Coaching: An Essential Tool to Increase the ROI of Expatriate Assignments. Research Paper by Myriam Callegarin

Transcription

1 Coaching: An Essential Tool to Increase the ROI of Expatriate Assignments Research Paper by Myriam Callegarin

2 Table of Contents Introduction What is a failed expatriate assignment The cost of failed expatriate assignments Reasons for assignment failures How to prevent assignment failure What is coaching and why it works Evidence of the benefits of coaching Conclusions References Page Myriam Callegarin, Certified Professional Coach 2

3 Introduction Corporations have been expanding their businesses abroad for decades in an effort to diversify their target market and increase profits. The economic downturn and the rise of emerging markets are now forcing corporations to increase their international operations to ensure long-term survival. According to a survey conducted by Mercer in 2008, the number of employees on international assignments had doubled in only three years (Mercer website, October 2008). Another study conducted by PricewaterhouseCoopers shows that the number of people working outside their home country is expected to increase by 50% over the next decade. ( Talent Mobility 2020: The Next Generation of International Assignments, PricewaterhouseCoopers, April 2010) Even though businesses recognize the economic benefit of international assignments, a large amount of assignments fail resulting in high financial costs, major losses in profits and reputation of the company, low morale and decreased productivity in the host country staff, as well as the loss of talent to competitors after completion of the assignment. To avoid the dire consequences of failed international assignments, many companies have begun to make coaching services available to their expatriate employees. The coaching relationship allows expatriates to work through the professional and personal challenges of their new role, and to accomplish their business goals with consistent support. As a result of it being offered, companies are noticing an increased success rate of international assignments. The purpose of this research paper is to better understand why so many expatriate assignments fail and to demonstrate how coaching helps reduce this trend, while increasing the return on investment. What is a failed expatriate assignment First, we would like to understand what a failed assignment is. In her research on international mobility, Yvonne McNulty described a failed assignment as the inability 2010 Myriam Callegarin, Certified Professional Coach 3

4 to achieve the organizational objectives of the assignment. ( International Mobility and The Bottom Line, April 2003) As reported by Expatica HR in 2004, here are some examples of a failed assignment: Having to return an expatriate to the home country earlier than expected. Poor performance during the assignment, including delayed productivity and start-up time, disruption of relationships between host and expatriate nationals, damage to company image, lost opportunities, negative impact on successors (Bennett et al., 2000, p. 241; Littrell et al., 2006, p. 357) Having to constantly go back and forth with an expatriate concerning compensation, allowances, taxes, benefits, etc. Losing an expatriate within a short time-frame after being repatriated, meaning loss of key management talent that can end up with competitors. (Source: Expatica HR website) The cost of failed expatriate assignments As a matter of fact, the majority of companies are unable to accurately calculate the return on investment of their expatriate assignments, according to the International Assignments Survey 2008 carried out by Mercer (Source: Expatica HR, October 2008). Considering this, we can assume that calculating the cost of a failed expatriate assignment is even more challenging. According to Matthew Hunt of Mercer, an expatriate assignment usually costs between 1.5 and 4 times what a local employee would cost, depending on the role and country. When a single assignment fails, it can cost the company between US$2 and to US$2.5 million. Considering that between 20 and 45% of expatriate assignments fail, corporations lose tens of millions of dollars each year. (Stroh, Black, Gregersen 2005; Swaak 1995, McCaughey and Bruning 2005) Myriam Callegarin, Certified Professional Coach 4

5 Besides purely financial costs we must also consider the invisible costs of failure for the employee, such as low self-esteem, family problems, depression, substance abuse. These personal issues can easily turn into high costs for corporations because of the employee s lower performance and productivity, an increase in sick leaves, and even because of the unwillingness of colleagues to accept an expatriate assignment themselves. Reasons for assignment failures One of the major causes for premature returns or ineffective performance is that firms tend to select technically qualified candidates without assessing whether they possess the cross-cultural communication or adjustment skills to perform well in a different country. For example, a confrontational approach during negotiations that works well in the US can be very offensive for the consensus-minded Koreans. A senior executive with a US car-maker who had been sent to Korea, offended the local suppliers so much that they refused to talk to him. The senior executive was called back home, and it took his replacement one year to undo the damage (Black & Gregersen, 1999). Another example is the assumption that management tools and techniques that work well in the home country will also work well abroad. The following complaint by an Asian-based executive with a German automotive company, as reported by management consultant Noel Miner, is only one example of common assumptions that can have a negative impact on the effectiveness of the assignment: "We know the German management style works. All we need now is to have the Chinese follow the German management style". (Kevin Voigt, The Wall Street Journal/Expatica HR, Why expats must think local, May 2010) A further example is the inability to socially integrate in the new environment. As reported by Gareth Williams, a worldwide partner in Mercer's, although companies realize the importance of integrating employees and their families into the local 2010 Myriam Callegarin, Certified Professional Coach 5

6 community, lack of time and cost constraints often force them to concentrate their efforts on more practical, day-to-day employee support. According to the Global Relocation Trends Survey carried out by Global Relocation Services in 2005, the main causes for assignment failure are the following: Source: Global Relocation Trends 2005 Survey GMAC Global Relocation Services During the international assignment, expatriate employees have to face a variety of challenges, such as finding the best way to lead a new local team that has a different way of doing things; managing possible tensions with their spouse and children who find it difficult to adjust to their new situation; the fear of being cut off from headquarters; feeling the responsibility in a new business, cultural and social environment while trying to understand and manage internal politics. Expatriate employees are expected to learn fast, adapt fast and make (the right) decisions fast Myriam Callegarin, Certified Professional Coach 6

7 All of these multi-faceted challenges have a deep impact on the expatriate s performance and satisfaction, and subsequently on the local team s performance and productivity, thus influencing the success or failure of the assignment. How to prevent assignment failure Since the reasons for failure seem to be lying both in the work-related area (professional, leadership, management and communication skills), and in the personal area (ability to manage change, ability to develop and maintain a new positive relationship with the family, social skills, emotional stability, etc.), we can assume that in order to prevent failure and to increase the success rate of international assignments it is important to support the expatriate in both the professional and personal area. Assessments can assist Human Resources professionals during the selection process, however they only provide a picture of the candidate s leadership skills and cross cultural adaptability before they are actually facing the challenges. Cross-Cultural Training is an excellent instrument for the future expatriate and their family to learn about the new country s norms, customs and etiquette (Corporate Leadership Council 2002a; Corporate Leadership Council 2002c). Such a training will also prepare expatriates and their spouses to face the four phases of cultural adjustment: the Honeymoon phase, the Culture Shock, the Adjustment and the Mastery (Black & Mendenhall, 1991). However, as underlined by Andrew L. Miser and Martha F. Miser (The Routledge Companion for International Business Coaching), no matter how much preparation and training expatriates receive prior to the move, they will not know what their life will be like until they have actually moved abroad. Therefore, there is the need of a consistent support at professional and personal levels not only prior to departure, but during the entire duration of the assignment. Coaching can provide this kind of support Myriam Callegarin, Certified Professional Coach 7

8 What is coaching and why it works The International Coach Federation defines coaching as partnering with clients in a thought-provoking and creative process that inspires them to maximize their personal and professional potential. (ICF website, 2010). When it comes to corporations, Harvard Business Online states that the purpose of executive coaching is to produce behavioral change and growth in the coachee (the employee) for the economic benefit of the client (the company that hires the coach). More specifically, expatriate executive coaching can assist expatriates in producing behavioral change and growth in the factors that have been found to be critical for the success of international assignments (Stroh, Black, Gregersen 2005), including: Professional, Conflict-Resolution, Leadership, Communication, Social and Cultural Awareness Skills. Coaching works across all these areas to mold a welladjusted corporate leader. A professional coach has the ability to help the expatriate manage their challenges both in the professional and personal area, for the benefit of the expatriate, of their team, of their family and of the corporation. A professional coach can assist the expatriate in further developing skills that are critical for the success of the assignment, and at the same time help the expatriate employee to respond and to manage sudden critical situations more effectively (crisis management). Summarized, Expatriate Executive Coaching can be very effective for two main reasons: 1. It helps to better integrate and balance the business and personal aspects: the expatriate may be coached on behaviors, emotions, family issues while keeping the focus on the strategic and business objectives of the assignment. 2. It assists the company and the expatriate executive before, during and after the assignment, as shown in the picture below Myriam Callegarin, Certified Professional Coach 8

9 Coaching as an on-going support for successful expatriate assignments Evidence of the benefits of coaching An extensive global study commissioned by the American Management Association and conducted by the Institute for Corporate Productivity study found that providing coaching to expatriates is associated with coaching success and improved market performance. (Mary Key, Institute for Corporate Productivity What Really Works When It Comes to Coaching, June 2008) Michael Markovits, currently vice president at IBM, Business and Technical Leadership, overseeing IBM's in-house executive coaching, said: "We've done research to show that leadership behavior has a direct impact on climate, and climate has a direct impact on business results. We invest in leadership development because we believe we're going to be a better-performing company as a result." 2010 Myriam Callegarin, Certified Professional Coach 9

10 According to a 2001 MetrixGlobal study of one Fortune 500 company, executive coaching produced a 529% return on investment and significant intangible benefits to the business. Including the financial benefits from employee retention, coaching boosted the overall ROI to 788%. (Merrill C. Anderson, Ph.D. MetrixGlobal, LLC) Researches carried out by McGovern, Lindemann, Vergara, Murphy, Barker and Warrenfeltz with Manchester, Inc. in 2001 show that coaching provided the following tangible and intangible benefits: Tangible Business Impacts (Frequency of impacts reported by executives) Productivity 53% Quality 48% Organizational Strength 48% Customer Service 39% Reduced Complaints 34% Own Retention 32% Cost Reductions 23% Bottom Line Profitability 22% Top Line Revenue 14% Reduced Turnover 12% Other Business 7% Intangible Business Impacts (Frequency of impacts reported by executives) Improved Relationship: Reports 77% Improved Relationship: Stakeholder 71% Improved Teamwork 67% Improved Relationship: Peers 63% Improved Job Satisfaction 61% Reduced Conflict 52% Increased Organizational Commitment 44% Improved Relationship: Clients 37% Other Intangibles 31% 2010 Myriam Callegarin, Certified Professional Coach 10

11 Conclusions In order to acquire or maintain a competitive position in the global marketplace, organizations must seek the highest possible return on their investment in international assignments. This can be achieved by clearly defining the strategic objectives of the assignment, selecting the right candidate, preparing them adequately, and by providing professional coaching to the expatriate (and even their teams if necessary), to ensure high performance and productivity throughout the assignment. Change is a constant, thus begins the Evidence Based Coaching Handbook (Grant and Stober 2006). And no where is that more so than when an employee is shipped to a new country to start a new job and a new life. In today s world, Coaching is the tool when it comes to both creating change in order to achieve a desired outcome, and managing change to positively face new challenging situations. Considering the challenges that corporations are facing, via the dramatic shifts in the global economy, it can safely be said that coaching is a key factor for the success of expatriate assignments. Coaching has proven to be an invaluable tool to improve communication and team collaboration, as well as to increase individual well-being, team performance and productivity. All these benefits are of critical importance when an individual is placed in an international work situation. The result is that Coaching makes a significant contribution to the bottom line of companies that offer it Myriam Callegarin, Certified Professional Coach 11

12 REFERENCES Linda K. Stroh, J. Stewart Black, Hal B. Gregersen, International Assignments: an integration of strategy, research and practice, Expatica HR expatica.com Joy McGovern, Ph.D., Michael Lindemann, Ph.D., Monica Vergara, M.A., Stacey Murphy,Linda Barker, M.A., & Rodney Warrenfeltz, Ph.D., Maximizing the Impact of Executive Coaching: Behavioral Change, Organizational Outcomes, and Return on Investment, The Manchester Review 2001, Volume 6 GMAC Global Relocation Services, Global Relocation Trends Survey, 2006 Grant and Stober, Evidence Based Coaching Handbook, 2006 Kevin Voigt, The Wall Street Journal/Expatica HR, Why expats must think local, May 2010 J. Stewart Black, Mark Mendenhall and Gary Oddou, Toward a Comprehensive Model of International Adjustment: An Integration of Multiple Theoretical Perspectives, The Academy of Management Review, Vol. 16, No. 2 (Apr., 1991) Mary Key, Institute for Corporate Productivity What Really Works When It Comes to Coaching, June 2008, American Management Association website Merrill C. Anderson, Ph.D. MetrixGlobal, LLC, 2001 Michel Moral, Geoffrey Abbott, Routledge Companion to International Business Coaching, 2009 Talent Mobility 2020: The Next Generation of International Assignments, PricewaterhouseCoopers, 2005 Yvonne McNulty, International mobility and the bottom Line, April Myriam Callegarin, Certified Professional Coach 12