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Global benchmarking study: Expatriate policies and practices in German, Japanese, UK and US multinational

 

Arrival in Singapore - Business Spotlight interview with Dr. Zsuzsanna Tungli

 

Doing business in Russia Excerpts from a research study

 

 


Global benchmarking study: Expatriate policies and practices in German, Japanese, UK and US multinationals

 

A report based on the findings of a comparative survey performed with 136 multinational companies in Germany, Japan,

the United Kingdom and the United States.

 

EXECUTIVE SUMMARY

 

Background. The importance of international business has escalated in the last decade. With the increasing competition and saturation of home markets, more and more companies have seen their future growth potential as coming from outside their domestic boundaries. At the same time a large number of new markets have opened up to world trade. As multinational organisations and their global strategies have become more complex and sophisticated, the importance of competent, flexible and internationally mobile employees has also grown.

 

The study. The comparative survey on expatriate practices and policies covered 136 of the largest multinationals from Germany, Japan, the United Kingdom and the United States. The results show that the four nations manage their expatriate assignments in different ways; they differ in

▪   why they use expatriates;      

▪   the make-up of their expatriates;     

▪   their selection;     

▪   training; as well as in      

▪   repatriation practices.

Japanese multinationals often operate distinctly differently from their Western counterparts, but even within the Western group there are big differences among the policies and practices.

 

Expatriate profile. The multinationals which participated in the study employ approximately 34,000 expatriates. The majority of these expatriates are male, married and are sent from the headquarters to foreign operations in Asia and West Europe.

 

US companies have the most (11 per cent) and Japanese multinationals have the least (0.6 per cent) female expatriates. There is also a difference in the number of female expatriates between the services (11 per cent) and the industrial (4 per cent) sectors.

 

In general, Japanese companies seem to be the most reliant on expatriates. Western firms tend to send expatriates for high level positions or - especially German firms - as specialists, while their Japanese counterparts often fill also middle and junior manager positions with expatriates. Western companies have started hiring expatriates also outside their headquarters. In the UK 37 per cent, in the USA 23 per cent and in Germany 12 per cent of the expatriates are non-headquarters nationals. Japanese multinationals still report 99 per cent of their expatriates to be Japanese.

 

Management of expatriate assignments. While there are significant differences among the countries, companies use expatriates primarily for

▪   setting up new operations;     

▪   filling skill gaps; and      

▪   developing the expatriates' international management skills.

Companies seem to have detailed guidelines for the more tangible parts of expatriation and less guidance for the more subjective areas. Most multinationals report to have guidelines for compensation and the majority also have guidelines as to how to manage the relocation process. Fewer companies have, however, policies for the selection and the training of expatriates.

 

Japanese expatriates' assignments tend to be longer (17 per cent last longer than five years), while UK expatriates' assignments tend to be shorter (41 per cent last shorter than two years). American expatriates have the shortest notice period, 84 per cent have less than three months prior to departure for the assignment.

 

Selection. Multinationals select their candidates primarily

▪   based on their technical/professional skills;     

▪   whether they are willing to go abroad; and      

▪   based on their experience in the company.

Partners are usually not involved in the selection process.

 

Training and support. The most often provided training is language training. Japanese and US companies offer the most cross-cultural training.

 

Companies generally assist expatriates in the physical relocation and provide education advice for their children. They also provide an orientation visit before the assignment and home visits from the assignment. The least provided support is job search assistance for the partners, which is somewhat surprising since 77 per cent of the expatriates are married.

 

Appraisal. The majority of expatriates are evaluated once a year, based on the same methods that are used for non-expatriates.

 

Success of failure. Overall, respondents rate the expatriates' performance as 'above average'. Companies also report a relatively low, 6.3 per cent premature return rate. According to the respondents' estimates, a typical premature return costs approximately US$ 200,000, which equals to a total of US$ 424 million in costs for the 136 respondent companies.

 

Repatriation. The biggest problem multinationals have with repatriates is 'their unrealistic expectations upon return'. Is expatriation a good thing for the employee? According to the respondents, the career opportunities of 38 per cent of expatriates do not improve or even worsen after a foreign assignment. 9 per cent of repatriates leave their company within a year after the return from the assignment.

 

Future expectations. A number of multinational companies are currently re-evaluating their policies. The following changes are expected:    

▪   An increase in the number of expatriates is anticipated, especially in Asia and Eastern Europe. These two regions also coincide with the two regions companies name as most difficult to find expatriates for. At the country level, the most problematic locations are China and the newly formed states of the former Soviet Union.      

▪   An increased number of expatriates will come from countries other than the headquarters'. Some expatriate positions are likely to be overtaken by local managers.     

▪   Due to the growing number of dual-career couples, an increase is expected in the number of commuter, unaccompanied and short-term assignments.     

▪   About half of the companies has either started or is planning to change their compensation system. They wish to offer more regionally based and local packages.      

▪   Companies have to face the growing challenges of repatriation that arise because of the overall downsizing and flattening of organisations.

Because of the increasing number of expatriates in 'hardship locations', the growing presence of dual-career couples and the persisting repatriation issues, expatriate management is likely to become more challenging in the future.

 

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Arrival in Singapore

 

What’s it like to work in Singapore? Business Spotlight interviewed Hungarian Dr. Zsuzsanna Tungli

 
Although Singapore might seem like just a tiny dot on the map, it is one of the world’s wealthiest countries. Despite having a popu- lation of only 5.4 million, Singapore has strong international trading links and one of the busiest ports in the world. It has an economy that is highly competitive, with a GDP per head as high as those of the leading economies of Europe. Singapore’s work culture is a complex mix of Asian and Western influences. While large multinationals are more strongly influenced by Western values, you will need to know about Asian culture to understand local companies. About 75 per cent of the population have Chinese roots; other important ethnic groups are the Malays and Indians. English is one of four official lan- guages, and is used widely, especially as the language of instruction in schools.
 
 
Tell us about your background and your link to Singapore.
 
I am Hungarian, but I have lived abroad for about 20 years. I always say I am a “proper” Hungarian, mean- ing that I grew up in Hungary, completed my first stud- ies and also had my first job there. I have also kept very close contact with my family and have regularly gone back to Hungary. By coincidence rather than by design, my family and I also lived for three years in Hungary, from 2007 to 2010. It was a great experience to be “properly” at home again, and of course, it was fantastic for our children to use their Hungarian and to learn more about Hungarian culture. We moved to Singapore at the beginning of 2011. We had lived previously in Asia — two years in Thailand and a few months in South Korea, the Philippines and Hong Kong. Ever since we left Bangkok, we had wanted to come back to Asia. When the right time came, we were considering moving back to Thailand but had an open mind about other possibilities. Because of the business environment in the end we decided to come to Singapore. I have been working in the leadership-development field for about 20 years now, and Singapore welcomes this kind of experience. My husband joined me from the corporate world, so now we are both personal and business partners.
 
So, what images do people from other countries have of Singapore?
 
I am not sure that we in the West realize the level of Singapore’s development. The Republic of Singapore is very young, only 47 years old. What they have achieved in these years is truly remarkable. It started as a fishing harbour, and now we live in a modern, high-tech city that is full of skyscrapers, many of them representing the banking sector. You see ships everywhere on the horizon, as well as the signs of strong industries.
 
People often have the image of Singapore as being a very strict place. Certainly, there are many rules and reg- ulations. When you arrive in Singapore, you may re- ceive a small card describing all the things you should not import or, if you do, what you should declare. The city state is very strict about drugs, and even for a minor offence, you may be caned or sent to prison. While we may question the methods, it is a fact that the city is very safe. For example, I haven’t heard about any other city where parents would feel so comfortable with the idea of their children jumping into any taxi on the street.
 
How do the Singaporeans see themselves?
 
Singapore has traditionally welcomed workers from foreign countries without too many restrictions. Recently, however, many Singaporeans have developed a certain resentment towards foreigners. At peak times, shopping malls and metro stations are becoming crowded, and some feel that Singaporeans have not been the preferred choice for certain jobs. Because it is widely felt that the number of foreigners allowed into the country should be limited, the government has recently started reduc- ing the number of work permits it issues. I believe this is happening across the board, at all kinds of job levels. This creates interesting dynamics in a market where there is almost full employment. I think this is going to be an important debate for a while.
 
In Singapore, there is a general perception, whether you are local or not, that people here want to work and want to make money — and perhaps also to spend money. Certainly, shopping is one of the favourite pastimes for many.
The government plays a pivotal role in almost everything in Singapore. So, it is not surprising that it is trying to establish a shared Singaporean value system. It advocates nation before community and society above self; the family as the basic unit of society; community support and respect for the individual; consensus rather than conflict; and racial and religious harmony.

 

What do business people from other countries need to consider when working in Singapore or with people from Singapore?

 

It depends, of course, on where they come from. For example, when I work with Thais, Indonesians and Malaysians, they often perceive Singaporeans as being pushy people who want to see action immediately. While this may often be true, people from Western countries would have different issues when dealing with Singaporeans. 

 

For example, a colleague of mine has been working with a German general manager whose main problem is that he doesn’t get any feedback from his Singaporean employees: not an uncommon comment around here. Singaporeans are quite hierarchical in their thinking and indirect. I think these two cultural characteristics are probably responsible for the general manager’s problems. As he is the top person in the organization, people are extremely reluctant to give him feedback, particularly negative feedback. It is not part of the culture here to criticize your boss. Even if they do say something to him, it will not be a direct statement. The boss will have to be able to interpret what his subordinates actually meant. I think a wonderful example of people’s indirect- ness is the many different ways they can say no without actually using the word “no”. My favourite is, “I’ll do my best”. But “I will check my schedule”, “it may be difficult” or even “yes, I think so” can all mean a definite no. Of course, if you come from a culture where direct com- munication is the norm, as is the case of the general manager I men- tioned, it is very difficult to understand and guess the meaning of such statements.
But before I go on, I have to make a comment about the diversity of Singapore. The place is very multicultural. Locals may be of Chinese, Malay or Indian origin. And although Singaporeans tend to be indirect, those of Indian origin will probably be a little less indirect than others.
 
I can give you another example of the respect for hierarchy here in Singapore. A Dutch vice-president of an organization gave a project to a young Dutch manager without mentioning it to the Singaporean director, who was the manager’s superior. Out of courtesy, as she put it, the Dutch manager informed the director about the fact that she was preparing a presentation for the vice-president. This, however, proved to be too little and too late. From then on, the director asked to be involved in everything. The chain of command was broken, and it was totally unacceptable for him. In the end, the project was completed successfully, but with a lot of frustration on both sides.
 
What management style works well in Singapore?
 
Leadership style is changing, or at least there seems to be a wide-ranging call for that. Employees traditional- ly expect guidance from their superiors. Managers in Singapore are also expected to take care of their em- ployees, and this often also includes knowing about personal issues. What an increasing number of managers have started to expect from their subordinates is that they become more active, come up with initiatives and speak up at meetings. What I find interesting is that it is not only Western managers who talk about this, but also Asian leaders. A number of studies in the region confirm this. The “not-speaking-up” issue can often be experienced in meetings. Compared to people from oth- er countries in the region, I think Singaporeans are relatively vocal, but they speak less often than many of their Western counterparts. Certainly, longer silences are needed in the conversation if we want to make sure that people contribute.
 
What should you consider when negotiating with people from Singapore?
 
In negotiations, you have to be aware that the Singaporean parties can be quite challenging. They will probably want to get a good deal, so you have to work hard to build relationships. It helps if you have a good service or product to offer at a good price, but you should also have patience and enjoy going out for a meal to try local specialities. Another aspect of prepa- ration for negotiations is to make sure that you send a negotiating partner who is of the same seniority as the partner on the other side of the table. Ideally, you should keep the negotiation team unchanged during the process.
Regarding conflict situations, the best way to prevent them is by building relationships. When you know your counterpart, you are more likely to be able to avoid con- flict. If possible, you shouldn’t directly point out what went wrong. Saving face — your own, as well as that of others — is very important. If you embarrass some- body by losing your temper, you have embarrassed yourself, too.
 
What advice would you give people planning to work in Singapore?
 
I would mostly advise them about the differences in communication styles and the respect for hierarchy. People like to perform tasks that match their job level. If you ask your subordinate to do something that is somebody else’s job, possibly at a lower level, it can easily happen that your request may get ignored.
It is also very important to find some contacts in Singapore. These people can be very valuable in your network, as it is often important to be introduced by a third party. This helps you build credibility and open doors.
A small but very important thing is always to have your business cards with you. The more information there is on them, the better. I often find that people look at both sides of the card. And another thing: remem- ber to present your card by holding it with both hands.
 
What do you like about living in Singapore?
 
I love the fact that it is so multicultural. While on the surface, Singapore may seem hectic and perhaps westernized, when you look and listen a little harder, you have no doubt that you are in Asia. We take advantage of our location and travel quite a lot to discover our immediate surroundings, as well as countries a bit further away. The country functions very efficiently, which makes life quite easy, particularly because schools use English as the language of instruction, so everybody speaks English. For me, the weather is also a plus, despite the high humidity. I love the fact that we can swim outside every day, or, since we live on the east coast, within a few minutes, we can be cycling on the seaside.
 
 

Doing business in Russia

Excerpts

 

A few years ago we conducted a study with 87 expatriates and Russians working together. Our aim was to understand the nature of conflict situations that may arise in expatriate-local interactions and how these could be pre-empted and/or solved. The results are quite different for the American-Russian, the German-Russian and the Japanese-Russian relationships. The following are brief excerpts from this study. While some of the results are very culture-specific, some of them are related to emerging economies in general.

 

What motivates the Russian employees?     

▪   Self-fulfillment;      

▪   Financial rewards;     

▪   Positive feedback;     

▪   Good working climate;     

▪   Responsibility;     

▪   Gaining experience, knowledge; and     

▪   Security.

 

What are the Russians' main expectations towards expatriates?     

▪   Competency combined with a coaching mentality;     

▪   Respect for and knowledge of their country, culture and the people;     

▪   Openness, understanding and sensitivity; and     

▪   Building personal relationships.

 

Perhaps not surprisingly, we found the biggest cultural clashes between the Japanese and Russian employees working together. In addition to the above expectations, Russian employees working for Japanese companies would also prefer if the Japanese expatriates:

▪   Shared information;     

▪   Involved the locals in the business decisions;     

▪   Gave the locals opportunities for promotion; and     

▪   Appreciated individual performance.

 

Russian employees working for German companies would also like to be able to apply their creative ideas in addition to following rules and orders.

 

Sample sources of potential conflict situations between expatriates and Russian employees:     

▪   Different styles in verbal and written communication

The sources of differences may be linguistic, cultural or due to the different levels of training. An example for cultural differences is the following: Russians often want to provide a high-context explanation. This means conveying a lot of background information, as Russians feel it is important to provide the context in order to illustrate and understand the issues properly. As a result, Russian communication may be long, quite detailed and not necessary concentrating on the main points. This style of communication clashes with a number of cultures' communication, in the study it clashed most with the American communication style;


 

▪   Using the wrong motivational factors

American expatriates were surprised to see that financial rewards were not the most important motivating factor for the Russian employees. Furthermore, they found it difficult to accept that the Russians did not appreciate stock options and pension contributions. The local employees, however, had two good reasons for this: 1) In the previous Russian system stock options and private company pension contributions did not exist, therefore Russians found it difficult to evaluate this reward. 2) Given the general financial situation of people, short-term benefits are much more important than long-term ones. Thus a small increase in the salary would often be a better motivator than a good number of stock options which would not vest for a number of years;

 

▪   Not providing (enough) positive feedback

Russians need more acknowledgements than Germans do. They are also willing to give more when motivated. The German attitude says: I have an assignment, therefore I have to produce results. When the feeling is right, the Russian person will try to do the impossible for you. (German expatriate);


 

▪   Not treating Russians as professionals, but using them primarily as interpreters;

 

▪   Language difficulties
The most common problem: Being unaware of misunderstanding each other. Nobody likes to admit that they did not fully understand what the other person said. You ask yourself, what do I do now? I did understand most of it, so I will not ask for clarification this time. This goes both ways in communication, it happens with both Americans and Russians. (American expatriate)

Difficulties of understanding each other's speech patterns. This may include using sport language, abbreviations and other jargon not known to the Russian locals. Russians also report that the Japanese' accent often causes difficulties for them.

 

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