assignment to a foreign country. During the assignment, three topics are of importance: assistance, performance appraisal and compensation. The objectives of permanent assistance are to make the stay as comfortable as possible and to anticipate problems. Performance appraisals and a well-designed compensation package should aim at motivating expatriates to perform well and to fulfill their tasks.

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3.3.1 Assistance Especially during the adaptation phase, expatriates and their families should receive extensive support in searching for housing, buying a car, searching the best place for buying groceries, enrolling the kids in school, etc. These tasks are often performed by a relocation service in the host country. Relocation services also help to introduce expatriates to social networks and clubs. (Kühlmann 2004)

Besides adjusting to the daily live in the host country, expatriates must familiarize themselves with their new jobs. The superior of the host unit should assist at the beginning by showing the new workplace, introducing key people, showing different departments, etc. During the assignment, expatriates are often assisted by a coach who answers questions and helps to solve problems. Feedback about their performance is also a crucial part so that expatriates know where they stand and where they have to improve. (Kühlmann 2004)

Even though assignees might be far away from their home unit, the contact between them and their home superior may not stop. For a successful repatriation at the end of the assignment, it is essential that expatriates still receive information about changes and developments in the home unit. (Kühlmann 2004) 3.3.2 Performance Appraisal Tracking the performance of expatriates is as important as tracking it for home country employees. However, it is far more complex because international assignees often have two supervisors, one in the home country and one abroad, with different company standards and cultural contexts. Therefore, by designing Performance Management Programs, questions such as: what criteria should be evaluated, who should evaluate, when the evaluation should take place and how the evaluation should be done are addressed. (Briscoe et al. 2009) Performance Criteria What performance criteria to use is a key question. Most often, performance criteria are set by the home country. In order that those criteria are realistic and adequate, people with extensive knowledge of the host unit and host country (supervisor in host unit,

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former expatriates, and consultants) should help to determine the criteria list. As with every performance appraisal, soft and hard factors should be integrated and the criteria list should be reviewed regularly. (Briscoe et al. 2009) Performance Reviewer In most companies, the home and the host superior evaluate the performance of the expatriate, although it might be difficult for the home superior due to little familiarity with the expatriate’s work. Another approach, which is called 360° Feedback (i.e. feedback from multiple sources), is gaining in importance. Expatriates will be in contact with many different groups of people (employees, suppliers, customers, etc.) abroad which can rate them and bring in different perspectives. (Briscoe et al. 2009) However, not all cultures favor 360° Feedback as many Asian workers are not used to evaluate any superior person or managers do not accept evaluation from subordinates. (Snell and Bohlander 2007) Frequency of Appraisal Typically, performance evaluations are done once or twice a year. Research, however, indicates that this is too infrequent as many supervisors do not remember the subordinates’ behavior in the past six to twelve months. They rely only on recent observations. Ratings after the completion of projects, tasks or milestones are more useful and accurate. The purpose of performance appraisals is to give feedback to the expatriate. Thus, the more often evaluations are done, the more accurate information about work behavior and performance the employee receives. (Briscoe et al. 2009) Form of Appraisal Typically, standard forms are used for the employees’ evaluation process. This standardization is no problem as long as the context of the performance does not change. Expatriates usually work in changing contexts. Therefore, adaptation to the context and regular reviews of the performance form are important. (Briscoe et al. 2009)

Kühlmann (2004) lists five requirements for a successful appraisal which must be fulfilled. (1) the performance appraisal should evaluate the degree of fulfillment of the international assignment tasks and not any standardized criteria list. (2) in addition to

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the performance goals, development goals must be included in order to give expatriates an overview over their strengths and weaknesses. (3) the cultural context and environment should be accounted for before setting the criteria. Standards in the home unit might be higher than in the host unit or visa versa. (4) an appraisal from multiple sources is suggested to integrate different perspectives. (5) short performance intervals are better because expatriates are dependent on feedback about their work. 3.3.3 Compensation Compensation is another major aspect during the assignment. For international Human Resource Specialist, it is one of the most complex areas in international HRM. (Snell and Bohlander 2007) Because of its importance, it will be discussed in Chapter 4 in detail.

3.4 Repatriation The move back to the home country can sometimes be as difficult as going on assignment. The employee has high expectations (demanding job, higher position) on the home unit which are often not satisfied. The goal of repatriation programs is to ‘prepare employees for adjusting to life at home’. (Snell and Bohlander 2007) Early repatriation planning is crucial. The majority of the companies begin either six or three month prior to the repatriation. Nevertheless, only one third agreed to have a well-managed process. One third was neutral about it and twenty per cent even disagreed. (KPMG 2008)

Because the expatriate goes abroad with the expectation of personal development and a higher position in the home country after repatriation, a suitable position should be provided which accounts for all competences and skills gained during the assignment. (Kühlmann 2004) Research shows that only a small fraction of the repatriates is promoted and it can even happen that no position can be offered. For those who repatriate successfully, the job offered may not utilize all their skills and competences acquired on assignment. (Snell and Bohlander 2007) Therefore, it is suggested to offer a position which preferably is in accordance with the expatriate’s skills and qualifications. If the expatriate does not much the job profile exactly, further education is offered to acquire the missing skills. The same person, who acted as contact person in the home

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unit during the assignment, is responsible for reporting any job vacancies and registering the expatriate for further education. (Kühlmann 2004)

Although the assignee might work in the same department as before the assignment, quite a lot could have changed. Therefore, induction programs help repatriates to become acquainted with new tasks, new people and the new situation. It is also important to sensibilize colleagues in the home country for problems which could arise due to different views and behaviors the repatriate has adapted abroad. (Kühlmann 2004)

Successful repatriation does not only include providing a job in the home country. Moving home also means quitting the apartment or house, selling furniture, de-register the children from school, leaving friends and doing the opposite back in the home country. As already mentioned in a previous paragraph, relocation agencies help doing these tasks so that the relocation takes place without problems. (Kühlmann 2004) In addition to this relocation support, some firms offer social events with former expatriates and their families to help re-integrating faster in the home office and home country. (Snell and Bohlander 2007)

3.5 Challenges in Assignment Life-cycle Employees normally accept a foreign assignment because they have a strong interest to go abroad, they expect higher pay and they perceive to have better career opportunities in the future. However, companies still face certain challenges to recruit and manage international assignees. (Briscoe et al. 2009) 3.5.1 Family Dual-career couples are becoming normal in today’s work environment. This makes the decision to relocate more difficult and resistance more common. Many firms try to minimize this problem by supporting spouses or partners in personal adjustments, career maintenance and offset of loss of income. (Briscoe et al. 2009)

Relocation with the whole family seems to be easier than without. However, the expatriate may have family members with health problems, adolescent children,

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dependent parents, etc. In those cases, sound planning is essential. For some countries, it is wiser that not all family members relocate due to security reasons. The separation from the family may cause performance reduction and mental problems for the expatriate. Therefore, careful preparation of the stay must be done in advance. (Briscoe et al. 2009) 3.5.2 Language Language differences are still one of the biggest challenges for companies and international assignees. Although English is determined as company or business language, knowledge of the host country language is important. Expatriates should be able to speak the host country language, as they must deal with customers, suppliers and local employees. Because language training is expensive and needs time resources, it should be well planned in advance. It may be more useful to send an employee in business language training than in a normal intermediate course. (Briscoe et al. 2009) 3.5.3 Women Expatriates Female expatriates are scarce. Early research showed that women are not accepted in the host country. However, more recent surveys indicate that it is the mistake of the home unit that women are not considered for international assignments and that they would not face any limitations in the host unit. Women are perceived as ‘less internationally mobile than men due to work and personal responsibilities’ (Snell and Bohlander 2007). This is a wrong assumption because male expatriates also have a partner or a family. Thus, both men and women should have the same chance and should receive the same amount of attention. (Briscoe et al. 2009) 3.5.4 Lifestyle With increasing work force diversity, companies are more often faced with potential candidates who might have a non-traditional lifestyle. This includes gay or unmarried couples, single parents, or employees who take care of their parents. These forms of living might not be accepted in the other countries and make international assignments for those people difficult and for the company challenging. Early clarification of any disadvantages or problems is essential. (Briscoe et al. 2009)

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3.5.5 Localization The assignment contract is normally for a defined period of time. In some cases, expatriates may ask for an extension of the assignment. For example, they have married a local. These extensions present a threat to the company because they are very expensive due to the continuing payment of the expatriate compensation and benefit package. Companies try to minimize this threat by stating in their international assignment policy that people who want to stay longer are automatically converted to local compensation. Most argumentation in favor of expatriate compensation becomes futile because the expatriate lives like a local. (Briscoe et al. 2009) 3.5.6 Career Development International assignments are more frequently used for career development purposes. To fully utilize the experiences and competences acquired abroad, the company must manage such assignments very well. It is not enough to relocate employees just that they were once in another location. The company must specify what competences are important and make use of them after relocation home. (Briscoe et al. 2009) 3.5.7 Costs As already stated many times, international assignment compensation is higher than local compensation. Moreover, the preparation of assignments needs a lot of time resources. In order to deal with these high costs, companies turn to short-term assignments and extended business trips and they try to reduce the amount of expatriate benefits. (Briscoe et al. 2009)

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4

Compensation

Compensation is one of the most difficult aspects in managing international assignments. On one hand, differences in compensation norms across countries make salaries extremely difficult to compare. On the other hand, countries have different standards of living, welfare and taxation systems which make movements complicated. Therefore, an effective expatriate compensation program should have the following objectives: (Briscoe et al. 2009; Snell and Bohlander 2007)



Providing an incentive to leave the home country



Maintaining a given standard of living



Providing for security in politically unstable or dangerous countries



Including provisions for good healthcare



Taking into account foreign taxes



Providing for education of the expatriate’s children



Taking into consideration career and family needs



Facilitating re-entry into the home country

To achieve these objectives, allowances and incentives should be paid additionally to the base salary. (Briscoe et al. 2009)

Before designing the compensation package and choosing the most suitable compensation method, several topics must be taken into consideration. Of course, the following topics must not be considered for every new assignment. The company should analyze the characteristics of their expatriate population and choose the method which is suitable for most of the expatriates. Type of Employee It is important to know what functions expatriates perform abroad. Are they executives who have to manage a foreign subsidiary or are they young professionals who want to gain international experiences? Both expect different aspects regarding compensation. While senior level employees expect generous pay packages, young professional find rewarding work more important. (Briscoe et al. 2009)

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Purpose of Assignment If international assignees are sent abroad due to demand-driven reasons (i.e. to manage a foreign subsidiary) it is likely that they will receive a higher salary than for learningdriven purposes (i.e. career development). For learning-driven purposes, assignees will benefit from their personal development after repatriation and should therefore not be compensated with as many additional incentives. (Briscoe et al. 2009) Duration of Assignment The duration of international assignments play a major role. On one side, it has implications on taxes (i.e. where to pay). On the other side, expatriates are extra compensated for changing circumstances and a different living environment in the host country. After a certain time period, it can be assumed that expatriates have adopted a host country living style. Their expatriate status would not be adequate anymore. (Briscoe et al. 2009) End of Assignment It must be determined what will happen after the completion of the assignment. The expatriate might repatriate home, move to another location or localize in the host country. These options have different implications on what compensation approach to choose. For example, if most expatriates return home, it is wiser to leave them integrated in the home salary structure during the assignment. On the other hand, if it is intended that expatriates are localized after the assignment, a host salary approach might be better. (Briscoe et al. 2009) Home and Host Country Knowledge about diverse laws (social security, taxes, etc.), regulations and practices in the home and host country should be available. Moreover, it is important to know whether assignees move from low-cost countries to high-cost countries or the other way round. (Briscoe et al. 2009) Expatriates from the same home country should be treated equally to ensure parity among nationalities. (Mercer 2008a)

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Peers of the International Assignee It is always good to know with whom expatriates compare themselves in terms of equity. Knowing this, the expatriates’ compensation and benefit package is more easily justifiable. (Briscoe et al. 2009, Mercer 2008a) Ease of Administration Not all approaches require the same administration time and knowledge. Therefore, resources needed for administrating the assignment should be in proportion to the benefit derived from it. (Mercer 2008a) Competitiveness The company’s objective should be to have a competitive compensation and benefit package without neglecting company specific goals. (Mercer 2008a) Overall Costs After considering everything else mentioned above, total assignment costs must be calculated and compared to the benefits the assignment brings to the company. (Briscoe et al. 2009)

Due to the increasing awareness that there is no method which suits all types of assignments worldwide, several compensation approaches were designed. The five most common methods with their advantages and disadvantages are described in more detail below. These include balance sheet, host country, headquarters-based pay, higher of host or home, negotiation. In practice, there are many variations to these approaches implemented by organizations.

4.1 Balance Sheet Approach The balance sheet approach, also called home country balance sheet approach, was developed in the 50s and is now the most common method. (Herod 2008) KPMG’s survey reports that sixty per cent of the respondents use this approach. In European and Asia Pacific companies it is applied by forty-two per cent and fifty-five per cent, respectively. In American companies, it is by far the most important approach with almost three quarters (70%) of the American companies using it. (KPMG 2008)

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The balance sheet approach’s base is the net salary the expatriate would receive at home. In addition to the net salary, allowances and differentials are provided to ensure that expatriates can maintain their standards of living in the host country. However, they are expected to contribute the amount on goods and services, housing and income taxes they would have paid at home. Only additional costs are reimbursed by the company. To make the whole package more attractive, various incentives (e.g. mobility and hardship allowance) are frequently paid separate to the balance sheet. (Herod 2008) Advantages By applying this approach, no differentiation between assignees from the same home country is made, regardless their host location. The expatriates’ base salary is the same as their colleagues’ compensation at home. This ensures consistent treatment of employees from the same home location. Through adding differentials, the expatriates’ home standard of living is maintained. Therefore, they are neither better nor worse off in their host country. In addition to the advantages already mentioned, this system also facilitates repatriation and re-integration into the home salary structure. (Herod 2008) Disadvantages Although equal treatment of home country colleagues is ensured, differences between expatriates from different locations cannot be removed and significant differences between expatriates and host country nationals exist. Higher compensation for international assignees can be justified for a short period. However, it is difficult if the assignment lasts longer than five years. Moreover, administration is tiresome when having a big expatriate population in the company. (Herod 2008)

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Figure 4.1: Categories in Balance Sheet Approach

Source: ORC 2009 4.1.1 Expense Categories As shown in Figure 4.1, the balance sheet approach divides the home salary into four expense categories. Each category will be explained below. Goods and Services The Goods and Services part of the salary is called spendable income and it is calculated by subtracting housing, income taxes and savings from the gross salary. Goods and Services is the most important section which includes daily living expenses for food, personal care, clothing, medical treatment, transportation, etc. Because these expenses are cheaper or more expensive in the host location, the company accounts for these differences in cost of living. Several sources including consulting firms and government departments provide data on cost of living in different countries and cities. If the basket of daily goods is more expensive in the host country, a positive cost of living adjustment is calculated which means that a cost of living allowance (COLA) is added to the home spendable income. On the contrary, if goods are more expensive in the home location, negative COLA is applied and the amount is subtracted from spendable income. In practice, many American firms do not use negative COL

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adjustments, while European and Asian companies frequently apply it. The cost of living allowance is further explained in Section 4.1.2. (Herod 2008) Housing The only frequent expense which is not included in Goods and Services is housing (e.g. rental, interest on mortgages, repairs, fuel and utilities). Usually, the company pays for housing in the host country but contribution of an amount equivalent to housing expenses in the home location is expected. Typical housing expenditure in the home country is called home-housing norm and is published, for example, by the government (statistical data). (Herod 2008)

Some companies establish rental cost guidelines to compensate their expatriates for higher housing in the host country. Others pay a cost differential between actual costs in the home and the host country. (Herod 2008)

The majority of the companies (39%) which provide host country housing do not deduct any home-housing norm. Twenty-six per cent apply the housing norm in all cases and twenty-three per cent apply it mostly, with specific exceptions. (KPMG 2008) Income Tax In most countries, expatriates have to pay taxes on their worldwide compensation package (e.g. base salary, bonuses) and their allowances (e.g. hardship, mobility). In general, it can be said that the total tax burden is higher during the assignment than at home. (Herod 2008)

Most multinational companies use tax equalization. Under this approach, a hypothetical tax is deducted from the salary and all actual tax expenses are paid by the company. The hypothetical tax is approximately equivalent to the taxes paid in the home country. A second approach is called tax protection. No hypothetical tax is deducted from the salary. Expatriate pay actual taxes and in case they are higher than what expatriates would have paid at home, the company reimburses the excess. Both methods have the difficulty of establishing an appropriate hypothetical tax formula to calculate the home

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country tax burden. It is advisable to seek extensive information before calculating any hypothetical taxes because tax treatment varies across countries. (Herod 2008) Savings The last category is called savings. It includes contributions to social security, pension and insurance programs as well as savings and investments. Under the balance sheet method, a fixed amount is assumed which is not affected by the international assignment. (Herod 2008) 4.1.2 Cost of Living Adjustment The cost of living index is an important factor in the balance sheet approach. It is crucial to understand its function. It is defined as ‘payment made to assignees which addresses differences in purchasing power between home and host location. The Cost of Living index measures the price differences as well as the currency variations between two locations.’ (Traber et al. 2008) The following paragraph shows why it is important to revise the COLA regularly.

Currency fluctuations, price movements and the amount of spendable income influence the cost of living allowance. If the currency of the home country appreciates compared to the host currency, the COL index decreases to compensate for the fluctuation. On the contrary, a depreciation in home currency leads to a higher index. A regular update on the COL index used to calculate host spendable income is important to account for these exchange rate fluctuations. The impact on inflation has similar consequences as exchange rate fluctuations. If the level of inflation changes in one country, the index will either rise or fall. Price movements above five per cent make an adjustment of the COLA indispensible, otherwise expatriates will lose their purchasing power. Salary increases and changing taxes also have an impact on the spendable income in the home country. An increase in spendable income of five per cent, with no change in the COL index, would result in loss of purchasing power of five per cent in the host country. (Traber et al. 2008)

As stated in a previous paragraph, a negative COLA is not favored by many companies because deducting money from the spendable income is uncommon. However, if

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companies are generous and do not deduct a COLA, problems may arise. Expatriates who move to a low-cost country with index sixty (living costs 40% cheaper than at home), are left with a significant higher spendable income in the host location. They either save more or spend more during the assignment. Repatriation home does not bring any difficulties but relocation to another low-cost country whose COL index is higher, for example eighty (20% more expensive than in previous location), is difficult. Although the expatriates still have a higher purchasing power than at home, compared to their previous location it decreases. The expatriates’ satisfaction is lowered and they start to complain. (Mercer 2008b) 4.1.3 Challenges The balance sheet approach can not be seen as best solution without challenges. Especially in recent years, some issues emerged. Low-wage Countries This approach was initially designed for moving employees from high wage countries. (Mercer 2008a) However, in recent years, an increasing number of expatriates relocated from low-salary countries such as India or China to Europe or the U.S. Although the differentials paid by the employer guarantee that expatriates can maintain their standard of living abroad, it is no guarantee that they have the same salary level and purchasing power compared to their peers in the host country. The discrepancy between country salary levels is an important limitation. (Herod 2008)

According to Mercer (2008a), it is possible to reduce this problem by applying a socalled ‘international spendable income’. This income is taken as the basis for the COLA calculation, leaving the expatriate with a higher spendable income in the host country. (see Figure 4.2) The rest of the balance sheet calculation stays the same. Two challenges remain with this approach. It is difficult to find an appropriate international spendable level and repatriation home is complicated.

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Figure 4.2: International Spendable Income

Source: Mercer 2008a Pay Delivery A second challenge to the system is the impact exchange rate fluctuations have on the cost of living allowance. Even though exchange rate fluctuations impact cost of living indices, the spendable income will remain the same. This fact is difficult to explain and hard to understand. In order to minimize confusion, a good option is to split the salary payment in home and host currency. The part protected by the COL index, spendable income, is paid out in host country currency and daily expenses can be paid with this money. The remaining money, which is not used in the host country, is paid in home currency so that no exchange rate risk occurs. Table 4.1 presents the different payment options (host currency, home currency, split pay) along with their currency risks. Due to different consumption pattern, it would be wrong to fix the amount paid in host currency to the spendable income. A better solution is to let expatriates decide how much they would like to receive in host currency. The amount exceeding the spendable income, however, is not protected by the COL index. (Mercer 2008c)

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Table 4.1: Different Payment Options Approach

Currency

Risk

Spendable Income

Host

No risk/protected by COL index

Remaining Income

Host

Risk

Spendable Income

Home limited

Remaining Income

Home

Spendable Income

Host

Remaining Income

Home

Host Currency

Home Currency

Split Pay

Risk if converted abroad No risk if spend at home No risk/protected by COL index No risk if spend at home

Adapted from Mercer 2008c

4.2 Host Country Approach Companies following the host country approach pay expatriates based on the host country salary structure. Thus, international assignees from various nationalities receive the same base pay as their work colleagues in the host location who perform similar work. A slightly adapted version is called host plus approach. Expatriate benefits such as housing and schooling may be added to the base salary. The host country approach is often used if the employees’ transfer is permanent or if they move to another assignment afterwards. (ORC 2003a)

Advantages This approach is very attractive for employees from low-salary, high-tax countries that move to high salary countries. Under other methods, they would not gain purchasing power similar to their peers. Furthermore, all nationalities receive the same pay according to their function, so that low-wage employees are not handicapped. The company’s gains are easier administration and explanation and lower international assignment compensation costs. (ORC 2003a) Disadvantages Although low-salary employees gain when relocated to another country, repatriation is very difficult. Similarly expatriation from high salary countries is also difficult. Moreover, this approach does not account for differences in taxes, housing and living costs

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between home and host country and expatriates may have difficulties in adjusting to local spending patterns. Expatriates have no special status, they are rather seen as local employees. (ORC 2003a)

In general, eleven per cent of all companies apply this system. Looking at where the companies’ headquarters are located, it is seen that twenty-one per cent of European companies, eighteen per cent of Asian companies and only four per cent of American companies pay assignees according to this approach. (KPMG 2008)

4.3 Headquarters-based Pay Headquarters-based pay is similar to the balance sheet approach. The only difference is the base salary which is not the home country salary but a reference salary at the headquarters (HQ). This means that all assignees have the same reference salary for calculating the assignment compensation regardless of their nationality or country of origin. Two reasons make this method worth to use. First, most expatriates are relocated from the home office of the company. Second, pay equity among expatriates is of high importance. (ORC 2003b) Advantages All employees, regardless of their nationality or home country, are treated the same way and pay equity is extra promoted. Expatriates are tied to the home office of the company. Attracted by this approach are especially employees from countries with lower living costs than in the headquarters country due to their financial gain. Headquartersbased pay is also advantageous for the company because it is easy to administer and explain to the assignees. (ORC 2003b) Disadvantages Even though many employees from low-salary countries are attracted to go abroad, reintegrating them into the home pay system is very difficult. It also increases costs of international assignments if many low-salary employees are transferred and candidates in high-salary countries are more difficult to convince. (ORC 2003b)

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According to the KPMG survey, nine per cent of the respondents use this approach in their organization. Astonishingly, whereas only four per cent of European companies use headquarters-based pay, twelve per cent of Asian and eleven per cent of American companies use this method. (KPMG 2008)

4.4 Higher of Host or Home The objective of the higher of host or home approach is to provide the best possible solution to the expatriate. As a first step, the net pay level of the balance sheet or headquarters-based pay approach is calculated. This amount is then compared to the pay level in the host country and the higher net pay is chosen. One variation is to compare only the costs of goods and services in both countries. (ORC 2003c)

By choosing this approach, the company is able to select the highest net compensation and to offer a fair and competitive compensation package. A negative aspect is the costinefficiency because in all cases the highest possible salary is paid. (ORC 2003c)

This approach is preferred by seven per cent of the respondents. Sixteen per cent of European companies apply this method. On the contrary, only three per cent of Asian Pacific companies and four per cent of American companies use higher of host or home. (KPMG 2008)

4.5 Negotiation Due to the inexperience with international assignments, some firms decide case-by-case what to include in an expatriate package. The compensation and benefit components are negotiated for every assignment. Often, no standardized process or no assignment policy is available. (Briscoe et al. 2009)

Although this approach is advantageous for assignees because they can negotiate for a higher salary, it is very challenging and not recommended for the company. The best negotiator, either the international assignment coordinator or the assignee, wins and the base for future compensation and benefit packages is set. Furthermore, this approach is difficult to administer and costs cannot be planned effectively. Even for small

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companies with only a few expatriates, it makes sense to have an international assignment policy with some basic guidelines. (Briscoe et al. 2009) Surprisingly nine per cent of the respondents have no predominant approach and decide case-by-case. (KPMG 2008)

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5

Benefits

In addition to the salary, incentives and benefits are part of the expatriate compensation package. Benefits which are often paid are hardship allowance, mobility allowance, schooling, home leaves and housing.

5.1 Hardship Allowance The hardship allowance is added to the package if the assignee is relocated to a country with poor medical facilities, pollution, crime and political unrest, etc. The allowance should compensate for restrictions in activities. Usually, it is calculated as a percentage of the base salary and paid for the whole assignment duration. Data on which locations are particular dangerous or difficult are available from government sources or consulting firms. (Herod 2008) One third (32%) of the companies do not provide hardship allowance, one third (35%) stated that the allowance is unlimited and the last third said that it is limited either because the base salary for calculation is limited (16%) or because the allowance is limited at a predetermined amount (17%). (KPMG 2008)

5.2 Mobility Allowance The mobility allowance is paid as a one time payment (lump sum) or an ongoing service premium aimed at making international assignments more attractive for employees. (Herod 2008) In 2008, forty-two per cent of all companies which participated in the Global Assignment Policies and Practices Survey paid a certain percentage of the base salary. Seventeen per cent reported that they pay a lump sum at the beginning and/or end of the assignment. Assignees receive in eleven per cent of the companies an amount based on their job grade, family size and host location and in four per cent of the cases based on performance. Thirty-five per cent of the respondents do not provide any mobility allowance. (KPMG 2008)

5.3 Schooling In case the assignees relocate accompanied by their spouse/partner and the kids, the question arises if schooling is provided or not. Fifty per cent of the surveyed companies stated that this benefit is available to all assignees (6% only to selected assignees).

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Twenty-six per cent provide it only if no free education is available in the host country and eleven per cent pay it on a case-by-case consideration. Only seven per cent said that a schooling allowance is not paid. Most companies only provide the money for preschool, primary and secondary school education. (KPMG 2008)

5.4 Home Leaves Providing home leaves aim at giving expatriates the possibility to visit family and home units regularly. The number of home leaves per year varies according to family size and location of the expatriate’s family. Almost half (47%) of the companies allow expatriates to go on home leaves wherever they like. Another forty-two per cent ask their assignees to go to their home country for home leaves and four per cent require headquarters country visits. Seven per cent of the companies do not provide home leaves. (KPMG 2008)

5.5 Housing Some firms provide apartments or houses for their expatriates during the whole assignment time, some reimburse only temporary housing at the beginning of the assignment. The typical duration for temporary housing is between one and thirty days. The amount and type of host-housing assistance is dependent on family size (29%), position of the assignee (20%), type and quality of housing provided to others (14%) or to peers (11%), the assignee’s base salary (8%) or the duration of the assignment (6%). (KPMG 2008)

5.6 Lump Sum Another method to provide money to the assignee for usual expenses is to pay a lump sum at the beginning and/or end of the assignment. That money should be used for housing, transport, travel, home visits, education, etc. The allowance’s impact on taxes must be taken into consideration. (Briscoe et al. 2009)

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Empirical Part 6

Swisslog’s Expatriate Management and its Challenges

Every company handles international assignments differently. The following chapter introduces Swisslog, a Swiss multinational company, and gives an overview of the company’s expatriate management. Moreover, results of a recent survey under Swisslog’s expatriates and line managers are presented and problem areas are defined.

6.1 Company Portrait Swisslog is a medium-sized company located in Buchs, Switzerland. Its history dates back to 1898. Over a period of 100 years, the company grew from a local supplier of automation systems to a global player for logistics solutions. Today, Swisslog employs over 2000 people and is present in approximately twenty countries on four continents. In 2008, net sales of 786 million CHF were generated. (Swisslog 2009a)

Figure 6.1: Logo Swisslog

Source: Swisslog 2009a

6.2 Expatriate Management The expansion in business and many cross-national projects made international assignments very important and policies for managing them vital. Business needs are the driving force for sending employees abroad, either for short-term projects or for long-term activities such as establishing a new subsidiary or transferring know-how. Since Swisslog has only about twenty expatriates, the company has no international assignment department. Local HR of the assignee’s home and host country perform most of the tasks related to international assignments. Corporate HR is involved in that they provide policies and guidelines and act as consultants for local HR. (Richard, B. pers. comm. 16 July 2009)

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Currently, a corporate policy which is called International Assignments is available to HR and line managers. This policy provides a framework for how international assignments are managed. It defines the different types of assignees and outlines the main principles HR, line managers and expatriates should respect. In addition to the corporate policy, three separate policies (Transferee Policy, Expat Policy, Short-term Assignment Policy) were elaborated to state rights and obligations of assignees. These policies are distributed to employees who relocate and are signed by all involved parties prior to the assignment. The Expat Policy, for example, states all benefits and their conditions for entitlement and it defines responsibilities for preparation and termination of the assignment. However, it does not contain processes for how to handle the different elements of the assignment life-cycle. (Richard, B. pers. comm. 16 July 2009) Because expatriates are the main focus of this thesis, only the content of the Expat Policy and matters related to expatriates are discussed.

Expatriates are relocated for a maximum of three years to ‘complete a special, timelylimited task’. (Swisslog 2003a)The main principle for compensating expatriates is that everyone is neither worse nor better of compared to the situation in the home country. Therefore, Swisslog applies the balance sheet approach to pay its expatriates. Factors such as social insurance contributions, income taxes, housing and cost of living are neutralized. The company deducts from the gross salary social insurance, hypothetical taxes and housing costs in the home country and obtains spendable income. Then, a positive as well as negative cost of living adjustment is calculated on the basis of the spendable income minus a savings part of fifteen per cent. To obtain the new gross salary in the host country, social insurance (if the expatriate has to pay it in the host country), housing costs, hypothetical taxes and the COLA are added to the spendable income. The outcome is the final expatriate salary which is either paid in host or home currency. (Swisslog 2003a)

In addition to the expatriate salary, benefits are paid. Swisslog offers external consulting on social insurances or taxes, house hunting in the host country, removal, temporary accommodation in the host country, school fees, home leaves and emergency leaves and storage in the home country. Normally, actual expenses up to a pre-defined amount are

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reimbursed for consulting, house hunting and storage after presentation of receipts. (Swisslog 2003b)

6.3 Survey Results In order to analyze strengths and weaknesses of the current system, corporate HR designed two online surveys in May 2009. One survey was developed targeted at current and former expatriates, the other one was prepared for line managers of expatriates. An empty version of both surveys can be found in Appendix 1.The survey results are presented in the next section. 6.3.1 Expat/Transferee Survey The first survey was designed for current and former expatriates. It contained thirty-two questions about different aspects of the international assignment life-cycle. Out of twenty-nine expatriates who received the survey by email, twenty-one people responded. Eighteen of them are still on assignment while three are back in their home country. Possible answers for all questions were: do not agree at all, tend to disagree, tend to agree, agree fully, no opinion. (Swisslog 2009b) Results The majority of the respondents thought that Swisslog recognizes the value of international assignments. Around seventy-five per cent said that they were fully supported and their extra effort was acknowledged. More than eighty per cent held that the assignment will benefit the career within Swisslog. The only suggestion which was made was to value the experience gained during the assignment more after repatriation. Although the majority saw many positive aspects in international assignments, six respondents thought that the refusal of a job offer abroad would have negative impacts on future career opportunities. (Swisslog 2009b)

The selection process and the preparation prior to the assignment were rated well overall. In the majority of cases, a clear understanding of the job in the host unit was there and the expatriate had the opportunity to meet the host line manager. Moreover, an open discussion about the assignment with both host and home superior was possible. HR

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was not always involved from the beginning which was seen by four negative answers (i.e. do not agree at all, tend to disagree) and ten respondents who only tended to agree. The preparation process seems to be effective because eighty per cent experienced no major surprises in the host country and ninety-five per cent could start as planned. It was only suggested that language classes should be part of the preparation as speaking English is not always enough. (Swisslog 2009b)

Several questions about the delivery of information were asked. Even though the majority stated that they received enough information about income taxes (61% yes), spendable income (61% yes), social security (66% yes), costs of living (66% yes) and living conditions (76% yes), most of them did not fully agree but tended to agree. Many respondents suggested to provide more information about social security, taxes and living conditions and to even ask for help from external experts. These results showed that some weaknesses in this area exist. (Swisslog 2009b) (see Table 6.1)

Table 6.1: Delivery of Accurate Information Agree fully

Tend to agree

Tend to disagree

Do not agree at all

Income Taxes

19%

43%

19%

19%

Social security

10%

57%

33%

0%

Cost of living

14%

53%

19%

14%

Spendable income

29%

33%

29%

9%

Living conditions

28%

43%

24%

5%

Source: author

Opinions about the compensation were collected by asking if compensation and benefits are fair. Seventy-one per cent held that it is fair compared to host unit colleagues and Eighty-one per cent rated it okay compared to home unit peers. Compared to other expats/transferees, forty-eight per cent agreed that compensation is fair, nine per cent disagreed and forty-three per cent had no opinion. As a last question, it was asked whether the compensation is fair compared to expats/transferees of other companies. Thirtyeight per cent agreed to that question, twenty-eight per cent disagreed and thirty-three

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per cent had no opinion. The last two questions mentioned have only limited validity because most answers are assumed to be based on a personal feeling and not on facts. The process of defining the expatriate conditions was transparent, trust building and efficient. (Swisslog 2009b)

Once on assignment, the majority of the respondents met all relevant people in the host unit at the beginning and also received sufficient support in daily topics and in understanding cultural differences. However, only for half of the people an induction program was organized. (Swisslog 2009b)

Three respondents have already returned back to their home country. All agreed that they were welcomed at the home unit and that they had no major problems in reintegrating. (Swisslog 2009b) 6.3.2 Line Manager of Expat/Transferee Survey The second survey was designed for line managers who have experience with expatriates. It was distributed to sixteen line managers, seven of them responded. Question one to twenty had the following answer options: do not agree at all, tend to disagree, tend to agree, agree fully, no opinion. For questions twenty to thirty, a ranking between 1 (minimal challenge) and 5 (extremely challenging) was used. (Swisslog 2009c) Results All line managers stated that international assignments should be promoted, not only if no local employee is available, as benefits exceed investment and risks. The majority also thought that foreign assignments should be promoted for career development purposes. (Swisslog 2009c)

The coordination and management of the assignments is perceived as insufficient. Only forty-three per cent agreed that they are familiar with the international assignment policy. Moreover, more than seventy per cent held that no clear process for managing assignments is in place. Although more than half of the respondents stated that local HR played an active role and managed to give all relevant information, less than fifty per cent agreed that local HR has supported the process well and handled the definition of

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terms and conditions appropriately. (see Table 6.2) Late involvement of HR was not seen as a challenge. However, lack of experience or know-how makes the whole process difficult. Half of the respondents agreed to have an induction program and to ensure sufficient support in adapting to local life. (Swisslog 2009c)

Table 6.2: Role of HR Agree fully HR played an active role HR provided all relevant information HR supported the process well HR handled definition of terms and conditions appropriately

Tend to disagree 14%

Do not agree at all 14%

No opinion

43%

Tend to agree 14%

14%

57%

0%

0%

29%

14%

29%

43%

0%

14%

0%

43%

43%

0%

14%

14%

Source: author Terms and conditions of expatriates are perceived to be reasonable overall but compared to peers in the host unit the minority stated that they think compensation is reasonable. Four line managers found differences in the remuneration of expatriates and peers in the host unit rather challenging. (Swisslog 2009c)

To find out what is most important to any successful expatriate management, six options were presented which had to be ranked by importance. In general, the ability of HR to provide necessary information within a reasonable time frame is seen as the most important aspect in the expatriate management process. Second most important is to get HR involved from the very beginning. Furthermore, it is essential that the expatriate has one contact person and that line managers collaborate closely with HR. The respondents perceived the formation of a project team for the whole management and a clear understanding of the motivations and expectations of the candidate as least important for a successful expatriate arrangement. In Table 6.3 the different factors are presented in descending order of importance. (Swisslog 2009c)

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Table 6.3: Factors for a Successful Expatriate Management •

The ability of HR to provide necessary information within a reasonable time frame



Getting HR to involve in the process from very beginning stage



Communication to the expatriate candidate is consistently from one single voice to avoid confusion



The host line manager collaborates closely with HR in the whole process



Formation of a project team structure with clear understanding of individual roles



Clear understanding of the motivation and expectations (compensation and benefits) of the expatriate candidate before designing the expatriate package/solution

Adapted from Swisslog 2009c, p. 29 6.3.3 Main Problem Areas In summary, it can be said that three problem areas exist. The process is insufficiently structured and handled by HR. The delivery of accurate and detailed information about the assignment is not optimal. Managing expatriate compensation and satisfying needs and expectations are difficult.

Out of these results, three questions can be deduced: (1)

How is the international assignment process best structured at Swisslog to satisfy all people involved?

(2)

How does a successful international assignment policy for Swisslog look like?

(3)

What is the best compensation method for Swisslog’s expatriates and what benefits should be paid?

The aim of the empirical part is to answer these questions and to present recommendations to Swisslog.

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7

Interviews

Because it is difficult to elaborate recommendations only with theoretical input, interviews with Swiss companies and Swisslog expatriates were accomplished. The objective of the company interviews was to obtain information how Swiss multinational firms manage international assignments. The goal of the second interview session with expatriates was to learn what expatriates perceive as important.

7.1 Swiss Companies Semi-structured face-to-face interviews were conducted with six companies, namely Alstom, ABB, Holcim, Synthes, Straumann and Schaffner, which were chosen based on suggestions of Swisslog. (An empty version of the interview guidelines is presented in Appendix 2) After a short introduction of key figures, the results of each interview are summarized in three parts. First, the company’s approach to organize international assignments is outlined. Then, the compensation method and possible benefits are presented. In a last paragraph, it is explained how exceptions to the policy and special requests are handled and how the company manages to deliver full and accurate information. 7.1.1 Alstom Key Figures Net sales in 2008

19 billion EUR

Number of employees in 2008

81’600

Number of countries with subsidiaries in 2008

70 countries (5 continents)

Number of expatriates in July 2009

750

Organization Alstom (www.alstom.com) relocates most of its employees because work experience or a certain employee profile is needed abroad. Career development is an important reason for young graduates who attend special programs. The duration of long-term assignments is between one and five years. After three years a first assessment is made to find

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out if the assignee will stay longer because of specific reasons, will return back to the home country or will be localized after the assignment. (Solecki 2009)

Alstom organizes its international assignment management in three centers which are located in France, the U.S. and Switzerland. Each center is responsible for a specific part of the world. The center’s employees coordinate and manage the whole assignment cycle based on a global international assignment policy and are always in contact with the expatriate’s home and host HR. The policy’s main content is compensation and benefits. All employees have access to the policy on the intranet. (Solecki 2009) Compensation Two compensation approaches are applied by Alstom. One is the typical balance sheet approach which has the expatriate’s home salary as basis. Negative and positive adjustments for cost of living, housing, taxes and social security are made to receive the new host salary. The second approach is directed toward integrating the expatriate into the salary structure of the host country. Therefore, a totally new gross salary is calculated on the basis of host country salaries. This approach is applied in most western European countries where salary structures are more homogenous. (Solecki 2009) Mercer (www.mercer.com) delivers all indices (cost of living, housing, etc.) which are used for the balance sheet calculation. These indices are updated twice a year and used for new calculations. Existing assignments are only recalculated once a year in April. The salary split in home and host currency can be changed once a year. Alstom’s proposal is to pay the spendable income in host currency and the rest in home currency. However, assignees are entitled to change the split according to their needs. (Solecki 2009)

In addition to the salary, a settling allowance (similar to a mobility allowance), a hardship allowance, housing, schooling, car, home leaves and emergency leaves are paid. These benefits apply to all expatriates to the same degree regardless their hierarchical position or assignment reason. Often, tax advice is also reimbursed because differences in tax systems make it very complicated. (Solecki 2009)

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Challenges Exceptions or special requests can not be eliminated with the policy as the personal or family situation of every assignee is different. If an exception is made, it must be justified in writing and be approved on divisional or corporate level, depending on the amount. Moreover, the expatriate’s host line manager must agree because the expenses will be part of the host country payroll. (Solecki 2009)

In Alstom, expatriates have a special status and local employees do not compare their compensation with the expatriates’ compensation, which is often much higher. It is generally known that no local person was suitable for that position and that expatriates bring additional benefits. Therefore, it is no challenge for the company to have expatriates and locals working side by side. (Solecki 2009) 7.1.2 ABB Key Figures Net sales in 2008

35 billion US$

Number of employees in 2008

119’500

Number of countries with subsidiaries in 2008

more than 100 (5 continents)

Number of long-term assignees in July 2009

640

Organization ABB (www.abb.com) distinguishes between long-term and short-term assignments, business trips and project assignments. Long-term assignments last between one and five years. They are mostly conducted because of business needs (e.g. know-how transfer, expertise). Career development is another reason for relocating someone but only about twenty per cent of total assignments belong to this category. (Lauener 2009)

ABB has a global policy (ABB Group International Transfer Regulations) which states fundamental regulations of international assignments. In addition, every country has its own country specific expatriate policy (Country Expatriate Policy) which accounts for differences in local circumstances. Corporate HR is responsible for educating local human resource personnel (so called International Assignment Representatives IAR) on

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the global policy and for ensuring compliance. The international assignment representatives’ job is to implement the Country Expatriate Policy and to manage the assignment life-cycle on their own. All policies are openly stored on the company’s intranet and accessible to every employee. (Lauener 2009) Compensation The company’s principles regarding compensation are as follows: (1) the home salary should be the basis for the expatriate salary, (2) the expatriate’s compensation should be in line with the compensation of its host peers and (3) the expatriate’s compensation should be competitive to host market conditions. In a first step, the new gross salary in the host country is calculated based on the home country salary. To obtain the new gross salary, adjustments for differences in cost of living, both positive and negative, are made and host country taxes or social insurance contributions added. If expatriates pay housing costs by themselves, house rental costs are also added. No less than the calculated host salary must be paid to the expatriate. In a second step, the newly calculated salary is compared to peer salaries and market salaries in the host country. If the final amount is still considerably less than peer or market compensation the amount can be adjusted upwards. Basically, it is the expatriate’s choice to obtain 100% host currency or a split between fifty per cent home and fifty per cent host. (Lauener 2009)

Mercer is ABB’s global provider for cost of living indices. The indices are updated twice a year. Nevertheless, the salary will be calculated at the beginning of the assignment and not changed during the assignment. It is only recalculated if extreme exchange rate or inflation fluctuations influence the host salary. (Lauener 2009)

In general, the following benefits are paid: language/cultural training, pre-assignment trip, relocation/resettlement, settling-in allowance, maintenance of principle residence (if the expatriate keeps his or her house/apartment in the home country), temporary accommodation (in home and host country), schooling, home leaves and emergency leaves. Hardship and mobility allowances are integrated into the salary calculation and not paid separately. The conditions for entitlement are not dependent on any criteria

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such as hierarchical level or years of employment. However, differences in the amount between different countries are possible. (Lauener 2009) Challenges During every assignment, challenges with international assignment may arise. ABB tries to make as less exception as possible to the policy to avoid discrimination. If exceptions are made, they have a sound justification statement and need approval. In case an expatriate feels to be treated unfair, it is referred to the policy which is generally applicable to every expatriate the same way. IAR have several meetings with the expatriate to exchange information and answer questions about the host country, the assignment and legal conditions. In this way, the company ensures that expatriates are wellinformed. (Lauener 2009) 7.1.3 Holcim Key Figures Net sales in 2008

25 billion CHF

Number of employees in 2008

85’000

Number of countries with subsidiaries in 2008

more than 70 (5 continents)

Number of expatriates in July 2009

500 to 600

Organization Holcim (www.holcim.com) has three main reasons why they relocate employees. (1) an expert is needed in another location. (2) Holcim’s management philosophy is copied to a new subsidiary and (3) Holcim requires some of its employees to be at least once on assignment before they receive promotion on a certain level. Assignees stay either for a short-term assignment between six and twelve months or for a long-term assignment between one and five years depending on the purpose. The procedure for managing short and long-term assignments is specified in an international assignment policy which is accessible to every employee. Except the selection of an appropriate candidate, all elements of the assignment life-cycle are covered. Responsible for its implementation and the management of assignments are three international assignment managers which are located in the head office in Zurich. The managers coordinate and manage

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moves within their assigned region. Normally, they are in close contact with home and host HR. (Eggenschwiler and Mühlebach Steen 2009) Compensation The balance sheet approach is used to calculate expatriate compensation. Holcim does the whole calculation with support of an online tool provided by ECA (www.ecainternational.com). This tool automatically incorporates cost of living index data, saving rates and tax rates from the host and home location. A cost of living adjustment is only made if the host country’s cost of living is higher. A so called market allowance is paid, if the expatriate’s salary is lower than host peer compensation. The base salary is not changed to minimize repatriation difficulties. Once a year, the salary is newly calculated for all expatriates. Salary payments are made in the home and host country and the expatriate can wish how to split them. (Eggenschwiler and Mühlebach Steen 2009)

In order to compensate the expatriate for additional costs related to the assignment, the following allowances are paid: location allowance (similar to a hardship allowance), relocation, housing, storage costs in the home country and temporary accommodation in the host location, spousal/partner assistance, home leaves and medical coverage. Every employee is entitled to these benefits the same way. (Eggenschwiler and Mühlebach Steen 2009) Challenges Exceptions to the policy are rarely made. If so, it is stated in the employment contract and the host line manager must approve it. Problems with expatriates who feel to be treated unfair are not existent in Holcim so far and local employees do not compare themselves with expatriates in terms of their compensation. However, some line managers question why an expatriate receives a higher compensation package than a local employee. In such cases, a solution is proposed by the international assignment managers.

Holcim manages information delivery with a checklist, so that nothing gets forgotten. Furthermore, one person in the host country is responsible for payroll and social security matters. Tax advice is worldwide provided by PricewaterhouseCoopers (PwC) (www.pwc.com). (Eggenschwiler and Mühlebach Steen 2009)

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7.1.4 Synthes Key Figures Net sales in 2008

3 billion US$

Number of employees in 2008

9950

Number of countries with subsidiaries in 2008

50 countries

Number of expatriates in July 2009

50

Organization Synthes (www.synthes.com) relocates its employees because of career development reasons and business needs. Depending on the reason, the employee is either on a shortterm assignment between six and twelve months or on a long-term assignment between three and five years. After five years, the expatriate is localized in the host country and receives a salary based on the host country’s salary structure or returns back to the home country. Long-term assignments are regulated in a global policy which was developed in 2008. The whole assignment life-cycle is covered in the policy with a special focus on what will be paid by the employer. Because of its detailedness, it is accessible to HR and line managers and it will only be distributed to employees who were selected for an international assignment. (Engelhart 2009) Synthes has no special international assignment department but a global mobility team integrated in HR and located in the U.S. and Switzerland who coordinates and manages the assignments. The global mobility coordinators are in close contact with home and host HR. (Engelhart 2009) Compensation Synthes applies the balance sheet approach for all long-term assignees. The company’s main principle is that the assignee will neither gain nor lose financially during the assignment. To ensure this, the balance sheet approach is the best solution according to Synthes. From the gross salary at home, social security, housing (home housing norm) and income taxes (home tax rate) are deducted. Then, the spendable income is adjusted positively or negatively for cost of living differences. The new host spendable income is grossed up for housing, taxes and social security, if applicable, to receive the new gross

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salary. The expatriate’s salary is paid on a split payroll. The part needed for paying daily expenses and host taxes is paid in host country currency. The remaining money stays in the home country where it is used to pay social security and taxes. (Engelhart 2009)

Indices and norms used for the salary calculation are provided by Air Inc. (www.airinc.com). They are updated twice a year. For tax and social security assistance, Synthes has a global contract with PwC. (Engelhart 2009)

In addition to the salary, the following benefits are paid: housing allowance (difference between home and host country norm), school fees, home leaves, moving allowance and tax advice in the host country. Moreover, spouse assistance is offered. A hardship allowance is not needed as Synthes has no locations in difficult or dangerous countries. (Engelhart 2009) Challenges Synthes handles exceptions rather flexible if they make sense for the company and the employee. On the contrary, if the expatriate just asks for more and more without specific reasons, the company is very strict. Reasons for an exception are not written down; the exception itself is only stated in the employment contract and is approved by the Global HR Vice President. The company has no major difficulties with expatriates or locals who feel unfair treated. This could be explained by the fact that the company operates in countries with similar salary structures. (Engelhart 2009)

To make sure that expatriates are well-informed about the assignment and its legal implications, they are informed about everything the global mobility coordinator does. Furthermore, to facilitate information delivery, small manager and assignee guides and an informative intranet page will be developed soon. (Engelhart 2009)

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7.1.5 Straumann Key Figures Net sales in 2008

780 million CHF

Number of employees in 2008

2150

Number of countries with subsidiaries in 2008

60 (subsidiaries and distributors)

Number of expatriates in July 2009

10

Organization Currently in Straumann (www.straumann.com), most expatriates are sent from the headquarters in Switzerland on long-term assignments lasting for a maximum of four years. Reasons are skill transfer, leadership and development assignments and projects. Skill transfer is the most important reason, while the others named are more seldom. Special about international assignments is that every assignment needs an approval of the executive management board (EMB) before a candidate is selected. (Sommer 2009)

International transfers are organized and managed by two HR Business Partners which are responsible for different functions (sales, products, finance, etc.). They act based on a corporate policy which presents guidelines for every part of the assignment process and specifies compensation and benefit matters. Only the EMB and the HR community have access to the policy while line managers and employees have no access. (Sommer 2009) Compensation For compensating the expatriates during their assignment, the balance sheet approach is applied. Straumann closely works with Convinus (www.convinus.ch) which delivers indices for the cost of living allowance and also makes the host salary calculation. Positive as well as negative COL adjustments are made. The company’s main objective is to pay only the difference between home and host location expenses, therefore actual expenses for housing and taxes are calculated and a differential is paid. Included in the salary calculation is also a savings part. For moves within Europe, the host location pays the expatriate’s salary in host currency. Moves to the U.S. or Asia are handled dif-

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ferently. Salaries are paid by the HQ to a Swiss bank account in Swiss Francs. The expatriate is responsible for changing the money into local currency. (Sommer 2009)

Straumann pays a housing allowance, a relocation allowance, car, home leaves, schooling, and storage of household goods. These benefits are paid to all expatriates if they meet the requirements and are not tied to any criteria such as hierarchical position or host location. Payments for hardship or mobility are not made. (Sommer 2009) Challenges Because most expatriates are on their first assignment, Straumann has not so many challenges with special requests or exceptions. Expatriates have no basis for comparison or experience how assignments are handled in other companies. If exceptions are made, they are approved by the EMB and stated in the assignment contract. (Sommer 2009)

Expatriates are continuously informed what the HR Business Partner does before and during the assignment, so that they are closely involved. (Sommer 2009) 7.1.6 Schaffner Key Figures Net sales in 2008

182 million CHF

Number of employees in 2008

2320

Number of countries with subsidiaries in 2008

14 countries (Europe, America, Asia)

Number of expatriates in July 2009

7

Organization Most of Schaffner’s expatriates (www.schaffner.com) are sent abroad to manage new subsidiaries or work on projects for a duration of three years. Due to the company’s size, Schaffner has no structured international assignment organization or process. The head of corporate HR is responsible for managing the assignments and preparing the assignment contracts. She is in contact with local HR whose task it is to facilitate integration. Currently, no written international assignment policy is available. Such a policy will be elaborated during the next months. Once finalized, it will be accessible to

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all employees and it will contain a framework for managing international assignments and compensating the assignees, but no money amount will be stated as it could be different depending on the host location. (Bolliger 2009) Compensation Recently, Schaffner elaborated a new compensation system together with Mercer. All key people, including expatriates, are graded according to their function. The company determines the expatriate’s host country function and takes the compensation level of that particular function in the home country. The respective salary is the basis for the assignment compensation calculation. Taxes and social security are considered in the calculation; adjustments for differences in cost of living are not made. Normally, the salary is paid out in the host country with a fixed split between home and host country currency. (Bolliger 2009)

In addition to the salary, an expatriate bonus (similar to a mobility allowances) is paid which depends on the expatriate’s performance. Moreover, home leaves, emergency leaves and in some cases housing are reimbursed. Whether tax advice is necessary or not is decided case-by-case. Schooling, hardship and mobility allowances are not provided so far. (Bolliger 2009) Challenges Due to the lack of a clear international assignment policy, many exceptions were made in the past. However, with the new policy fewer exceptions should be made as the basic guidelines are clearly stated. Expatriates should have no reason to feel unfairly or unequally treated. At the moment and also in the future, exceptions must be stated in the assignment contract and approved by the CEO. (Bolliger 2009)

Expatriates are always informed when something changes regarding social security, taxes, etc. However, to some degree, it is their own responsibility to ask for clarification or more detailed information if something is unclear. (Bolliger 2009)

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7.1.7 Summary The studied companies have between seven and 750 expatriates. Because of this difference, international assignments are handled differently. The three companies with the largest number of expatriates (Alstom, ABB, Holcim) showed the most similarities. Organization For all companies business needs is the most important reason to relocate employees. Career development assignments were also mentioned, but they are not widely used. Transfer of the management philosophy and need for international experience were only named once. Most companies’ long-term assignments last for up to five years.

Except one company, which is currently in the process of developing an international assignment policy, all companies established a global policy in order to manage the assignments efficiently. One big company has in addition to its global corporate policy country specific policies to account for local circumstances. In four companies, the policy is accessible to every employee; two companies distribute it only to HR and line managers and potential candidates. The following key success factors for an effective policy were named: transparency, fairness, equal treatment, compliance. The implementation of the policy and the coordination of the assignments are in every company different. While one company has special international assignment representatives in each country, another one has assignment managers who coordinate every assignment from the HQ in Zurich. Two companies have their people located in several coordination centers on different continents. In the two smallest companies, assignments are managed on corporate level in the HQ in Switzerland. Compensation Four companies apply the normal balance sheet approach with the home salary as basis. Two use a slightly adapted version. Differences in cost of living are adjusted positively and negatively by four companies. One company only adds a positive COL allowances and one company does not calculate any. Mercer, Air Inc., ECA and Convinus were mentioned as data provider, not only for COL indices but also for housing norms and tax rates. Most of the companies pay the salary divided in home and host currency.

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The most common benefits paid extra to the salary are relocation, settling-in allowance, housing, schooling, home and emergency leaves and tax consulting. A real mobility allowance which is an incentive to go abroad was only listed by two companies. The hardship allowance is only relevant for the three big companies due to their countries of operation. Two companies support the spouse/partner of the expatriate in that they pay spouse/partner assistance. Depending on the company, other benefits might be paid as well. Challenges All companies try to make as less exceptions as possible to the policy. If an exception is made, it needs approval of, for example, the divisional or corporate management, the EMB or the CEO. Two companies write a justification statement, whereas the rest only states exceptions in the employment contract.

Suggestions for delivering accurate and complete information about the assignment were: regular meetings, a special intranet page, assignee guides and external advice for taxes and social security. 7.1.8 Interpretation of Results It is seen that the more expatriates a company has, the more structured the expatriate management is. Clear processes are in place and designated international assignment managers organize the assignments. Concerning financial aspects, it is assumed that big companies have more money to invest in the international assignment management. Therefore, they can afford to regularly educate their assignment managers and to ask for external help from consulting firms. Also, the company is able to pay more benefits. The company’s size does not seem to have an impact on who is responsible for managing international assignments. In five companies, international assignments are managed from a centralized department.

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7.2 Swisslog Expatriates After the interviews with the companies were accomplished and the results analyzed, five expatriates of Swisslog were interviewed. Four short interviews were accomplished face-to-face and one was done by telephone. Two of the interviewees came from the U.S. to Switzerland, one relocated from Australia to Switzerland and one moved from Malaysia to Switzerland. The last one expatriated from Switzerland to Australia. The interviewees are from different hierarchical levels (three of them have a senior level position) and age groups.

Prior to the interview, a criteria list for a successful policy was established based on the results of the company interviews. This list is presented in Table 7.1. Every criterion has two options. The interviewees’ job was to state which option of each criterion is more appropriate from their point of view. Questions about the organization of the expatriate management and compensation approaches were not asked because expatriates have too little information about these aspects.

Table 7.1: Criteria List for a Successful Policy 1) Public (accessible to all employees) vs. semi-public (accessible to people involved) 2) One policy for all parties involved (HR, line manager, employee) vs. separate policy for each party 3) Detailed vs. general 4) No exceptions vs. flexibility 5) Benefits dependent on hierarchical position of expatriate vs. benefits the same for all expatriates 6) Benefits dependent on host country vs. benefits the same for all expatriates 7) Transparent vs. trust-based 8) Compliance controlled by corporate HR vs. compliance controlled by local HR

Source: author 7.2.1 Results Criterion 1 The first question is weather the policy should be public or semi-public which means that it is only accessible to the people involved. People who are involved in the assignment are defined as HR, line managers and expatriate candidates. Three respondents

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held that is should be semi-public because of the jealousy of other employees. One person with an Asian background added that it might not be possible to public it due to cultural reasons. Two thought that an open policy would be more transparent and thus better for the company. (Expatriate Interviews 2009) Criterion 2 The result of the second criterion is more obvious. Four out of five interviewees thought that every party should have a separate policy because otherwise to much information is in the policy and the expatriates must search for what is relevant to them. This would mean that one policy is established for HR and line managers which regulates the whole process as well as responsibilities and another policy is elaborated for expatriates which only incorporates aspects important to them (i.e. compensation and benefits, legal aspects). (Expatriate Interviews 2009) Criterion 3 and 4 Either a policy is kept general and certain flexibility is possible or it is very detailed and no exceptions are made. A statement in the general policy could be as follows ‘The expatriate is entitled to a relocation allowance of appropriate size’. A detailed policy would also include the amount and on what factors the amount of the allowance is depending. The majority of the respondents (three interviewees) preferred a general policy due to different personal and family situations. A detailed policy with no exception is not possible in their opinion. Two stated that the policy should account for different scenarios (e.g. single, couple, family) and the conditions for each scenario should be defined in detail. (Expatriate Interviews 2009) Criterion 5 and 6 In the opinion of four interviewees, the entitlement to benefits should be dependent on the hierarchical position. One mentioned that within the definition of an expatriate different groups should be made (e.g. employee, manager, etc.). Only one thought that the same benefits for all expatriates would be fairer. (Expatriate Interviews 2009)

Out of the four who thought that different benefits should be paid depending on the position, three held that benefits should also be dependent on the host country. This would

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mean that the expatriate in China might be entitled to have a car, while the assignee in Australia is not. (Expatriate Interviews 2009)

Both criteria do not refer to the amount which is paid but to the conditions of entitlement. Criterion 7 Transparency about everything related to the assignment and what HR does is important to four expatriates. One example of transparency would be to show the whole compensation calculation and not only the final amount. One assignee held that it should be possible to trust HR and it is not necessary to be always involved. (Expatriate Interviews 2009) Criterion 8 According to the results, compliance to the policy should be controlled by corporate HR. Three even agreed that corporate HR should be responsible for managing all international assignments so that consistency is ensured. One respondent did not agree because compliance should be controlled by the party who bears the costs for the whole assignment, namely the host unit. (Expatriate Interviews 2009) Two people commented that the purpose of the whole policy should be to leave the assignee neither better nor worse off in the host country. The employee should not become financially hurt by accepting an assignment. (Expatriate Interviews 2009) 7.2.2 Summary Although a diverse group of expatriates was interviewed, most of the answers were equal. In the expatriates’ opinion a general and rather flexible policy for each party should be established. Furthermore, the policy should not be accessible to everyone but to the people involved. Transparency about how things are managed and coordinated is as important as corporate control of the compliance to the policy. According to the interviewees, the entitlement to benefits should be dependent on the hierarchical position and the host location.

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7.2.3 Interpretation of Results By looking at the results, it seems that the expatriates have chosen the option which maximizes their overall benefit. They did not evaluate which option is fairest. This is best seen by the fact that the majority would like to have a general policy with room for negotiation, although a detailed policy would be fairer. Furthermore, it is assumed that the results would look differently, if a higher number of expatriates were interviewed and if the different hierarchical levels were equally represented. The majority of these interviewees were from a high hierarchical position.

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8

Recommendations

Based on the literature review as well as the company and the expatriate interviews, recommendations for a successful and effective international assignment management are made. If possible, the company objectives of Swisslog are allowed for in the recommendations. However, if this is not possible more general recommendations are listed as well.

8.1 Organization The first section refers to the question ‘how is the assignment process best structured?’. Four recommendations for an efficient organization and coordination of the assignments are made. One Responsible Department/Person The results of the company interviews showed that assignments are mostly managed from one location. Special international assignment departments are built to facilitate the assignment process. Current Swisslog expatriates prefer this centralization. They held that corporate HR would be most suitable at Swisslog. Therefore, it is recommended to integrate the management of international assignments into corporate HR in Buchs, Switzerland. The most suitable employees or new hires should be designated to coordinate the assignments. These employees are referred to as international assignment managers (IAM). These IAM must work closely with the HR department of the home and host country to have access to data about the expatriate (i.e. social insurance, income taxes, etc.).

To centralize the whole management makes sense because of several reasons. The international assignment managers can develop comprehensive knowledge of the aspects related to international transfers. The more experienced someone is the faster and more successful an assignment is managed. Furthermore, as always the same people are responsible, consistency in implementing the policy and equal treatment is ensured. Compliance to the policy and compliance with legal matters such as social insurances and taxes is very important and can be guaranteed with competent staff.

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Due to Swisslog’s number of expatriates, a full-time international assignment manager does not make sense. It is estimated that the preparation of a new assignment takes about twenty to forty hours. (Richard, B. pers. comm. 11 August 2009) Thus, it makes sense to assign one main person and one deputy and to educate them accordingly. The management of international assignments would be one of many duties specified in their job description.

It is assumed that the suggested change has high impact on the satisfaction of the expatriates because they explicitly asked for a centralized management. On the satisfaction of the line managers, it would also have high impact because they expect knowledgeable people who manage the assignments and a clear process. Early Involvement of International Assignment Managers The line managers clearly stated in the online survey that HR should be involved earlier in the whole process. Some companies also agreed with this statement because international assignment managers learn over time what the cultural requirements are and what personal competencies the candidate must possess. It is recommended that the IAM is informed by the line manager about an open expatriate position before a candidate is chosen. If this is not possible, the IAM must be informed just after selection of the candidate, before any promises are made regarding compensation and benefits and anything is organized.

The early involvement is crucial because the whole assignment will be faster organized. The expatriate has a competent contact person from the beginning and especially legal aspects can be considered early. Furthermore, the IAM has an overview of what needs to be done so that nothing is forgotten and no negative surprises emerge. If the IAM is informed before a candidate is chosen, they can give valuable inputs on what the expatriate must have for the particular country (e.g. good knowledge of how to successfully lead employees in Asia). It is assumed that the number of unsuccessful assignments (i.e. early return home, bad performance) can be minimized.

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It is the responsibility of the corporate HR to educate line managers on how the process should take place (i.e. when they have to inform the IAM) if an international assignment is considered.

Early involvement of the managing person would have high impact on the satisfaction of both expatriates and line managers. Transparency is very important for expatriates. With one contact person from the beginning, transparency can be ensured. Furthermore, legal aspects can be clarified at the beginning and more time is left to organize them. Line manager listed late involvement of the responsible people as challenging; therefore this recommendation would enhance their satisfaction. List of Clear Responsibilities Because the preparation of an international assignment is very complex, a structured process and clear roles and responsibilities are crucial. It is suggested to have a clear list of the different stakeholders or involved parties with their responsibilities. This list should be part of the international assignment policy. Hence, confusion and duplications can be avoided.

The roles and responsibilities can be defined as follows:

The international assignment manager is responsible for coordinating the whole assignment and specifying terms and conditions based on the international assignment policy. The IAM calculates the new compensation package and establishes the assignment contract. Furthermore, the right handling of legal aspects such as work visa, taxes and social security is guaranteed by the IAM with the close involvement of the local HR. A database with all expatriates is administered and the IAM reminds the host line manager and the expatriate of the expiration of the assignment. If already involved in the selection process, the IAM provides candidate feedback to the home line manager.

The expatriates’ job is to deliver accurate information on their family or personal situation and to be at the IAM’s disposal for answering any questions. Furthermore, expatriates are responsible for searching for housing, schools, etc. in the host location because

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that is very personal. Addresses and a list with contact persons should be delivered by the IAM.

Home country HR is responsible for delivering information about the base salary, possible company benefits, social security and other information about the assignee to the IAM. After completion of the assignment, home HR facilitates repatriation in that they provide an appropriate job and support the relocation home.

Pre-assignment visits and the relocation are coordinated by host HR. They are responsible for delivering information about cultural differences, climate, etc. to the expatriate. Moreover, they must deliver accurate information about work visa, taxes and social security to the IAM. At the beginning and during the assignment, host country HR facilitates integration and is in close contact with the expatriate to help with problems.

The home line manager has the responsibility of identifying a suitable candidate and specifying the purpose of the assignment as well as the estimated duration. Before the assignment, close cooperation between home and host line manager takes place to agree on the assignment conditions. In addition, the line manager is responsible for providing an appropriate job after repatriation home together with the home HR.

The last involved person is the expatriate’s line manager in the host country. Besides a close collaboration with the home line manager, the host line manager must also work with the IAM to specify the terms and conditions of the assignment and to approve total costs. During the assignment, he or she is responsible for integrating the new employee into the company (i.e. induction program) and to accomplish the annual performance appraisal. Before the assignment expires, short notice of possible continuative projects must be given to the IAM and the home line manager.

This recommendation has low impact on the satisfaction of the expatriates and line managers as the need of such a detailed list was not expressed. However, it will have indirect impact because the different roles are clear and the management easier.

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Checklists, Documentations, Meetings According to the company interviews, the complexity of international assignments can be best managed with standardized processes and external help. The top priority should be to deliver accurate information so that assignees are well-informed about what is of interest to them and to be compliant with local laws.

It is recommended to establish checklists for every element of the international assignment life-cycle for line managers and the IAM and to develop these checklists further. This ensures that nothing important is forgotten. Furthermore, templates and the documentation of all international assignments make the whole management easier as old cases can be consulted. Personal or telephone meetings with the expatriate are a good mean to answer questions and to deliver information, especially for sensitive topics such as taxes and social security. It is also suggested to hire external consultants for these aspects because it is hardly possible to have specialist knowledge of every country’s laws and regulations.

The establishment of checklists and templates has only indirect impact on the satisfaction of the expatriates. However, the interviewed companies find them vital for a good management as expatriates will feel more satisfied if the management is well-organized. Therefore, it is said that the impact is medium. External consultants, on the other hand, have high impact on the satisfaction. Several interviewees asked for such consultants to receive professional support.

8.2 International Assignment Policy To make recommendations for how a long-term assignment policy should look like is challenging because the results of the expatriate interviews differ from the company interview results. In many aspects, expatriates have the opposite opinion.

Before the characteristics and the content of the policy can be specified, basic aspects such as the duration of long-term assignments and the definition of expatriates must be discussed. A long-term assignment should last between one and five years. The initial duration is best set at three years. (This duration might vary due to work permit

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reasons.) Then an evaluation of the situation is done to determine how the assignment will be continued. After five years, the assignee should be fully localized into the host salary structure because the special status as a foreigner is not justifiable anymore.

Long-term assignment policies apply most often for employees who are send abroad from the company to accomplish a specified task and who will return back to their home country after the assignment. It is recommended to use this definition. In addition to employees who are send by the company, employees who express the desire to work abroad and who are then selected should also be included. To make a difference between employees who are chosen by the company and those who ask for an international assignment is unfair. Furthermore, a distinction would block the employees to express their desire. Employees who apply for a regular job offer in one of the subsidiaries should not be included in the definition. There, it can be assumed that they want to live in the country forever and a local contract should be worked out. Characteristics of Policy Most companies agree that an international policy should be accessible to all employees. Expatriates, on the other hand, prefer a semi-public policy for fear of jealousy. It is recommended to have an open policy and to promote transparency. An open policy does not necessarily promote jealousy but employees would know what expatriates receive in addition to their salary, if they are interested, and therefore rumors do not exist. Furthermore, employees who are interested to work abroad have the chance to read the policy before they make their decision.

To minimize confusion and to enhance transparency, one policy for all parties is recommended. Again, all involved parties would know how the whole process is managed, who is responsible and what can be expected. Moreover, the IAM can refer to the corporate policy if questions or difficulties arise. Transparency in everything Swisslog does during the assignment preparation and while the expatriate is on assignment is very important.

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The existing policy is already quite detailed in some parts. It is suggested to have a detailed policy. This means that the amount of money for each benefit is stated. Furthermore, the policy should account for differences in living situations for singles, couples and families. If it is Swisslog’s philosophy to differentiate in their company policies between employee level and executive level, they can also do it in this policy. However, it is not suggested to make too many differentiations.

The recommended policy is publicly stored, quite detailed and applicable to all parties. It has indirect impact on the satisfaction of expatriates and line managers due to more structured processes and transparency. However, the expatriates will not feel more satisfied only because the policy is openly stored and the same for all parties. Therefore, it is said to have low impact.

It is very important that the IAM, local HR and line managers are educated on the policy by corporate HR. The different stakeholders must have knowledge of the content and of how the policy is applied so that no wrong promises are made. A repetition of the content and the most important aspects is suggested every second year due to normal employee turnover. This repetition can be done with a short reminder. Content of Policy In order to be complete and effective, the policy should have the following content. The objectives and the scope (for which type of international assignments does the policy apply?) of the policy should be stated. Furthermore, the different assignment types and their goals should be defined so that it is clear what the definition of an expatriate is. The assignment process should also be outlined divided into selection, preparation, relocation, compensation and benefits, repatriation. It is vital to clarify key points of every part and to define roles and responsibilities. It is also suggested to define the expatriate’s legal employer (home or host unit), the content of the assignment letter (or assignment contract) and the term family (e.g. spouse/partner and children up to the age of twenty-one).

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8.3 Compensation and Benefits The last section discusses the most suitable compensation approach and the most appropriate benefits. Most firms have different benefits and components they pay because of their company culture regarding compensation. The suggestions made hereafter are based on Swisslog’s principle that the assignee should be neither financially better off nor worse off than at home. Also, expatriates are expected to return home after their assignment and not to pursue a new one. Most often, expatriates are asked by their local manager if they want to go abroad and are then relocated. In the future, it is suggested to create a pool of candidates who are willing to go abroad. Employees in that pool do not expect as much from the company as employees who are pushed to go. Compensation Approach To account for Swisslog’s main principle, it is recommended to use the balance sheet approach. With this approach, the assignee has the same purchasing power abroad and differences in cost of living are equalized. To ensure transparency, it is highly recommended to search a provider for COL data, tax rates, saving rates and housing norms because these data change annually and are different for singles, couples, families and it would be too tiresome for the IAM to look for these data every year. Furthermore, one source of data enhances transparency and trust into the compensation calculation. Current expatriates would be more satisfied because inaccurate cost of living data was one of the weaknesses they mentioned in the survey.

It is not suggested to work with actual data for housing and taxes, because the collection of such data is difficult. Norms and tax rates are easier to obtain from consulting firms or statistical offices. The spendable income should be adjusted positively and negatively because of the fairness.

During the assignment, expatriates keep financial responsibilities in the home country (i.e. social security, taxes, etc.). Therefore, it makes sense to pay the salary in home and host currency. To simplify matters, a proposal should be made by the company (e.g. pay spendable income and taxes in host currency, rest in home currency). Expatriates may be entitled to change the split according to their needs.

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If employees from low salary countries relocate to a high salary country challenges with the balance sheet approach may arise. Even though adjustments are made, the assignee does not reach the market salary level and it could even be difficult to obtain a work visa. One way is to take a higher base salary to minimize the gap. However, this approach hinders a smooth reintegration into home salary structures. Thus, it is recommended to pay an additional allowance of the amount equal to the gap between the expatriate compensation and local/market compensation. Benefits At the moment, Swisslog has no allowance for language lessons in the policy. However, language lessons should be reimbursed by the employer because even though the assignee might speak English and can communicate within the work environment, speaking the local language is helpful and gives insights into the local culture. Therefore, language lessons for expatriates and their spouse/partner should be paid, if appropriate, during the preparation phase at home and maybe at the beginning of the assignment. Language lessons might be exchanged with cultural trainings, if a sound knowledge of the language is already existent.

Already now, prior to the start of the assignment, assignees and their spouse/partner are entitled to go on a pre-assignment trip to the host country. This trip is used for visiting the host unit, house hunting, visiting schools for the children, etc. It is suggested to keep the limitation of five working days, without travel time. Expenses are best reimbursed according to the company policy for business trips.

Today, temporary accommodation is paid for two month (first month full, second month 50%). It is recommended to grant this benefit in the home country and the host country. In the home country, a period of ten days is reasonable if expatriates have to leave their accommodation before the assignment starts or household goods must be shipped in advance. After arrival, temporary accommodation up to thirty days is paid by most companies. This time should be used to search for appropriate accommodation if it was not possible before. Durations longer than thirty days might encourage the expatriate to not search seriously.

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Usually, the expatriate has no transportation mean at the beginning of the assignment in the host location. Therefore, it is suggested to pay for a rental car during the first thirty days. In this period, the assignee is asked to look for appropriate transportation. Entitlement for a car during the assignment should be in accordance with the company policy in the host unit.

Swisslog should pay a relocation allowances for miscellaneous items which must be bought because of the international assignment. Examples of miscellaneous items are electrical appliances, new passports or driver’s licenses, medical tests and vaccinations, etc. The relocation allowance is fully paid as a lump sum before the assignment starts. It makes sense to distinguish between singles, couples and families. The interviewed companies’ allowances are between 3’000 CHF and 7’500 CHF for a single person. For a family, it is between 5’000 CHF and 10’000 CHF. Because of the ease of administration, it is recommended to have a higher relocation allowance instead of many small allowances for different things. Moreover, expatriates do not ask for cash reimbursement for every miscellaneous item if they know they have to pay it with the relocation allowance. A similar allowance, called re-settlement allowance, should be paid at the end of the assignment prior to repatriation. The amount of this allowance might be fifty per cent of a relocation allowance because the number of miscellaneous expenses which accrue is smaller.

Shipment of household goods is a typical allowance which is already paid by Swisslog. It is recommended to have different container sizes for a single person (e.g. 20 feet), a couple (e.g. 40 feet) or a family (e.g. 60 feet). Due to the foreseeability of costs, a list of possible relocation agencies should be prepared by the IAM. After a certain time, the IAM knows how much the different relocation agencies cost and better international assignment cost forecasts can be made. Expatriates are asked to present at least two offers of relocation companies before it is approved by the IAM.

It is not recommended to pay storage costs if the assignee receives a shipment of goods allowance. Normal household goods can be shipped with this allowance to the host country. Expenses for storage of special goods such as caravans, boats, paintings, etc.

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should not be paid by the employer. If the assignee moves into a furnished accommodation abroad, storage costs for typical household goods may be paid.

It is very important that the whole family feels good about the relocation to another country. Thus, school fees should be paid by the employer, if it is not possible to attend a public school due to, for example, cultural, language or religion reasons. However, it is reasonable to pay only fees for kindergarten, primary and secondary school and not for preschool or tertiary education.

To visit close family members in the home country, home leaves should be provided to the expatriate and the accompanying family. At the moment Swisslog provides one roundtrip ticket per year per family member. It is recommended to keep this practice because most of the interviewed companies also pay one home leave per year. If the assignee relocates without the rest of the family, the number of home leaves should be increased to every forth month (three times in one year). It should not be possible to transfer unused opportunities to the next year. In return, the company should not make any constraints when the expatriate is allowed to fly back home (e.g. not in the first six month), however, approval of the host line manager must be obtained. It is recommended to base the flight conditions on the company’s policy for business trips.

Currently, no hardship allowance and no mobility allowance are paid. It is not suggested to pay a hardship allowance in the future because Swisslog has no subsidiaries in real hardship countries. It is also not recommended to pay a mobility allowance. International assignments should be pursued because of personal interests in other cultures and the work itself and not because of the financial benefits.

Any expenses for renting or selling home housing should not be reimbursed by the company. Similarly, costs for maintaining the property at home should not be paid. House hunting costs in the host location are not suggested to be paid. The job of the host HR is to provide expatriates with a list of addresses and contact persons and to support them in searching accommodation. If it is not possible to find appropriate accommodation, external help can be requested.

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The impact on the satisfaction is to be expected high if a new allowance is paid. If the allowances is changed (e.g. the amount or the condition for entitlement) the impact is assumed to be medium.

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9

Conclusion

The management of international assignments is very complex due to different cultures, norms and legal systems in the home and host country as well as different expectations of the people involved. Therefore, clear directives and guidelines are essential for successfully managing assignees.

During the selection process, the company must have a good understanding of what technical and cultural requirements the position abroad needs. To test the candidates’ suitability to these requirements is crucial. Once an employee is selected, the preparation and training phase starts. In this phase, language training, cultural training and preparing the family life abroad are the most important aspects. Because the whole family will need to adjust to a new environment and culture, all of them should be involved in training courses. During the assignment, the support of the line manager and the local HR is required to minimize difficulties. A well-structured compensation package compensates the assignee for extra expenses which accrue during the assignment. The following approaches are applied by multinational companies: balance sheet, host country, headquarters-based pay, higher of home or host and negotiation. The balance sheet method is used most often. It takes the home salary as basis. Adjustments for different costs of living, income taxes and social security contributions are made. In addition to the salary, differentials and allowances are paid for expenses related to the assignment. The allowances paid most often are: mobility, schooling, housing, home leaves and hardship. To monitor the expatriate’s performance, regular performance appraisals are conducted. It makes sense to adjust the performance criteria used for local employees to consider special circumstances an expatriate faces (e.g. different cultural environment, different work habits, etc.). Because of the limited duration of an assignment, repatriation to the home unit must be organized. It is important to search a suitable position in the home country which allows the expatriate to use experiences and knowledge gained during the assignment.

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After a thorough analysis of Swisslog’s current expatriate management, recommendations for a successful management of future assignments were established. Table 9.1 summarizes all areas of investigation and presents the old situation as well as the new suggestions along with their impact on satisfaction. High impact means that these activities have a substantial effect on the satisfaction of expatriates and line managers because they either explicitly mentioned it or because they have financial gains. Medium and low impact means that the effect is indirect or it is only important to either international assignees or line managers. No impact indicates that no changes are recommended.

Table 9.1: List of Recommendations Area Organization

International assignment policy

Compensation

Baumgartner

Old

New

Impact on Satisfaction • High

Responsible Person



Local HR in home and host country



International assignment managers in one location

Involvement of responsible person



Often late



Always early



High

Roles and responsibilities



Not clear (although stated in the international assignment policy)



Clear list of all parties involved with their roles and responsibilities



High

Internal and external help for managing assignments



Templates, meetings



Checklists, documentations and meeting



Medium



No single provider which was always used



External help for legal aspects (e.g. PwC, Mercer, Convinus)



High



HR and line managers



All employees



Low



International assignment policy for HR and line managers, expatriate policy for expatriates



One policy for all parties



Quite detailed



Detailed



Mostly legal aspects and compensation



All elements of assignment lifecycle



Balances sheet



Balance sheet



No impact

Characteristics

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Area

Old Benefits

New

Impact on Satisfaction • High



No language lessons



Language lessons (assignee and spouse/partner)



Pre-assignment trip (5 days)



Pre-assignment trip (5 days)



No impact



House hunting in host country (3’000 CHF)



No house hunting in host country, no reimbursement of home housing selling expenses



Medium



Temporary accommodation (first month full, second month 50%)



Temporary accommodation (10 days in home country, 30 days in host country)



Medium



No transportation



Rental car (30 days)



High



No relocation allowance



Relocation allowance based on family situation (between 5’000 and 10’000 CHF)



High



No re-settlement allowances



Re-settlement allowance (50% of relocation allowances)



High



Shipment of household goods (single: 20 feet, couple: 20 feet, family: 40 feet)



Shipment of household goods (single: 20 feet, couple: 40 feet, family: 60 feet)



Medium



Storage of household goods (5’000 CHF)



No storage of household goods (if shipment of goods paid)



Medium



School fees (full)



School fees (full)



No impact



Home leaves (1 per year)



Home leaves (family in host country: 1 per year, family in home country: 1 per four month)



Medium



No hardship allowances



No hardship allowances



No impact



No mobility allowances



No mobility allowances



No impact

Source: author

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International Assignments

List of References Beamer, L. and Varner, I. 2008. Intercultural communication in the global workplace. 4th ed. New York: McGraw Hill Briscoe, D., Schuler, R. and Claus, L. 2009. International Human Resource Management. 3rd ed. London: Routledge Gmür, M. and Thommen, J.-P. 2006. Human Resource Management. Zürich: Versus Herod, R. 2008. Expatriate Compensation: The Balance Sheet Approach. Society for Human Resource Management KPMG. 2008. Survey 2008: Global Assignment Policies and Practices. KPMG. Available online at: http://www.kpmg.com/SiteCollectionDocuments/EconomicClimate-Spot-Survey-09.pdf (Accessed 16 May 2009) Kühlmann, T. M. 2004. Auslandseinsatz von Mitarbeitern. Göttingen: Hogrefe-Verlag GmbH Mercer. 2008a. Designing competitive expatriate compensation packages. Mercer. Available online at: http://www.mercer.com/referencecontent.htm?idContent=1303865 (Accessed 27 May 2009) Mercer. 2008b. Applying negative cost of living indices – bad practice or logical solution?. Mercer. Available online at: http://www.mercer.com/referencecontent.htm?idContent=1312800 (Accessed 27 May 2009) Mercer. 2008c. How to deal with currency fluctuations issues: The beauty of split pay. Mercer. Available online at: http://www.mercer.com/referencecontent.htm?idContent=1312795 (Accessed 27 May 2009) ORC. 2009. The Balance Sheet Approach. ORC. Available online at: http://www.orcworldwide.com/compensation/mobility/balance.php (Accessed 16 May 2009)

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ORC. 2003a. Host-country Approaches. ORC. Available online at: http://www.orcworldwide.co.uk/compensation/expatriate/custom_host.html (Accessed 16 May 2009) ORC. 2003b. Headquarters-based Pay. ORC. Available online at: http://www.orcworldwide.co.uk/compensation/expatriate/custom_hq.html (Accessed 16 May 2009) ORC. 2003c. Higher of Host or Home. ORC. Available online at: http://www.orcworldwide.co.uk/compensation/expatriate/custom_high.html (Accessed 16 May 2009) Ruch, F. V. 2002. Expatriates – Inpatriates: Handbuch zur Entsendung von Mitarbeitern. Bern: Cosmos Verlag Snell, S. and Bohlander, G. 2007. Human Resource Management. Student International ed. Mason: Thomson Swisslog. 2009a. Facts & Figures. Swisslog. Available online at: http://www.swisslog.com/index/home/crp-facts-figures.htm (Accessed 16 May 2009) Traber, Y., Constantin, N. and Su, J. 2008. Why is it important to revise cost of living allowances regularly? Mercer. Available online at: http://www.mercer.com/referencecontent.htm?idContent=1313565 (accessed 27 May 2009) Interviews Bolliger, S. 2009. Interview with the author on 27 July 2009. Luterbach. (Cassette recording in possession of author) Eggenschwiler, J. and Mühlebach Steen, C. 2009. Interview with author on 30 July 2009. Zürich. (Cassette recording in possession of author) Engelhart, V. 2009. Interview with the author on 27 July 2009. Solothurn. (Cassette recording in possession of author) Lauener, A. 2009. Interview with the author on 21 July 2009. Zürich. (Cassette recording in possession of author)

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International Assignments

Solecki, J. 2009. Interview with the author on 9 July 2009. Baden. (Cassette recording in possession of author) Sommer, C. 2009. Interview with the author on 24 July 2009. Basel. (Cassette recording in possession of author) Unpublished Work Author. 2009. Expatriate Interviews.doc. (Document in possession of author) Swisslog. 2003a. Corporate Policy: International Assignments. Buchs: Swisslog Swisslog. 2003b. Expat Policy. Buchs: Swisslog Swisslog. 2009b. Results Expat/Transferee Survey. Buchs: Swisslog Swisslog. 2009c. Results Line Manager of Expat/Transferee Survey. Buchs: Swisslog

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Appendix 1

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ix

International Assignments

Appendix 2

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x

Expat/Transferee Survey Dear colleague, Employee mobility is crucial for our business as it helps to achieve the goal of Human Resources management to have "the right people at the right place at the right time" and to strengthen our human resources capabilities with cross countries work exposure. Corporate HR has recently started the project "Expatica" that aims at improving the competence within Swisslog to have smooth employee transfers and successful foreign assignments placement at host units and eventual reintegration back into the home units. Your input as a current or former Expat or assignee who have the experience of a move within Swisslog is extremely valuable for this project. Therefore, we kindly ask for your assistance in answering this online questionnaire latest by 1 May 2009. Your survey responses will be strictly confidential and data from the research will be reported only in the aggregate. If you have questions at any time about this survey or the procedures, you may contact Ray Johnson via email at [email protected] Thank you very much for your time. Bernie Richard (Corporate Compensation & Benefits Manager) Ray Johnson (HR Manager, WDS USA) Andrew Ng (Senior HR Manager, WDS Asia) Please complete and return survey by: 05/01/2009 1

My former line manager has fully supported my foreign assignment/transfer. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion

2

It was primarily my own will to go abroad. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion

3

I was/I am in general very welcome at the host unit.

Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 4

My personal development was a major reason why the company has offered me the foreign assignment/transfer. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion

5

My foreign assignment/transfer will benefit my career within Swisslog. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion

6

My line manager and line manager+1 acknowledge the extra effort I do as an Expat/Transferee. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion

7

I had a clear understanding of my job in the host unit when I decided to accept it.

Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 8

I had the opportunity to meet my line manager during the selection process (face-to-face interview).

Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 9

I could openly discuss the foreign assignment/transfer with both my manager in the host and the home unit. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion

10 HR was involved from the beginning. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 11 If I did not accept the foreign assignment/transfer I was made to feel that this would potentially stop me from being given any potential career opportunities in the future. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 12 I was made aware of living conditions in the host country. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 13 I was well informed about the implications of the foreign assignment/transfer on my income taxes. Do not agree at all

Tend to disagree Tend to agree Agree fully No opinion 14 I was well informed about the implications of the foreign assignment/transfer on Social Security. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 15 I was well informed about the implications of the foreign assignment/transfer on other insurances. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 16 I was well informed about the implications of the foreign assignment/transfer on the costs of living in the host country. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 17 Overall, I was well informed about the implications of the foreign assignment/transfer on my (spendable) income. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 18 I consider my conditions (compensation & benefits) during the foreign assignment/transfer as fair compared to colleagues in the host unit.

Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 19 I consider my conditions (compensation & benefits) during the foreign assignment/transfer as fair compared to colleagues in the home unit.

Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 20 I consider my conditions (compensation & benefits) during the foreign assignment/transfer as fair compared to other Swisslog Expats/Transferees. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 21 I consider my conditions (compensation & benefits) during the foreign assignment/transfer as fair compared to Expats/Transferees from other companies. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 22 The process of defining the Expat/Transferee conditions was transparent and trust building. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 23

23 The process of defining the Expat/Transferee conditions was efficient. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 24 I have not experienced major surprises in the host country. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 25 I could start working in the host unit at the date as planned.

Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 26 I quickly met all relevant persons in the host country. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 27 I received sufficient support for getting along with daily topics in the host country such as shopping opportunities, public transport, money transfer / banking, etc. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 28

28 People in the host unit have helped me to understand cultural differences and pitfalls. Do not agree at all Tend to disagree Tend to agree Agree No opinion 29 My line manager has put an induction program in place when I arrived. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 30 My job in the home unit allows me to use the experience I gained during the foreign assignment/transfer. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 31 I was welcome by the home unit after completion of the foreign assignment/transfer. Do not agree at all Tend to disagree Agree fully Tend to agree No opinion Not yet returned to the home country 32 I faced no major problems during reintegration in the home unit and the home country. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion Not yet returned to the home country 33

33 Comments to the above ratings

34 Your personal suggestions on how to improve Employee Mobility/Expat/Transferee Management within the Swisslog Group

35 Basic Information (Optional)* Last Name, First Name: Transfer from______________ to_________________ Start of foreign assignment(month/year) End of foreign assignment(month/year) * Please enter the information in the box below

Line Manager of Expat/Transferee Dear colleague, Employee mobility is crucial for our business as it helps to achieve the goal of human resources management to have "the right people at the right place at the right time" and to strengthen our human resources capabilities with cross countries work exposure.Corporate HR has recently started the project "Expatica" that aims at improving the competence within Swisslog to have smooth employee transfers and successful foreign assignments placement. Your input as a line manager of a current or former Expat is extremely valuable for this project. Therefore, we kindly ask for your assistance in answering this online questionnaire latest by 1 May 2009. Your survey responses will be strictly confidential and data from the research will be reported only in the aggregate. If you have questions at any time about this survey or the procedures, you may contact Ray Johnson via email at [email protected] Thank you very much for your time. Bernie Richard (Corporate Compensation & Benefits Manager) Ray Johnson (HR Manager, WDS USA) Andrew Ng (Senior HR Manager, WDS Malaysia) Please complete and return survey by: 05/01/2009 1

As a multinational company, Swisslog should continue to promote foreign assignments between different regions as the benefits for the organizational development exceed the investment and risks (e.g. higher personnel costs, high administration, risk of failure, etc.). Do not agree at all Tend to disagree Tend to agree Agree fully No opinion

2

Swisslog should allow an expat under foreign assignment ONLY if it is unlikely to hire a local of the required expertise or competencies. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion

3

Swisslog should allow foreign assignments from existing employees that are primarily aimed at career development and planning

Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 4

Managers of a certain hierarchical level and above should be required to gain the experience of a foreign assignment. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion

5

I am familiar with Swisslog’s International Assignment Policy.

Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 6

Swisslog has clear processes as far as expatriate management (arrangement and relocation) is concerned. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion

7

Comments on International Assignment Policy: Please provide any other feedback or comments on the above topic that you would like to see included.

8

HR has played an active role in managing together with various parties involved in the Expat management process Do not agree at all Tend to disagree Tend to agree Agree fully no opinion

9

HR has managed to provide the Expat with all relevant information about the assignment, which allowed the Expat to make an informed decision Do not agree at all Tend to disagree Tend to agree Agree fully No Opinion

10 Considering the complexities in expat arrangement, HR has well supported the process and has helped to find the best possible solution Do not agree at all Tend to disagree Tend to agree Agree fully No Opinion 11 The Expat was able to start working in the host unit at the planned time Do not agree at all Tend to disagree Tend to agree Agree fully No Opinion 12 I was aware of the total costs of the foreign assignment when I signed the contract with the Expat

Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 13 I consider the terms and conditions(remuneration & benefits) offered to the Expat is reasonable compared to his/her peers in the host unit Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 14 Overall, I consider the terms and conditions (compensation & benefits) as the costs of assignment is reasonable Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 15 The process of defining the Expat’s terms and conditions of assignment for the contract was not easy but it was appropriately handled by HR Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 16 So far, no legal issues have arisen out of the Expat contract and arrangement Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 17 The 3rd party or consultant (if applicable) that we have engaged in this process was efficient and effective in

17 The 3rd party or consultant (if applicable) that we have engaged in this process was efficient and effective in offering professional assistance and advice Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 18 We have put together an induction program for the Expat Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 19 We have provided sufficient support to the Expat in adapting to local life e.g. public transportation, accommodation, shopping, banking, cultural understanding etc. Do not agree at all Tend to disagree Tend to agree Agree fully No opinion 20 Comments on Process: In your opinion how can the expat management process within Swisslog be further improved?

21 What do you think are the most common challenges faced in the expat management experience that you have gone through or that you have heard?

22 Please rate the following issue on a scale from 1 to 5 on the extent of challenges or difficulties that you faced in your last involvement in an expat arrangement (1=minimal challenges/difficulty, 5 = extremely challenging/difficult). Managing the candidate's expectations on the expat package (remuneration & benefits) 1 2 3 4 5 No opinion 23 Please rate the following issue on a scale from 1 to 5 on the extent of challenges or difficulties that you faced in your last involvement in an expat arrangement (1=minimal challenges/difficulty, 5 = extremely challenging/difficult). Time taken by HR to understand the legal and statutory requirements on the expat arrangement and relocation (i.e. social security, insurance, withholding tax, salary approach, work visa, cost of living etc.) 1 2 3 4 5 No opinion 24 Please rate the following issue on a scale from 1 to 5 on the extent of challenges or difficulties that you faced in your last involvement in an expat arrangement (1=minimal challenges/difficulty, 5 = extremely challenging/difficult). Lack of common understanding by various parties involved (line manager, HR, expat) on the expat management process 1 2 3 4 5 No opinion 25 Please rate the following issue on a scale from 1 to 5 on the extent of challenges or difficulties that you faced in your last involvement in an expat arrangement (1=minimal challenges/difficulty, 5 = extremely challenging/difficult). The expat candidate subsequently changed his/her mind to take up the foreign assignment

1 2 3 4 5 No opinion 26 Please rate the following issue on a scale from 1 to 5 on the extent of challenges or difficulties that you faced in your last involvement in an expat arrangement (1=minimal challenges/difficulty, 5 = extremely challenging/difficult). Conflict of interest or priorities between the expat candidate and the company 1 2 3 4 5 No opinion 27 Please rate the following issue on a scale from 1 to 5 on the extent of challenges or difficulties that you faced in your last involvement in an expat arrangement (1=minimal challenges/difficulty, 5 = extremely challenging/difficult). Late involvement of HR in the entire process of expat management (i.e. HR was not informed since the early stage) 1 2 3 4 5 No opinion 28 Please rate the following issue on a scale from 1 to 5 on the extent of challenges or difficulties that you faced in your last involvement in an expat arrangement (1=minimal challenges/difficulty, 5 = extremely challenging/difficult). Lack of experience or know-how of HR in expat management processes and procedures 1 2 3 4 5 No opinion 29 Please rate the following issue on a scale from 1 to 5 on the extent of challenges or difficulties that you faced in your last involvement in an expat arrangement (1=minimal challenges/difficulty, 5 = extremely

in your last involvement in an expat arrangement (1=minimal challenges/difficulty, 5 = extremely challenging/difficult). The significant differences in the remuneration of the expat candidate and the peers in host unit (of similar role) 1 2 3 4 5 No opinion 30 Please rate the following issue on a scale from 1 to 5 on the extent of challenges or difficulties that you faced in your last involvement in an expat arrangement (1=minimal challenges/difficulty, 5 = extremely challenging/difficult). The entire process has taken too long time while the needs for the expat candidate to report for work is rather urgent 1 2 3 4 5 No opinion 31 Please rank order by importance the factors that are important to any successful expat management/arrangement (1 = least important, 6 = most important) Clear understanding of the motivation and expectations (remuneration & benefits) of the expat candidate before designing the expat package/solution Form a project team structure with clear understanding of individual roles (HR, line manager of home/host unit etc.) and the expat management processes Getting HR to involve in the process from very beginning stage Communication to the expat candidate is consistently from one single voice to avoid confusion The line manager (host unit) collaborate closely with HR in the whole process The ability of HR in providing necessary information within a reasonable time frame pertaining to the expat arrangement (i.e. social security, insurance, withholding tax, salary approach, work visa, cost of living etc.) 32 Basic Information (Optional)* Last Name, First Name: Transfer from______________ to_________________ Start of foreign assignment(month/year) End of foreign assignment(month/year) * Please enter the information in the box below

Interview Fragebogen (Leitfaden) Allgemeine Fragen 1.

Wie gross ist Ihr Unternehmen? (Mitarbeitende, Umsatz)

2.

In wie vielen Ländern (Kontinente) sind Sie vertreten?

3.

Wie viele Expats haben Sie?

4.

Wie lange dauern Entsendungen normalerweise?

Internationale Entsendung (nur Langzeit) 5.

Aus welchem Grund entsenden Sie Ihre Mitarbeitenden?  Business Need  Career Development Anderer _________

6.

Haben Sie eine International Assignment Policy?  ja

 nein

Was sind die wichtigsten Inhaltspunkte?  Auswahl  Beurteilung  Vorbereitung  Repatriierung  Betreuung während Assignment  Rechtliche Aspekte (Sozialvers., Steuern, etc.)  Entlöhnung  Andere ___________________ Für wen ist diese Policy zugänglich?  HR  Linie  Mitarbeitende Von wem wird diese Policy umgesetzt?  Lokales HR  IA Abteilung  Corporate HR Auswahl 7.

Wie wählen Sie Ihre Expats aus? _____________________________________________________________

Vorbereitung 8.

In welchen Aspekten werden die Expats auf ihr Assignment vorbereitet? _____________________________________________________________

Betreuung während Assignment 9.

Von wem werden die Expats betreut?  Lokales HR  IA Abteilung  Relocation Service

 Andere

Entlöhnung 10. Welche Methode wenden Sie an?  Balance Sheet Approach  Host Country Approach  Headquarters-based Pay Fragebogen Nicole Baumgartner

 Higher of Host or Home  Negotiation (Case-by-case)  Andere ___________________ Seite 1/3

Aufgrund welcher Kriterien haben Sie diesen Approach gewählt? _____________________________________________________________ Warum nicht die Anderen? _____________________________________________________________ 11. Berechnen Sie eine Cost of Living Allowance (COLA)?  Ja Wenden Sie eine negative COLA an?  Ja Woher stammen Ihre Daten?

 Nein

 Nein

____________________________________

In welchen Abständen werden diese Daten aktualisiert? _________________ 12. Steuern: Welche Methode wenden Sie an?  Tax equalization  Tax protection  Andere _____________________________________________________ 13. Housing: Bezahlen Sie Ihren Expats housing?  Ja

 Nein

Wenn ja: abhängig von Kriterien? __________________________________ Ziehen Sie eine housing norm vom Einkommen ab?  Ja

 Nein

14. Savings: Wie gross ist der Savings Teil? _____________________________ 15. Erhalten Sie von einer Drittpartei Hilfe (Beratung)?  Ja

 Nein

Von wem? ____________________________________________________ In welcher Hinsicht? ____________________________________________ 16. Was für Benefits bezahlen Sie Ihren Expats?  Housing allowance  Home leaves  Hardship allowance  Emergency leaves  Mobility allowance  Consulting (tax, social insurance)  Schooling  Andere _______________________ Für alle Expats gleich? __________________________________________ 17. Was für Kriterien zeichnen eine gute Compensation and Benefit Policy aus? _____________________________________________________________ _____________________________________________________________ 18. Wie wird das Gehalt ausbezahlt?  Host Currency  Home Currency  Split pay Schwierigkeiten 19. Wie gehen Sie mit Ausnahmen/Sonderwünschen um? _____________________________________________________________ _____________________________________________________________

Fragebogen Nicole Baumgartner

Seite 2/3

20. Der Balance Sheet Approach hat den Nachteil, dass Expats von Low-Salary Ländern, zwar den gleichen Lebensstil weiterführen können, das Gehalt aber nicht gleich hoch ist wie das von ihren Kollegen. Machen Sie etwas dagegen? _____________________________________________________________ _____________________________________________________________ 21. Wie gehen Sie mit Expats um, die sich gegenüber den Anderen ungerecht behandelt fühlen? _____________________________________________________________ _____________________________________________________________ Wie gehen Sie mit lokalen Mitarbeitern um, die sich gegenüber den Expats ungerecht behandelt fühlen? _____________________________________________________________ _____________________________________________________________ 22. Wie stellen Sie sicher, dass der Expat alle nötigen Informationen erhalten hat? _____________________________________________________________ _____________________________________________________________ 23. Haben Sie sonstige Schwierigkeiten, die häufig auftreten? Wie gehen Sie mit diesen um? _____________________________________________________________ _____________________________________________________________ Beurteilung 24. Wer nimmt die jährliche Beurteilung der Expats vor? _____________________________________________________________ _____________________________________________________________ Repatriierung 25. Besteht ein Repatriierungsplan? _____________________________________________________________ _____________________________________________________________ 26. Wer ist für die Repatriierung zuständig? _____________________________________________________________ _____________________________________________________________

Fragebogen Nicole Baumgartner

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