Why are MNCs increasingly looking for alternative forms of international assignments

Introduction

Global business environment today is changing very fast forcing Multi-National Corporations to aggressively seek new ways of maximizing the utility of expatriate assignments in order to survive. Because of these changes and the nature of business environment in today’s information age has led to the emergence of different alternative expatriate assignments most of which are self – initiated. Thomas et al (2005) argued that these alternatives are based on the nature of the modern international global careers which know no bounds. Recently in the international management literature the dominating research agenda has been the topic of international assignments.

Because of these changes caused by the dynamism of the business industry, shortages of international managers have continued to grow, thus the increased difficulty for MNCs to meet their objectives (Evans et al, 2002; Scullion, 1994). The changes are the major cause of challenges especially on issues such as dual careers and family disruption. Although women are storming with full force in the international arena as Adler (2002) strongly put it, “Global managers; no longer men alone”, but still shortages of international managers are increasing. This is because, most MNCs have a weakness in their HRM policies in regards attracting and keeping quality employees of international level.

Small and medium enterprise (SME) have been very aggressive in the international arena and some are even competing with the strongest MNCs (Anderson and Boocock, 2002) thus making international expatriates even “hotter” a commodity. Having said this, it can be seen that the concern is mostly about employee turnover and selection issues. Recently, these issues have increased the need for alternative types of international assignments for expatriates. This paper intends to compare and contrast two alternative types of international assignments namely short-term and commuter assignments and critically analyze the challenges faced by the organizations as well as individuals as far as these alternative international assignment types are concerned.

Alternative assignment types

Currently we have all been witnesses to a “jam” as far as global business travelling is concerned. The current recession on the global financial system and the current state of the housing market have worsened the situation as far as international employment and global business travelling are concerned. All these have continued to popularize even more the alternative international assignments because they brought a solution to complicated sstaffing issues in the international environment (Torbiorn, 1997). Although there are many alternative types of assignments such as virtual assignments, international business travel and so forth but here after I will compare and contrast commuter and short-term assignments.

Similarities

It has been a while now since MNCs started to use of short-term and commuter assignments. As time went on, these two alternatives proved to be more suitable than long-term traditional international assignments thus gaining more popularity. For the past decade there has been debate on international career concerns specifically on family issues. Such alternative types of assignments like short-term and commuter were both seen by families as not only convenient but also suitable. Today, these types of assignments have gained even more popularity because of the expansion of air travel which has lowered the prices thus maximizing their utility.

Basically, both alternative assignments (short term and commuter) enable employees without much disruption to the family to gain experience and cultural exposure as they take up international career jobs. Because of the options now presented by these alternative assignments, families now can maintain their lifestyles without disturbing their social lives. Even special cases like taking care of the sick and the old can be met.

These arrangements to families have received favour because the family gets to take care of their home because their house is occupied as secure all the time during the assignment thus relieving the fears of exposing it to risks. Indeed, it is very risky for the family to sell their home when on assignment. This is because owing to the unexpected changes in the housing market can make purchase or re-purchase very difficult after the completion of the assignment. As the house prices keep on decreasing due the current global financial situation, make it extremely difficult to get house loans thus raises the fear of loosing a home. But with these alternative forms of international assignments the family won’t have to worry about the home as they get to keep it.

Commuter assignments in a nutshell mean that expatriates on international assignments commute on a weekly or bi-weekly basis to and from the new location without taking the family along; this can also be seen on short-term assignments though in this case the duration may be longer, usually not more than twelve months (Tahvanainen et al., 2005). Both short term and commuter assignments are characterized by intra- regional assignments as entrepreneurs are increasingly becoming cognizant of the importance of international employees.

The two alternative assignments are both used as means of organizational development, as they help to transfer knowledge within the Corporation. Remuneration considerations are also similar for Short-term and Commuter assignments which include salary- usually home based, incentives, hardship premiums, accommodation, transport, home visits etc are usually met by the Company.

Differences

Duration is the major difference between short term assignments and commuter assignments. Both alternatives are opted for by couples and single professionals because of their flexibility but essentially they take different lengths of time. Commuter assignments require an employee to commute (weekly or fortnightly) to and from the new location while short term assignments might take 3-12 months usually with some consideration to home visits (frequency depends on distance).

Short-term assignments, suits project-based business sectors best (Tahvanainen et al., 2005). The MNCs use these short- term assignments to send employees to foreign regions to for example oversee the execution of a project which usually takes a couple of months. Depending on the distance between the employee’s home and the work station the frequency of having weekends with family on the company’s expense if any might be considered. On the other hand, commuter assignments are more or less a direct means of surveillance over subsidiary operations which may take a couple of days, a week or two.

Career development and training opportunities are some of the benefits of short term assignments as they tend to take a longer duration than commuter assignments thus suit best young unattached expatriates to gain experience. These types of international assignments also ease repatriation problems. On the other hand, commuter assignments have an advantage especially when MNCs want to use expatriate employees in exerting closer control and coordination of international subsidiaries. Commuter assignments are best to those deals which needs to be closed or those managerial trips or networking assignments which may take a couple of days or a week maximum. These assignments provide a new and broader global perspective on modern business operations.

Challenges faced by Organizations

Policy implications

These alternative assignments, short-term and commuter are also known as ‘flexpatriate’ assignments in the international mobility literature (Forster, 2000). As we may have known that business trips as well as assignments both require frequent flyers. But domestically, the car, train or plane can be a suitable means for such movements. In order for these kinds of assignments to succeed the distance to commute has to be reasonable. This is because trains and planes are frequent victims of delays, and roads are even riskier.

The remuneration of such assignment must be considered because of its importance and sensitivity. It is necessary to observe equity as its importance is paramount especially when designing policies which to MNCs is still a major challenge.

This is because of some imbalances in remunerations and incentives given to some expatriates. For example, those employees who are on a short-term international assignments abroad, the frequency of visiting their family back home is very low compared to those of employees who are based in locations nearer to home. This is inequitable because those employees close to their families can easily be able to arrange for their own visits to their families during weekends (Scullion and Collings, 2006c). These situations results in complex remuneration structures which is a hurdle to most international firms.

Costs

Both of these alternative international assignments may increase costs due to the resulting high transfer costs. Employee’s commuting and renting costs when on domestic assignments might have to be covered by the Company. Also disruption, time and location might be compensated which can prove very costly to the Corporation compared to the utility of the assignment. Apart from costs another challenge is that Corporations face the possibility of encountering local government restrictions. Different laws of the foreign regions might cause complex issues which might end up escalating operational costs.

Sometimes employees who are sent on international assignments might require additional administration. This is also one of the challenges as it doesn’t only contribute in the cost increase but also complicate the remuneration structure even more. This, as I have mentioned before is one of the factors that are of great importance in Global HRM as far as policies implications are concerned. As global competition intensifies the greatest international talent management challenge for Multi National Corporations (Scullion and Collings, 2006c) is to find new ways of identifying, attracting and keeping new cohort of international employees (Black et al, 2000; Mayrhofer and Scullion, 2002). The employee turnover is very high considering these are most sought after employees because of the obvious perception that the employees will be the MNCs’ most precious assets

Challenges faced by Individuals

Family disruptions

The two alternative assignments though flexible and convenient still present some difficulties. In such a mobile lifestyle, financial and human costs are unavoidable. Current research studies show that as frequent as the travelling is the more the individual is prone to stress thus a health advice urging to keep the travelling to a minimum. Current research studies show that families don’t favor the disturbances associated with international assignments (Forster, 2000).

This can mean that only unmarried employees are more suitable than those with family ties, despite the fact that both alternatives advocate family harmony so as to attract and enable dual-career couples with children who still attend school to maintain the harmony of the home.

Although the two alternatives advocate convenience to couples but still causes stresses and create family problems. Specifically to those employees on short –term assignments this family separation might contribute to low performance. But commuter assignments have a different effect altogether. Most expatriates on these types of assignments tend to suffer jetlag more than the stress caused by being far from family. The traditional international assignments were a bit tough on the family as compared to these current alternatives though. This is why MNCs have managed to maximize the utility of international assignments using commuter and short-term assignments.

Culture adjustments

Both short-term and commuter international assignments give some kind of international life style coupled with some cultural exposure, but it might be argued that the assignees undertaking them do not truly become culturally conversant, as they are not long enough in-country, or that they do not attempt to build a social life, as they return home at weekends. But all in all they all must orient themselves so as to understand the global business environment. Also get a chance to develop the required skills for excellent effectiveness in different cultures which is a herculean challenge.

Because both alternative assignments involve foreign regions some complex tax issues may arise. This could be the greatest challenge to individual expatriates as sometimes a surprise might hit on their income due to some unknown foreign tax laws. Alien tax laws and resulting complications in the global tax system have now and then been a blow to financials of international expatriates and as I have said before regular cultural adjustments are thus required so as to be able to blend in and minimize whatever cultural risks that might jeopardize the assignments success.

Other challenges encountered by individuals are peculiarities of the foreign environment. Most employees from Africa working in Europe or vice versa will definitely find it hard to cope and/ or to blend and feel un-alien. It is even more challenging because there is no support whatsoever from the Corporations to provide these employees with the necessary cultural training so that they can work effectively. In their empirical works Cascio (2006) and Oddou and Mendenhall (2000) observed that some expatriates complained of the low level of support provided by the HQ.

Conclusion

Indeed the literature on International Human resource Management (IHRM) has largely focus on analyses of traditional expatriate international assignments. But in the recent past a cohort of researchers exploring the benefits of the alternative international assignments emerged. This is the result of the associated challenges with such international assignments which have managed to attract the attention of these academics.

Multi National Companies in their quest to minimize costs, staff turnovers and cope with international travel slowdown opt to the use of alternative types of international assignments. These include short-term assignments which usually take not more than a year to complete. Then there are commuter assignments which like international business travel require frequent travelling. Lastly there are virtual assignments which are mostly handled electronically (see Dowling and Welch, 2004).

As I have afore mentioned, the literature suggests the emergence of alternative different types of international assignment within the MNC as compared to the traditional assignments (Roberts et al, 1998). Considering the two alternative assignments, commuter and short-term, which are considerably similar in terms of time saving, family impacts, and a host of other characteristics, there is still a need for Multi National Corporations to develop effective international HRM policies and practices to strengthen the implementation of their global strategies.

Also, arising from the operations of expatriates on international assignments particularly short term and commuter, one can see the similarities in the advantages of using the two alternatives like solution to family disruptions and cost effective especially to employees and expensive to the firm as rent and other costs are covered by the MNCs, also allowances are usually a part of the remuneration package.

The two alternatives differ as well on their durations for example and of course they are suitable to use in different kinds of operations. This paper also analyses some of the major challenges faced by MNCs and individuals on assignments which include family and the employees’ work/life balance, human and financial risks due to frequency of travel and complex tax implications on income, culture policy implications and stress and burnout for some short-term international assignees (Brewster et al, 2001).

Lastly the paper critically analyzed the challenges presented to individuals in regards to the two alternative international assignments. As mentioned above the manner in which these challenges arise are very complex thus causing a lot of problems to international expatriates. The risk factor is very high because both assignments require frequent movements involving such long distances. Sometimes employees are required to travel into war zones and unstable political situations. The companies that operate in Gaza and Iraq today send employees to manage and/or oversee their interests. The nature of the international business environment as I have afore mentioned creates financial risks. For an international employee working abroad may be surprised when receiving allowances which are usually home based and realize the tax bill was more than affordable.

References

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