international hr advisor september 2013
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8/13/2019 International HR Advisor September 2013
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8/13/2019 International HR Advisor September 2013
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EVALUATING EXPATRIATE ROI6
metric has clarity and is feasible but theoutcome itself will not tell a company what it needs to know about the valuegained from international assignments,then the metric itself has little meaning.For example, if revenue per full timeemployee (FTE) or profit per FTE is usedto assess financial gains, but the globalstaffing strategy is tied up in expatriates’developmental gains, then the usefulnessof such metrics is questionable.
[4: SIMPLICITY]. The next criterionis to avoid being overly prescriptive byattempting to measure the impact of everyglobal mobility activity or every outcomeexpected from international assignments.This is important because mobilitymanagers are busy people who arefrequently overworked and understaffed,leaving them with fewer resources andmore time constraints. It therefore makes
more sense to measure carefully selectedmobility activities using just a few keymetrics, ensuring a greater likelihood thatthere is a clear intention for the use of theresulting data, given that less – but the
most important - data will be collected.[5: TIMING]. The final criterion
is to measure eROI at the appropriatetime, recognising that the outcomes tobe expected from expatriates may notbe fully realised for several years. This isparticularly true for assignments wherepredominantly non-financial benefitsare expected, in areas such as buildingleadership and succession pipelines,and talent management programmes. Assessments of eROI can also be made atmore than one point in time: for example,during the assignment (via performancereviews); at the immediate conclusion ofthe assignment; during and/or after thepoint of repatriation (if appropriate); andin subsequent years as the benefits accrue.The timing of the eROI assessment iscritical because it shifts the measurementof eROI beyond the traditional accounting
approach that expects assessments of valueto be conducted in the same time periodin which the initial financial investmentoccurs. Instead, eROI can, and should, beassessed when the value that is gained is
expected to be most apparent.
Why use an evaluationframework? A key benefit of the evaluation frameworkoutlined here is that it elevates the mobilitymanager from an internally focused andprogramme-based “advisory” role, andmakes him or her accountable for businessresults. By capturing and combining hardoutcomes such as sales and profits, andsoft outcomes such as developing expertiseand building leadership, the accuracyof eROI assessments improves, therebyimproving global staffing decisions.
It also proposes a ‘paradigm shift’ fromusing only one ‘best’ measure to assessoutcomes from every type of assignment,to instead using a mix of metrics thatbetter suit the purposes and expectedoutcomes of each type of assignment. By
accounting for differences in assignmentpurposes, including different assignmenttypes (short-term, long-term, commuterand so on), the resulting eROI outcome isfar more accurate.
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17EVALUATING EXPATRIATE ROI
Dr. Yvonne McNulty is a leading authorityon expatriate returnon investment and anacademic expert in the fieldof expatriation. Currentlyon the faculty at Singapore
Institute of Management University, herresearch has been featured in The New York Times, Economist Intelligence Unit,International Herald Tribune, BBC Radio,China Daily, and The Financial Times, among
others. An Associate Editor for the Journalof Global Mobility, she can be contactedat [email protected], www.expatresearch.com, or hp +65 9107 6645.
Furthermore, the framework issufficiently flexible to be adapted whennew trends and learning needs emerge,and therefore to account for changesin organisational priorities over time,particularly in relation to changes in a
broader corporate strategy. Additionally, the focus on evaluating,rather than “measuring”, is likely to avoidmetrics that are not relevant, timely, or useful. After all, it is not the measurement of eROIitself but what mobility managers do withthe insights gained from the measures thatmatters and drives business performance.
Of course, I don’t mean to suggest thatdeveloping metrics is unimportant – it isa very critical step in implementing eROI when the right metrics are used, thoughhere I will go so far as to suggest that some
companies will not even require additionalmetrics to achieve a satisfactory eROI,provided they have the right philosophyand framework in place. Doing this maybe enough if senior management is realisticthat lasting change is more than just themetric, and has invested sufficient time,money, and thought in implementing aproper eROI philosophy. As many mobilitymanagers know, metrics are not likely todeliver the change that is needed to improvetheir international assignee programme.
My goal in this article has been toadvocate how eROI measurement mightbest be achieved, but the core messageremains quite simple: while it can beimportant for some companies to usemetrics, for others it may not, where themetric matters less than the philosophythat drives satisfactory eROI outcomes.For these companies, we must now ask:How do we get the expatriate ROI weare seeking? A recently published bookprovides some direction. With a focuson strategically-based practices for themanagement of expatriates applicable ininternational organisations worldwide,and an in-depth understanding of today’scorporate expatriates, the lives theylead and the issues they face, ManagingExpatriates: A Return on Investment Approach (Business Expert Press, 2013)draws on the latest research to address thecritical challenge of expatriate ROI.
In the book, my co-author (ProfessorKerr Inkson, the world expert on globalcareers) and I focus the concept of Return
on Investment (ROI) – both corporateROI and the individual ROI expectationsof expatriates themselves – and explainhow to manage expatriates with anROI approach in mind. We replace
the traditional model of expatriation with a new model. We define what‘expatriate ROI’ is, why it matters,and how organisations can improveexpatriate management to secure ahigher ROI. We focus particularly on
expatriates themselves and the ‘mobilitymanagers’ who manage them, and on theexpatriation processes and practices oftheir organisations.
These and other key concepts are explainedin more detail in “Managing Expatriates: AReturn on Investment Approach” by McNultyand Inkson (Business Expert Press, 2013).
Metrics Resources Although I do not endorse any specificmetric for measuring eROI, readers mayfind some of the following sources useful:
PricewaterhouseCoopers. 2010. Key
trends in human capital: A global per-spective - 2010. UK: Pricewaterhouse-Coopers.Fitz-enz, J. 2002. The ROI of human
capital. New York, NY: MacMillan.Becker, B., Huselid, M., & Ulrich, D.
2001. The HR scorecard: Linking peo-ple, strategy, and performance. Boston:Harvard Business School Press.Fitz-enz, J., & Davison, B. 2002. How
to measure human resources manage-
ment (Third ed.). New York: Mac-Graw-Hill.
For an excellent summary of thebusiness case for human capital metricsincluding traditional approaches to itsmeasurement, see:
O'Donnell, L., & Royal, C. 2010. The
business case for human capital metrics.In J. Connell, & S. Teo (Eds.), StrategicHRM: Contemporary issues in the AsiaPacific region: 110-138. Prahran, Aus-tralia: Tilde University Press.