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Former human resources manager and expatriate Stan Lomax shares his considerable experience and innovative ideas on best practices for overseas assignees and their managers. He discusses common problems and answers tough questions for parties on both sides of the expatriate issue. He provides tips and advice on issues from choosing and training candidates to applying for overseas positions and getting ...
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Former human resources manager and expatriate Stan Lomax shares his considerable experience and innovative ideas on best practices for overseas assignees and their managers. He discusses common problems and answers tough questions for parties on both sides of the expatriate issue. He provides tips and advice on issues from choosing and training candidates to applying for overseas positions and getting the best compensation package possible. Expert advice on these subjects, and more, is included:
Whether you’re an expatriate, a candidate, or a manager of expatriates, Best Practices for Managers and Expatriates provides the practical and reliable advice you need.
What Is the Global Demand for Expatriates?
What Are the Profiles of Today's Expatriates?
What Are the Purposes of Expatriate Assignments?
What Challenges Do Expatriates and Managers Face?
How Can Managers Identify the Best Expatriate Candidates?: What Can Individuals Do to Enroll?
How Should Managers Assess and Train the Candidates?
How Should Managers Select the Best Candidate for Each Overseas Assignment?
How Can Managers Design a Sound Expatriate Rewards Package?
What Are the Issues to Consider While the Assignment is in Progress?
What Are the Issues in Adjusting the Length of an Assignment?
What Are the Issues in the Next Assignment Process?
Expatriate Assignments: Future Directions.
(Please note: Tables and any other illustrations mentioned in the following text refer to the print edition of this work, and are not reproduced here.)
Thomas Paine, the passionate supporter of the American Revolution against colonial rule, would have little difficulty grasping another kind of dramatic transition: today's global business revolution and the often violent reactions to it. He would empathize with the genuine fervor of street protestors who disrupted the World Trade Organization meetings in Seattle and Prague in the year 2000. But instead of military forces pitted against each other, these present-day rebels are attacking global businesses, which they perceive as posing dangerous hazards for their countries. The protestors are well-organized groups, including environmental organizations such as Greenpeace, coalitions of national and local labor unions, and governmental antitrust regulators. They're calling for protection for the environment, human rights, free trade, job security, and other socioeconomic issues.
Consider the startling street violence in Prague, where more than 100 individuals were injured, 400 protestors jailed, and extensive damage done to Mercedes-Benz showrooms and Kentucky Fried Chicken (KFC) restaurants, among other global targets. The Village Voice of October 18, 2000, reported: "The 12,000 activists who flooded the streets of Prague weren't the only ones targeting the titans of global capital last week. In addition to the militants hurling molotovs and bricks at the police and financiers during the annual meeting of the International Monetary Fund and the World Bank, thousands of other protestors waged war on line by squatting the two organizations' web sites."
Isn't it ironic that the antiglobalization forces are now appropriating the computer-based tools of modern technology that the multinationals themselves are employing so successfully? The Village Voice ran eye-catching headlines: "Couldn't Get to the Protests in Prague? Thousands Threw Virtual Stones Instead" and "Hactivists Chat Up the World Bank."
There is little doubt that the antiglobalization crusade has the organization, power, and publicity to pose a serious threat to globalization. Indeed, the globalization process has been relentlessly carried on in office meetings, cross-border communications, and most importantly, by means of an estimated half million employees sent abroad from their companies' home country headquarters. These peaceful invaders are expatriates. This new kind of army generates no violence and little publicity.
Which movement--globalization or antiglobalization--will prevail? Whether you're a manager for a multinational organization, an expatriate on assignment, or a person seriously considering the opportunity to work overseas, you have a vested interest in the ongoing conflict. If globalization is slowed or stymied by the protesters, your overseas aspirations might be dashed.
This scenario, however, is highly unlikely. Whether multinationals are attacked visibly on the street or assaulted, unseen, through the Internet, they have progressed so far along the road to globalization that no forces, whether governments, unions, or protesters, have the power to restrain them. Today's frenzied pace of cross-border mergers, acquisitions, and joint ventures is testament to the lack of effective restraining forces.
How are governments reacting to the force of globalization?
Instead of trying to seal off their borders, government officials are accepting the movement as part of their own transitions to compete in the worldwide marketplace. Many nations, such as China, Russia, and the Asian "tigers," are dismantling the economic controls and liberalizing the economies that had been restraining their efforts to attract foreign investments and export more goods and services. It's been a difficult process.
Western-style governments are also speedily embracing the globalization concept. The European Union's antitrust commission rejected only 13 major mergers outright over the entire past decade, with proposals averaging about 300 per year. Indeed, the U.S. picture appears to be fully consistent with Europe's. Thomas Friedman, the foreign affairs correspondent for The New York Times, wrote: "But what happens to democracies when companies grow to size extra-extra large in order to compete globally, but democratic institutions--like the antitrust division of the Justice Department--remain a size small?"
Can unions and environmental groups fare any better?
Most unlikely. Let's listen to the head of the AFL-CIO, John J. Sweeney, who recently stated: "Globalization is happening one way or another and it can't be stopped." New York Times columnist Joseph Kahn adds: "It's probably a mistake to think that globalization isn't threatened. On the contrary, the unions and environmental groups that assail the World Trade Organization seem on the whole to prefer that nations become more like one another faster--and in a great variety of ways. They are not so much trying to block globalization as to hitch a ride."
So the global companies, without the traditional fanfare of fifes and drums, continue to cross national frontiers with the avowed purpose of expanding market penetration. As these corporate monetary investments into new territories escalate, their need for quality employees to manage those investments will soar. And as globalization continues, more expatriates will be required to maximize efficient management of current investments and to explore further opportunities in these new territories.
In short, expatriate activities will continue to thrive in the future. But there will be some changes in the kinds of assignments; and hopefully, there will be sufficient manager interest to reform the overseas assignment process.
This book addresses the two audiences who must work together to make expatriate assignments successful: the managers of the process and the expatriates themselves. After more than 30 years as a manager of the process, both sending out and receiving expatriates, as well as being an expatriate, I've often wondered why planning and communications are so lacking throughout the entire assignment and return process. Managers and expatriates should literally be reading from the same page, in this case the same book. Why the literature in this field is written for one party but not the other is puzzling. If each party to the expatriate contract were more fully aware of all the relevant factors affecting the other party's thinking, there would be far fewer failed assignments, early terminations, and "brownouts." These issues continue to plague both managers and expatriates, with no discernible trends for improvement on the horizon.
Our purpose is to examine each step of the expatriate assignment process, and to furnish practical guidelines and best practices for both the expatriates and the managers of the overseas posting process. We'll view the evidence of current assignment practices in major corporations and explore their ramifications. This research includes a variety of sources: managers, search people, former expats, expatriate case studies, newspaper and magazine articles, survey findings, and other recent books focusing on this dynamic field.
Each global corporation designs its own approach to expatriate programs, and no two have identical programs. To be really effective, these programs must be customized to each company, its industry and business, its stage of global growth, its financial well-being, and its management styles. We'll observe the interplay of these factors at work as we discuss what the multinationals are doing for their expats today. Those practices impact on the expats and their families. Given the expatriate tendency to be outspoken, we'll have little trouble gauging their reactions to those policies. As we proceed we'll make some constructive recommendations for both the expatriate and the managers of the expatriate programs. In addition, we'll have ideas for individuals considering an overseas assignment as well as those who are managing expats.
We'll examine the major global competitors. They vary by how far they have progressed toward true globalization; that stage of transition can have a great impact on the nature and importance of the expatriate workforce.
In this regard, they can be likened to surfers at the beach. As each organization sees the rising wave of globalization, each has to decide, recognizing its own strengths and aspirations, how to ride that surge to its fullest--or in some cases, whether to dive below the breaker and take a chance on the next wave. For those of you who have enjoyed the experience of body surfing, you appreciate the need to furiously swim in advance of the crest in order to catch the surge and be propelled by it--a truly joyous experience as you ride to shore. Carrying on this analogy, those companies that are thoroughly committed to riding the globalization wave must have trained, energetic expatriates to accelerate the firm's growth pace to catch the wave and capitalize on its momentum.
Conversely, if your present organization has elected to avoid all that extra exertion by diving underneath the breaker (remaining domestic), there is every possibility that some unlikely global giant from somewhere may be a "Jaws," looking for some lunch--your company.
As a manager or a current or potential expatriate, you need to assess what stage of the globalization transition your own organization has reached. If senior management has not directly communicated the facts of its global development efforts to its employees, you can often pry those facts out of the annual report. In a similar vein, management usually communicates its business strategy, if not verbally, at least by deeds. Your unclouded understanding of your company's position will enable you to view more clearly how the overseas assignments are perceived by senior management, and whether they are esteemed well enough for you to take the plunge in trying for such an assignment now--or should you wait for the next stage of global growth?
Indeed, many of today's more advanced global competitors have endured painful learning experiences on the progressive path to globalization that demonstrated the need to change their approaches to the overseas marketplace, both for customers and expatriates. From their histories we can draw some understanding that can be put to work for us. Let's explore recent experiences of Procter & Gamble and Coca-Cola.
This leading consumer products company had to learn about globalization the hard way: by trial and error. Fortune magazine ranked this company among the 10 most admired organizations for eight consecutive years in the 1990s. However, P & G's poor performance in Japan in the 1980s serves as an illustration for managers and expatriates alike that its successful U.S. marketing should have been modified to succeed in Japan.
Procter & Gamble had long been a world-class manufacturer and marketer of a wide variety of consumer branded products when it first entered the Japanese market in 1972; but it suffered more than $250 million of operating losses by 1983. The company's soap and detergent products, enormously popular in the United States, were being passed over by Japanese consumers for two local brands. To solve this problem, P & G senior management gave the new U.S. expatriate country manager a dire ultimatum: either make the business profitable or shut it down.
As a Harvard Business School case summarized, "Procter & Gamble charged into Osaka with marketing strategies that played so well in Ohio. The results were disastrous. They didn't listen to anybody." Indeed, the company was proudly following its traditional "The Procter Way" approach to marketing, which emphasized the advantages of selling standardized products everywhere, products that were thought to be superior. The P & G Japan operation, staffed with U.S. expatriates in senior roles, had been unable to figure out why their products were performing so badly among Japanese consumers.
After viewing operations, the new U.S. expatriate country manager determined that the company had not thoroughly researched Japanese consumer preferences; he also found that certain soaps and detergents did not suds up properly in the hard mineral water. P & G's research and development group swung into action, reformulating and testing new products while conducting consumer satisfaction surveys. P & G's new country manager went to the extent of appearing on Tokyo television to humbly make a formal apology to local consumers, admitting that the company had not carefully evaluated the local needs and wants of the marketplace. The new P & G in Japan proceeded to shift its emphasis in hiring, focusing on attracting and retaining more Japanese nationals to staff more responsible and career-track positions. And the company promised to listen to these people.
In the human resources area, the company's policies reflected strong centralized management, with the Cincinnati, Ohio, headquarters controlling worldwide operations. Local Japanese managers had previously received little encouragement for career growth within the company. Further, P & G management had insisted that they be proficient in English. However, given more decision-making authority, the new U.S. expatriate country manager elevated the roles of the Japanese managers from being order takers to being customer service representatives. Thus, P & G staged a remarkable comeback in Japan by empowering Japanese staff to better serve local consumer needs.
Although this case is taught in connection with sales/marketing strategies, it also shows how expatriate performance can make or break an overseas operation. Expatriates who become thoroughly knowledgeable about the host country are valuable assets to their companies, especially when they are given substantial autonomy in developing and implementing sound business plans. In a very real sense, management's universal responsibility is to see to it that highly qualified employees are selected and trained for their expatriate assignments, and given a reasonable measure of independence in setting direction and policy for the company to take in the host country.
In sum, the P & G Japan experience shows that even the most highly regarded of global players can stumble in a foreign market and that recognition of mistakes is critical for long-term global survival. As long as managers understand the nature of the problem and are strong enough to take risks in fixing it, overseas expansion, and with it the need for solid expatriate representatives, will continue to flourish.
This leading beverage and food company has savored a traditional centralized management philosophy that stressed decision-making and technology improvements that emanated from its Atlanta headquarters. The company has preferred to keep its soft drink taste relatively standardized throughout the world, and has long been known for its pride in maintaining its original formula. We are all familiar with its attempt to drop that traditional taste from the market shelves, and the U.S. public's clamor for Coke Classic to be restored. The company duly bowed to its clients' tastes and brought back the original to the market. But Coca-Cola's financial problems have not been limited to the fall and rise of Coke Classic in the United States. Of the company's $20 billion in worldwide revenues reported in 1999, it recorded only $2.4 billion in profits, down a full 31 percent from 1998. The firm was heading in the wrong direction and needed some global expertise in a hurry.
In February 2000, the company surprisingly selected Douglas Daft, an Australian national with more than 30 years of Asian regional postings, to be its new worldwide chief executive officer. This choice broke a long tradition of promotions from within the Atlanta headquarters. Mr. Daft had no Atlanta headquarters experience, but did come to the CEO post with several years of hands-on market exposure to the Asian marketplaces. He had implemented product modifications there that were working. Further, he presented credentials of an executive who knew how to observe, listen, and then make decisions about how to accommodate local tastes. Clearly the Coca-Cola board had to be expanding its horizons in seeking out a more global perspective for the firm from its corporate leader. Six years of falling profits at Coke were enough for its board.
Indeed, Douglas Daft was virtually a stranger in Atlanta because of his overseas postings and constant travel, "in just a few weeks he has turned the world of Coca-Cola upside down." In an interview, Daft said that his restructuring of the company will "let local managers make decisions about products, advertising, and other functions that were previously controlled from Atlanta. It's something I've always lived by."
Incidentally, one of the major results of pushing downward the empowerment was a layoff plan involving 6,000 employees, almost half of whom were Atlanta-based. As a telling sign of headquarters' lack of confidence in its expats, the Atlanta headquarters had maintained a roster backups for expatriates in case of failures. In fact, these corporate staffers were constantly monitoring the overseas people and checking on information about them on a continuing basis. Daft was not slow to recognize that this "shadowing" practice depressed overseas morale. By illustration, when a manager wanted to shift advertising dollars among brands, he or she had to wait for approval from Atlanta before being able to implement such a change.
Stephen C. Jones, who was the number two executive in Japan, stated that Daft is "very careful about delineating his point of view, but at the end of the day it's: You live here, you're accountable, you make the decision." There's a quote that ought to please you expats on assignment--that golden delegation of real responsibility, essentially the same tactic that had been used so successfully in Japan by P & G more than 10 years earlier.
Daft had taken overseas postings in Indonesia, originally for one year (extended to five), Hong Kong, Singapore for three years, and back to Hong Kong for a four-year stint. What does a successful expatriate carry away from a succession of diverse postings?
"In China, I really learned the value of relationships and understanding political agendas, and there was a real need to understand that you sold and marketed to consumers on a local basis. In a country that large, with that many people, you would really miss a lot if you tried to generalize," Daft said in February 2000.
Do you have any doubt, as manager or expatriate, about Coca-Cola's new expatriate philosophy? Let the empowerment begin!
The global transition process--that traditional tug-of-war between central corporate power retainers versus expanding overseas autonomy--remains a critical strategic struggle for every company considering competing in the global market today. Here we've seen how two respected and successful giants have become even more successful overseas by thinking small, permitting their expatriates on the scene to manage their operations. These two brief histories ought to pose an attractive challenge for you expatriates seeking opportunities to develop your own expertise in an autonomous managerial environment. That's really surfing the globalization wave.
Here is another recent corporate case study centering on how different managements perceive the expanding global markets and fashion their staffing strategies overseas accordingly. But in this case we can learn from a huge merger between global giants that had sharply contrasting approaches to expatriate programs. This merger was at first allegedly to be a marriage of equals, but it rapidly evolved into a combination of oil and water, culminating in a power struggle that put an abrupt finish to the "equals" publicity. What could go wrong with this largest of all mergers?
"In truth it was a marriage of opposites, a highly diversified German conglomerate getting hitched to a streamlined American car manufacturer," note Bill Vlasic and Bradley Stertz in their book Taken for a Ride: How Daimler-Benz Drove Off with Chrysler." "Daimler and Chrysler didn't develop, manufacture, market, or sell cars the same way. Daimler executives had larger staffs and fatter expense accounts. Chrysler officers had broader responsibilities and bigger salaries and homes. Virtually all the German executives spoke English. None of the Americans, with the exception of Lutz [Chrysler's president] spoke German."
Another illustration of the disparities between the corporate parties was reflected in the fact that the Daimler-Benz chairman, Juergen Schremmp, had extensive expatriate experience. Indeed, at the time of the merger (1998), Daimler had more than 1,500 expatriates on assignment, while Chrysler, with a total employee head count of more than 121,000 people, had only 300 posted abroad, a clear sign that it put less value on cross-border postings as stepping-stones than did its new German partner.
Nine months after the 1998 merger date, both companies agreed that it would be mutually beneficial for the new organization if a small group of promising executives could be expatriated to the other headquarters for purely developmental assignments. The avowed purpose was to enable each of the transferees to better understand the other company's business methodology and culture. As expected, the call for selected volunteers drew an enthusiastic response from Daimler managers, who voiced little concern over having to adjust to their new host country location, Auburn Hills, Michigan. German nationals who clearly had recognized an invaluable developmental overseas posting when they saw it immediately filled the Daimler quota of 40 expats.
Chrysler, perhaps having anticipated possible employee reluctance, emphasized the richness of the expat packages that would be given for employees taking their developmental postings in Stuttgart. The company offered the following rewards package for its 40 expatriates:
Chapter 8, describing expatriate packages, will further review the elements that must be included in competitive reward systems today, but suffice it to say here that the Daimler package was generous to an extreme--indeed, far more lavish than the package that had been offered to the Daimler expat candidates.
Surprisingly, only about one-half of the allocated assignments were volunteered for by the selected pool of Chrysler employees. Many explained that living in Stuttgart would be too uncomfortable for them--less space, different food, new schools, and, of course, the language and German customs.
The substantial group of rejections is troubling. This opportunity was a once-in-a-lifetime event. At this initial stage of the merger, there would have to arise a considerable need for both companies to have on staff people who are experienced in understanding the differences in business philosophies and styles as well as the cultural influences that affect the way each managed their operations. This kind of unique cross-corporate experience would be invaluable for the merger and ongoing operations. While there is little question that the upheaval caused by transferring overseas always represents a trauma for the entire expatriate family unit, there is little doubt, in today's world of accelerating globalization, that most employees would have gained a distinct advantage in competing for top corporate positions through their understanding of how the other corporate partner actually operates. This would have been especially enlightening for the Chrysler expats; Daimler had prospered overseas while Chrysler had not.
So it is difficult to understand the reticence of so many of the eligible Chrysler employees in rejecting the transfers, a truly developmental opportunity, to Stuttgart. Did Chrysler management adequately portray the benefits involved? Were some of the U.S. nationals so homegrown that a two- or three-year overseas assignment was really too difficult for them to adjust to? Had they reached age levels that produced too many family ties and responsibilities to balance against further career opportunities?
As an update to the "marriage," by November 2000, most of the top U.S. executives had left the old Chrysler organization, and Dieter Zetsche, the son of a German expatriate born in Turkey, with expatriate assignments in Brazil and Portland, Oregon, in his record, was named to head the Chrysler unit, replacing a U.S. national, James Holden. Indeed, the press concluded, "Most of Chrysler's top executives have either quit or been pushed out."
How do you think all those Chrysler expat candidates who rejected those developmental assignments would look back at their decisions today? Would they have been better positioned in the staff realignment? While there must have been a percentage of the Chrysler candidates who had thoroughly valid reasons for some of the turndowns, it is highly unlikely that one-half of all those receiving the offers actually had such reasons.
Why, then, was there this strong reluctance on the part of these U.S. nationals to be an expatriate for a few years?
The answer should exclude two major concerns that usually govern assignment rejections: the nature of the assignment itself and the size of the expatriate package. In the Chrysler case, the company constructed these two items as very attractive features. The assignment was for developmental purposes, a splendid opportunity for an employee's career advancement. Further, the package being offered for it was far richer than most current expatriate packages.
The reasons that the Chrysler people gave were generally vague. One would expect an outpouring of physical problems or spouses with employment issues or children with school difficulties. These were not generally offered. Rather, there seemed to be a perceived issue with the smallness of housing, adaptation challenges to the German culture, and having to leave their large, comfortable homes in such pleasant suburbs.
We can extract some useful learning points from the failure of this well-intended program. All overseas assignments carry real trepidation for the entire expatriate family. They will not look forward to having to pull up stakes from a community that they have been comfortable with for years. The spouse will more often than not be currently employed, accompanied by his or her own long-term career aspirations. Consequently the spouse will not be comfortable putting his or her career on hold while leaving for some strange place that many not be able to offer a suitable substitute. Schooling may be a serious concern for the children.
All of these are serious concerns, and we will analyze each of those factors in Chapter 4. But for now we need to focus on why U.S. nationals seem to have such difficulty in making that fateful decision to try an overseas posting. I'll submit that this general American reluctance to work abroad will sharply decline as the differences in lifestyles among countries narrow and the use of younger expats who have traveled more extensively than their parents did when they were young grows.
These two trends will take some time to play out, but in the interim, the globalization wave is still swelling. That means smart employees will want to capitalize on this window of opportunity, while there are still many good potential candidates out there who are leery of the process, even in the face of the career advancements that such assignments might bring.
I've had the pleasure of instructing at the New York State School of Industrial and Labor Relations at Cornell University and the University of South Carolina, and explored what these human resources students thought about the Chrysler rejections. Ironically, students at both schools were unanimous in indicating their own willingness to take such developmental assignments, even in the face of family disruptions. They fully recognize that globalization spells out a requirement to develop expatriate experience or, at the least, exposure to one of the non-U.S. organizations doing business here. We'll present lists of the biggest players (surfers) in each category further on, after covering one more aspect of overseas assignment that does not receive much attention from the press or other authors: the sheer enjoyment and learning benefits that can be had from these overseas postings.
First, as to the expatriate positions themselves, those that are ongoing staff or line jobs that are needed to do the company's business on a regular basis tend to be broader than those back at the U.S. headquarters or other domestic operations. One finds the need to act as a jack-of-all-trades, which is for most humans more fulfilling than doing the same narrow tasks repetitively. Along with breadth of job scope is increased autonomy. The separation by space and time zones gives rise to more decision making rather than advice and consent taking that often governs headquarters and domestic U.S. operations. For an employee desiring to develop managerial skills, these positions often offer the challenge of working with local staff employees, whose culture must be learned and appreciated in achieving their fullest cooperation. Increased patience and the sharpening of listening skills are just a few of the major attributes that can be stimulated by the expatriate assignment.
There is also the unique knowledge that the overseas assignee acquires that can be put to work in coordinating efforts with other corporate functions as potential projects. Or, upon repatriation, there will be the need to fully debrief a cross section of headquarters functions as to the host operation. There will also be training and mentoring opportunities that should be explored upon return. Another fact: Overseas experience is in great demand on the job market. There just may be a better opportunity for you repatriates with another company than putting up with a make-do job back in your home country.
All of these career paths open in some form to repatriates.
As for the remainder of the expatriate family unit, the experience of living within another culture can and should be a fascinating albeit challenging experience. Youngsters often find where they stand in the spectrum of global living conditions, especially if they have been reared in suburban communities or pockets of wealthy neighborhoods within U.S. cities. This can be an enlightening experience for them, and they may gain an appreciation of what they have taken for granted so long as the normal lifestyle. Exposures to more extreme cultures of wealth and poverty are worth lots of sociology classes.
This experience of exchanging values with new neighbors should provide real insights into what really makes for a target for life's pursuits. In fact, the children of expatriates seem to make excellent expatriate candidates. Perhaps once the mind is opened to new sets of foreign concepts it eagerly pushes on for more such exposures. We will see in a Chapter 2 expatriate stories that reflect feelings of enjoyment even in the remotest and most savage of physical and social climates. These assignments, in addition to all the other benefits we'll describe, can also be the most rewarding and enjoyable work and cultural experiences you may ever encounter.
So I've hoped to arouse enough interest in those still deciding about expat careers, and for you present expats and managers, I hope I did the process justice.
Let's see which multinationals are the biggest of the behemoths. For those of you perusing the field of target employers, the lists of the largest organizations, both U.S. and non-U.S.-based, make for a good start in looking over the types of businesses that are crossing borders today. First we will set out the 25 largest U.S. organizations doing business overseas (see Table 1.1). These firms, unfortunately, do not break out expatriate totals; consequently these head counts include those working within the United States and those working beyond its borders.
The remaining 75 largest U.S. multinationals were listed in the Forbes, July 24, 2000, issue. Additional statistics showing the employee head counts were published in the Fortune issue of July 24, 2000. There the largest 500 global firms were listed.
Both lists ought to afford valuable guidance for those of you searching for a new corporate home overseas. While there may be no direct correlation between the percentage of revenues being made overseas and the overall employee populations, you can gain a feel from these two statistics as to the volume of overseas positions that represent that company abroad. There should be some relevance for the two statistics in providing some guidance as to the volume of overseas opportunities that may be available at that company.
There are some surprising numbers here for those who may not have been monitoring the extent to which U.S. companies have crossed national borders in the quest of greater revenues. Since most of these U.S.-based organizations continue to staff their overseas operations with U.S. expatriates, it stands to reason that there are significant numbers of overseas postings at all the organizations listed here, as well as the rest of the companies set forth in the Fortune and Forbes tables. So we are looking at thousands of expatriate opportunities; the glass is half full if you have the desire and the talent to find an appropriate one, and the glass is half empty if you choose not to sample the global wave. You may find yourself competing for a "domestic" promotion against a repatriate, whose broader background could well be the decision-making factor.
As increasing numbers of expatriates return to their companies or enter the open job market, they will represent formidable competition for job seekers here, especially for openings at those multinational firms that need to put the overseas experience to work, either here or back at a host location. This may mean that you should consider getting your expat ticket punched even if you are not deliriously happy about leaving your U.S. domicile.
There are some observations worth noting about these annual corporate listings. It comes as no surprise that in 1999, when technology was riding its own wave of investor popularity, that several technology organizations such as Lucent and Ingram reported overseas revenue increases of 40 percent or more; this was astounding growth then, but would that surge be perpetuated?
No. The fall of 2000 brought more than chilly weather. It also brought a severe decline in the once high-riding tech and dot-com stocks. But whether that means these companies are no longer desirable entrance points to the world of expatriate assignments is still unclear. You'll need to monitor these organizations very carefully if you are thinking about that type of overseas career.
There is another trend from the Forbes report worth considering. Only 15 percent of the 100 companies reported declines in their revenues from overseas operations, and most of those were negligible drops. Many were attributable to the sharp decline of the euro, which lost more than 14 percent against the dollar that year.
Unfortunately, no one seems to know for sure how many expatriates are on assignment today. The size, globally, of the cross-border businesses may be gleaned from a United Nations report that estimates there are 53,000 companies operating as multinationals through 450,000 affiliates worldwide. So if we can't isolate absolute numbers, let's turn to the world of surveys to at least get a feeling for whether the overseas employment trends are continuing to increase, commensurate with the money invested, or whether there has been some leveling off in expatriate employment.
We'll refer to a widely cited annual survey: the May 1999 Global Relocation Trends, 1999 Survey Report, which was sponsored by Windham International (consultants advising multinationals), the National Foreign Trade Council, Inc. (a nonprofit organization whose prime objective is the promotion of the open trading system, with over 700 member companies), and the Institute for International Human Resources (which provides a forum for 5,200 professionals in the international human resources field with members in over 80 countries). We note the origin of this study because the sponsors do not have a specific agenda that might color the structure of the results. Consequently we will refer to this project, which was participated in by 264 companies with a worldwide expatriate population of 74,709. The study crosses industry lines and has been considered a reliable benchmark for human resource planners throughout its six years. We'll refer to the most recent survey as the 1999 NFTC survey in future citations.
That survey asked the participating firms whether their U.S. expatriates and third-country national (TCN) populations had increased, remained level, or decreased over 1998. The majority of the companies, some 52 percent, reported an increase, 28 percent indicated that the head count had leveled, and 20 percent reported a decrease in the overseas assignee head count. The increase at 52 percent represented a drop from the prior year's report, when 66 percent of the respondents had indicated that their overseas assignments had increased. When asked for their estimates for year 2000 assignments, 66 percent expected to increase their number of expatriates, while 22 percent thought there would be no change, and only 12 percent estimated there would be a reduction in the expatriate head count.
When we visit some of the expatriate challenges in Chapter 4, we'll examine the cost factor that has been so widely written of as spelling the death knell of overseas postings. It appears from the 1999 NFTC survey that such a trend has not materialized as yet.
The balance between expatriate achievements against their costs and the use of local staff or third-country nationals will have to be remeasured by each company on a regular basis to determine staffing levels for the future. For the present, it would appear that the 1999 NFTC survey prognostications by international human resources professionals will continue to indicate that more rather than fewer expatriates will be sent out in the near future by the majority of U.S. global competitors.
For those of you potential expatriates who are seriously considering the U.S. company marketplace, there is another useful magazine article at your disposal; this one a Fortune table listing the 500 largest corporations by revenues, profits, assets and stockholders' equity. 17 This listing can be especially timesaving in that it gives a corporate headquarters breakout by state, providing the headquarters contact points, both for the web and telephone.
Thus far we have considered the U.S. global corporations. As you see every day from advertising in this country, or when you turn on your Sony headset, television set, or CD player, or drive your Honda to your corner gas station to fill up with Shell or BP Amoco in order to shop at your nearby Royal Ahold supermarket, there is an invasion of non-U.S. companies competing for ever greater shares of the U.S. marketplace. And this highly visible penetration of the local marketplace ought to give even the most domestically oriented of employee career aspirants an ominous hint to the effect that avoiding expatriate exposures will be all but impossible over the next few years. You could be working for a purely domestic little U.S.-owned organization one day and wake up the next to discover that a non-U.S. global giant has decided to acquired your employer--and you! As the initial trauma fades, you'll appreciate that you've just been exposed to the world of expatriate assignments; only this time, you are the local staff.
For those individuals who really do not want to try the expatriate path now but recognize the need to become globalized now, there is another alternative for you to explore: work for a non-U.S.-owned company here. So if you've always had a hankering to work in France, but your daughter is entering her senior year of high school and would not accompany you if you had such an assignment, why not hedge your longer-term expatriate assignment to Paris with a position working for a French-owned organization doing business here? You will encounter many of the cultural issues that would confront you on the potential Paris job without having to leave your home and being distracted by settling issues that invariably present themselves at the initial stages of a foreign relocation. Additionally, most foreign-owned subsidiaries doing business here will eventually have opportunities back at the home country headquarters, especially for those employees already employed in the corporate family. They already have knowledge of the corporate culture and possibly the language. Such jobs here also present a testing opportunity to see if you really enjoy working with that corporate and national culture.
Executive search people have recognized this possible employment avenue and are beginning to seek out attractive candidates for the foreign subsidiaries, knowing that some of these candidates may want to consider expatriate assignments seriously further along in their careers, and they will have an inside track, whether it is with their own subsidiary now or some other foreign-owned company. Indeed, Thomas Cook, a managing director of DHR International, an executive search firm that has grown a niche for international positions, can attest to the value of a candidate's experience with a foreign-owned subsidiary here, not only from the headhunter's viewpoint but also because of more than five years of serving as human resources director at Daiwa Securities America, a New York-based subsidiary of one of Japan's enormous brokerage firms. Tom had this to say about the value of expatriate or foreign subsidiary exposures:
"Whether an individual gains cross-cultural experience while on an overseas posting or as an employee of a foreign-owned company here, those exposures are highly valued assets in today's competitive candidate market. I've found that those candidates bring flexibility and a measure of self-confidence that give them a distinct advantage over candidates who come to the interview room with no foreign exposure, whether the position in play is located overseas or in the United States for a non-U.S. organization. At Daiwa's New York operation, there were all the issues of Japanese and local U.S. staff coordination challenges that one could ever find in Tokyo."
For those of you potential expatriates who are seriously targeting foreign-owned subsidiaries as a first step to taking the big plunge into that globalizing wave, there is another useful article for you: this one a Forbes table of information setting out the 500 largest organizations in the world, appearing in the July 24, 2000, issue. It is from this table that we will set forth the 25 non-U.S. companies producing the largest amounts of revenue in this country (see Table 1.2).
As we saw in the listing for U.S. corporate revenues generated from overseas, there is a broad spectrum of industries represented here. While the focal point for this chart is the size of firms' business results and their global head counts, you may proceed to assume that some proportional consistency would affect their local staff employment of U.S. nationals. And once again, the signs of dynamic revenue growth are starkly captured in the percentage gains from 1999 over 1998. Consider that only two of these 25 lost revenue ground. Also indicated in that Forbes report was the fact that foreign companies spent a record $238 billion here in 1999, a whopping 31 percent increase over expenditures in 1998.
So deep runs the non-U.S.-owned entry into the American pastime that not only has baseball been touched by the many outstanding non-U.S. players from around the Caribbean, Australia, Japan, and Korea, but globalization has even reached the hallowed environment of Boston's Fenway Park, where the huge Citgo electrical sign has been a venerable Boston landmark just outside and over the famous left-field wall. How many of those staunchly loyal Red Sox fans know that the company's parental identity is really the Venezuelan energy giant Petróleos de Venezuela? Globalization has really landed in Boston! Bostonians, surf's up!
And the pace of takeovers is accelerating. Consider the recent acquisition of Atlantic Richfield (ARCO) by newly merged Amoco. The year 1999 also witnessed the Giant Food company, the Dutch supermarket giant, acquire Giant Food here, at about the same time Group Carso was acquiring Compaq. Indeed, wasn't it just a few years ago that Compaq had acquired Digital Equipment Corporation (DEC) in what was seen by many as a way to protect against the very takeover that just occurred?
The pace of acquisitions continued unabated in 2000, with the purchase of the spirits giant Seagram (which also owned Universal Studios and Polygram) by the French company Vivendi. Also in that year, the venerable investment adviser Alliance Capital, still another huge financial services organization, purchased Sanford C. Bernstein; but Alliance is indirectly owned by AXA, the French insurance behemoth. Certainly as these non-U.S. business managers continue to invest here, they will need dependable, bright local U.S. nationals to help them to do that professionally.
To help you view this terrain, let's take a look at how some major non-U.S. companies doing business here have fared in terms of their employment histories in this country. We'll view two Japanese global giants, Sony and Nomura Securities. These two highly successful firms, domestically, approached the U.S. labor market (and other markets around the world) very differently. It may surprise some that there could be marked contrasts between Japanese overseas management styles, but stereotyping any group of companies as diversified as the Japanese organizations doing business in the United States is hazardous at best. This will become apparent at the outset of our descriptions of how each approached the U.S. marketplace, in terms of both business and employee relations results. Obviously both organizations could be viewed as final employers of U.S. nationals here, or in the future, potential employers for U.S. nationals overseas in their other offshore locations or home headquarters, Tokyo.
This modern-day global power grew out of the ashes of Tokyo in 1946 as an engineering firm. The power behind the development was the late Akio Morita, an independent and progressive thinker. His book, Made in Japan, was a worldwide bestseller and promoted much discussion among corporate students as to whether this approach, the Sony way, could be a feasible model for companies around the globe. As a human resources person, I found the following excerpt of particular value, and for you managers and potential expats, it should be the kind of policy you ought to be searching for:
"We have a policy that wherever we are in the world we deal with our employees as members of the Sony family, as valued colleagues, and that is why, even before we opened our U.K. factory, we brought management people, including engineers, to Tokyo and let them work with us and trained them and treated them just like members of the family."
That was written in 1988 at the time when Japanese organizations were vigorously pursuing global expansion almost everywhere, often using the traditional Japanese corporate techniques that had worked so well in Japan. So what has happened since that time, given the Japanese economy's substantial downturn in the 1990s? What did Sony actually do here as an employer of U.S. nationals? Did its original policy of equitable treatment continue and keep pace with its highly successful innovations in electronics, motion pictures, and entertainment, or were adjustments made to that policy?
We asked those questions in September 2000, to John Stern, who was executive vice president, human resources, for Sony Electronics for the United States for 15 years, from 1979 through 1994. Here are his comments:
"Sony's culture is highly localized. Local nationals can aspire to the highest jobs in the United States and even to become directors of Sony's parent corporation in Tokyo. In the United States, Sony targets the top business schools for candidates for global assignments. Those candidates are asked if they would feel comfortable being assigned overseas.
"As for current local staff employees [U.S. nationals], they are encouraged to indicate that they would desire an overseas posting. Sony will listen to them and will try to accommodate those career aspirations where the circumstances, skills, and openings permit. The company prefers that qualified, bright U.S. employees spend time in Tokyo in developmental roles lasting about six months prior to their next assignments, which could be another expatriate posting or a repatriation back to the United States."
John, recently retired from his post at the Darla Moore Graduate School of Business, University of South Carolina, summed up the four traits that Sony management was looking for when identifying potential candidates for overseas assignments:
According to Stern, Sony continually provides for specific training in each of the various functions, especially where new technology needs to be mastered. John himself had been sent to the Harvard Business School for nearly six months of advanced executive training. Here is the story of a company taking its direction from the chief executive and following through with policies and procedures that should be attractive for those of you considering the expatriate or foreign subsidiary career paths.
This is the U.S. subsidiary of the Nomura Securities Company, the world's largest securities firm in terms of assets held. In Tokyo, this firm dates back to its founding in 1927, and notwithstanding severe economic recessions and the war, it not only proved resilient enough to survive, it prospered in the Tokyo retail market as the most powerful of Japan's four major securities giants, garnering almost one-third of the entire nation's shareholder market.
In the 1980s the parent firm took on global proportions when it set up subsidiaries in New York, London, Hong Kong, and a dozen more major offices sprinkled through Europe, Asia, and the United States. The company needed to look for a market niche in each of its overseas locations. In New York it concentrated on the institutional, fixed-income business (trading bonds with other companies), a new line of business for the firm. Unlike Sony, which was positioned in industries that stressed technological skills as entry points into the U.S. market, Nomura would have to rely on the expertise of experienced U.S. professionals who could leverage the firm's giant capital into positions that would make trading bonds and stocks profitable ventures for the parent.
By 1986, when I joined the firm in New York as their director of human resources, the firm had approximately 200 employees and was led by two senior expatriates who had successfully split the leadership role into inside management and outside business and public relations. There was a sprinkling of U.S. local managers, but the majority of managers were expats from Tokyo on three-year terms. This was the standard structure of most Japanese-owned subsidiaries in the United States.
The firm needed two kinds of U.S. nationals--experienced Wall Street veterans who could immediately start up their divisions, and junior individuals, U.S. nationals fresh out of college.
This college recruiting program was a classic example of how to construct an appealing orientation for a new person coming to the securities industry. The program proved highly successful because it was structured to provide a blend of formal instruction with learn-on-your-own processes. The program called for a formal three months' classroom training session at the parent headquarters in Tokyo, where the New York hirees attended basic sessions with Oxbridge people from London, and all kinds of recent graduates from Nomura offices around the world.
After the first three months' orientation at the Tokyo headquarters, the program called for three separate training exposures back in New York. Each of these rotations--equities, fixed income, and investment banking-- featured desk training, a process of observation of a bond trader trading, the opportunity to ask questions, and then the ability to assist. After the full year of those four experiences, both the recent graduates and the division heads made preference lists as to who wanted what, and those assignments were made following those mutual priorities. This kind of program, with substantial opportunities to test the water and mix with the professionals while on the job (rather than in a formal classroom setting), proved to be highly sought by the top students at the top schools. If you happen to be still at school while pondering where to enter the global marketplace, that sort of program can produce ultimately solid job opportunities for those who have the patience to proceed through the 12-month program period. This kind of rotational program continues in many organizations, although Nomura decided to discontinue it for its U.S. operations.
The program effectively encouraged non-Japanese nationals to pursue careers with the firm, including expatriate assignments to Tokyo, London, and Hong Kong. The training target was clearly to build a global workforce, producing individuals who understood all four operation centers and their distinctive cultures. This was consistent with what the parent firm's then CEO, Yoshihisa Tabuchi, had stated at the annual Tokyo headquarters conference in 1986: "I will be the last in this position who has not worked outside Japan and cannot speak English." Indeed, at that meeting, there were encouraging reports from all overseas locations regarding expansion plans, and in the case of London, significant results as well. Authentic globalization of the company appeared to be just on the horizon. Has it become a reality?
As to the campaign to lure Wall Street veterans, the firm encountered some difficulties, not exclusively a Nomura challenge in that tight labor market, but a learning point for those of you evaluating foreign-owned subsidiaries as your career targets at this time. Let's turn to an objective perspective as to what actually happened. Professor Samuel Hayes III of the Harvard Business School collaborated with Phillip Hubbard in 1989 on a book entitled Investment Banking: A Tale of Three Cities, in which they draw the following conclusion:
"Nomura's role as a truly global investment bank has depended not only on its success in Tokyo, but also on its activities in London and New York.... The key to developing these areas [sales and trading of corporate bonds and equities] is recruiting and retention of skilled professionals, particularly Americans. Nomura has made an effort to differentiate its personnel practices in America from those in Japan. However, without an American at the helm, it seems likely that a number of talented individuals will shy away from a firm that could be viewed as heavily directed from Tokyo."
Nomura eventually did appoint an American cochairman and grew its U.S. workforce to 1,200 employees, but it has not achieved leadership status among its Wall Street competitors. Mr. Tabuchi's prediction that he would be succeeded by an English-speaking person with extensive expatriate experience was nearly borne out; his successor's successor, Junichi Ujiie, currently heads the firm, after extended expatriate assignments in Switzerland and New York.
Let's wrap up our two cases' analysis with a quote from the venerable Japanese consultant Kenichi Ohmae, who concluded that the general failure of the Japanese subsidiaries derived "from their failure to fully empower their native talent--always reserving key decision-making authority for native Japanese." Clearly Mr. Ohmae was referring to the more traditional-thinking of Japanese firms doing business here; there are certainly more exceptions to his general rule than Sony. And, to be fair, that conclusion was rendered more than a decade ago. Many of the non-U.S. firms doing business in the United States have adopted more progressive management approaches here. Each of these companies is torn between its own unique culture, originating in some form from its home-country culture, and the need to effectively adapt to the U.S. business cultures.
You, as a job candidate, or as a U.S. national working for a non-U.S.-owned subsidiary, need to consider the relative autonomy we've been describing here. Sometimes this empowerment springs from a change of expatriate or parental leadership, and these accidents of personal philosophy are a continuing concern, since the tendency of most foreign subsidiaries, regardless of nationality, is to replace these people at regular intervals. So you must make careful probings as to your target company's current philosophy toward bona fide delegation of decision-making authority, and where that direction emanates from.
Whichever career path you choose, international work should be a continuing goal.