The Trouble with Expats

On Tuesday I joined fellow Café bloggers Ann Bares and Chuck Csizmar for a Focus.com podcast on International Compensation.  You can listen to the recording here but one topic in particular seemed to spark interest and a touch of controversy: Expat compensation!

We've all encountered at least one expat that made us wonder what service they perform that’s so valuable it’s worth a rent-free five bedroom apartment with high molded ceilings, private school for three kids and a monthly ‘hardship’ allowance that’s higher than most of the locals’ salary.  (And also wondered where you sign up… unfortunately, it’s the same place you sign up for golden parachutes.)

In the centralized organizational structure that characterized the early days of globalization, that's what you did - you sent your ‘tame’ leaders overseas to whip the locals in shape and supposedly groom them for the next level of leadership.  And since they were already making a packet and enjoying a fine standard of living you had to sweeten the pot to get them to go, especially if family was involved. 

But times are changing.  On the one hand, we see a greater demand than ever for global leadership skills, as well as a critical leadership shortage in developing countries that necessitate seeding new local offices with experienced personnel and leaders.  That means that expats aren’t going away and we’ll still see generous packages for top roles. 

At the same time, there is heavy scrutiny of conspicuous spending even as companies are realizing how important global experience will be to compete in the global economy.  So we’ll probably see some evolution on the expat front with an eye to acquiring more global experience for less money. 

Here are a few predictions:

1. Top expatriate roles will still exist but be fewer and harder to get outside of companies that have a formal global leadership program.
2. Companies that have a formal global leadership program will vacillate between ‘home’ based pay, which tends to result in more complexity and inequity vis-a-vis the locals, and standardized ‘host’ based pay, which reduces complexity but creates disparity in assignment attractiveness.
3. Companies will get better at clearly separating COL adjustments from local job responsibilities, making it easier to explain variations in expat packages as well as smooth the adjustment when returning home.
4. There will be more reliance on short-term assignments, site visits and web conferencing tools rather than multi-year fully loaded expat assignments.
5. To develop future leaders, companies will start sending mobile high potentials on overseas assignments that look more like relocations with a bit of assistance than expat assignments.
6. As overseas assignments become more common for early leadership development purposes, repatriation programs will increase in importance in order to help employees re-adjust to corporate life and avoid wasting or losing valuable skills acquired during the assignment.
7. Companies will – or should - begin defining ROI criteria for expat assignments, as my Café colleague Chuck Csizmar advises in his excellent and informative post Expats: How to Toss Your Money Away.  (Chuck tends to take a dim view of throwing away money.)

When determining an appropriate expat package, one size doesn’t fit all.  An unmarried junior engineer looking to pick up some global experience has very different needs and expectations from a senior business leader who will be undertaking new responsibility and relocating his or her family.

Having said that, no organization has time to create a compensation package from the ground up every time someone goes on overseas assignment.  An effective expat policy takes home country, host country, skill and job levels into account in order to strike the right balance between consistency and individual appropriateness.

Picture courtesy of justlanded.de.

Laura Schroeder is a global talent specialist at Workday, headquartered in Pleasanton, CA.  She has nearly fifteen years of experience envisioning, designing, developing, implementing and evangelizing global Human Capital Management (HCM) solutions and holds a certificate in Strategic Human Resources Practices from Cornell University.  Her articles and interviews on HCM topics have been published in the US, Europe and Asia.  She lives in Munich, Germany and enjoys cooking, reading, writing, kick boxing (well, kicking things) and spending time with friends and family. If you want to read more from Laura, check out her talent management blog Working Girl or follow her on Twitter @WorkGal.