The Expatriate ROI Zero Sum Game
The Return on Investment (ROI) that companies receive from their global
mobility efforts has come under increasing scrutiny as budgets have
tightened. At the same time, companies are sending more people overseas
on assignment. Global mobility programmes are still often seen as a
necessary expense of doing business for international companies and cost
measurement is typically complex. The pay back companies receive for the
investment they make is less well understood, though it is often
conceptualised in terms of the international working experience and
leadership experience people gain whilst on global assignment.
But now it is clear that the world is moving towards a knowledge economy
where competitive advantage comes from the ability to leverage knowledge,
innovate and create other forms of human capital. We know that within a
knowledge economy competitive advantage comes from people but the
exponential impact of digitisation and hyper-connectivity means that
competitive advantage is going to come, in particular, from helping people
to think and act differently and to leverage the value in those differences.
The response to this has been a clarion call for more co-operation between
the talent management and global mobility functions within companies,
and a greater alignment of both with the strategic objectives of the
company.
Global mobility is, therefore, a key conduit for creating the conditions
where new forms of human capital can grow and lead to greater
competitive advantage. The consequences of failing to embrace and develop
global talent at a time when your company needs to maintain competitive
advantage within a hyper-connected, digitised global market could be dire.
Innovations rise and fall with increasing speed. It is therefore becoming
even more crucial to understand the value-creation side of the global
mobility ROI equation, and particularly to understand the forms of
knowledge capital global mobility creates for companies, employees and the
environment in which each operates.
A Return on Investment approach provides a rigorous framework from
which to set forth an exploration of the value created by global mobility.
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Yvonne McNulty and Kerr Inkson took critical steps to outlining these
forms of value creation and investment costs in their book ‘Managing
Expatriates: A Return on Investment Approach’ (2013)1. They defined
expatriate ROI (expatriate ROI) as:
“A calculation in which the financial and non-financial benefits
to the firm are compared with the financial and non-financial
costs of the international assignment, as appropriate to the
assignment’s purpose.” (page 28)
They go on to further define expatriate ROI as a combination of Corporate
Return on Investment (corporate ROI), which is the return on investment
to companies, and Individual ROI (individual ROI), which is the ‘perceived
benefits that accrue to expatriates arising from international assignment
experience in relation to personal and professional gains’. Expatriate ROI is
therefore made up of both corporate ROI and individual ROI. This dual
focus within the expatriate ROI formula is critical as companies are
dependent on the intellectual, social and personal development of their
employees in order to grow.
The Challenge of People Analytics and ‘Big Data’ for
Expatriate ROI.
As soon as efforts to quantify any kind of ROI begin, you end up in the
realm of Big Data. Expatriate ROI is no exception. These days, the specialist
press and organisations such as the Harvard Business Review, McKinsey
and Deloitte are challenging HR professionals to integrate a people analytics
approach to their business to inform HR strategy development and quantify
the impact of HR progammes. If you want to measureexpatriate ROI, you
will have to embrace Big Data.
There are some fundamental keys to success when it comes to interrogating
big data sets. First, you must understand and define the models and
assumptions underpinning your analytical efforts. Big Data sets are so vast
that you can become lost in the possibilities of what to measure and what
1McNulty, Y. and Inkson, K. (2013). Managing expatriates. New York, NY: Business Expert Press.
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not to measure. In addition, we now have so much analytical processing
power at our fingertips that we can, in fact, use Big Data to prove almost
anything. You are cruising in an ocean of data with a huge motor to help
you cut through the water. But where should you go? To get to the right
destination, you need to use a reliable map. In the context of Big Data, that
means approaching your data set with an evidence-based model in mind.
Failure to approach Big Data sets in a structured, evidence-based way
results in what researchers call ‘G.I.G.O.’ or ‘Garbage In, Garbage Out’. You
can create beautifully impressive but highly misleading statistics, which can
be worse than no statistics at all.
I set out to explore what could be a model for informing a Big Data
exploration of expatriate ROI that brings together corporate ROI and
individual ROI but found there was a fundamental barrier hampering
company’s efforts to throw light in this area. The barrier came in the form
of the model that currently underpins much of the thinking within the
international mobility industry: the U-shaped model of cultural integration.
The Zero Sum Problem Undermining Efforts to Measure
Expatriate ROI.
The U-shaped model of cultural integration was first described by Lysgaard
in the 1950’s (Lysgaard, 19552) and has been further developed and refined
over the years (e.g. Gullahorn & Gullahorn, 19633). At its core, the model
describes the experience of cultural adaptation and refers to stages of
‘culture shock’, ‘honeymoon periods’, ‘recovery’ and ‘adaptation’ that take
place over a period of months or years.
2Lysgaard, S. (1955) Adjustment in a foreign society: Norwegian Fulbright grantees visiting the
United States. International Social Science Bulletin, 7, 45-51.
3Gullahorn, J. and Gullahorn, J. (1963). An Extension of the U-Curve Hypothesis. Journal of Social
Issues, 19(3), pp.33-47.
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Figure1:U-shapedIntegrationCurveandWork
PerformancemodelderivedfromLysgaard(ibid)
This model and its derivatives have become an almost universally adopted
and highly influential mental model within the global mobility industry and
across companies. But there is a key problem with the U-shaped model
when it comes to measuring expatriate ROI. The U-shaped model defines
expatriate ROI as something approaching a zero sum game. When we
approach global mobility Big Data analyses with the U-shaped integration
curve as the guiding model, we are looking at a ROI approach that will
describe small positive returns at best and struggle to define tangible
positive outcomes.
Indeed, this outcome has been borne out in companies, as described by
McNulty & Inkson (ibid) for example:
“..the reality is that many [companies] still struggle to define
what international assignment success really means and have
made little or no progress.…The Brookfield 2012 Global
Relocation Trends Report shows that there has been very little
improvement in expatriate ROI-based management
techniques…None of the companies rated their ROI from
expatriation as “excellent”. While 42% estimated their ROI as
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very good or good, 58% said it was fair or poor. In our view,
these figures indicate a massive waste of time, money, and
resources to secure a return on investment that is considered
marginal at best….” (page 23)
This is because the U-shaped curve model shapes our approach to
measuring expatriate ROI by focusing attention on what the assignee is
losing in the move, that is, the space between the branches of the U. The
end point of the U marks a return to previous levels of success. The key
indicator that you may be applying an inherent zero sum approach to your
quantification of expatriate ROI is when you base your global mobility
policies on gap analyses, looking primarily at what people are losing in the
move and trying to replace that in the most appropriate, cost effective way
in order to ensure a return to successful performance. The model leads us to
ask questions like ‘how quickly can we get our employees back to full
functioning?’ (i.e. how narrow is the U-shaped curve?) and ‘how can we
avoid or prevent the worst effects of mobility?’ (i.e. how much has our
mobility approach reduced the depth of the curve?)
The consequences of this model are apparent when companies focus mostly
on the cost of mobility and have relatively little data regarding the benefits
of the programme to the global assignees, their host environments, the
teams around them and the company on the whole. The consequences are
also apparent around the meeting table when company global mobility
professionals say that ‘you can’t measure the tangible benefits’ of a global
mobility program. In effect, the U-shaped curve model imposes a thinking
silo that excludes clarity around the value creation side of the expatriate
ROI equation. The aim to have a return to previous levels of success
becomes a limiting belief that leads to the zero sum game being played
when trying to quantify expatriate ROI.
What If We Ask a New Question about Expatriate ROI?
As a behavioural scientist, I am fascinated by the power we have to reshape
our world when we ask different questions. Applying that curiosity to the
challenge of measuring expatriate ROI, I wondered how we could
conceptualise the way that people and organisations flourish together using
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global mobility within a knowledge economy. This is not a futuristic, bluesky question. People and companies do flourish in the here and now
because of the stimulating effects of global mobility activites. We see it all
the time, anecdotally. What we struggle to do is define it and then measure
it. What I wanted to do was build a model that interlinked the value created
by people and companies together (i.e both individual ROI and corporate
ROI) so that we could define, shape and measure the value creation side of
the expatriate ROI equation in a more integrated and systemic way.
My framing question became: how can people and organisations
flourish together using global mobility within a knowledge economy, in
a way that creates competitive advantage for all?
When we approach the question of measuring the impact of global mobility
with this new question in mind, it becomes evident that far from being a
fundamental truth, it’s not necessary for people to experience a U-shaped
curve after a global assignment. The question itself precludes a U-shaped
curve answer. The clear alternative model for the global mobility
experience is, in contrast, the S- or sigmoid curve.
Figure2:S-curvemodelofValueCreation
throughGlobalMobility
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This curve is a mathematical model that has been used to describe the
trajectory of every successful human system. Rather than describing a
downturn like the U-shaped curve, the S-curve charts an initial period of
experimentation and learning, which is followed by a time of rapid growth
and development. The curve eventually levels as growth slows. The key
difference for expatriate ROI analyses is that the S-shaped curve model
describes a positive trajectory of economic behaviour by a global assignee. It
therefore opens up new questions and modes of thinking around global
mobility value creation, making it possible for us to devise methods and
measurements without inadvertently planning for and creating ROI zero
sum outcomes.
New Models Lead to New Questions and Solutions
The parallels with global mobility are clear as we fast forward to the dawn
of the 4th Industrial Revolution. At the moment, global HR directors are
wondering how to plot the spread of innovation and new forms of human
capital as they move knowledge workers around the world, and global
assignees are wondering how to grow their career in meaningful ways as
they make successive overseas moves.
The use of the S-curve is not a radical or new idea when it comes to
describing human behaviour. It is, however, an approach that has been lost
to common knowledge through the passage of time and through the
popular take-over of the U-shaped model of cultural integration. Back in
1890, Gabriel Tarde4, the French sociologist, used the S-curve to explain
the diffusion of innovation in society. His particular focus was on how
individuals shared, created and adopted new technologies and new
knowledge. More recently, for example, Charles Handy (19955) used the
sigmoid curve to describe human and management change processes.
4Kinnunen,J.(1996)."GabrielTardeasaFoundingFatherofInnovationDiffusionResearch".ActaSociologica39(4):
431.
5Handy,
C. (1995). Gods of management. New York: Oxford University Press.
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Moving Beyond the Zero Sum Game in Expatriate ROI
The critical first step in successfully quantifying expatriate ROI is
recognising the analytical straight jacket that has been imposed by the Ushaped curve model. This model has been leading companies to implement
systems, policies and processes that accept a downturn in performance as
the inevitable consequence of global assignments. It is a model that
encourages us to remain fixed on the ‘return to previous levels of success’
end point for corporate and personal investment in the global assignment,
thereby creating the expatriate ROI zero sum game. An even more
important corollary of changing this limiting mental model we have been
using is that we can start to change the questions we ask and the solutions
we perceive when it comes to harnessing the co-creative power of a globally
mobile human system such as a multinational company.
We can change our approach to global mobility so that we place the Sshaped human growth model at the forefront of our global mobility
approach and end our frustrations with the expatriate ROI zero sum game.
About Wendy Kendall
Global talent strategy expert and executive coach, Wendy Kendall advises
corporations and executives to think differently about global talent development.
An organisational psychologist for more than 20 years and former senior scientist
to the Director of Army Personnel Strategy (UK), Wendy has lived and worked
overseas for the last 15 years. She established her own practice in 2003 and worked
with nearly 3000 global leaders and managers in that time. Her work focuses on
assisting multinational companies and international NGOs to implement global
talent development strategies that prepare their future leaders for the 4th Industrial
Revolution. Her website is at www.wendykendall.com
If you would like to learn more about measuring the effectiveness of your global
mobility programmes in creating value for your company, or if you would like to
support your talents in creating value on global assignment, please contact Wendy.
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