Seminar Paper, 2011, 15 Pages
2 Expatriation - Discontinued Model?
2.1 Virtual Teams - Advantages
2.3 Improved Travelling Conditions
3 Expatriation - Importance in Global Economy
3.1 Virtual Teams - Disadvantages
3.2 Cultural Intelligence
3.3 Business Relationships
3.4 Investment in Human Capital
Figure 1: Global economic downturn - effects on expatriation
Figure 2: Project Complexity / Communication Effort Matrix
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,,If globalization is seen as inexorable, then companies will need a globally mobile workforce tasked with administering their far-flung but rapidly growing operations” (cf. The Economist, 2010).
Corporate business strategies involving mergers and acquisitions, greenfield investments or international joint ventures underline the importance of acting international throughout all business activities. Consequently human resources (HR) is facing an increased need for employees willing to work abroad for a limited time period. International human resources management has entitled these cross-border workers as ,,expatriates”. According to studies published in 2008 by a leading business consulting company 80% out of 4,200 graduates in 44 countries declared they would like to work abroad for a limited time period (The Economist, 2010). Examples provided above indicate that demand as well as supply characterizes the expatriation market, underlining the relevance of this approach in global business. Throughout this essay, the term ,,expatriate” is used to refer to employees, which are moving from their parent company to foreign subsidiaries or from one country to another while staying in the employment of the same firm. Excluded from this discussion are international students, lifestyle migrants or people that moved due to economic reasons or were hired to fill vacant job positions in other countries. (Briscoe / Schuller, 2004, p.208).
This essay critically examines the question whether ,,with the growth on modern communication technologies, such as email and video-conferencing, and the ease of international travel, expatriates will become an extinct species.” Pros and cons will be discussed in order to weight different perspectives and provide a final conclusion.
Beardwell and Clark point out the relevance of a tight fit between business and human resources strategies (Beardwell / Clayton, 2007, p.4-9). From a strategic perspective internationalization tendencies became relevant for many companies during the second half of the 20th century. Driven by motives such as labor cost reduction, market growth or worldwide production they began to establish themselves abroad. In this process expatriates are fulfilling the following three main functions: First, launching local operations. Second, transferring technical or functional expertise to local markets. Third, developing managerial structures abroad (Briscoe / Schuller, 2004, p.230).
In recent years, the number of international staff assignments increased steadily. The percentage of delegated top managers remained relatively constant, growing numbers were tracked on operational level. (Hoppe, 2003) However, the current economic situation leads to an increased cost pressure on human resources management. Current practices in sending employees abroad have to be reviewed critically, as today modern communication technologies or short business trips provide more cost effective solutions to manage global projects (Hoppe, 2003). The following arguments support the replacement of the traditional expatriation approach.
Modern communication technologies are currently revolutionizing society, markets and the traditional way corporations interact internally as well as with clients. This trend is expressed by the establishment of virtual teams, which are an aggregation of people from different locations, utilizing e-mail, teleconference or virtual web- and video conferencing software in order to meet virtually and move on as soon as group objectives are achieved. Personal contact might be an exception (Picot et al., 2001). These platforms provide the opportunity to interact worldwide on a low cost level while being based in the HQ. Special subscriptions with communication providers deliver flat rate Internet access and low cost calling to selected telephone numbers or specific countries. These modern technologies provide the opportunity to fulfill elementary tasks, which have previously been in the hands of expatriates, while staying in the HQ. Consequently, these tools allow the combination of job responsibilities and social (family) functions. This is key as research has shown that the happiness of children and the spouse can have a strong impact on the overall work moral and performance (Moore, 2006, p. 211). Communication experts forecast that in 2012 30 percent of all fully employed people will communicate via virtual teams, underlining the potential to replace expatriates partially (Fokus Money Online, 2008). Disadvantages linked to the usage of virtual teams and the question whether this approach can be implemented for every project type will be discussed later in this paper.
The classic form of expatriation is often associated with high expenses, increasing total costs for these employees. Consequently, cost-benefit ratios (expatriate ROI) of international assignments are increasingly in focus as the added value is questioned (Deresky, 2008). Based on a survey (1995), costs of moving a single US employee to the UK for two years including selection, training and monitoring totals approximately $460.000, excluding the cost of housing and other material benefits (Forster, 2000).
Figure 1 (p.7) points out that 37% out of 418 executives mention that their company has recalled expatriates due to the global economic crisis. From this isolated cost perspective business trips and modern communication technologies have to be considered as alternatives to the traditional form of expatriation.
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Figure 1: Global economic downturn - effects on expatriation (The Economist, 2010)
21st century business travelling has set high quality and comfort standards. In order to meet the requirements of a global economy, public transportation agencies such as railways and airlines geared towards full service business packages. There are three primary objectives of these agencies when trying to fulfill customers’ needs and expectations: First, provide the opportunity to work while travelling in a relaxed environment. Second, provide the infrastructure to stay connected to the business world via Internet throughout the entire trip. Third, reduce holding times and make them less unprofitable for managers.
This can be illustrated by an Air France advertisement which announces ,,New Convenience for Air France Business Customers” starting end of 2010. The airline is establishing higher quality business seats which are promoted as perfect for working in a relaxed atmosphere. In addition, an updated high level gastronomy supports intercontinental flights (Tip Online, 2010). A second example is given by the Deutsche Bahn. The main business trains ICE are equipped on selected routes with wireless- enabled devices to access the Internet, upgrading standards such as seats with tables and electricity. In combination with train station lounge areas, business travelers can take advantage of amenities that were not available in the past (Deutsche Bahn, 2008).
Conversely to the aforementioned arguments to replace the traditional form of expatriation, the importance of this approach in ensuring the profitability of international business operations is outlined below. Several fields, such as the establishment of virtual teams, provide arguments against the relevance of international assignments; simultaneously they deliver opposite reasons why this approach is key to working on international projects.
The major criticism of virtual teams is their dependency on technology. Internet and telephone connections are classified as major risk factors due to the fact that outside forces such as weather, connection speed etc. are uncontrollable by the end users. Second, virtual teams lack of human one-on-one contact neglecting important interaction such as body language which can be found in face-to-face meetings. Confusion might occur as language barriers rise, the participant attention might not be focused constantly on the computer screen and consequently details get lost. In addition, time differences between participants have to be considered which requires corporate guidelines as punctuality might be defined differently from culture to culture. Based on the business field and project type, participants may be overwhelmed with electronic information such as E- Mails and file sharing. Managing projects on-site provides expatriates the chance to deliver higher levels of managerial performance and the ability to immerse one’s self in foreign cultures.
Earley and Mosakowski summarize the term ,,Cultural Intelligence” as, “the ability to differentiate a person’s pattern into those linked particular to this person or related to the culture in general” (cf. Earley / Mosakowski, 2004). The key argument which strongly supports the relevance of traditional expatriates in the process of ,,going global” is the importance of learning through observation and imitation (Woodwall, 2006, p.177). This key skill requires the analysis of a foreign culture over a prolonged time period from several perspectives such as business and social life. Research undertaken by Geert Hofstede indicates that worldwide society consists of different cultural groups which have a significant influence on the behavior of individuals and/or the corporate behavior of firms.
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