Five Easy Ways to Waste Money on Expatriate Assignments

Chuck Csizmar – CMC Compensation Group

Once your company decides to send an employee overseas on expatriate assignment the danger of imminent waste looms large. The problem usually begins with management not understanding or even choosing to ignore the real costs of the international assignment. The money pit is then worsened by having only a weak business reason to support the assignment. If you lack a compelling business justification for why an employee is needed overseas, it is likely that you won’t be able to measure whether their assignment will be a success or not.

Below are some of the major reasons for the cost spiral of money slipping out of your hands; however, this is by no mean an all-inclusive list. I have no doubt that you can provide your own reasons as well.

  • Do not worry about the ROI

For some companies it is easier for a manager to have an international assignment given a green light than it is to have a piece of hardware or software approved for purchase. Where is the business case? Where is the justification via projected financial return that management should be held accountable for? Is anyone being held accountable that an ROI is achieved?

You should think twice before agreeing to pay out 2-3 times annual salary to provide for an expatriate assignment. “It’s in the budget” is never a good business reason.

  • Tell the employee that they are the only one who can do the job

Once an employee realizes that they are the only, or preferred choice for the assignment, you lose all negotiating leverage. I recall one fellow who insisted that he and his family live in Inner London (meaning: uber expensive) – though the office was 35 mi. north – or else he wouldn’t take the assignment. Do not expect someone holding leverage to be reasonable and accommodating when discussing terms & conditions of what you will pay for.

Strive to develop a stable of qualified candidates. It would also help if you remember that the ability to perform the job should not be the only criteria for selection. A bad cultural “fit” would be a painful and expensive experience for everyone.

Note: an employee with an attitude of doing you a favor, versus appreciating the career opportunity being offered, is a bad bet.

  • Do not bother to create an international assignment policy

Unless you enjoy living in a “let’s make a deal” world, you would be advised to lay down an international assignment policy, and then adhere to it. You will still be challenged by the employee / spouse to make improvements in their conditions, but without the support of a policy you will be hard pressed to stand your ground.

Note: make sure all terms & conditions have been confirmed *before* the plane departs. Once you have an expat on the ground in the host country you have lost whatever leverage you might have had. From there you *will* agree to term revisions, because senior management will conclude that having already made the investment you have to keep the expat happy or risk the assignment.

  • Focus on the employee, not the family

Even an otherwise contented expatriate will be rattled if every night they come home to complaints about life in the host country. Such a situation will distract the employee from concentrating on their assignment, and eventually you will face the need to further revise terms (increase costs) and / or the employee will throw in the towel and the assignment will be deemed a failure.

Be sensitive to potential family issues and include everyone in cultural orientations. The family is the expat’s support group, and if they are unhappy . . . well, you know the rest.

  • Separate assignment costs into multiple budget categories and line items

This way no one would understand the full extent of the costs involved. During five years spent overseas on assignment, neither Corporate nor local Finance was able to explain the full cost of my assignment. They had assigned expenses into so many diverse costs centers and budget line items that the confusion never cleared. Imagine the drip – drip – drip of your money if no one is even asking!

If no one is watching the costs of the assignment, those costs cannot be controlled. It would be like handing over a blank check – with no guarantees of gaining anything in return.

Finally, watch out for the manager who tries to “save money” by circumventing HR assignment policies. These creative thinkers consider that short cuts save money, but typically those “cuts” do little more than alienate the expatriate (and / or family) by treating them as second class citizens. Bad idea.

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