Expatriates predeparture training: An investigation into the approach of two German-based MNCs

iii

SPECIMEN ABSTRACT

STUDENT NAME Dennis BARBIAN

DEGREE BA (Hons) International Business Management

PROJECT SUPERVISOR Gillian Forster

PROJECT TITLE Expatriates’ pre-departure training: An

investigation into the approach of two Germanbased MNCs

DATE April 2006

KEYWORDS HUMAN-RESOURCE-MANAGEMENT

EXPATRIATE-MANAGEMENT PRE-DEPARTURE-TRAINING FAILURE GERMAN-MNCs BMW DAIMLER-CHRYSLER ABSTRACT

Increasing globalisation of business has led to a constant rise in the use of expatriate managers who are sent abroad for temporary assignments. Much of expatriates’ cross-cultural contact has, however, not been successful. In the majority of cases the high incidence of expatriates’ inability to adapt to foreign cultures originates from the neglect of crosscultural preparation which academics advocate as a means of facilitating this adaptation. A review of expatriates’ success rates and of cross-cultural training (CCT) literature is presented. A comparison between theoretic view and practical approach of two German-based multinational companies (MNCs) is drawn. It is determined that, given that cross-cultural training is regarded as very effective throughout extant literature, the MNCs in the case under consideration could improve their expatriates’ cross-cultural preparation.

iv

ACKNOWLEDGEMENTS

Thanks are owed to my tutor for her advice and guidance throughout this project. Moreover, I am grateful for the support I have received from my friends and my family whilst researching and writing this dissertation. Special thanks go to my flatmate, who overtook a lot of my household duties when I was occupied working on this project. Last but not least I thank the companies for their cooperation without which this study would not have been feasible.

v

TABLE OF CONTENTS

  Page  

  Title Page  i

  Declaration and Word Count  ii

  Abstract  iii

  Acknowledgments  iv

  Contents Page  v

  Glossary  vii

1  INTRODUCTION  1

1.1  Chapter Introduction  1

1.2  The role of expatriates in multinational companies  1

1.3  Overview of the project  3

1.4  Project objectives:  3

1.5  Guide through this dissertation  3

1.5.1  Literature Review  3

1.5.2  Methodology  4

1.5.3  Findings and Results  4

1.5.4  Analysis and Discussion  4

1.5.5  Conclusion  4

2  LITERATURE REVIEW  5

2.1  Chapter Introduction  5

2.2  Reasons for expatriate assignments  5

2.3  Provided training and failure rates  5

2.4  Is there a rationale behind the neglect of expatriates’ training?  8

2.5  What kind of training is required or desirable to prepare an  

  expatriate assignment sufficiently?  9

2.5.1  The scope of cross-cultural training  9

2.5.2  Training models and techniques - a categorisation  10

2.5.3  Training methods for CCT and their rigour  10

2.5.4  CCT methods at a glance  11

2.5.5  Cultural awareness and sensitivity training  14

2.5.6  But how should MNCs choose CCT-methods appropriate for their  

  expatriates?  14

2.5.7  How much time should be spent on CCT?  17

2.5.8  Language Training  17

2.5.9  The use of repatriates as a means of CCT  18

2.5.10  Limitations of pre-departure CCT  18

2.5.11  Chapter conclusion and hypothesis  19

3  METHODOLOGY  20

3.1  Chapter introduction  20

3.2  Research strategy and aim  20

3.3  Procedure  20

3.4  Limitations  21

vi

3.4.1  Data quality issues  22

3.5  Ethical issues in research involving human participants  22

4  FINDINGS AND RESULTS  24

4.1  Chapter introduction  24

4.2  BMW Group  24

4.2.1  What are the reasons for international assignments in the BMW  

  Group?  24

4.2.2  What kind of pre-departure training do BMW’s expatriates receive?  

   25

4.2.3  Content of BMW’s CCT  26

4.2.4  Foreign language training  27

4.2.5  Is the BMW Group successful with its expatriate training?  27

4.2.6  Do BMW’s expatriates need more CCT?  28

4.3  Daimler Chrysler  29

4.3.1  Foreign language and cross-cultural training  29

5  ANALYSIS AND DISCUSSION  31

5.1  Chapter introduction  31

5.2  What is the MNC’s definition of an expatriate?  31

5.3  What are the MNC’s reasons for expatriate assignments?  32

5.4  How are CCT methods chosen and what kind of analysis is  

  involved?  32

5.5  What kind of pre-departure training is provided?  33

5.6  What is the content of CCT provided?  34

5.7  Language Training  36

5.8  The use of repatriates as a method of CCT  37

5.9  How successful are the MNC’s overseas assignment and do  

  expatriates need more training?  37

5.10  Spouse and family issues  38

5.11  Conclusion  38

6  CONCLUSION  40

6.1  Chapter introduction  40

6.2  Review of the objectives  40

6.3  Possible areas of future research  40

6.4  Concluding statement  41

  References  42

  Bibliography  52

  Appendices A Tung’s (1981 ) list of reasons for expatriate failure.  54

  B Brief company descriptions  55

  C Learning Outcomes  56

  D Transcribed telephone interviews  57

  Last Page  65

vii

GLOSSARY

BMW CCT CD-ROM CEO DC e.g. e-mail et al. etc. HRM IHRM MNC PWC SLT U.S. USA

1

1 INTRODUCTION

1.1 Chapter Introduction

This chapter sets the scene by introducing the topic, explaining the reasons for this research and providing a guide through this paper.

1.2 The role of expatriates in multinational companies

“In today’s highly competitive global business environment, multinational companies (MNCs) recognize that human resources play a necessary role in developing and sustaining a competitive advantage” (cited from Caligiuri et al., 2001b). “The international arena can provide lucrative opportunity for expansion” (cited from Puccino, 2005). “Untapped markets, resources, technology, customers and partners could potentially boost an organization's competitive advantage and profitability” (cited from Puccino, 2005). As companies move toward a more global operating model, it becomes increasingly necessary to focus attention on developing appropriate training methods which improve employees’ global, or crosscultural, competence which in turn enables them to work effectively across borders and work with those from diverse cultures (Caligiuri et al., 2001b). With the rapid globalisation the number of expatriate employees, defined as employees residing and working outside of their home country, continues to rise (Puccino, 2005). PricewaterhouseCoopers International Assignment Global Policy and Practice Survey 2005 underpins this argument and indicates that despite predictions that the number of expatriates will decrease over the next years, due to a struggling world economy and the increasing popularity of alternatives to expatriation such as frequent flying or Euro-commuting (Forster, 2000; Petrovic et al., 2000 in Brewster and Scullion, 2001), the vast majority of participants in the PWC survey expect a growth in the number of international assignments. As Harris and Brewster (1999, in Beaverstock, 2001) observe, “the rapid globalisation of business has led to an ever increasing need to

2

'internationalize' managers within organizations”. Beaverstock (2001) states that it is now readily acknowledged in the human resource management literature that one of the major implications of the ever increasing globalisation of firms is the steady growth in the magnitude, importance and complexity of expatriation (e.g. Bartlett and Ghoshal, 1992; Brewster, 1991; Forster 2000; Koser and Salt, 1998; Welch, 1994). Successful expatriate assignments are indispensable to MNCs for both developmental and functional reasons (Adler, 1983; Brake et al., 1994; Dowling et al., 1998; Mendenhall and Oddou, 1985; Stroh and Caligiuri, 1998; Tung and Miller, 1990; in Caliguiri et al., 2001a). “The global business environment makes expatriate assignments a necessary, but risky proposition” (cited from Jack and Stage, 2005). Success on a global assignment is greatly influenced by an expatriate’s cross-cultural adjustment to the host country (Black and Mendenhall, 1990; Caligiuri, 1997; Kealey and Protheroe, 1996; Sappinen, 1993, in Caliguiri et al., 2001a ). For example, cross-cultural adjustment is positively related to performance on the assignment and negatively related to the premature termination of the assignment (Black, 1988; Caligiuri, 1997; Tung, 1981, in Caliguiri et al., 2001a ). “For these reasons, research examining ways to predict and improve cross-cultural adjustment have received much attention in the recent past” (cited from Caliguiri et al, 2001, who name the following: Aycan, 1997; Aryee and Stone, 1996; Black and Gregersen, 1991; Black et al., 1991; Kealey, 1989; McEvoy and Parker, 1995; Morley et al., 1999; Robie and Ryan, 1996; Schneider and Asakawa, 1995). However, the most common criticism on HRM practices in multinational companies still is the lack of sufficient expatriate training. Studies, such as those of Mendenhall and Oddou (1985, in Linehan and Walsh, 1999) and Dowling et al. (1994 in Linehan and Walsh, 1999) reveal that merely a small number of companies offer any kind of pre-departure training, and if, it reflects hardly any recommendations arising from research.

3

1.3 Overview of the project

This study will look at the research examining ways to predict and improve cross-cultural adjustment of expatriates, in particular at the role predeparture training plays in the cross-cultural adjustment of expatriates. Furthermore, this study will examine to which extent selected Germanbased MNCs make use of cognitions attained from the abundance of studies in the field of expatriate training. The writer will explore the current stance on expatriates’ training through the work of academics and professionals and will compare the theoretic view with the approach of selected companies. The research into two MNCs will be undertaken to explore to what extent these organisations apply the theory of expatriate training to their personnel and whether they are successful with their approaches.

1.4 Project objectives:

The key objectives of this project are:

• To identify the extant academic theories regarding expatriate failure and pre-departure training.

• To compare the approach of expatriate pre-departure training of two German-based MNCs with the existing literature.

1.5 Guide through this dissertation

Below the author gives an overview for each chapter, outlining the purpose

of the chapter.

1.5.1 Literature Review

The literature review introduces the reader to the research that has been conducted in the field of expatriate management with regard to predeparture training, compares given theories and contrasts them and eventually critically evaluates them. The purpose is to identify the

4

knowledge that has been established and what its strengths and weaknesses are.

1.5.2 Methodology

The methodology will introduce the reader to the primary research that has been conducted, explaining the rationale behind the primary research and the research methods used.

1.5.3 Findings and Results

In the chapter “Findings and Results” the results of the primary data collection will be presented and first comparisons will be drawn to the secondary research discussed in the literature review.

1.5.4 Analysis and Discussion

In the chapter “Analysis and Discussion” all relevant findings and results are analysed and discussed, and a line is drawn between the literature review and the results. Evaluations are made and data is compared with the main theories, as well as with other relevant findings mentioned in the literature review.

1.5.5 Conclusion

In the conclusion the writer will review the objectives set out in the introduction in order to evaluate whether the project has been a success and briefly discuss the evidence obtained for each objective. It is to summarize whether primary and secondary data are correlative and which conclusions need to be drawn. In this section the writer will also offer personal conclusions and recommendations.

5

2 LITERATURE REVIEW

2.1 Chapter Introduction

The literature review introduces the reader to the research that has been conducted in the field of expatriate management with regard to predeparture training, compares given theories and contrasts them and eventually critically evaluates them. The purpose is to identify the knowledge that has been established and what its strengths and weaknesses are.

2.2 Reasons for expatriate assignments

As mentioned in the introduction, expatriates nowadays are indispensable for organisations operating internationally. The pace of globalisation makes their use mandatory. Their use may be versatile. A classic article by Edström and Galbraith (1977) explores the principal motives for transferring employees internationally. These motives are still running on validity. The ones identified by Edström and Galbraith are position filling, management development and organisation development. Position filling refers to the transfer of knowledge, management development refers to the development of an individual manager and organisation development to the co-ordination and control in the process of changing or maintaining the structure of the organisation (Harzing, 2001).

2.3 Provided training and failure rates

Empirical evaluation studies have shown that cross-cultural training programs enhance global managers’ job performance, adjustment to their new cultures and cross-cultural managerial skills (Black and Mendenhall, 1990). Moreover, "cross-cultural training has long been advocated as a means of facilitating adjustment to the expatriate environment" (e.g. Brislin, 1981; Landis and Brislin, 1983; Mendenhall and Oddou, 1986; Tung, 1987; in Brewster and Pickard, 1994). And still most academic research into the preparation of expatriates indicates that expatriates’ pre-departure training

6

has a positive impact on the outcome and success of international assignments (Earley, 1987; Black and Mendenhall, 1990; Fish and Wood, 1996). However, many studies have shown that in spite of the recommendations attained from academic research in reality very little preparation takes place (Brewster and Pickard, 1994), and what training does is not very rigorous (Black et al., 1992). 70 percent of US expatriates and 90 percent of their families are send abroad without any cross-cultural training (Baker and Ivancevich, 1971; Black and Mendenhall, 1990; Larnier, 1979; Tung, 1981; in Baumgarten, 1995). Thus, very high percentages of foreign assignments that fail can be found in the academic literature. Studies show that 16-50 percent of US expatriates fail on their foreign assignment (Dowling et al.,1994; Harzing, 1995; Forster, 1997; Baker and Ivancevich, 1971; Black, 1988; Dunbar and Ehrlich, 1986; Mendenhall et al., 1987; Tung, 1981; in Baumgarten, 1995). The criterion for failure used in these studies is the premature return of the expatriate to his home country before the assignment has been completed successfully. This may be very costly for companies (see Copeland and Griggs, 1985, in Black and Mendenhall, 1990). In fact, in 1999 Black and Mendenhall claim that a complete expatriate package including benefits and cost of living adjustments costs anywhere from $300,000 to $1 million annually which is probably the single largest expenditure most companies make on any one individual except for the CEO (Black and Mendenhall, 1990). This does not include non-financial costs including damaged company reputation, lost business opportunities and lost market share (Black and Mendenhall, 1990).

While “Black et al. (1992) concede that by the early 1990s, only ‘35 percent of US firms offer any pre-departure, cross-cultural, or language training for their global managers’” (cited from Beaverstock, 2001), GMAC Global Relocation Trends Survey Report (1997) indicates that in 1996 about 61 percent of U.S. firms offer some type of cross-cultural preparation encompassing at least one day’s duration. Of the firms that offer cross-cultural training, 35 percent offer programs for the entire family,

7

23 percent for the expatriate and spouse only, and 3 percent for the expatriate only (GMAC Global Relocation Trends 1996 Survey Report, 1997). From the European angle similar results can be found on the one hand. For instance, Torbiorn's (1982, in Beaverstock, 2001) study suggested that about half of Swedish MNCs provided a formalised training programme and in “Brewster's (1988) analysis of 25 European MNCs, only ten designated training courses” (cited from Beaverstock, 2001). Black et al. (1992, in Beaverstock, 2001) appositely concluded on these findings that "no wonder so many global managers struggle in their overseas assignments." On the other hand, there is some evidence from the examination of expatriate failure rates that European organisations are more successful than their North American counterparts at managing the process of expatriation (Tung, 1984; Brewster, 1991; Suutari and Brewster, 1999; Harzing 1999; in Brewster and Scullion, 2001) and that many Europeans are better prepared for their role as expatriates (Harris and Brewster, 1999b in Brewster and Scullion, 2001). Brewster and Scullion (2001) explain that the better adaptability of European expatriates is due to Europe’s geography and history. European companies were the first to internationalise their business operations because of the size of their domestic markets which made it a requirement to gain revenues in other markets. Thus, moving managers internationally has a longer tradition in Europe (Hamill, 1989, in Brewster and Scullion, 2001). Although European MNCs appear to be less affected by expatriate failure, it still is a persistent contemporary issue in IHRM and much effort is put in finding solutions to overcome it. Given the considerable figures regarding the success of foreign assignments, especially from North American studies, one would suppose that firms nowadays would do everything in their power to train and prepare their employees adequately for foreign assignments. However, this is not the case: even if firms provide their staff with training they often offer only short, superficial cultural briefings and mainly focus on the development of technical competence and other job- related skills (Lanier, 1979, in Baumgarten, 1995). In addition, in the

8

majority of cases when training is offered, the partners are not included in the training programmes, which reflects hardly any recommendations arising from findings in research, which indicate that the inability of the partner to adapt to the foreign environment is one, if not the most important cause of expatriate failure (Tung, 1981; Black and Stephens, 1989).

2.4 Is there a rationale behind the neglect of expatriates’ training?

For the widespread neglect of preparatory training for foreign assignments several reasons have been advanced in the literature (Hogan and Goodson, 1990; McEnery and DesHarnais, 1990; Mendenhall and Oddou, 1985; Murray and Murray, 1986; Ronen, 1989; Tung, 1981; in Linehan and Walsh, 1999). The most common reasons are that training in general is not thought to be effective (Baker and Ivancevich, 1971; Tung, 1982; Zeira, 1975; in Brewster and Pickard, 1994). Many managers believe that international expertise can be learned only through experience gained abroad and that “good” performers can already do the job or that “good” management is transferable to any setting, irrespective of cultural differences. Thus, managers often give little support to cross-cultural trainings. Moreover, the time between the expatriate’s selection and departure often is not sufficient to expose him/her to training prior to departure (Baumgarten, 1995). Furthermore, the temporary nature of an expatriate assignment sometimes does not warrant budget expenditures for training (Baumgarten, 1995). The belief, that technical skills are the main success factors on foreign assignments and consequently crosscultural competencies can be considered less important for the success of an assignment, can be dismissed after closer examination of Tung’s (1981) list of the main reasons for the failure of foreign assignments (the complete list can be found in Appendix A). The expatriate’s lack of technical skills scores rather low on the list while the inability of both, the expatriate and his partner to adapt to a different cultural environment are far more important factors of failure. Never the less the belief that technical