U.s. multinational companies experience expatriate assignment failure rates of

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Abstract

The high rate of expatriate failure among U.S. multinationals stems from several factors: the family situation, lack of cross-cultural relational abilities, the short duration of overseas assignments, problems of repatriation, overemphasis on the technical competence criterion to the disregard of other important attributes such as relational abilities, and inadequate training for cross-cultural encounters. Tung examines the expatriation policies of 17 European and 18 Japanese multinational firms that experienced significantly lower incidences of failure than American multinationals, and found the common denominators to successful performance in these firms. They were (1) long-term orientation with regard to overall planning and assessment of performance, (2) use of more rigorous programs to prepare candidates for overseas assignments; (3) provision of a comprehensive support system to expatriates; (4) overall qualification of candidates for overseas assignments; and (5) restricted job mobility. In the European multinationals, three additional factors enhanced the incidences of success: their international orientation, longer history of overseas operations, and language capability. In the Japanese firms, two other factors that accounted for the lower failure rate were selection for overseas assignments and the role of the family. On the basis of these findings, Tung suggests that to enhance expatriate success and minimize failure, U.S. multinationals (1) adopt a longer-term orientation with regard to expatriate assignments and provide support mechanisms at corporate headquarters to allay concerns about repatriation; (2) develop a more international orientation; and (3) provide more rigorous training programs to prepare expatriates for cross-cultural encounters.

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INTRODUCTION

As foreign investment continues to grow globally, multinational corporations (MNCs) and governments become dependent on expatriates to act as knowledge transfer agents in today's global competitive business environment. MNCs send expatriates to a foreign country to work and live for at least one year in order to complete a specific assignment, and then typically repatriates back to the home country (Kraimer, et al., 2016). Conducting business overseas requires special trained employees and a deep understanding of the local cultures, business dynamics, legal environments and workforce diversity. However, expatriates face numerous challenges associated with adjusting to working and living in culturally diverse countries.

In fact, many MNCs face high-expatriate failure rates. When MNCs expatriate objectives are not met for their assigned jobs in host countries, the rates of expatriate failure will be traditionally very high (Tahir, 2018). Research has shown how challenging it could be for expatriates to work overseas, adjust to new cultures, and understand managerial effectiveness and decision making in their roles (Matic, et. al., 2016). The jobs of expatriates continue to be a relevant subject of research in business relations between host countries and MNCs. Many expatriates return from their international assignments early or have poor job performance. The criticality and costs associated with expatriates and their reported high failure rates make training necessary (Peng, 2018).

Expatriates are from parent-country nationals; they are employees from the country of the company headquarters. Most MNCs usually operate their business overseas through an expatriate assignment. An expatriate can be defined as "an employee of a parent company who is transferred for a particular amount of time (from several months to several years) to work in a branch of an international company located abroad" (Banerjee, Gaur, & Gupta, 2012). In other words, MNCs locate expatriates to a foreign country to work and live for at least one year in order to complete a specific assignment, and then typically repatriates back to the home country (Kraimer, Bolino, & Mead, 2016).

With a given set of capabilities, MNCs employ expatriates as vehicles for the knowledge transfer from one unit to the other (Musasizi, et. al., 2016). However, the risks of an expatriate's staffing family adjustment problems are many. Expatriate failure rates have been traditionally very high because either his/her job performance is less than expected, or he/she is unable to adjust to the new host country and culture. Moreover, work-related and family-related problems also lead to expatriate failure. Expatriates fail because of inadequate education and training or preparation for his/her international assignments (Tahir, 2018).

According to Witting-Berman and Beutell (2008), there are high costs associated with expatriate failure and repatriate turnover. Wang (2008) reported that expatriate failure causes a high level of loss to the employer and may result in loss of market share or hurt the reputation of an MNC. The survey conducted by GMAC Relocation Trends (Business Editors, 2008) reported that 21% of expatriates left their companies during the assignments and another 23% left within a year of returning from the assignment. Therefore, expatriate failure causes a high level of loss to the employer and may result in loss of market share or hurt the reputation of an MNC (Wang, 2008).

Peng (2018) noted that the cost of each expatriate failure is between $250,000 and $1,000,000 dollars, which is remarkably high. Other sources noted that the cost of an unsuccessful expatriate assignment is approximately $100,000 (Misa et al., 1979). Furthermore, others estimated the cost for each expatriate failure ranges between $40,000 and $1,000,000 (Barbian, 2008).

Recent studies have suggested that 80% of medium-sized and large-sized U.S. employers are successfully sending expatriates around the world, and 45% expect the number of expatriates to increase (Black & Gregersen, 1999). In May 2008, a GMAC Relocation Trends survey also found that despite a slowing economy, 68% of MNCs continued to relocate expatriate employees at record levels (Deresky, 2011). Also, 54% of the expatriates are being deployed at younger ages (20-39 years old, up from 41%).

Women represent 21% of those sent overseas, an increase from the historical 15% (Ball et al., 2010; Haile, Jones, and Emmanuel, 2010). Such an increasing trend of females for expatriate assignments is a positive sign of progress. Women comprise over 40% of the employable global workforce, yet women hold only 22% of all expatriate jobs (SHRM, 2014). A current review of research by Brookfield Global Relocation Services (2016) noted that female expatriates accounted for 25% of the total. Haile, Jones, and Emmanuel (2016) also noted that the global average workforce of women is 35% compared to the global average composition of women in senior management, which is 24%.

Female managers and MNCs have the responsibility to play a role in breaking the "expatriate glass ceiling." Women managers who desire expatriate assignments must be more proactive in managing their careers. MNCs must play a significant role in breaking the "expatriate glass ceiling" that still exist for women seeking expatriate assignments. The success level of women for expatriate assignments does not differ from that of their male counterparts (Taylor & Napier, 1996; Insch, McIntyre, &, Napier, 2008)

The authors of the current study will elaborate on major reasons for expatriate failure; suggest ways and means (expatriate selection and preparation, training and development needs, and cultural adjustment) that MNCs can use to turn expatriate failure to success. The authors will also deliver implications, draw concluding remarks, and recommendations for future research.

MAJOR REASONS FOR EXPATRIATE FAILURE

Historically, expatriate failure has been a major concern and the problem persists today. Forster (1997) defined Expatriate failure as "a premature return" (or ending the international assignment before the contract ends, or is considered ineffective by senior management, or low performance and adjustment problems). Forster (1997) expanded the definition of "expatriate failure" to include underperformance and retention upon completion of the assignment.

There are several reasons why expatriates overseas' tenure ends in failure. MNCs often focus on the obvious expatriate failures who return home early instead of going in depth and focusing more on exploring corporate level concerns in relation to why foreign assignment fail (Connelly et al., 2007). Mendenhall and Oddou (1985) stated that a major problem in many MNCs is that HR professionals tend to compare domestic performance with overseas performance possibilities. Domestic performance and overseas performance potentials are not the same thing

Reviews of research literature reveals that there is a lack of preparation of expatriates before departure, improper selection and training, inadequate support to the accompanying family members, and the expatriate's inability to adjust to other cultures. A similar review of research study shows that 57% of expatriates fail due to their inability of adjusting to the new environment (Olsen & Martins, 2009). Other reasons include family related issues, expatriate's and the manager's inability to cope with responsibility associated with the overseas work (Heijden et al., 2009)

The literature on expatriate-adjustment consistently confirmed the lack of pre-departure training for the expatriate and their family (Tung, 1998; Insch et al., 2008). The MNCs normally identify the skills and knowledge that expatriates have and those needed in the area of operation. Expatriates who lack the necessary skills or knowledge persist because their MNC did not direct them into specific training or development (Wild, 2012). Foreign languages are barriers and frustration for expatriates in host countries. In addition, misunderstanding cultural differences between home country and host country are important factors to expatriate failure. Expatriate success depends so much on the entire family's cultural adjustment; therefore, the spouse should be included in the preparation training activities. Andreason (2008) explored how international work experience affect the spouse and children of the expatriates.

Failure of the family to adjust to a new culture is a common reason for expatriates terminating their international assignments (Shaffer & Harrison, 2006). In reviewing some of the research literature, the most striking reasons for expatriate failure is the "inability of spouse to adjust" for U.S. multinational subsidiaries in the host countries (Tung, 1998). Most research into the matter of expatriate failure concluded that the family situation should be part of the expatriate selection process. The family members of an expatriate play a critical role in the success or failure of the international work assignment and living experience. It is important to note that the ability of a family member (spouse in particular) to adapt to a new culture is a key factor in the success or failure of an expatriate (Wild, 2012).

If MNCs' HR professionals do not train "expatriates and their family" with native language, social behaviors, and cultural norms, both expatriates and their family will face cultural shock and not a smooth transition to a host country. Ineffective communication system and lack of coordination between expatriates with their families, who do not accompany them, will deter expatriate adjustment to an international assignment environment.

TURNING EXPATRIATE FAILURE TO EXPATRIATE SUCCESS

The authors of this study have developed a conceptual model showing selected factors that could turn expatriate failure to success. Appendix 1 presents these factors, which the authors have described below:

* Selecting and Preparing Expatriate

* Expatriate Training and Development Needs

* Expatriate Cultural adjustment

Selecting and Preparing Expatriate

Most MNCs use three types of employees: Parent-country nationals, host-country nationals and third-country nationals to manage their overseas business operations. Implementing these plans in the staffing process could be a highly difficult challenge in many cultures (Deresky, 2011). Different scholars have suggested several approaches to enhance expatriate success in host countries. Major approaches include expatriate selection and preparation, expatriate training and development, and cultural adjustment.

Wild (2012) defined the expatriate selection as "the process of screening and hiring the best-qualified applicants with the greatest performance potential." The selection of expatriate employees are determined based on the three most important reasons: technical competence, management development and control (Rocke, 2017). Harvey (1983) attested that expatriate failure is a result of MNCs improper selection policies to identify qualified candidates who will succeed in international assignments. To reduce expatriate failure, MNCs should improve selection procedures, training, adjustment, clearing their roles and screen out inappropriate candidates in international assignment.

Preparing an expatriate for an overseas job is an exciting opportunity but it is a challenging experience. It is also a crucial issue for MNCs to compete and succeed globally because expatriate education and training is necessary in a global market place. There are certain factors that have greater impact on the success of an expatriate. These factors include staff recruiting, selection for expatriation, training for expatriates, costs of expatriates, repatriation of expatriates, motivation and job performance evaluation of expatriates (Kraimer, Wayne, & Jaworski, 2001).

A review of the family situation should be part of the expatriate selection process Tung (1998). Yet, in spite of all of the aforementioned, MNCs

are facing an increasingly complicated task in finding, motivating and retaining talented expatriate managers who can handle the complexity of cultural adjustments in their MNCs (attitude towards work and perception in time) and personal lives (differences in food, language and weather) in other countries (Selmer, 2005). This expatriate experience can be fully developed through expatriate assignments and global corporate career support (Insch, McIntyre, & Napier, 2008; Heijden, Engen, & Paauwe, 2009). In other words, MNCs need to provide continuous education and training for expatriates and their families with comprehensive programs, which offer support for the length of the assignment (Dolgener, 2017).

MNCs play an important role in the globalization of business processes. This rapid globalization of world markets since the 1970s was a great opportunity for international companies to become known and to operate from a global point of view. This observable fact led to the possibility that many of the managers who served in the parent company could be transferred to host country nations, which are characterized by different cultures and work processes (Giorgi et al., 2016). Such a transfer to overseas involves adapting oneself to new job tasks, roles and foreign environment. Work adjustments could be easier if there are similarities between parent and the host subsidiary in terms of procedures, policies and task requirements (Black & Gregersen, 1999).

Challenges and existing problems faced by expatriate assignments are becoming inseparable from the various new challenges in the field of management, including those related to the importance of international human resource management (IHRM) who are processing the expatriation process and management thereof (Sarkiunaite & Rocke, 2015). In fact, human relations skills are almost always equally significant at all levels of management. This development signals that the demand for skilled employees and managers for international assignments continue to increase. Employers become encouraged to hire more people with the culture and language skills needed to deal with the expanding operations outside the national borders.

As the trends for globalizing businesses have increased, so have new opportunities for new business enterprises globally. The demands for expatriate professionals are also increasing in MNCs foreign operations. As a result, Herrera (2005) noted that the need for more expatriate employee assignments has become more important than ever. Their geographical relocations are rising to record levels, resulting in more expatriate workforce demand by international companies to live abroad. Herrera also noted that many international companies need to deal with the problems and difficulties for expatriate assignments in different ways. These companies need to take an important role in preparing potential expatriates for exciting opportunities but challenging experiences abroad.

The human resource departments in international companies should create and support an effective workforce training and development program to help expatriates succeed in international assignments (Heijden, Engen & Paauwe, 2009). In doing so, the rising number of skilled employees can be transferred to foreign countries to fill the void for expatriates needed to manage the operations of international companies (Olsen & Martins, 2009).

The jobs of expatriates are important to both host country and international companies. They are also challenging as a result of differences in cultural and work processes between the host and home countries (Sims & Schraeder, 2005). Therefore, it becomes a critical issue that international companies need to make sure that the expatriates they send overseas are the best persons and as such, must take careful measures to select the best candidates for expatriate roles (Pokharel, 2016). HR professionals need to offer realistic information about what it is like to live and work in a given situation. The expatriate needs information about his or her role in international assignment as well as the rewards, benefits and costs associated with the assignments.

This is because the method and process for recruitment and selection for expatriates are becoming expensive for international companies. The investment in recruiting and selection of expatriates should meet the desired MNCs goals relative to expected returns. In general, most research into the matter has concluded that expatriate failure rates are high. In addition, expatriates are expensive. For example, the cost of a three-year international assignment can easily exceed $3 million. Yet, many MNCs fail to get it right. Despite their significant investments in international assignments, companies still report a 42% failure rate in expatriate's assignments (SHRM, 2017).

Expatriate Training and Development Needs

As MNCs continue their international business expansion, there are challenges related to the necessity of managing their expatriates within different host countries. These host countries are located at far distances. They have different economic conditions, people, technology, marketing sizes, and laws. Also, they have significant cultural differences existing within the nations. The differences in cultures across MNCs within countries are larger than the differences across countries (Noe et al., 2019).

According to Noe, development and training provides opportunities for expatriate employees to grow their skills. At the same time, it also help grow their contributions to high levels of engagement and satisfaction. In other words, conducting business in a foreign country requires a deep understanding of the local cultural values, business dynamics, and legal environment. MNCs' success with global expansions and operations demonstrates the enhanced needs to manage their worldwide expatriate staff effectively and efficiently (Selmer & Fenner, 2009).

As more international companies continue to globalize their operations, it is important to identify training needs and support training for high potential expatriate managers to take over global leadership positions (Noe, et al., 2019). Research reviews have also indicated that the demand for experienced and competent global managers is growing rapidly and companies could use more than the current supply (Rocke, 2017). It is also noted that the demand for expatriate employees with international experience is increasing (Insch, McIntyre & Napier, 2008). If the demands are met, MNCs will be able to meet the need to manage, control, coordinate and integrate operations between the home company and the host countries.

Cultural Adjustment for Expatriation

Cultural intelligence is becoming a necessity for effective MNC operation. The use of host-country nationals by MNCs is increasing, not only because they are normally less expensive of the three types of MNCs' workforce, but because they do not need to be relocated or undergo adjustment training in the culture, language, or tax laws of the host country. On the other hand, both the expatriate and third-country nationals would have to be relocated and normally undergo more difficult challenges for adjustment training and development programs (Selmer, 2005).

It is usually a combination of work-related and family-related problems that lead to expatriate failure (Peng, 2018). As Selmer (2005) noted, there must be a better way to train expatriates to adjust to other countries' local culture, customs, language, and government. In other words, the key to a successful international assignment is a combination of training and career management for the employee and the employee's family (Noe et. al., 2019).

Cavusgil, Knight, and Riesenberger (2012) also stated that the process for expatriate assignments should include measuring a person's ability to bridge cultural differences (understanding other groups). It is also noted that cultural sensitivity (differences exist between cultures, but not assigning values to the differences) should be included in the criteria of selection.

As noted before, expatriates for international assignments normally have the difficult task of adjusting to a new cultural situation. MNCs must help provide the competencies required for expatriates to adjust to cross-cultural work assignments in order to increase the likelihood of success. They are also facing greater challenges in filling expatriates opting out of foreign assignments due to family and dual-career concerns (Harvey & Wiese, 1998). Reviews of research on the field of international HR management literature have reported that availability of corporate career support with the goal of the retention of expatriates have become a significant determinant in terms of international business success (Heijiden, et al., 2009; Tung, 1998; Paine, 2010).

The argument was that the standardized approach to managing international assignment was difficult due to national cultural dynamics (Cascio & Boudreau, 2016). The requirements for expatriates must be the ability to adapt to a new way of life in the host country is often an extreme challenge (Wild, 2012). The expatriate adjustment to new cultural differences, which affect his/her attitudes and behaviors are factors for overall MNCs success.

In his study of Taiwanese financial institution expatriates in the U.S., Lee (2005) found that expatriate adjustment was enhanced with greater satisfaction at the host country. Given the associations between job satisfaction and cross-cultural adjustment, MNCs need to ensure that they have human resource policies and practice to support job satisfaction of their expatriates while abroad" (Lee, 2005: 278). MNCs also have the option to train the local workforce in their (company) culture during growth in global markets (Noe, et al., 2019).

IMPLICATIONS

Expatriates play an important role in the business operation abroad and as noted before, they are very expensive human resource. Some expatriates have become very successful while others have failed. There are different reasons why international assignments end in failure (Olsen & Martins, 2009). HR professionals need to recognize the signs of potential expatriate assignment failures and their impact on the business and long-term objectives of the MNCs. HR professionals of MNCs need to create and support effective workforce development programs to help expatriate employees' adjustment to the international assignment which will lead them to succeed in their international assignments, and meet MNC goals.

MNCs need to prepare high potential managers to take over global leadership positions (Noe, et al., 2019). Once the MNC select an expatriate employee for international assignment, it is necessary to prepare that manager for the upcoming overseas assignments. It is the responsibility of MNCs HR professionals to help the expatriate's family adjust to a new foreign language and cultural environment. The objective is to make sure that expatriates adjust as soon as possible through training and development before departure from the host country and after arrival on their new international assignment begins, in order to develop MNCs goals (Paine, 2010).

Human resource professionals should enhance discussion and communication between expatriates and their families to increase the exchange of views among family members. By doing so, it reduces conflicts and disagreements arising from international assignments. In other words, sufficient communication between family members can reduce potential conflicts and enable expatriates to adapt and adjust to overseas life and the work environment in order to perform effectively and efficiently (Haile Jones, & Emmanuel, 2010; Wang, 2008). MNCs' HR professionals must train "expatriates and their family" with native language, social behaviors, and cultural norms to avoid cultural shock and ease transition to a host country.

As Benson and Pattie (2008) recommended, MNCs should consider expatriates opportunities, and how these opportunities will be valuable to the MNCs. The opportunities for expatriates include acquiring new knowledge and skills, including leadership skills, knowledge of international business and international technical skills which are significant factors to operate international business successfully. On the other hand, failure to retain valued repatriates does not only make the company's huge financial investment in the international assignment meaningless, but also brings other serious nonfinancial losses. The retention of expatriate failures increases the difficulty of recruiting key personnel into future international assignment (Shen & Hall, 2009).

CONCLUDING REMARKS

The importance and increasing use of international work assignments have made expatriates a topic of great interest for HR professionals and researchers (Benson & Pattie, 2008). Rocke (2017) understood expatriation as an assignment for work overseas for an amount of time. Pokharel (2016) reported that most of the research problems being conducted are among expatriates who are sent from the headquarters to foreign subsidiary with the objective that goals are met on assignment. The competitive and challenging experiences from cultural norms, political environments, policies and practices between the host and home countries are designed to impact employee attitudes and behaviors (Jaina et al., 2012).

Cultural and language differences, challenges, family issues, illness, unsuited for position, etc., depending on the country, contributes to expatriate failure. Expatriate failure usually represents a failure of MNCs' selection policies to identify individuals who will not succeed in an international assignment (Harvey, 1983). One way to reduce expatriate failure is by improving selection procedures, training, adjustment, clearing their roles and screen out inappropriate candidates in international assignments.

In order for expatriates to survive, cope, and succeed, they need to be trained in the areas of culture, language, and practical day-to-day matters (Kraimer et al., 2016 & Cascio, 2019). Practical training and development should occur prior to expatriate departure to work in different cultures abroad. Training provides opportunity for expatriate employees to promote their skills, and also contributes to achieve high levels of their engagement and satisfaction (Noe et al., 2019).

As Wang (2008) noted, MNCs must comprehensively train those employees who are assigned overseas to improve their work achievements and cross-cultural adjustment. Proper expatriate training or briefing for a start should be given to expatriate employees before they depart. Pre-departure training need to be revised for increased attention to expatriate issues of spouse and family needs. A continued research on the subject matter should focus on the roles of expatriates for adaptation to the environment with an explicit developmental goal and plan.

As Pokharel (2016) suggested, the expatriate experience in every country is not the same; therefore, a different training in language, cultural, practical training must be conducted to challenge the adjustment to have far less tension and cultural shock. Moreover, continuous training should be provided during and after the international assignment. The most striking reasons for expatriate failure is the "inability of spouse to adjust" for U.S. multinational subsidiaries in the host countries (Tung, 1998). Most research into the matter of expatriate failure concluded that the family situation should be part of the expatriate selection process. Educating expatriate employees and their families who are to be sent to a foreign country would ease them into day-to-day life to do his/her jobs in the host country.

HR professionals need to nurture and develop expatriate employees. They are supposed to provide all applicable training and development to expatriates with the information of the parent company and all necessary support and help. The lack of communication and networking between the head office and the rest of the subsidiaries as well as subsidiaries in other countries further reflects the failure of international assignment (Pokharel, 2016).

Another critical dimension of the process that has not been thoroughly delineated is the impact of these expatriate failures on the careers of the expatriates themselves. Theoretically, these failures could have compounding effects on losses associated with expenditures related directly to the expatriate and the loss of future contributions to MNCs.

RECOMMENDATIN FOR FUTURE RESEARCH

Future research could reveal "new insights" concerning the importance of expatriation to avoid the rates of expatriates returning home early before they complete their assignments. As Rocke (2017) suggested, MNCs can pay attention to the improvement of the process of expatriation by paying careful attention and doing an in- depth analysis of their mistakes to find the best solution. Future research could revise the expatriate selection and the preparation process, expatriate training development needs, and the expatriate cultural adjustment.

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About the Authors:

Semere Haile is Interim Head Department of Management and Marketing in the College of Business and Ben Johnson Endowed Professor in Business in the College of Business at Grambling State University. Dr. Haile's research covers a range of international topics. He has published in many journals including European Journal of Management, Journal of Education Research, International Journal of Business and Public Administration, International Journal of Business Research.

Donald White is an Assistant Professor of Management in the College of Business at Grambling State University. Dr. White holds an MBA and Doctorate of Business Administration (DBA) from Louisiana Tech University. He is the current Dean of the College of Business at Grambling State University and his research interests are primarily Human Resources Management.

Semere Haile

Donald White

Grambling State University

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What percent of expatriate assignments fail?

Research over the last 40 years indicates expat failure averages out at 40% with destination playing an important role in this. Expatriates sent to emerging economies are likely to have higher rates of failure than those sent to developed countries.

How can the failure rate of US expatriates be converted to success rate?

Five Ways You Can Prevent Failed Expat Assignments.
Find employees with the right soft skills. It is critical to find the right person for the job. ... .
Encourage a Recon Trip. ... .
Choosing an Employee with a Supportive Family. ... .
Ensure a Supportive Work Environment. ... .
Having Comprehensive Global Health Insurance..

Which is the most common cause of an employee's failure to complete an expatriate assignment?

Expatriate failure is often caused by lack of practical support in the host country and/or disconnection with the home environment. It is crucial that relocation support does not end as soon as the employee has arrived at their new destination.

Why should multinational company be concerned about expatriate failure?

With the economic globalisation, most Multinational Companies (MNCs) need expatriates to manage the subsidiaries, as expatriates are more familiar with management techniques and methods used in the MNCs than locals. Expatriate failure represents a fault both in the selection process and the pre-departure training.