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T <strong>Magazine</strong> 07<br />
<strong>Magazine</strong><br />
Tax insight for business leaders<br />
The global<br />
executive<br />
A new breed of manager<br />
takes center stage<br />
Tax as a factor<br />
in employee relocation<br />
The rise of the stateless<br />
employee<br />
The challenges of<br />
managing virtual teams<br />
07
Imprint<br />
Publisher:<br />
<strong>Ernst</strong> & <strong>Young</strong> EMEIA Tax<br />
Maagplatz 1, 8005 Zurich, Switzerland<br />
Marketing Director: Alfred Raucheisen<br />
Program Manager: Alexander Lorimer<br />
Program Support: Gabi Wichmann<br />
Content Advisor: Monica Kremer<br />
Online Manager: Mikael Enoksson<br />
Publishing House:<br />
Infel AG<br />
Militärstrasse 36, 8004 Zurich, Switzerland<br />
Publishing Director: Elmar zur Bonsen<br />
Editor-in-Chief: Rob Mitchell<br />
Editor: James Watson<br />
Creative Director: Guido Von Deschwanden<br />
Art Direction: Käthi Dübi<br />
Project Manager: Michèle Meissner<br />
Picture Editor: Diana Ulrich<br />
Printer:<br />
Rüesch Druck AG<br />
9424 Rheineck, Switzerland<br />
All rights reserved. Contents of this<br />
publication may not be reproduced<br />
whole or in part without written consent<br />
of the copyright owner.<br />
A part of this issue will be distributed<br />
as an insert in the Financial Times<br />
across Europe, Middle East, India and<br />
Africa in April 2012.
Stephan Kuhn<br />
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Dear Reader<br />
By Stephan Kuhn Editorial<br />
The growing emergence<br />
of a “new global<br />
executive”<br />
Recruiting and retaining talent is a perennial challenge for any multinational business. In rapidgrowth<br />
markets, there is already intense competition for relatively small numbers of highly skilled<br />
and experienced workers, especially within middle and upper management, despite huge<br />
numbers of new graduates emerging each year. In developed markets, multinational businesses<br />
are grappling with other challenges: an aging workforce as a result of demographic change,<br />
and all too often a disconnect between the skills of the labour force and those that businesses<br />
need to succeed.<br />
Addressing these talent mismatches requires companies to think carefully about how they<br />
manage their human capital on a global basis. For many, the greater use of overseas postings is<br />
an important tool for filling talent gaps and transferring best practice around the world.<br />
Gaining experience in other markets is also a crucial part of management development, helping<br />
high-potential employees to develop the international experience and cultural understanding<br />
that will enable them to lead tomorrow’s global business. Can tomorrow’s CEO be someone without<br />
deep, first-hand knowledge of today’s rapid-growth markets?<br />
In recent years, the pattern of international postings has evolved. Traditional expatriate models,<br />
whereby companies relied on the experience of managers from developed markets to establish<br />
operations in rapid-growth economies are now just one part of the mix. Today, there is<br />
a much more fluid, dynamic approach to the migration of talent, with executives also moving<br />
from rapid-growth to developed markets, and also from one rapid-growth market to another.<br />
The emergence of a new generation of “global executives”, while beneficial for the business overall,<br />
presents companies with many challenges from a tax perspective. Different rates of income<br />
tax around the world can make it difficult for companies to create remuneration structures that<br />
equalize liabilities between jurisdictions. A related challenge here lies in crafting incentive<br />
structures that motivate global executives, without creating a mismatch between them and local<br />
workers. Beyond this, social security obligations and pension entitlements, complex enough in<br />
many jurisdictions, become even more challenging to manage for mobile employees. In addition,<br />
meeting the challenges of housing, schooling for children and potentially work assistance for<br />
spouses present complications. Obtaining appropriate residential and working permits are also<br />
critical steps in managing risks for both the firm and employees. Even employees who are not<br />
based overseas can present problems because they may trigger local tax liabilities if they travel<br />
frequently enough.<br />
In this issue of T <strong>Magazine</strong>, we look at the emergence of a new generation of “global executives”,<br />
either traveling frequently, or else shifting from one international posting to the next. We<br />
consider how companies are developing global talent management processes to build talent<br />
pipelines for the future, and explore the tax implications of this increasingly mobile workforce.<br />
We hope that you find the publication valuable and stimulating.<br />
Stephan Kuhn<br />
Stephan Kuhn is Area Tax Leader for the Europe, Middle East, India and<br />
Africa (EMEIA) region at <strong>Ernst</strong> & <strong>Young</strong>.<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 3
Contents Credits: Jos Schmid, Digital Vision / Jeremy Woodhouse, Keystone / MaxPPP / Leemage; Cover: Keystone / EPA / Patrick Seeger<br />
Discover more content,<br />
news and features on<br />
the T <strong>Magazine</strong> website at<br />
www.ey.com/tmagazine<br />
Access the App Store<br />
on your iPad to download<br />
the free T <strong>Magazine</strong> app<br />
T <strong>Magazine</strong> 07<br />
<strong>Magazine</strong><br />
Tax insight for business leaders<br />
The global<br />
executive<br />
07<br />
Tax as a factor<br />
in employee relocation<br />
A new breed of manager The rise of the stateless<br />
employee<br />
takes center stage<br />
The challenges of<br />
managing virtual teams<br />
8<br />
Cover<br />
16<br />
Features<br />
8 __ From expat manager to global executive<br />
A competitive, globalized marketplace is reshaping<br />
the nature and dynamics of the expatriate<br />
assignment. Is your organization meeting this<br />
challenge?<br />
14 __ Assessing the global executive<br />
As the global map for today’s expartriate changes,<br />
our infographic provides an overview of today’s<br />
expatriates.<br />
16 __ Upward and outwardly mobile<br />
Increasingly global business leaders need to be<br />
mobile. This can have costs, both personal and<br />
financial, as well as presenting challenges for<br />
employers.<br />
20 __ Preparing a new human age<br />
T <strong>Magazine</strong> interviews Françoise Gri, President<br />
of ManpowerGroup Southern Europe and one of<br />
Fortune’s Global 50 Most Powerful Women in<br />
Business.<br />
Focus<br />
22 __ Living costs<br />
How the relative costs of the world’s business cities<br />
are evolving in line with shifts in the global economy.<br />
28 __ The stateless employee<br />
Managing an increasingly mobile workforce<br />
presents a new set of challenges to meet associated<br />
tax obligations for employee and employer alike.<br />
Management<br />
30 __ Making relocation a success<br />
Expatriate postings all too often end in failure.<br />
So what can be done to help ensure a successful<br />
assignment?<br />
34 __ Human capital on the move<br />
The traditional pattern of West to East migration<br />
is giving way to a new multipolar reality for<br />
expatriates.<br />
36 __ Managing in a virtual world<br />
Effectivly managing virtual, multinational<br />
teams requires both new tools and different<br />
approaches.<br />
40 __ Welcome back. Now – please don’t leave!<br />
Returning expatriates are far more likely to<br />
leave an organization than their compatriots.<br />
How can this be avoided?<br />
44 __ Who’s next?<br />
An effective CEO succession planning strategy<br />
is crucial to the long-term success of any<br />
company. Why do so many corporate boards<br />
struggle?<br />
Outlook<br />
48 __ Developing global leaders<br />
Professor Manfred Kets de Vries, founder of<br />
INSEAD’s Global Leadership Centre, writes on<br />
future challenges and tomorrow’s global<br />
business leaders.<br />
“Our disadvantage as an economic zone is the coexistence<br />
of 27 different national systems. Of course, variety can also be a bonus.<br />
But what we do need is a common framework and common rules,<br />
so that employees can move inside the EU without barriers.”<br />
Martin Schulz, President of the European Parliament, in an interview with T <strong>Magazine</strong> on free movement of labor (see page 13).<br />
4 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong><br />
36
Global tax news<br />
A roundup of recent developments from major<br />
governments and tax administrations<br />
1 France<br />
communications with HMRC<br />
February 2012<br />
through an electronic system,<br />
A proposal was submitted to part of efforts to streamline<br />
parliament for the introduction VAT procedures. These<br />
of a tax on certain financial encompass applications to<br />
transactions, which would be register for VAT, make returns,<br />
introduced from 1 August submit claims, and keep<br />
2012. It proposes taxes on the<br />
transaction of shares of<br />
accounts, among other things.<br />
publicly traded companies 3 South Africa<br />
established in France, whose February 2012<br />
capital is valued at over South Africa will switch from<br />
€1b, at a rate of 0.1% of the its current secondary tax on<br />
value of the shares traded. companies to a dividend<br />
High frequency and automated withholding tax, as of the first<br />
trading operations would be of April 2012. The new tax is<br />
taxed at 0.01% on the amount essentially a tax on the<br />
of cancelled or modified shareholder, rather than the<br />
orders above a ceiling. company, and is calculated at<br />
a 15% of the net amount of<br />
2 United Kingdom the dividend declared, up from<br />
February 2012<br />
The UK’s HM Revenue &<br />
the 10% initially proposed.<br />
Customs (HMRC) published 4 Canada<br />
draft updates to its VAT law and January 2012<br />
regulations, aimed at enabling Effective January 1, 2012, the<br />
businesses to make specific federal corporate tax rate was<br />
4<br />
2<br />
1<br />
5<br />
3<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 5<br />
6<br />
7<br />
News<br />
cut to 15%, from 16.5%. Certain 6 Finland<br />
accelerated tax depreciation January 2012<br />
incentives for manufacturing The Finnish government<br />
and processing equipment were confirmed amendments to<br />
extended through to 2013. its corporate and individual<br />
During 2011, new legislation taxation rules, as part of its<br />
was introduced to curtail the 2012 budget. Within this,<br />
use of partnerships to achieve a the corporate tax rate was<br />
tax deferral and draft legislative reduced to 24.5%, while<br />
proposals were released related the special withholding tax on<br />
to foreign affiliates.<br />
certain dividends was cut<br />
to 18.38%.<br />
5 Portugal<br />
January 2012<br />
7<br />
China<br />
Portugal confirmed a range of January 2012<br />
tax amendments in January, China’s Ministry of Finance<br />
affecting both corporate and increased the tax threshold<br />
income tax rates. Withholding of its windfall tax on the<br />
taxes on investment income oil industry, from $40 per<br />
were increased, along with the barrel to $55. Progressively<br />
tax rate applicable to capital high taxes are applied<br />
gains on the sale of shares. The thereafter, with a maximum<br />
rate of autonomous taxation on rate of 40% for any prices<br />
profits distributed to entities above $75. This applies to<br />
wholly or partially exempt from all oil companies operating in<br />
corporation tax was also China effective from<br />
increased in certain cases. 1 November 2011.
News Credit: Getty / ChinaFotoPress<br />
Tax reform in the spotlight<br />
Share of labour force<br />
Canada<br />
Ireland<br />
United Kingdom<br />
New Zealand<br />
United States<br />
0%<br />
% foreign<br />
% native<br />
20.7%<br />
21.2%<br />
Source: MARC M&A Maturity Index<br />
Source: OECD, 2011<br />
The freedom to move<br />
May 2004<br />
Expansion of the<br />
European Union<br />
gives residents of<br />
10 more countries<br />
the right to move<br />
freely within the EU.<br />
26.0%<br />
31.5%<br />
29.3%<br />
30.0%<br />
37.5%<br />
38.9%<br />
43.5%<br />
46.9%<br />
20% 40% 60%<br />
September 2006<br />
The G20 calls for<br />
international tax<br />
transparency to<br />
be “vigorously<br />
addressed”.<br />
__ In recent decades large corporations have explored every corner of the world<br />
in search of new growth. Between 1976 and 2007, the number of multinational<br />
companies expanded nearly eightfold, from 11,000 to 79,000, according to<br />
United Nations Conference on Trade and Development (UNCTAD). These<br />
businesses now compete at a global level to attract, retain and develop the<br />
best talent for their enterprises.<br />
In 2011, the main motivation for sending an executive abroad was involvement<br />
in a specific project; anything from an engineer on a mining survey to a manager<br />
overseeing a merger. Close behind this were managerial assignments – often with<br />
specific leadership or strategic components aimed at filling skill gaps, spreading<br />
corporate procedures or developing local talent.<br />
Naturally, with the economic turmoil of recent years, international expansion<br />
has slowed for many large companies. From 2008 to 2010 there was a steady<br />
decrease in employees on short-term assignments. However, in 2011 this trend<br />
reversed and today more companies are sending a larger percentages of<br />
employees on short-term international assignments. Interestingly, where<br />
long-term investments were concerned the global economic crisis did not have<br />
such a large effect. In other words, companies continued to see the need for<br />
long-term assignments throughout the economic downturn.<br />
Net migration<br />
Top 20 importers Top 20 exporters<br />
Country Net for 2007–2011<br />
1 United States 4,954,924<br />
2 United Arab Emirates 3,076,634<br />
3 Spain 2,250,005<br />
4 Italy 1,998,926<br />
5 Russian Federation 1,135,737<br />
6 Australia 1,124,639<br />
7 Canada 1,098,444<br />
8 Saudi Arabia 1,055,517<br />
9 United Kingdom 1,020,211<br />
10 Qatar 857,090<br />
Source: World Bank<br />
2006 2008 2009<br />
February 2008<br />
The UK begins<br />
phased introduction<br />
of points based<br />
immigration.<br />
September 2008<br />
The global financial<br />
crisis begins to slow<br />
the movement of<br />
workers.<br />
Country Net for 2007–2011<br />
1 India 2,999,998<br />
2 Bangladesh 2,908,015<br />
3 Pakistan 1,999,998<br />
4 China 1,884,102<br />
5 Mexico 1,805,238<br />
6 Indonesia 1,293,089<br />
7 Philippines 1,233,365<br />
8 Zimbabwe 900,000<br />
9 Peru 724,999<br />
10 Morocco 675,000<br />
June 2009<br />
The first-ever High<br />
Level Policy Forum<br />
on Migration held at<br />
the OECD.<br />
May 2009<br />
The European<br />
Parliament backs<br />
the introduction of<br />
the ‘blue card’, an<br />
EU-wide work<br />
permit.<br />
6 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong>
Credit: Getty / Bloomberg, Keystone / Laif / Thomas Grabka<br />
83%<br />
Percentage of companies<br />
outsourcing the taxation for<br />
their international assignees<br />
given the complexity of global<br />
tax law, according to Spencer<br />
Stuart.<br />
262<br />
The number of additional<br />
jobs created by every<br />
100 foreign-born workers<br />
with an advanced US degree<br />
in a science or technology<br />
field, according to the<br />
American Enterprise Institute.<br />
30%<br />
Percentage tax relief that<br />
Ireland will offer highly paid<br />
foreign executives,<br />
as part of a suite of measures<br />
aimed at attracting talent<br />
to the country.<br />
2010 2011<br />
July 2010<br />
Russia introduces<br />
measures to attract<br />
highly-skilled<br />
foreign workers, as<br />
part of efforts to<br />
modernize the<br />
economy.<br />
November 2010<br />
The UK announces<br />
a cap on the<br />
number of skilled<br />
workers from<br />
outside the<br />
European Economic<br />
Area.<br />
“This measure will reduce the cost to<br />
employers of assigning skilled individuals in<br />
their companies from abroad to take up<br />
positions in Ireland . . . [This] will help us<br />
compete for foreign investment.”<br />
Michael Noonan, Ireland’s Finance Minister, quoted in The<br />
Financial Times, February 2012, on his country’s new tax relief<br />
measures being introduced to help attract highly skilled workers.<br />
China<br />
New legislation will force foreign workers in China<br />
to pay up to 11% of their salaries into five separate<br />
insurance funds, covering pensions, health care,<br />
unemployment, maternity and work-related injuries.<br />
In addition employers can be forced to contribute up<br />
to 37% of the employee’s salary. The move will make<br />
a foreign workforce more expensive for multinationals,<br />
as well as making China less attractive for global<br />
executives.<br />
Germany<br />
Despite widespread unemployment across the Euro<br />
area - averaging 10.4% overall, and as high as 22.9% in<br />
Spain - Germany has low unemployment of just 5.5%<br />
and a worsening skills shortage. Germany is in need of<br />
engineers, doctors and highly qualified IT professionals.<br />
Skilled healthcare<br />
workers are especially<br />
difficult to find.<br />
March 2011<br />
The UK unveils a<br />
new visa aimed at<br />
attracting foreign<br />
entrepreneurs and<br />
investors.<br />
Photo:<br />
Germany’s Federal Minister<br />
of Labour and Social Affairs,<br />
Ursula von der Leyen.<br />
January 2012<br />
The US Department<br />
of Homeland<br />
Security announces<br />
reforms aimed at<br />
attracting and<br />
retaining highlyskilled<br />
immigrants.<br />
2012<br />
January 2012<br />
Ireland offers new<br />
tax relief to attract<br />
highly paid foreign<br />
workers.<br />
Inbounds =<br />
__ Over the next three years<br />
companies expect to increase<br />
the number of assignees to:<br />
India by 80%; Africa by<br />
75%; Brazil by 71%; Russia by<br />
43%; and China by 23%.<br />
China currently has the<br />
highest number of inbound<br />
assignees per company,<br />
followed by Africa, then India.<br />
Outbounds =<br />
__ Over the same period to<br />
2014, outbound assignees will<br />
increase by: 80% from China;<br />
67% from both Russia and<br />
Africa; 20% from Brazil; and<br />
13% from India. However,<br />
India’s relatively low increase<br />
could be due to the fact that it<br />
currently has the highest<br />
volume of outbound assignees<br />
per company, followed by<br />
Africa and then China.<br />
February 2012<br />
Switzerland’s<br />
largest political<br />
party files a petition<br />
to cap immigration<br />
to the country.<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 7
Feature The global executive Credit: Jos Schmid<br />
From expat manager<br />
to global executive<br />
Despatching old hands from head office to run the show in new territories has<br />
been a feature of international business. But a competitive, globalized marketplace<br />
is reshaping the nature and dynamics of the expatriate assignment.<br />
Summary<br />
The traditional<br />
expatriate model is<br />
changing as companies<br />
get to grips with a<br />
changing global<br />
economy. Executives • By Paul Kielstra<br />
are not just flowing from<br />
West to East, but in all Viewed through a narrow lens,<br />
directions. Overseas<br />
the traditional corporate expat<br />
postings can be a<br />
seems alive and well. Cost<br />
powerful tool to share cutting during the recent downturn<br />
expertise and build dented the enthusiasm of companies<br />
leadership talent, but for sending people abroad, but now<br />
there are many<br />
firms are stepping up the number of<br />
practical difficulties such assignments.<br />
that can impede their <strong>Ernst</strong> & <strong>Young</strong>’s recent Global<br />
success.<br />
Mobility Effectiveness Survey found<br />
that, although the number of<br />
companies with at least 1% of<br />
employees on a short-term international<br />
assignment declined precipitously from 48% in<br />
2008 to just 20% in 2010, it bounced back up to<br />
33% during 2011. Longer-term assignments,<br />
which are harder to cut rapidly, never went out<br />
of fashion: the proportion of businesses with<br />
more than 1% of employees on long-term<br />
postings rose steadily from 27% in 2008 to 46%<br />
in 2011.<br />
In line with the rebalancing of the global<br />
economy toward high-growth emerging markets,<br />
these are the primary destinations for expatriate<br />
postings. About six in 10 (61%) of companies<br />
polled have seen an increase in the number of<br />
international transfers to emerging growth<br />
markets in the last three years. Nearly seven in<br />
ten (68%) expect to see a further rise in the next<br />
three years. Other studies back this up. A 2010<br />
Economist Intelligence Unit (EIU) survey<br />
indicated that by far the most international<br />
transfers still originate from Western Europe and<br />
North America, with China and the rest of Asia<br />
the most common destinations. The key drivers<br />
for such assignments are strategic and<br />
managerial needs. In the EIU’s words, “The<br />
traditional expat model is alive and well”.<br />
New patterns of postings<br />
But all this misses some significant changes. The<br />
most obvious is the evolving traffic patterns of<br />
executives. Philippe Waty, Group Head of<br />
Compensation and Benefits at Novartis, the<br />
Swiss-based global pharmaceutical company, has<br />
seen a “rapid change with respect to executives<br />
moving out of developing countries, with many<br />
people from India and China coming to<br />
developed countries over the last few years.”<br />
Others agree. Susan Steele, Global Chief Human<br />
Resources Officer at Millward Brown, a global<br />
brand insight consultancy, explains that, “In the<br />
past, it was one-way traffic from the United<br />
States and Europe to the rest of the world. Now,<br />
in sending people to Africa, we are taking folks<br />
from India and vice versa. It is becoming much<br />
more blended and less one-way. Going on<br />
assignment will be the norm for this current<br />
8 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong>
Credit: Xxxxxx / NameVorname GCR today Feature<br />
Philippe Waty, Novartis<br />
__ As Group Head of<br />
Compensation and Benefits,<br />
Philippe Waty is responsible<br />
for developing Novartis’ pipeline<br />
of emerging global executives,<br />
a growing number of whom hail<br />
from markets such as India,<br />
China and Latin America.<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 9
Feature The global executive<br />
80%<br />
The number of international<br />
transfers originating from<br />
China will increase by 80%<br />
between 2010 and 2014,<br />
according to <strong>Ernst</strong> & <strong>Young</strong>.<br />
Main drivers for sending<br />
people across borders<br />
86%<br />
Project-based<br />
84%<br />
Managerial and strategic<br />
75%<br />
Developmental<br />
50%<br />
Other<br />
32%<br />
Employee-driven<br />
Most common reason<br />
Least common reason<br />
14%<br />
16%<br />
25%<br />
50%<br />
68%<br />
Source: <strong>Ernst</strong> & <strong>Young</strong>’s Global Mobility<br />
Effectiveness Survey 2011<br />
generation, so they will become more global.”<br />
<strong>Ernst</strong> & <strong>Young</strong>’s research backs this up:<br />
companies expect to increase the number of<br />
international transfers originating from China by<br />
80% between 2010 and 2014, and those from<br />
Russia and Africa by 67%. India will see less<br />
growth (13%), but from a far higher baseline,<br />
given it has an average of three times as many<br />
outbound assignees as incoming ones.<br />
This highly visible change reflects an even<br />
more fundamental one: if the expat executive<br />
model seems still to be thriving, it is because its<br />
very purpose has adapted to a more globalized<br />
business environment. “The idea of people being<br />
sent out from head office to colonize the world<br />
ended more than 10 years ago,” says Peter<br />
Ferrigno, the EMEIA Area Leader for Human<br />
Capital at <strong>Ernst</strong> & <strong>Young</strong>. This reflects the way in<br />
which many companies have moved away from a<br />
model in which a central head office, frequently<br />
with distinct characteristics shaped by the<br />
business’s country of origin, controlled what<br />
were essentially branch operations abroad.<br />
Instead, leading firms today are seeking to create<br />
more integrated, global operations.<br />
Inevitably, this has affected the role of the<br />
global executive. At a broad level, executives<br />
going abroad no longer resemble high-ranking<br />
foreign dignitaries from the corporate center, but<br />
are increasingly arriving to work as equals with<br />
others. In line with this, the primary objectives in<br />
sending them have grown more complex. The<br />
main ones now include:<br />
Filling vacancies/project support<br />
This objective has always been an important<br />
driver of international transfers and remains the<br />
most common reason for sending employees<br />
across borders. Globalization and modern<br />
technology, however, allow a greater use of<br />
international talent in this way and new forms of<br />
assignment for global executives. Indeed, Waty<br />
notes an increasingly common phenomenon,<br />
especially within Europe, of business travelers<br />
who spend weekdays in one country and return<br />
to their homes in another country for the<br />
weekend. Others companies are embracing<br />
“virtual” international assignments, notes Steele,<br />
with executives working as part of teams in<br />
another country while remaining in their own<br />
home countries. “It is not ideal but, with<br />
technology, it is increasingly feasible and<br />
increasingly being done,” she says. This also<br />
avoids many of the practical difficulties and costs<br />
of sending people to another country.<br />
Knowledge transfer<br />
The benefits of bringing knowledge from one<br />
part of the company to another have also always<br />
been a driver in the use of international<br />
executives, but the direction of flow is no longer<br />
one-way. For example, Indian and Chinese<br />
executives often have more experience with the<br />
intricacies of outsourcing, says Waty. They can<br />
bring such expertise along on placements in<br />
Europe or North America. Greg Schupp, Partner<br />
for Human Capital at <strong>Ernst</strong> & <strong>Young</strong> in the United<br />
States, sees this cross-fertilization as an<br />
important benefit of modern expatriate postings.<br />
“The more diverse and inclusive your teams can<br />
be, the more global and thought-provoking they<br />
become. The solutions they propose tend to be<br />
better for the organization.”<br />
Developing executives<br />
International transfers have also always been<br />
used for executive development, and as a benefit<br />
to retain talent. But in global companies, the<br />
scope of these opportunities has changed. These<br />
sorts of assignments – especially short-term<br />
ones – are happening earlier in careers, notes<br />
Steele. Her own company has found that, in<br />
emerging markets, taking new local hires and<br />
giving them international exposure is a fast and<br />
efficient way of growing talent. <strong>Ernst</strong> & <strong>Young</strong>’s<br />
Global Mobility Effectiveness Survey indicates<br />
that this practice is common in emerging<br />
markets with, for example, junior executives<br />
making up half of outbound assignees from India<br />
– in part to make up for the lack of experienced<br />
senior executives to provide mentorship. “If you<br />
find decent people in a small country, sometimes<br />
they outgrow the local market,” says Ferrigno.<br />
“You need to take people like that into the global<br />
talent pool.”<br />
Creating the company’s future leaders<br />
International exposure is becoming ever more<br />
important for businesses seeking to train<br />
leadership prospects. The reason is simple. “If<br />
only 5% of your business is in the home country,<br />
and you’ve only worked there, how qualified are<br />
you to sit on the board?” asks Ferrigno. Novartis<br />
has institutionalized this in its leadership<br />
development processes. Once a year, its<br />
executive committee looks at people who have<br />
the potential to become future leaders of the<br />
company and then considers how international<br />
postings should figure in their development. “We<br />
are 150 countries,” explains Waty. “A successful<br />
global executive is someone who can hit the<br />
ground running, can pick up the nuances of the<br />
new location quickly, can spot the issues quickly<br />
and begin delivering on the issues in a very short<br />
space of time. They should also be able to bring<br />
an insight into how other markets operate and<br />
other ways of doing things.”<br />
Getting the most out of international<br />
assignments<br />
If these goals are met, sending executives across<br />
borders can create substantial value for<br />
companies, but at a cost. Although dependent on<br />
the location and position, Schupp estimates that<br />
the total expense may be as high as three to five<br />
times that of the base salary of an executive who<br />
stays at home. “The cost is such that you have to<br />
make sure there will be a benefit,” adds Steele.<br />
10 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong>
Credit: Reuters / Handout, Iron Ore Company Canada<br />
Carlos Ghosn, the Brazilian-born Chairman and CEO of the<br />
Renault-Nissan Alliance splits his time between Tokyo and Paris.<br />
He holds both Brazilian and French citizenships.<br />
One difficulty facing companies, however,<br />
is that the goals outlined above are not<br />
complementary, and can even be contradictory.<br />
To give one example, a person sent primarily to<br />
learn about a foreign market may encounter a<br />
completely different set of tasks and<br />
responsibilities from one sent to plug knowledge<br />
gaps. To get the full benefit of such assignments,<br />
says Ms Steele, companies have to aim for global<br />
executives to do both teaching and learning.<br />
However, as she says, most businesses do<br />
neither. “Doing neither has a cost. Doing both is<br />
not difficult but it does require planning.”<br />
Comprehensive planning, though, is too often<br />
absent when executives are sent abroad because<br />
very few companies approach such activity<br />
holistically. Instead, foreign placements are<br />
frequently driven by an ad hoc desire of an<br />
individual business unit. <strong>Ernst</strong> & <strong>Young</strong> research<br />
shows, for example, that human resources<br />
departments play little role in helping to decide<br />
who would benefit most from going abroad – for<br />
nearly 6 in 10 companies, global mobility<br />
professionals are not involved at all in candidate<br />
selection. “People aren’t always looking<br />
strategically. Instead they are looking tactically<br />
and short term,” says Ferrigno. “There is a<br />
massive difference between companies who treat<br />
transfers as a way to invest in people and those<br />
who see them as a way to fill positions.”<br />
The first step, then, toward getting the most<br />
benefit out of international placements is for<br />
Zoë Yujnovich, the Australian-born President and CEO of Rio Tinto’s<br />
Iron Ore Company of Canada, built her career in roles within<br />
the company’s operations in Australia, the UK, US and Brazil.<br />
companies to recognize the multiple objectives<br />
involved and to try and align the varying interests<br />
of distinct parts of the organization around<br />
meeting as many of them as possible. But the<br />
million-dollar question, says Schupp, is working<br />
out how to bring this together. This is especially<br />
true amid the tension between business units<br />
and HR in trying to align strategies. “You get<br />
pressure from business units to quickly fill the<br />
open positions. To maximize the value of an<br />
assignment, the best thing to do is to get the two<br />
groups to sit at the table together to begin to<br />
understand each other and collaborate on how to<br />
meet the multiple objectives they each have,”<br />
says Schupp. “It sounds simple, but many<br />
organizations have a difficult time doing that.”<br />
One way that some companies have found to<br />
improve cooperation is to fund international<br />
postings jointly, especially of junior executives. In<br />
this model, the budget is split between the<br />
receiving business unit and corporate level<br />
training funds, as both parties have an interest in<br />
the assignment.<br />
Such alignment allows a coherent approach to<br />
another crucial element of success: defining how<br />
each assignment will benefit the business and<br />
what is expected of the executive. Millward<br />
Brown’s Steele notes, “Every transfer is looked at<br />
individually and as part of a broader strategic<br />
plan.” Not only are executives properly prepared,<br />
but corporate expectations are made explicit.<br />
Being very clear about why you are sending<br />
Global executives<br />
The highly globalized<br />
operating environment of<br />
today is increasingly<br />
demanding leaders with a<br />
suitably international<br />
background and CV, in order<br />
to more effectively manage<br />
multinational teams and<br />
organizations. Executives<br />
such as Renault-Nissan’s<br />
Carlos Ghosn or Rio Tinto’s<br />
Zoë Yujnovich may once<br />
have been the outliers, but<br />
a growing number of<br />
companies are now actively<br />
working to develop new<br />
leaders with similarly global<br />
backgrounds.<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 11
Feature The global executive<br />
people on assignment is hugely important,<br />
agrees Ferrigno. “You see people go with the<br />
wrong expectation to markets, thinking they are<br />
there to show and tell when they should be there<br />
to listen and learn,” he says. Indeed, appropriate<br />
metrics are a central part of defining the<br />
assignment properly. Global executives should<br />
not be evaluated against traditional business<br />
measures such as revenue goals, but they<br />
should also be measured on how well they are<br />
adapting to their assignment. “From there you<br />
can quantify the return,” says Schupp.<br />
A clearly defined assignment also helps<br />
significantly in finding the right person for the<br />
job. The ideal attributes of potential<br />
international executives is one of the most<br />
studied aspects of global transfers. But barring<br />
some obviously useful aspects – cultural<br />
sensitivity, ability to interact with others, and a<br />
desire to succeed – no definitive list exists.<br />
Inevitably, choosing a candidate is a balancing<br />
act between the talent available, the ability of<br />
candidates to thrive in a foreign environment,<br />
and the skills needed to do the particular job at<br />
hand. “There is no perfect test. Each case has to<br />
be looked at individually,” says Steele.<br />
Practical issues<br />
Once the job is defined, and the correct person<br />
found, international assignments throw up a wide<br />
range of challenges for the sending company.<br />
Many of these have long been present - from the<br />
basic need for appropriate visa and working<br />
permits, to the more complex need to align<br />
assignment strategies with overall business goals<br />
- but several are worth noting here given how they<br />
are changing. All of these issues are discussed in<br />
greater detail in other articles throughout this<br />
issue of T <strong>Magazine</strong>. Nevertheless, as the list<br />
highlights, there are many practical complexities<br />
of using global executives.<br />
The social network<br />
Any transferring executive has a network of social<br />
connections at home that will be disturbed as a<br />
result. This is especially true of close family. “It is<br />
also increasingly difficult to move some<br />
employees on assignment when their spouses<br />
work,” says Waty. “We do provide spousal support<br />
to find work in the new location and support to<br />
complete further education. Very often we can<br />
‘sell’ the assignment on the basis that it is a great<br />
experience for the whole family in terms of<br />
personal development.” A separate issue is that<br />
an increasing number of people may be together<br />
but not married, raising challenges over<br />
immigration rights. Addressing family issues is<br />
more than just a practical matter: it may define<br />
how well international executives fulfil their<br />
assignments. “Very often, if an executive has<br />
been successful, it is thanks to a spouse and<br />
family who have a global mindset,” says Waty.<br />
“Companies are not doing enough to assess how<br />
well the family can adapt.”<br />
Compensation arrangements<br />
As the goals of international placements evolve,<br />
payment arrangements need to keep pace. “If<br />
you send people around as part of their<br />
development, you are going to need to look at<br />
how these costs get people to take on the right<br />
challenges without overly enriching them,” notes<br />
Ferrigno. It might be valuable, therefore, to tie<br />
compensation to metrics designed around those<br />
challenges. Another current trend is for<br />
companies to use “localization” packages, with<br />
executives receiving a lump sum up front to<br />
cover moving costs, but then being compensated<br />
in the same way as their new local peers,<br />
including in terms of eligibility for bonuses. Not<br />
only does this control costs, but it leads to<br />
executives being taken more seriously by their<br />
colleagues because they now have an obvious<br />
stake in local success.<br />
Dealing with tax<br />
International employment has always brought<br />
income tax complications, but the current<br />
economic climate can make this even tougher.<br />
“Many countries are looking for additional<br />
sources of revenue, so revenue agencies are<br />
turning over rocks to make sure organizations<br />
are compliant on income or payroll tax,” notes<br />
Schupp. Over half of companies polled by<br />
<strong>Ernst</strong> & <strong>Young</strong> describe tax compliance as very<br />
challenging. Although the most pressing specific<br />
issues vary by jurisdiction, some tax issues have<br />
a growing profile internationally. For example,<br />
the payment of stock options to executives.<br />
Depending on where the executive is resident<br />
for tax purposes when these are earned and<br />
exercised, a variety of countries – which may<br />
or may not have relevant double taxation<br />
treaties – might wish to tax the proceeds.<br />
There is also the important need to adhere to<br />
social security obligations in all relevant<br />
jurisdictions.<br />
Bringing them back again<br />
“Assigning a person abroad creates a retention<br />
issue. It is not always easy to bring back a former<br />
assignee,” says Waty. Indeed, <strong>Ernst</strong> & <strong>Young</strong><br />
research indicates that just over 1 in 10 executives<br />
resign within two years of returning from foreign<br />
assignments. Given the significant investment<br />
made into the development of these executives,<br />
this can be a costly loss for any company.<br />
The broader picture is that the expat has, in<br />
recent years, evolved into the global executive.<br />
Within this, the key factors of who is being sent,<br />
why they are going, and where they are headed<br />
to, are all changing as companies have<br />
transformed themselves from centrally run<br />
multinationals to globally diverse enterprises.<br />
In order to manage this new species, however,<br />
businesses have to keep up. In particular,<br />
different functions in the company need to work<br />
together in a way that too few are currently<br />
doing.<br />
Percent of the total number<br />
of employees are long-term<br />
assignees (>12 months)<br />
12 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong><br />
2008<br />
21%<br />
2011 2%<br />
9%<br />
18%<br />
7%<br />
6%<br />
9%<br />
73%<br />
64%<br />
Source: <strong>Ernst</strong> & <strong>Young</strong>’s Global Mobility<br />
Effectiveness Survey 2011
Credit: Keystone / EPA / Julien Warnand<br />
Martin Schulz, President of the European Parliament<br />
Interview<br />
Toward integration<br />
Martin Schulz<br />
is Member of the<br />
European Parliament<br />
for the Social Democratic<br />
Party of Germany,<br />
since 2004 leader of<br />
the Socialists in the<br />
European Parliament.<br />
In January 2012, the<br />
56-year old politician<br />
was elected President<br />
of the Parliament.<br />
One complication facing multinational<br />
organizations trying to relocate and develop more<br />
rounded global executives is the national barriers<br />
that inhibit the free movement of labor. Even<br />
within an integrated region such as the EU, this<br />
can prove difficult, not least due to differing social<br />
security schemes and tax regimes. T <strong>Magazine</strong><br />
speaks to Martin Schulz, the new President of the<br />
European Parliament, about what is being done<br />
to create a more flexible labor market.<br />
What is being done from a political perspective,<br />
at both a national and European level,<br />
to eliminate the barriers to cross-border tax<br />
and social insurance legislation and<br />
facilitate more flexibility on the international<br />
labor market?<br />
Martin Schulz: I must point out, unfortunately,<br />
that there are practically no borders for capital<br />
any longer, whereas in terms of labor mobility, the<br />
freedom of movement for workers, there are still<br />
considerable obstacles. However, many fiscal<br />
issues and, above all, decisions relating to the<br />
labor and social sector are still the national<br />
responsibility. I regret this since, in Europe, it<br />
means we are faced with fiscal and social<br />
competition between one another, usually with a<br />
downward tendency, which is damaging to the<br />
economy in many of our countries. This<br />
754<br />
The European Parliament is<br />
the only directly-elected<br />
EU body and one of the largest<br />
democratic assemblies in<br />
the world. Its 754 Members<br />
are there to represent the<br />
EU’s 500 million citizens.<br />
complicates the desired convergence of our<br />
economies and ultimately does not lead to<br />
sustainable growth for the Member States. I see<br />
our social model as a key to the economic success<br />
of the European Union and it will play an essential<br />
role in overcoming the current crisis. All the<br />
same, the European Parliament will continue to<br />
press for decisions in important fiscal matters –<br />
whether toward the harmonization of corporate<br />
tax assessment bases or toward a financial<br />
transaction tax.<br />
What are Germany and/or the EU doing to<br />
standardize the various pension regulations?<br />
Our disadvantage as an economic zone –<br />
compared, say, with the USA – is the coexistence<br />
of 27 different national systems. Of course,<br />
variety and difference can also be a bonus: I am<br />
against total standardization. But what we do<br />
need is a common framework and common rules,<br />
so that workers can move inside the EU without<br />
barriers. Yes, superannuation and pension<br />
schemes are a matter for Member States. But the<br />
European Parliament will support any steps<br />
aimed at helping enable workers to retain their<br />
retirement pension claims if they move from one<br />
Member State to another. However, in that<br />
process, there should be no need to weaken<br />
national social standards.<br />
One of the key areas of harmonization<br />
lies within the financial services sector.<br />
What else needs to be done here?<br />
As noted, capital nowadays can be transferred<br />
between countries almost instantaneously. But<br />
many financial centers are only inadequately<br />
regulated, a situation that can cause substantial<br />
damage to our economy. I firmly believe that<br />
politicians have to help to set clear guidelines<br />
here, which is why I wholeheartedly support<br />
measures taken within the G20 framework – it is<br />
in this area that we must take joint action. The<br />
European Parliament has already made an<br />
important contribution by limiting certain kinds of<br />
short selling in particular and by generally<br />
creating more transparency on the derivatives<br />
trading market.<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 13
Feature The expatriates<br />
Assessing the global executive<br />
The devil is in the detail when it comes to assignments abroad. Executives must work out<br />
how taking — or not taking — an overseas role will affect their career, how their family<br />
will cope and how effective they might be in another culture. There are also wide-ranging<br />
considerations of the net impact on their finances and lifestyle.<br />
US$200,000<br />
In Singapore, over half of expats earn at least<br />
US$200,000, making it one of the highest paid expat<br />
destinations globally.<br />
According to expats:<br />
1 in 3 complain of<br />
excessive interference<br />
from HQ<br />
1 in 3 believe foreign<br />
subsidiaries too often<br />
work to their own rules<br />
1 in 3 report that the<br />
corporate centre has<br />
excessive revenue<br />
expectations from<br />
the local market<br />
1 in 5 report<br />
insufficient involvement from<br />
HQ<br />
3 out of 5 believe that their<br />
corporate HQ does not<br />
sufficiently grasp the nature<br />
of the local business<br />
environment<br />
71%<br />
of expats report increased<br />
earnings since moving<br />
abroad, but also more<br />
complicated finances<br />
In 27% of companies declining<br />
the opportunity to relocate<br />
hinders your career<br />
Expats in South Africa, Mexico and the Philippines<br />
are most likely to have luxuries like domestic staff,<br />
swimming pools and second properties.<br />
The most popular expat destinations<br />
Singapore<br />
The countries with the highest<br />
ranking financial complexity<br />
for expats<br />
Source: HSBC Expat Explorer 2011, Atlas Corporate Relocation Survey 2011, <strong>Ernst</strong> & <strong>Young</strong> Global Mobility Effectiveness Survey 2011,<br />
EIU - Up or out: Next moves for the modern expatriate 2010 / Graphic: Käthi Dübi<br />
4<br />
2<br />
USA<br />
Australia<br />
74%<br />
of companies provide<br />
cross-cultural preparation<br />
Nigeria, India and China<br />
are the top three postings<br />
most likely to qualify an<br />
expat for a hardship<br />
allowance.<br />
Most expats<br />
are married men<br />
in their 40s<br />
The most important<br />
attribute for a successful<br />
expat = cultural sensitivity<br />
Between two and five years<br />
— the length of time most<br />
senior expatriates are sent<br />
to a particular destination<br />
46% of companies make<br />
periodic adjustments<br />
to expat compensation to<br />
manage exchange rate<br />
fluctuations<br />
80% believe an assignment<br />
in a “major emerging” market<br />
aids career progression<br />
14 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong><br />
3<br />
1<br />
5<br />
20%<br />
80%
80%<br />
of graduates want to work<br />
internationally<br />
Most expensive destinations/highest cost of living<br />
1. Luanda, Angola<br />
2. Tokyo, Japan<br />
3. N’Djamena, Chad<br />
4. Moscow, Russia<br />
5. Geneva, Switzerland<br />
The top three<br />
expatriate package benefits<br />
1 Housing allowance<br />
2 Regular paid trips home<br />
3 Relocation costs allowance<br />
63%<br />
By 2014, multinational companies<br />
expect to send:<br />
more expats to India<br />
more to Africa<br />
more to Brazil<br />
71%<br />
75%<br />
80%<br />
37%<br />
On repatriation 37% of<br />
assignees return to a new<br />
position and responsibilities<br />
which leverage their gained<br />
experience.<br />
Don’t forget the family<br />
France (1st),<br />
the Netherlands (2nd)<br />
and Australia (3rd)<br />
are the top ranked<br />
countries for raising<br />
children abroad.<br />
The top reasons for early return from<br />
assignment:<br />
ª Family concerns (34%)<br />
ª A new position at the company (22%)<br />
ª Early completion (21%)<br />
US$7,500<br />
The average annual cost of childcare for expats<br />
is $7,500 and $11,500 for education<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 15
Feature Tax as a factor of executive mobility<br />
Upward and<br />
outwardly mobile<br />
Global business leaders need to be mobile, but this brings real costs,<br />
not least in terms of potentially higher personal taxes. Employers also need<br />
to manage their risks from increased mobility.<br />
33%<br />
Percentage of companies<br />
that have at least one<br />
percent of their workforce<br />
on an assignment<br />
away from home.<br />
• By Nigel Gibson<br />
Summary<br />
A growing number<br />
of business executives<br />
are spending much<br />
of their time in jobs<br />
away from home, as<br />
business becomes more<br />
globalized. Employers<br />
need to address the tax<br />
and financial challenges<br />
this presents.<br />
Despite worries about the strength of<br />
the world economy the number of<br />
employees working in a foreign country<br />
on a long-term contract has also remained<br />
buoyant. Indeed, it has hardly been affected by<br />
the dark days of 2008. What does this mean?<br />
First, it suggests that companies realize the<br />
benefits of deploying people with<br />
the skills and experience required<br />
in promising, new markets.<br />
Second, it means that firms are<br />
more efficiently managing a<br />
number of considerations best<br />
coordinated centrally - from<br />
unequal rates of tax to domestic<br />
pensions and complicated<br />
systems of social security – which<br />
can deter executives from<br />
accepting an assignment, long or<br />
short, in another country.<br />
Michael Dickmann, Professor<br />
of International Human Resource<br />
Management at the UK’s Cranfield University, and<br />
the author of Global Careers, a new book on the<br />
subject, explains that global careers are<br />
becoming increasingly important. “This is<br />
because we all know that the world is becoming a<br />
smaller place in one sense. We all see the rising<br />
multinationals from developing countries. We<br />
know that they operate much more globally, but<br />
even small organizations nowadays have global<br />
issues to master.”<br />
Assignment challenges<br />
Having worked with many well-known<br />
multinationals, Dickmann and his co-author,<br />
Yehuda Baruch, are under no illusions about the<br />
need for change. Although more companies now<br />
Credit: Uwe Noelke<br />
employ more people on assignments in more<br />
places around the world, there are no easy<br />
solutions to the problems it creates. “What it<br />
means for organizations is that they have to<br />
start thinking about different patterns of<br />
international work and to understand their<br />
individuals better, as well as the tensions in the<br />
whole process,” says Dickmann.<br />
Chief among which obstacles is tax. Moving<br />
from a country with a high rate to one where<br />
they pay little or no tax may seem straightforward<br />
to an employee. But expecting executives to<br />
move between destinations with markedly<br />
different rates of tax, not to mention social<br />
security and other changes, can lead to strife,<br />
disillusion and, sometimes, even defections.<br />
To overcome these problems, some 85% of<br />
multinational companies adopt what is known as<br />
tax equalization. This aims to create a level base,<br />
so that all mobile executives feel part of the same<br />
team. Chris Debner, Senior Manager for Human<br />
Capital at <strong>Ernst</strong> & <strong>Young</strong> in Zurich, explains: “If<br />
you go abroad with a company, the amount of tax<br />
you pay is equalized in such a way that you do<br />
not lose out. There is often something called a<br />
net promise which means that, as an employee,<br />
you do not suffer from a higher rate of tax and<br />
neither benefit from a lower one. Especially in<br />
financial services the amount of tax that needs to<br />
be paid is a factor in how mobile some executives<br />
are prepared to be.”<br />
Taxing alternatives<br />
There are two other main ways to manage an<br />
employee’s liability when on a foreign<br />
assignment, which are hardly used anymore. One<br />
is tax protection, under which the employee is<br />
subsidized if they pay more tax than at home, yet<br />
enjoys a windfall if the posting is to a destination<br />
with a lower rate. The second is laissez-faire, in<br />
16 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong>
Credit: Xxxxxx / NameVorname Estonia Feature<br />
Matthew Ozburn<br />
__ Deutsche Bank’s<br />
US-born director of Human<br />
Resources International<br />
has spent many years<br />
living in Europe, the US<br />
and Japan, helping him<br />
assess the challenges<br />
that multinational<br />
executives face.<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 06 T <strong>Magazine</strong> 17
Feature Tax as a factor of executive mobility<br />
Singapore’s steady rise as a global hub for international expansion has been partly fuelled by its wide-ranging steps to attract<br />
expatriate workers. Today, nearly one in four people in the city-state are foreigners.<br />
Migration mix<br />
Deutsche Bank now has<br />
180 sets of country<br />
combinations between<br />
which employees migrate<br />
on a mixture of short- and<br />
long-term contracts, a<br />
growing number of which<br />
are located in emerging<br />
markets. Singapore has<br />
been one of its Asian<br />
expansion hubs, ever since<br />
setting up operations there<br />
in 1971/2. It now employs<br />
over 1,900 staff there.<br />
__ Does your company have more and<br />
more employees working in different<br />
parts of the world?<br />
Is the administration of masses of<br />
contracts, currencies and<br />
assignments causing a headache?<br />
Then the answer may be to set up<br />
what is known as a global employment<br />
organization (or GEO).<br />
Besides the above reasons, many<br />
companies find other valid business<br />
cases for changing the employment<br />
structure of their mobile employees.<br />
Such entities have long been popular<br />
among multinational companies in the<br />
oil and gas and mining industry. The<br />
idea is that a peripatetic executive is<br />
employed not by the company in their<br />
home country, nor by a subsidiary<br />
elsewhere, but centrally by a GEO.<br />
Not only does this reduce the number<br />
of country combinations and<br />
therefore complexity; it may also<br />
Credit: Digital Vision / Jeremy Woodhouse<br />
Alternative solutions to managing a global workforce<br />
Going GEOpolitical<br />
enable all expatriates, wherever they<br />
happen to be, to be treated equitably<br />
and compliant with local legislation.<br />
The parent company may also find it<br />
easier to standardize the salaries,<br />
pensions and other benefits of those<br />
employed by the GEO. Indeed, many<br />
international firms look upon a GEO<br />
as a center of excellence that hosts<br />
and manages much of the company’s<br />
talent.<br />
There are drawbacks, of course. One<br />
is the effort that goes into the setup<br />
of such a structure. Another is that<br />
the employees have to change their<br />
existing terms of employment.<br />
Employees of the GEO could also find<br />
they are ineligible for social security<br />
at home unless their employer has a<br />
subsidiary registered there.<br />
For many international employers,<br />
however, the advantages are<br />
sufficiently convincing.<br />
18 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong>
which the employee is left to fend for themself.<br />
Unsurprisingly, the latter is an option that can<br />
prove tempting in countries where there is little<br />
or no tax to pay, but unpopular elsewhere. A<br />
further approach – known as “net to net” –<br />
adjusts the employee’s net income for the cost of<br />
living in the new country and may be used in<br />
conjunction with one of the other approaches.<br />
As Peter Ferrigno, Leader of <strong>Ernst</strong> & <strong>Young</strong>’s<br />
Human Capital practice for EMEIA, points out,<br />
the aim of equalizing liabilities between<br />
destinations is to remove tax from the question<br />
of whether or nor to accept the assignment.<br />
“Large companies don’t want people to<br />
determine whether they move or not based on<br />
the rate of tax. Tax protection, on the other<br />
hand, to cover the cost of higher rates but giving<br />
someone the benefit of lower ones, becomes<br />
more and more difficult to justify on the grounds<br />
of fairness.”<br />
A global approach<br />
Small wonder therefore that a growing number<br />
of firms, particularly larger multinationals<br />
international, have chosen to set up what are<br />
known as “global employment organizations”<br />
(see box). These seek to lift executives clear of<br />
disagreements over the rate of tax, as well as<br />
problems over entitlements to pensions, by<br />
creating an international entity that hovers over<br />
all destinations.<br />
Often domiciled in an offshore location, such<br />
organizations are popular with oil companies and<br />
firms that need to move skilled people from one<br />
site to another, often at short notice. Instead of<br />
providing a fresh contract each time an employee<br />
moves from one country to another, all those<br />
within the global employment organization are<br />
employed on similar terms.<br />
Such an approach may have its advantages but it<br />
does not suit all, not least because of the cost of<br />
managing offshoots. Take Deutsche Bank, a<br />
global financial services organization<br />
headquartered in Germany that has no fewer<br />
than 180 “country combinations” – sets of<br />
nations, in other words, between which<br />
employees migrate on a mixture of short- and<br />
longer-term contracts. With developing markets<br />
making much of the running within the world<br />
economy, many of the destinations are big cities<br />
in Asia.<br />
“Five years ago,” says Matthew Ozburn,<br />
Deutsche Bank’s Director of Human Resources<br />
International, “the number of executives moving<br />
from job to job around the world was probably<br />
1% of the workforce. Today it may be double<br />
that number, even allowing for a rise in the<br />
number of employees in Germany brought in by<br />
the acquisition of a domestic operation such as<br />
Postbank. “We use an approach which we call<br />
host-based”, says Ozburn. “We start from the<br />
premise that the executive has a pay package<br />
which looks like those of his or her peers. Then,<br />
considerations as to whether or not the employee<br />
has a family, children and so a need for<br />
schooling, etc. are introduced on top.”<br />
“Within each market, we must remain<br />
competitive. So an assignment in, say, Singapore<br />
will be different from one in Frankfurt. We do a<br />
calculation at the outset, which addresses<br />
whether there is an advantage or disadvantage<br />
for the employee. We look at the difference<br />
between what an executive would have received<br />
in their home country and what they stand to<br />
get in the new one. The result is a system of<br />
equalization that allows for the combinations<br />
of pay found in the financial services industry:<br />
a mixture of salary, bonus and deferred<br />
equity.”<br />
Deutsche Bank also uses a system called<br />
“local to local”. Under this, an employee would<br />
complete an assignment on local terms in one<br />
place and then move to another on similar terms.<br />
That such an arrangement is used more and<br />
more reflects, among other things, the growth in<br />
banking in and around offshore and what are<br />
known as near-shore locations. Many such<br />
centers require the same kind of skills,<br />
experience and knowledge, so executives can<br />
move easily from one to another.<br />
Pensions pose a problem<br />
Within the European Union, of course, individuals<br />
assigned from one country to another can<br />
remain under their home state’s system of social<br />
security, subject to certain conditions. This can<br />
be done for up to five years. So, for a typical<br />
assignment, it may not become an obstacle to a<br />
job abroad.<br />
By comparison, says Ferrigno, pensions<br />
remain an issue. In part, he says, this is because<br />
each country’s legislation is different, but also<br />
because of a philosophical difference between<br />
private vs. state, and employer vs. private<br />
provision, in different places. “Long term, the<br />
trend away from final salary systems in countries<br />
like the UK and the US will probably accelerate a<br />
simplification towards schemes based on defined<br />
contributions,” he explains.<br />
Even so, the appetite for mobility among<br />
international executives will still pose difficulties<br />
for companies, not least because of the risk of<br />
getting it wrong. Firms are in danger not just of<br />
leaving employees disgruntled and so losing<br />
them altogether, but also of making mistakes<br />
that can undermine their reputation at home as<br />
well as abroad.<br />
As Debner points out, out that there is a risk<br />
of an employee choosing to do it themselves,<br />
making a mistake and thereby failing to comply,<br />
and so causing trouble for their employer.<br />
“The risk of an investigation by the tax<br />
authorities has increased in recent years.<br />
This can damage a company’s reputation. The<br />
danger of being dragged into the headlines for<br />
alleged wrongdoing is one of the worst.” The<br />
secret, it seems, is to be aware of such risks from<br />
the outset and to manage them as they arise.<br />
Percentage of employees<br />
that are short-term<br />
assignees (
Feature Working trends<br />
33%<br />
The proportion of some<br />
36,000 firms globally,<br />
polled by ManpowerGroup,<br />
that are struggling to fill<br />
positions due to local<br />
skills shortages.<br />
Preparing a new<br />
human age<br />
Françoise Gri is President of ManpowerGroup Southern Europe and has been named<br />
as one of Fortune’s Global 50 Most Powerful Women in Business for eight consecutive years.<br />
She talks to T <strong>Magazine</strong> about key trends in the world of work. Interview by Fergal Byrne<br />
T <strong>Magazine</strong>: In today’s increasingly global<br />
business environment, how important is it for<br />
managers to have international experience?<br />
Françoise Gri: Over the past decade or so,<br />
businesses have become more global. But what<br />
has changed more recently is the way in which<br />
we think about different markets. In the past, we<br />
assumed that the world was flat and we wanted<br />
managers who dealt with different markets in a<br />
similar way. Today, we no longer believe that the<br />
world is flat. We want business leaders who have<br />
an international perspective and who can<br />
respond to local differences.<br />
Although we still need managers with<br />
international experience, we view this experience<br />
in a slightly different way than we did in the past.<br />
It’s no longer desirable to have a manager who<br />
has lived in five different countries for two years<br />
each because, although they have some<br />
experience of different cultures, they do not<br />
have a deep enough knowledge of any. Today, we<br />
need managers who are totally connected with<br />
the local culture but who can also build a bridge<br />
with the culture of the company. This will be a<br />
critical dimension of tomorrow’s leadership style.<br />
ManpowerGroup has recently published<br />
research on the Human Age. Can you tell us<br />
what this is?<br />
We believe that we are entering what we call a<br />
20 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong>
Credit: Philippe Schlienger<br />
Human Age. This is a complex new era in which<br />
companies will have to embrace new work<br />
models, people practices and talent sources to<br />
ensure future success. In order to unleash their<br />
potential, companies will need to engage with<br />
their people on a deeper, human level. Individual<br />
needs will determine recruitment and<br />
development strategies. Companies will need to<br />
provide an environment suitable for collaboration<br />
and to anticipate more precisely the skills that<br />
they’ll need.<br />
When we first discussed these ideas at the<br />
2011 World Economic Forum in Davos, many felt<br />
that they were interesting. Since then, there has<br />
been continued social, political and economic<br />
turbulence. This year in Davos, we noticed that<br />
more and more companies are seeing the impact<br />
of these changes. Business leaders realize, for<br />
example, that there is a shortage of good people,<br />
that they don’t have the right people to develop<br />
the right strategy and that there is skill mismatch<br />
in key markets.<br />
What does the future hold for expatriate<br />
managers?<br />
We see fewer and fewer companies today looking<br />
for expatriate managers. They are not<br />
sufficiently or deeply connected to the markets<br />
in which they operate. The old idea where<br />
managers from developed countries go in and<br />
show the locals what to do is finished.<br />
Increasingly, we see what we call the “reverse<br />
expat” phenomenon. This approach rotates a<br />
local manager, based in the emerging market,<br />
through functions outside the home market. The<br />
manager can then adapt the experiences gained<br />
from this to the local market upon their return.<br />
The reverse expat approach is also a<br />
particularly powerful way to enhance retention<br />
of local talent because it allows employees in<br />
emerging markets to see that the company is<br />
truly global. If you are sitting in a business in<br />
Asia, for example, and you can see some Asian<br />
counterparts who have been promoted and are<br />
now running pieces of the business, it makes a<br />
big difference to the overall level of employee<br />
retention, particularly when it comes to key<br />
talent. Seeing that the top echelons of<br />
management are not just dominated by the<br />
parent country management team provides<br />
reassurance for ambitious local managers in<br />
these markets.<br />
How can companies balance local<br />
responsiveness with global economies of scale?<br />
I think many companies struggle to get a balance<br />
between being aligned globally but also being<br />
sensitive to appropriate local interpretation.<br />
Companies need to have global collaboration but<br />
they also need to be anchored in the local<br />
market. Some company programs will be applied<br />
systematically in all markets; others can be<br />
adapted to the needs of the local environment.<br />
There is a lot of complexity here, and managers<br />
Rise of the reverse<br />
expatriate<br />
One of the trends that<br />
Manpower’s Françoise Gri<br />
is seeing in the market<br />
is the rise of the “reverse<br />
expat”, in which a local<br />
manager from an emerging<br />
market is rotated through<br />
functions outside of their<br />
home market.<br />
have a new level of responsibility to implement<br />
this quickly, efficiently and in the right way.<br />
At ManpowerGroup, we have developed<br />
frameworks to help the company find a balance<br />
between local and global. The framework has two<br />
major components to it: one fixed and one<br />
flexible. The fixed part consists of processes that<br />
are non-negotiable, whether you are in Istanbul<br />
or Buenos Aires. In those instances, the local<br />
company needs to operate according to this fixed<br />
template, no matter what. Then there’s a flexible<br />
component, where managers can localize the<br />
program to the needs of the local market.<br />
Creating those frameworks has increased our<br />
speed tremendously because it has taken a lot of<br />
the mystery out of who’s accountable for what.<br />
Is technology changing the nature of work?<br />
It is difficult to understate the likely impact of<br />
technology on the workforce. Technological<br />
developments allow new ways of getting work<br />
done, which increase the importance of<br />
co-ordination and collaboration. Rapid<br />
communication via online networks, for example,<br />
is changing organizations’ choice of where, when<br />
and how work is performed. Social networks are<br />
pervasive, but research suggests that only 30<br />
of executives understand the implications of this<br />
new, data-intensive, social network-intensive<br />
world. This is a big challenge. We have had waves<br />
of technology before, but I think the impact<br />
today is much more subtle, while no less<br />
important. It has therefore become crucial to<br />
understand the human dimension, to adapt and<br />
respond to this changing technology.<br />
How important is diversity?<br />
I am a strong believer in diversity. It isn’t just<br />
about hiring on the basis of gender, religious<br />
persuasion or culture. Without genuine diversity<br />
of thought and representation, you’re not going<br />
to come up with the right answers. It’s just too<br />
complex to have a purely British team, for<br />
example, running a global company.<br />
As part of that drive for diversity, we need to<br />
have more women involved in business,<br />
particularly given the talent supply challenges<br />
and talent mismatch problems we see. The<br />
female talent pool is still largely untapped. I think<br />
involving women more in the labor market and,<br />
in particular, at senior leadership level, will help<br />
companies to access the right talent to succeed.<br />
In addition, female executives can bring new and<br />
valuable perspectives to the leadership team.<br />
This kind of change does not come about on<br />
its own, however. You have to fight for it. I think<br />
companies are slowly making progress on this<br />
front, but not enough. Much more still needs to<br />
be done. Looking to the future, I think the<br />
companies that will do best in the new and<br />
evolving workplace of tomorrow are those that<br />
have dealt with diversity for a long time<br />
and that have embedded it into their values and<br />
culture.<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 21
Focus Living costs Credit: Reuters / Chico Sanchez<br />
The cost of a liter of unleaded petrol in Caracas,<br />
Venezuela, the world’s cheapest.<br />
US$ 0.02<br />
Most expensive cities<br />
Paris US$ 2.76<br />
Oslo US$ 2.62<br />
Istanbul US$ 2.52<br />
Amsterdam US$ 2.40<br />
Rome US$ 2.37<br />
Cheapest cities<br />
Bahrain US$ 0.21<br />
Riyadh US$ 0.15<br />
Jeddah US$ 0.13<br />
Al Khobar US$ 0.13<br />
Caracas US$ 0.02<br />
The Economist Intelligence Unit’s Worldwide Cost of Living survey ranks 140 major business cities in 93 countries by their cost of living,<br />
based on a wide-ranging basket of goods, such as the price of fuel, and other goods profiled here.<br />
22 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong>
Living costs<br />
The relative costs of the world’s business cities are evolving<br />
in line with shifts in the global economy.<br />
• By Nigel Holloway<br />
Globalization is both a product of and a<br />
contributing factor of economic integration.<br />
As national markets become increasingly<br />
connected, the demand among international<br />
employers for globally-minded executives has<br />
grown. For the jet-setting business traveler, many<br />
markets can seem fairly homogeneous, as they<br />
travel from hotel to hotel, their feet barely<br />
touching the ground.<br />
Yet, despite the trend toward globalization,<br />
the cost of living varies almost as widely from<br />
city to city today as it did 20 years ago. This<br />
is a problem not only for expatriate business<br />
executives trying to maintain their living<br />
standard. It is also a headache for their<br />
employers that seek to keep their top talent<br />
happy, while deploying them around the world<br />
wherever the need is greatest.<br />
With the expatriate in mind, the Economist<br />
Intelligence Unit (EIU) has collected price data<br />
from cities around the world for more than<br />
two decades, comparing costs such as home<br />
rental, private school tuition and the costs of<br />
domestic help. It then ranks the cities on an<br />
index, using New York as a constant baseline at<br />
100. Today, the most expensive city in the world,<br />
Zurich, is at 170, meaning that costs there<br />
are 70% higher than New York’s. Twenty years<br />
ago, the most expensive, Tokyo, was at 171.<br />
The cheapest city today is Karachi at 46. In<br />
1992, the cheapest was Mumbai at 32, which<br />
this year ranked just above Karachi.<br />
Generally, cities in the developed markets of<br />
Europe and Japan are among the most<br />
expensive. Their individual rankings bounce up<br />
and down according to exchange rate<br />
movements, but they remain in the same richer<br />
group. By the same token, cities in the<br />
fast-growth regions of Asia and the Middle East<br />
are among the cheapest. But there are some<br />
notable exceptions. Singapore, for example, is<br />
now in the top 10 and 42% pricier than New<br />
York, thanks to soaring rents and a strong<br />
exchange rate. It is now far more expensive than<br />
rival Hong Kong (115 on the index) and<br />
neighboring Kuala Lumpur (83). Nor are all cities<br />
in other rapidly growing countries cheap.<br />
Luanda, the oil-rich capital of Angola, was one<br />
of the most expensive cities in the world for<br />
expatriates in 2011. Two other African cities<br />
were also prominent on a the list, Ndjamena,<br />
Chad and Libreville, Gabon. Energy and mining<br />
companies have been lured there by the promise<br />
of natural resources. But the lack of<br />
infrastructure means that these firms must build<br />
their own housing and amenities, resulting in<br />
high costs for expatriates’ employers.<br />
Cheapness, in and of itself, does not<br />
necessarily make a city attractive. But as the<br />
global economy tilts towards fast-growth markets,<br />
an increasing number of professionals are seeing<br />
cities in those markets both as a source of jobs<br />
and as places that offer a boost to their careers.<br />
Inevitably, as demand for fine housing grows,<br />
prices go up. Shanghai, on a par with Moscow, is<br />
now slightly more pricey than New York. São<br />
Paulo in Brazil is 12% more expensive than New<br />
York, and pricier than Rome and Berlin.<br />
And the variations within countries are often<br />
as great as from one nation to another. Thanks<br />
to the weak US dollar, American cities are in the<br />
middle of the global rankings. But the gap<br />
between the top (Los Angeles at 102) and the<br />
cheapest (Cleveland at 73) is greater than<br />
between Shanghai (102) and Tianjin (79). In the<br />
US, high unemployment and falling rents have<br />
made the traditional manufacturing heartland<br />
a cheap region in which to do business.<br />
Overall, though, the cities with the lowest<br />
expatriate costs tend to be in non-western<br />
countries. Mumbai, New Delhi, even Panama City<br />
(42% less expensive than New York) would seem<br />
to present enticing bargains to the expatriate.<br />
The question arises, though, as to how much<br />
longer such disparities will last. The foreign<br />
executive living in the lap of luxury on a foreign<br />
assignment, with domestic help covering the<br />
daily chores, may become a thing of the past,<br />
not least as cheap labour finds better-paying jobs<br />
in manufacturing or IT. Indeed, a popular<br />
complaint for wealthy households in São Paolo<br />
today is the soaring cost of domestic labor, as<br />
the pool of available nannies, cooks and cleaners<br />
dries up. Such changes will continue as the<br />
balance of power in the global economy shifts<br />
towards key growth markets.<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 23
Focus Living costs Credit: Keystone / Laif / Frank Tophoven<br />
Average cost of 4 theatre tickets to a good show<br />
at teatro real in Madrid, Spain.<br />
US$ 1,182.86<br />
Most expensive cities<br />
Madrid US$ 1182.86<br />
Beijing US$ 1022.26<br />
Caracas US$ 876.46<br />
Munich US$ 857.14<br />
Milan US$ 828.57<br />
Cheapest cities<br />
Lexington US$ 130.0<br />
Amman US$ 126.76<br />
Istanbul US$ 120.0<br />
Nouméa US$ 82.75<br />
Nairobi US$ 47.81<br />
Cost of living surveys are a key tool for corporate HR teams to compare costs of key locations around the world, as part of their calculations<br />
in creating fair compensation policies for expatriate employees.<br />
24 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong>
Credit: Reuters / David Gray<br />
Average cost of a routine checkup at<br />
family doctor in Dalian, China.<br />
US$ 6.35<br />
Most expensive cities<br />
Frankfurt US$ 377.14<br />
Bangkok US$ 340.51<br />
Houston US$ 325.00<br />
Chicago US$ 279.00<br />
Miami US$ 275.00<br />
Cheapest cities<br />
Shenzhen US$ 12.54<br />
New Delhi US$ 12.01<br />
Colombo US$ 9.55<br />
Algiers US$ 6.86<br />
Dalian US$ 6.35<br />
HR teams can apply the cost of living index to an expatriate’s net income, to assess whether it provides a fair cost of living allowance for their<br />
overseas assignment.<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 25
Focus Living costs Credit: Keystone / Laif / Multhaupt<br />
Average monthly rent of 2 bedroom furnished<br />
apartment in Tokyo, Japan.<br />
US$ 12,331.21<br />
Most expensive cities<br />
Tokyo US$ 12331.21<br />
Osaka US$ 8006.60<br />
London US$ 7741.94<br />
Hong Kong US$ 6974.75<br />
New York US$ 6333.33<br />
Cheapest cities<br />
Karachi US$ 718.24<br />
Cairo US$ 621.85<br />
New Delhi US$ 596.93<br />
Panama City US$ 291.67<br />
Kathmandu US$ 477.75<br />
Until recent years, the typically low costs of living in many emerging markets made expatriate assignments relatively luxurious.<br />
But living costs in many emerging market cities, from Luanda to Moscow to Shanghai, now outstrip New York, the usual baseline city.<br />
26 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong>
Credit: Reuters / Punit Paranjpe<br />
Average cost of a tailored men’s business suit<br />
in New Dehli, India.<br />
US$ 120.11<br />
Most expensive cities<br />
Vancouver US$ 2022.11<br />
Tel Aviv US$ 1952.91<br />
São Paulo US$ 1917.79<br />
Milan US$ 1866.67<br />
Brisbane US$ 1840.07<br />
Cheapest cities<br />
Dhaka US$ 331.75<br />
Ho Chi Minh City US$ 331.22<br />
Phnom Penh US$ 294.33<br />
Kathmandu US$ 227.50<br />
New Delhi US$ 120.11<br />
The cost of living in a given city is a crucial factor in deciding an expatriate’s pay package, but other factors also matter, not least of which is the<br />
local rates of taxes, and or social security provisions.<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 27
Focus Finances and tax risks<br />
The stateless<br />
employee<br />
A growing number of workers are nearly permanently on the road<br />
as their employers expand globally. This in turn raises considerable challenges,<br />
not least of which in terms of finances and tax.<br />
71%<br />
The proportion of expatriate<br />
workers who have experienced<br />
more complex finances since<br />
relocating abroad, according<br />
to HSBC.<br />
• By Andrea Chipman<br />
An era of rapid globalization has produced<br />
a new generation of “stateless<br />
employees.” These executives may be<br />
born in one country, live in another and spend a<br />
significant proportion of their working lives<br />
traveling from one continent to another, either<br />
as an expatriate on assignment or else simply as<br />
an executive constantly on the move. This<br />
nomadic workforce is increasingly valuable to<br />
companies, but can also pose headaches from a<br />
tax and benefits perspective.<br />
This challenge isn’t for the companies alone.<br />
Expatriate employees that move intermittently<br />
from one geographic assignment to another can<br />
face considerable difficulties in managing their<br />
personal finances too. Those who spend a lot of<br />
time overseas can have more complex personal<br />
tax affairs, may need multiple bank accounts,<br />
and can have difficulties with moving pension<br />
arrangements when they relocate. In a survey<br />
for HSBC International, 71% of expatriate<br />
employees said that their finances had become<br />
more complex since relocating. 1<br />
Salary arrangements may need to be split<br />
between home and host country, causing<br />
significant reconciliation work when tax returns<br />
are filed, to determine how much time the<br />
executive spent in each location. Certain<br />
compensation structures can make tax affairs<br />
even more complex. For example, if an executive<br />
receives deferred compensation in the form of<br />
equity, rather than cash, this can have tax<br />
consequences if equity awards are granted for a<br />
particular business year but vested over a longer<br />
period during which the employee changes<br />
location several times.<br />
Such issues can also crop up for so-called<br />
“accidental expatriates”, which relates to the<br />
phenomenon of executives who are ostensibly<br />
based in their home country, but which travel<br />
overseas frequently. Employees who are paid in<br />
their home country but do a lot of work overseas<br />
can trigger local tax liabilities, presenting a<br />
challenge to companies to find ways of tracking<br />
these individuals in order to be compliant. “We<br />
see more and more individuals who are on a<br />
domestic contract but overseeing a regional area<br />
with a lot of cross-border commuting that can<br />
expose them to local taxes,” says Nick Bacon, a<br />
Partner in EMEIA Financial Services-Human<br />
Capital at <strong>Ernst</strong> & <strong>Young</strong>.<br />
It may also be unclear how to account for the<br />
mobile employee’s time and costs, particularly if<br />
they move frequently. “If you have someone<br />
sitting in a legal entity in India, going to work for<br />
an entity in the same group in London, what<br />
happens to the individuals’ costs – are they borne<br />
by London or Mumbai?” asks Bacon. “If there is<br />
a supply of staff, it can give rise to a VAT reverse<br />
charge, where the host country would have to<br />
charge itself VAT on the deemed import of<br />
services from the home country.”<br />
There are also corporate tax risks for<br />
employers in the context of triggering a taxable<br />
presence (or permanent establishment) and<br />
impacts for their transfer pricing systems when<br />
high-value creating employees frequently travel<br />
and work abroad. “If you think about financial<br />
institutions sending project teams abroad to<br />
work on a large deal, they may be based abroad<br />
for weeks or months at a time. This could<br />
certainly attract the attention of local tax<br />
authorities during transfer pricing reviews or tax<br />
audits,” says Chris Price, the Head of Tax for<br />
<strong>Ernst</strong> & <strong>Young</strong>’s EMEIA Financial Services<br />
practice in London.<br />
Creating mobile retirement plans<br />
Pension arrangements also pose a major<br />
challenge to the mobile workforce. Employees<br />
1<br />
28 T <strong>Magazine</strong> Issue 07 HSBC Expat Explorer Survey 2011<br />
<strong>Ernst</strong> & <strong>Young</strong>
who live in several countries throughout their<br />
career are likely to have multiple pension plans,<br />
each in a different currency. When the executive<br />
finally retires, reconciling these plans and<br />
moving money to where it can be accessed from<br />
one location can be a time-consuming process<br />
that holds currency and taxation risks.<br />
“Pensions are the one thing people want tied<br />
to what they see as their home country,” says<br />
Sarah Dyce, Senior Manager for Global Mobility<br />
at <strong>Ernst</strong> & <strong>Young</strong>. “Portability is increasing<br />
slowly, but we’re a long way from people being<br />
able to move their pensions wherever they are in<br />
the world.” Matthew Ozburn, a director at HR<br />
International at Deutsche Bank, argues that it<br />
can be extremely complex to advise highly<br />
mobile executives to save for retirement in a<br />
tax-efficient way. “One of our biggest challenges<br />
is in the area of private company pension<br />
planning looking over the course of a person’s<br />
career,” he explains. “If most highly performing<br />
people will have careers taking place in different<br />
countries with different tax-related incentives,<br />
you will end up with this challenge of saving in a<br />
tax-efficient way to allow mobile people to live<br />
well in retirement.”<br />
Tax policy on international pensions has been<br />
slow to develop. There are currently no tax relief<br />
regimes for international employee pensions,<br />
and no way to claim deductions on foreign<br />
assignments when plans vest. This means that<br />
employees can be exposed to tax liabilities, while<br />
employers may be taxed in multiple locations on<br />
the contributions.<br />
Domicile debates<br />
Remaining domiciled in one’s home country for<br />
pension purposes has been a particularly<br />
emotive issue for citizens of European countries,<br />
which have traditionally had strong welfare<br />
states and extremely generous health care and<br />
social security benefits. Increasingly, however,<br />
employers are less willing to keep global<br />
employees in their home country benefit plans.<br />
Changes in the social contract between<br />
government and the population in these<br />
countries have also started to weaken this link:<br />
“Social security systems are no longer as secure<br />
as they were 20 years ago so people are more<br />
willing to work elsewhere because they have no<br />
idea where and when they are going to retire,”<br />
says Bernd Kirchner, Global Head of HR<br />
International at Deutsche Bank. “In the old days,<br />
it was a big selling point if you could tell someone<br />
you were sending them on an assignment but<br />
keeping them in the German social security<br />
system. Now that’s not seen as much of a<br />
benefit. The opportunity cost is lower today.”<br />
More generally, employees who work overseas<br />
as expatriates are now less likely to receive the<br />
generous benefits that once went with the role.<br />
In part, this is because there is a view that<br />
international postings should now be seen as an<br />
attractive part of the career path, rather than a<br />
Tracking compliance<br />
Tax track and trace<br />
for global executives<br />
__ Keeping track of globally mobile<br />
employees is a major challenge for<br />
corporate compliance teams. Senior<br />
executives that live in one country,<br />
work largely in another, and regularly<br />
fly into several others can present a<br />
particular challenge from a tax<br />
tracking perspective, as can<br />
international expatriates. Some<br />
countries are even handing executives<br />
and their employers an income or<br />
social security tax bill when they stay<br />
too long in one place, or pass a time<br />
threshold after one-too-many<br />
short-term visits to a location.<br />
But a new app called “Tracer”<br />
promises to help globetrotting<br />
executives avoid tax traps. Created<br />
by <strong>Ernst</strong> & <strong>Young</strong>, the app provides a<br />
mobile calendar service which, when<br />
activated, records the location of an<br />
employee and tracks their movements<br />
using the phone’s GPS. This<br />
generates a report that allows<br />
employers to analyze the travel<br />
hardship. This reduction in the financial<br />
incentives for expatriate postings can create a<br />
dilemma for some employees. While recognizing<br />
that the move is good for their own career, it<br />
may mean that their spouse – if they are also<br />
working – will not be able to work because of visa<br />
issues. This can mean that, in real terms, the<br />
employee’s total household income will fall,<br />
making the move less attractive.<br />
Kirchner thinks that, in future, companies will<br />
need to do more to encourage mobility among<br />
their employees, particularly those below the<br />
C-suite who rely on incomes from both partners.<br />
“Companies need to find a smart way to make it<br />
an attractive package to both partners, even<br />
though you can only employ one,” he says. “For<br />
example, they can offer support for the spouse<br />
to apply for a job, visa sponsorship or an<br />
explanation of the labor market in the host<br />
country.”<br />
As companies become more global and as<br />
talent flows increasingly in every direction, the<br />
stateless employee is likely to become a more<br />
important fixture in the workforce. Rather than<br />
being the preserve of the top echelons in a<br />
company, mobility is likely to be common at all<br />
levels, requiring companies to consider the<br />
needs of this section of the workforce whenever<br />
corporate decisions are made.<br />
data—which automatically excludes<br />
holidays and other exceptions, as well<br />
as any personal information—and<br />
provides alerts when an individual is<br />
close to triggering a tax alert in a<br />
location.<br />
According to Tim Stansel, an<br />
Executive Director in the Human<br />
Capital practice at <strong>Ernst</strong> & <strong>Young</strong> in<br />
New York, the app targets two kinds<br />
of executives. One is the frequent<br />
traveller who works outside of his or<br />
her home tax jurisdiction and is at<br />
risk for triggering a taxable event; the<br />
other is an expatriate on assignment<br />
and who needs to track their travel<br />
for income tax purposes. “It helps<br />
mitigate the potential risks<br />
associated with cross border tax and<br />
immigration,” he says. “At the same<br />
time, it allows employees to focus on<br />
their job responsibilities by<br />
eliminating the need for users to log<br />
into a web-based calendar to keep<br />
track of their travel.”<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 29
Ellen Shipley<br />
__Ellen Shipley, the Head of<br />
Mobility and International<br />
Assignments at BT, the<br />
telecommunications<br />
company, works to ensure<br />
the successful overseas<br />
placement of executives<br />
and their families.<br />
30 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong>
Credit: Muir Vidler Expatriate postings Management<br />
Making relocation<br />
a success<br />
Despite their obvious benefits for any executive pursuing a global career,<br />
expatriate postings all too often end in failure. So what can be done<br />
to help ensure a successful assignment?<br />
• By David Balchover<br />
Anecdotal evidence strongly suggests that<br />
a significant proportion of expatriate<br />
placements end in failure, with workers<br />
returning earlier than planned to their home<br />
country, thus giving their company an<br />
organizational headache and creating further<br />
costs. So what causes these placements to end in<br />
disappointment for both worker and employer?<br />
And, more practically, what can be done to help<br />
expatriates overcome these difficulties and<br />
thrive in their new role in a distant land?<br />
Many expatriate postings might actually be<br />
doomed to failure before they have even begun,<br />
To avoid potential conflict or<br />
failure, companies need to test for<br />
cultural sensitivity<br />
simply because the particular employee is poorly<br />
suited to living and working abroad. Nearly<br />
three-quarters (73%) of respondents (all of them<br />
current or recent expatriates, or those who had<br />
overall responsibility for assignments) to a 2010<br />
Economist Intelligence Unit survey cited “cultural<br />
sensitivity” as the most important attribute in a<br />
Summary<br />
Despite the obvious<br />
benefits to both<br />
employees and the<br />
firms they work for, a<br />
significant proportion<br />
of foreign placements<br />
end in failure. But<br />
various measures can<br />
help ensure a greater<br />
likelihood of success,<br />
from better initial<br />
planning through to<br />
better support for the<br />
expatriate’s family.<br />
successful expatriate. If you<br />
don’t have the ability to<br />
perceive cultural differences,<br />
you are destined to struggle in<br />
both the workplace and your<br />
wider social life in a foreign<br />
environment.<br />
“Managers who struggle are<br />
the ones who aren’t sufficiently<br />
flexible to adjust their<br />
management style; what has<br />
been successful in their home<br />
country for years suddenly<br />
doesn't work any more, and they find it difficult<br />
to adapt to the new situation,” says Thomas<br />
Efkemann, an Executive Director for Assignment<br />
Services at <strong>Ernst</strong> & <strong>Young</strong>. “You need to have<br />
different managerial approaches available, and<br />
then you select the best one according to the<br />
circumstances.”<br />
Several management thinkers, most notably<br />
Geert Hofstede and Fons Trompenaars, have<br />
sought to measure cultural differences in the<br />
workplace, comparing attitudes across the world<br />
to various concepts such as teamwork, hierarchy<br />
and risk. Any expatriate who ignores the intricate<br />
subtleties of national culture will soon pay the<br />
penalty.<br />
35%<br />
The proportion of spouses<br />
working during an assignment,<br />
down from 89% that were<br />
working prior to the placement,<br />
according to the Permits<br />
Foundation.<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 31
Management Expatriate postings Credit: Getty / Sean Sexton<br />
“I once went to a meeting with a fellow<br />
Westerner in Japan,” recalls Ellen Shipley, Head<br />
of Mobility and International Assignments at BT,<br />
a major telecommunications company. “He took<br />
a business card from our Japanese hosts, didn’t<br />
look at it, and flipped it on the table. You just<br />
can’t do that there. There are a lot of little rules<br />
you simply have to pick up on, wherever you go.”<br />
Getting the right person<br />
Because many workers are just unsuited to<br />
conditions abroad, careful selection of the<br />
expatriate is vital. To avoid potential conflict<br />
and the resulting failure of the placement,<br />
companies routinely test for cultural sensitivity<br />
in prospective expatriates. But all too often,<br />
company headquarters will play down the<br />
importance of the test’s findings, and go ahead<br />
in selecting candidates purely on their<br />
performance on home territory. "I have seen<br />
Language ability, or at least the<br />
desire to learn, can be a key factor<br />
in helping expatriates settle in<br />
people who were superstars in their own<br />
country," recalls Efkemann. "And based on this<br />
record, their management assumes they will<br />
perform just as well in a different country.<br />
But then they fall flat on their faces because<br />
their approach didn't fit the local market at<br />
all."<br />
Cultural training, prior to departure, can teach<br />
some of the essential dos and don’ts and help<br />
reduce the risk of major clashes. Large<br />
companies also routinely offer language training<br />
to ease the transition. Although no one will<br />
become fluent in a language after a short course,<br />
a basic grounding can demonstrate respect for<br />
the local culture, and a willingness to learn more<br />
about it.<br />
Indeed, language ability, or at least the desire<br />
to learn, doubtless correlates strongly with the<br />
cultural sensitivity that is so essential to<br />
expatriate success. After all, it must be difficult<br />
to be sensitive to a culture when you have very<br />
little idea what is being said around you. The<br />
Economist Intelligence Unit survey seems to<br />
confirm this link. Former expatriates were much<br />
more likely to crave another posting if they found<br />
dealing with a foreign language to be “highly<br />
attractive.”<br />
Despite the apparent benefits of cultural<br />
and language training, the current economic<br />
climate is prompting some companies to cut back<br />
on it. “There is a real lack of understanding<br />
within the corporate world about what it actually<br />
means to pack up and move to another country,”<br />
says Shipley. “Consequently, when times are<br />
hard, heads of departments can see the<br />
investments that have traditionally been made to<br />
help an expatriate settle as dispensable items.”<br />
5 key measures that can help boost the success of a placement<br />
Improving the odds<br />
__ No strategy can guarantee the<br />
success of an expatriate placement.<br />
However, companies can certainly<br />
adopt measures to facilitate their<br />
employee’s transition, and thus<br />
increase the likelihood that he or<br />
she will excel in a foreign<br />
environment.<br />
1. Choose the right individual<br />
The key issue of selection is too<br />
often downplayed, with companies<br />
often believing that domestic star<br />
performers will automatically<br />
reach a similar standard within a<br />
completely alien culture. Robust<br />
selection procedures which ensure<br />
that the individual is flexible and<br />
sensitive enough to recognize and<br />
adapt to cultural differences are<br />
essential.<br />
2. Offer cultural and language training<br />
Provided that prospective expatriates<br />
possess this necessary openness,<br />
cultural training will educate them<br />
about the key differences in approach<br />
and behavior that they are likely<br />
to encounter in their new country.<br />
Language training can teach the<br />
basics, and thus help to show<br />
a welcome interest in the host<br />
culture.<br />
Relocations on the rise<br />
International relocations,<br />
especially among service<br />
firms, have risen steadily<br />
for three years in a row,<br />
rebuilding since a 2009<br />
low. In 2011, 28% of firms<br />
globally expected an<br />
increase in the number of<br />
relocations abroad,<br />
according to Atlas' 2011<br />
Corporate Relocations<br />
Survey.<br />
3. Allow the family time to commit<br />
wholeheartedly<br />
Rushed decisions to spend several<br />
years away from family, friends and<br />
a familiar setting can quickly be<br />
regretted. Companies should insist<br />
that the whole family contemplates<br />
all the personal repercussions of the<br />
placement before consenting to<br />
it. A paid-for “look-and-see” trip<br />
will aid this decision-making process.<br />
4. Support the entire family<br />
Family discontent frequently<br />
undermines the success of an<br />
expatriate placement. Companies<br />
can help to integrate spouses by<br />
introducing them to others in a<br />
similar situation, or by assisting<br />
them to find work that is appropriate<br />
for someone of their level. (According<br />
to the Permits Foundation, 82% of<br />
expatriate spouses or partners have<br />
a university degree.)<br />
5. Appoint a good destination service<br />
provider<br />
Once ensconced in their new country,<br />
a destination service provider can<br />
teach the family all the necessary<br />
practicalities, such as how to pay<br />
utility bills and where to go shopping<br />
for various items.<br />
32 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong>
The importance of family integration<br />
The adjustment for the expatriate may be<br />
difficult enough, but many believe that<br />
assignments more often than not fail because<br />
the worker’s partner and children don’t<br />
acclimatize well to their new surroundings.<br />
“Family issues are the biggest obstacle to<br />
expatriate success,” says Yvonne McNulty, an<br />
academic specialising in global mobility at<br />
Monash University in Australia. “If the<br />
organization is focusing only on the expat and<br />
not on the family, problems can quickly surface.”<br />
When you look at the available evidence, it’s<br />
not hard to understand why. According to an<br />
extensive 2008 survey by the Permits<br />
Foundation, interviewing more than 3,000<br />
expatriate spouses and partners of 122<br />
nationalities, 89% of spouses were working prior<br />
to the assignment, but only 35% during the<br />
assignment itself.<br />
Three-quarters of those not working said they<br />
wanted to work, inevitably leading to frustration,<br />
disillusionment and boredom. Eight in 10<br />
working spouses reported a positive adjustment<br />
to their adopted country, compared with only<br />
32% of non-working spouses. “The location may<br />
have changed, but the expat worker’s routine of<br />
getting up and going to work hasn’t,” says<br />
Shipley. “But the partner doesn’t know a soul –<br />
he or she’s not working and, unlike the expat,<br />
has no ready-made networks to tap into. Three<br />
or four months down the line, you’re both fed up,<br />
and we’re talking about bringing you home.”<br />
Many companies, including BT, try to help<br />
partners (also known as, “the trailing spouse”),<br />
by offering them a few thousand pounds to be<br />
used for anything that might help them to<br />
integrate, be it a vocational training course,<br />
language classes or club membership.<br />
However, McNulty says that the amount of<br />
corporate attention devoted to helping the<br />
spouse and other family members is simply<br />
insufficient, given the impact of their potential<br />
unhappiness on the success of the overall<br />
assignment. “HR departments have a hugely<br />
difficult time getting sufficient funding for<br />
something that doesn’t have a clearly<br />
Insufficient corporate attention is<br />
devoted to helping the expatriate's<br />
family members<br />
measurable return on investment,” she says.<br />
“Family support has rarely been seen as an<br />
essential part of expatriate management. Maybe<br />
companies shy away from it because the issue is<br />
too challenging, or perhaps they are wary of<br />
crossing a line and interfering in their employees’<br />
personal lives.”<br />
Further statistics from the Permits Foundation<br />
appear to verify these views. About threequarters<br />
(76%) of expat partners, for example,<br />
would have welcomed some guidance or advice<br />
on their job search, but only 11% believed they<br />
received adequate support in this regard.<br />
Taking matters into their own hands,<br />
expatriates and their partners have established<br />
informal networks throughout the world,<br />
including clubs to meet each other face-to-face<br />
and websites for sharing ideas, anxieties and<br />
local recommendations. Most partners’ websites<br />
and blogs are set up by women (according to a<br />
2010 survey by Brookfield Global Relocation<br />
Services, 83% of expatriates are men), but there<br />
are signs that support groups for male partners<br />
are emerging, such as the Brussels-based STUDS<br />
(Spouses Trailing Under Duress Successfully).<br />
Careful consideration<br />
Thomas Efkemann of <strong>Ernst</strong> & <strong>Young</strong><br />
recommends that expatriates should discuss the<br />
potential international assignment in depth with<br />
their partner and family prior to accepting the<br />
offer. “Company managers should allow them<br />
the time to consider all the implications,” he<br />
says. “Sometimes, after the initial wave of<br />
Companies need to intervene to<br />
ensure that executives are not<br />
placed at a financial disadvantage<br />
enthusiasm for this exciting opportunity to work<br />
abroad, problems begin to arise. Where will they<br />
live? What about schooling and health care? Is<br />
the partner able to work abroad as well? By the<br />
time worker and partner both realize they don't<br />
really want to go, they may have already made a<br />
commitment.”<br />
A “look-and-see” trip to the relevant<br />
destination, often paid for by the company, can<br />
give the family the knowledge they need to make<br />
an informed decision, prior to formal acceptance.<br />
If they then do decide to take the plunge, a good<br />
destination service provider who can assist with<br />
the practicalities of the move is also invaluable.<br />
“Having someone there to help you find the right<br />
property to live in, sort out your bank account, get<br />
you a driving license or show you the local grocery<br />
store, can greatly ease the stress involved in the<br />
transition to a new country,” says Shipley.<br />
“Cutting back on this service is a false economy<br />
for companies. They need their expatriates to hit<br />
the ground running, not spend their days<br />
worrying about how to pay an electricity bill.”<br />
For any potential expatriate family, an open<br />
and curious mind, and the motivation to make the<br />
assignment work, along with the initial assistance<br />
an employer might provide, will make for a good<br />
start to what can be a fulfilling and successful<br />
venture. But those who are inflexible by nature,<br />
or are accompanied by a family member dragged<br />
to the foreign destination against their will, are<br />
unlikely to get successfully through the long days,<br />
weeks and years that lie ahead, even with the<br />
most expert tax advice or instructive cultural<br />
training course in the world.<br />
Most common issues<br />
affecting international<br />
assignments<br />
49%<br />
Family- or spouse-related issues<br />
47%<br />
Compensation package<br />
36%<br />
Repatriation<br />
32%<br />
Location or cultural issues<br />
14%<br />
Others<br />
9%<br />
Position-related issues<br />
(e.g., unsatisfactory position)<br />
*multiple responses possible<br />
Source: <strong>Ernst</strong> & <strong>Young</strong>'s Global<br />
Mobility Effectiveness Survey 2011<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 33
Management The reverse brain drain<br />
Human capital<br />
on the move<br />
The magnetic pull of skilled professionals and students from developing<br />
to developed markets is giving way to a more multipolar world, where countries<br />
increasingly compete for talent.<br />
Summary<br />
For the past century,<br />
the flow of talent has<br />
been largely from<br />
emerging to developed<br />
markets. But a more<br />
multipolar world is<br />
triggering new flows<br />
of skilled workers.<br />
This is sparking global<br />
competition for talent.<br />
• By Gerri Chanel<br />
People have been moving in search of better<br />
opportunities since the dawn of humanity.<br />
Back then, hunters migrated to stalk<br />
bigger herds. Today, it is intellectual capital on<br />
the move. Just a few years ago, talented<br />
engineers or scientists from such countries as<br />
India or China would make their way to countries<br />
such as the UK or the US. Today, those<br />
individuals are increasingly returning to their<br />
country of origin after obtaining education and<br />
experience – a phenomenon sometimes called<br />
“reverse brain drain.” Of course, one country’s<br />
brain drain is another’s gain, presenting<br />
challenges and opportunities for the countries<br />
– and companies – on both shores.<br />
China, India – and beyond<br />
Hai gui is the Mandarin term for sea turtle, a<br />
creature that is born on land, but grows up in the<br />
ocean before returning. It is also the informal<br />
term for the ever-growing number of Chinese<br />
graduates and professionals abroad who are<br />
increasingly returning home. China is not alone<br />
in this phenomenon: according to a 2011 study<br />
by recruitment consulting firm Kelly Services, an<br />
estimated 300,000 Indian professionals now<br />
working overseas are expected to return to India<br />
by 2015. Elsewhere, skilled expat workers from<br />
African countries such as Nigeria, Kenya, Ghana<br />
and Angola are also returning in notable<br />
numbers to their countries of origin, not<br />
least due to a slowdown in many richer<br />
economies.<br />
Joseph Pagop Noupoue, <strong>Ernst</strong> & <strong>Young</strong>’s<br />
Managing Partner for Cameroon, is one example.<br />
He recently relocated back to Africa after being<br />
educated and working in France for 23 years,<br />
and is far from alone. “We are receiving<br />
applications from so many young and talented<br />
Africans who are ready to make the trip back and<br />
bring their contribution to the development of<br />
the continent,” he says.<br />
Another notable trend is the movement<br />
of skilled workers within Europe due to varying<br />
economic conditions, says Michael Liley of<br />
<strong>Ernst</strong> & <strong>Young</strong>’s Human Capital practice<br />
in London and former Global HR Director of<br />
<strong>Ernst</strong> & <strong>Young</strong>. As a result, Spain, Italy and<br />
Greece now host a generation of highly-educated<br />
people in their mid-20s to mid-30s who cannot<br />
find good work. “So EU countries that are doing<br />
better economically, like Germany, have had<br />
quite a significant intake of qualified talent from<br />
those other countries,” he says.<br />
These trends are quite different to the<br />
established ones, which are characterized by the<br />
movement of talented workers from less<br />
developed to more developed countries. But a<br />
striking reversal may be looming, with various<br />
talent consultancies arguing that within several<br />
decades, many vacancies for senior roles in<br />
countries such as India will be filled not only by<br />
returning Indians, but also by Americans and<br />
Europeans seeking better prospects.<br />
Push and pull<br />
“The labor market is a major driver of talent<br />
migration,” says David Rooney, Executive<br />
Director of Global Mobility in <strong>Ernst</strong> & <strong>Young</strong>’s<br />
Human Capital practice, but he notes that it is<br />
only one of many factors, often categorized as<br />
either “push” or “pull.” Push factors might<br />
include lack of career or salary growth, or<br />
immigration policies that discourage permanent<br />
residence after training. “Pull factors,” he says,<br />
“may include higher wages or opportunity for<br />
career advancement, but there are others.<br />
Cultural affinity and family ties can also pull<br />
people back home, as well as pride around<br />
supporting growth in the home country, and<br />
sometimes simply quality of life.”<br />
According to a 2011 study sponsored by the<br />
Kaufmann Foundation in the US, which<br />
interviewed Indian and Chinese professionals<br />
who had been educated in America about their<br />
reasons for returning home, the top three<br />
34 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong>
factors were economic opportunities, access to<br />
local markets and family ties.<br />
For highly skilled scientists and technology<br />
workers, there are yet other factors. According<br />
to a 2008 OECD publication, The Global<br />
Competition for Talent: Mobility of the Highly<br />
Skilled, these workers also seek better research<br />
funding and research infrastructure, the<br />
opportunity to work with “star” scientists and<br />
more freedom to debate.<br />
Government programs and policies<br />
Governments across the world continue to<br />
create a wide repertoire of programs to help<br />
draw highly skilled expats home. China’s list<br />
alone is huge. To encourage students to return,<br />
the Government there has set up educational<br />
bureaux in its embassies and consulates as well<br />
as several thousand student associations.<br />
Universities and government-funded research<br />
organizations actively recruit returnees. One<br />
initiative, The Thousand Talents Program, offers<br />
incentives to top researchers to come home,<br />
including a one-time, tax-free cash allowance of<br />
¥1 million (US$159,000), and a residency<br />
permit in whichever city they choose, among<br />
other benefits. Some cities have created<br />
“enterprise incubators” for returnees.<br />
The United Arab Emirates has made its expat<br />
workers aware of employment opportunities<br />
back home by creating an online platform called<br />
Return2Home. The initiative targets Emirati<br />
jobseekers in the US, UK, Canada, India and<br />
South East Asia, as well as employers seeking<br />
non-resident Emiratis with international<br />
experience and expertise.<br />
With many skilled expats being increasingly<br />
“pulled” home, the countries currently hosting<br />
these expats have an equally large stake in<br />
encouraging them to stay. According to Liley,<br />
“How well a country integrates its talent will<br />
have a high impact on whether that talent comes<br />
to consider the host society home. For example,”<br />
he says, “countries such as Sweden and other<br />
Nordic countries have provided language training<br />
for numerous years, which is the key to<br />
connecting with the local population and<br />
integrating into the society.<br />
In some cases, immigration policies create<br />
barriers to workers who might otherwise wish to<br />
stay in a host country. For example, the US is<br />
experiencing an exodus of skilled foreign<br />
workers, particularly in crucial fields of science,<br />
technology, engineering and mathematics.<br />
“Many of these people are leaving simply<br />
because they cannot get permanent visas to<br />
stay in the US after their student or training<br />
visas expire,” says Rooney. Another approach is<br />
to ease immigration policies that prevent needed<br />
talent from entering. Like the US, the UK faces<br />
shortages of skilled workers, particularly in<br />
certain sectors. The British Business Secretary<br />
Vince Cable stated in 2011 that the UK’s<br />
aerospace industry faces a serious, chronic<br />
shortage of engineers; he believes certain<br />
immigration caps are partly to blame.<br />
Governments can also change immigration<br />
rules to make it easier for expats to return. For<br />
example, in Canada, a pilot program was<br />
launched in 2011 to encourage Canadian expats<br />
in certain sectors facing significant shortages,<br />
such as health care and academic research, to<br />
return home by easing immigration restrictions<br />
on non-Canadian spouses.<br />
Education is also on the move<br />
Working professionals are one facet, but<br />
students are also crucial here. Vast numbers of<br />
students in developing economies leave home<br />
each year to attend Western institutions of<br />
higher education. That fact has not been lost on<br />
Western business schools. INSEAD, a top<br />
European business school, has a campus in<br />
Singapore, and other schools, such as the<br />
University of Pennsylvania’s Wharton School,<br />
have established campuses abroad for their<br />
executive-MBA programs. Local business schools<br />
in countries such as India and China are also<br />
appearing at a rapid pace.<br />
Science and technology research institutions<br />
are globalizing more slowly. However, a new<br />
publication, OECD Science, Technology and<br />
Industry Scoreboard 2011: Innovation and<br />
Growth in Knowledge Economies, indicates<br />
that there is evidence that some universities in<br />
Asia are emerging as leading research<br />
institutions. With non-OECD economies<br />
accounting for a growing share of the world’s<br />
R&D (measured in terms of both number of<br />
researchers and R&D expenditures), it is<br />
reasonable to expect that, over time, additional<br />
research institutions in these regions will<br />
continue to emerge and grow; these will further<br />
support shifting brain flows.<br />
Talent at stake<br />
Employers face somewhat different concerns in<br />
managing talent flows from an HR point of view.<br />
But whether the issue at hand is retaining valuable<br />
immigrant employees or encouraging people to<br />
come home, “companies need to focus on the<br />
opportunities they create for employees,” says<br />
Michael Dickmann, Professor of International HRM<br />
at the UK’s Cranfield School of Management and<br />
co-author of Global Careers. “This goes far beyond<br />
monetary issues. I believe it is about the very clear<br />
development of employees and the way companies<br />
manage their talent. We consistently see that, in<br />
the range of drivers for people who work globally,<br />
these are the strongest.”<br />
In his book, Dickmann notes that what was<br />
once a clear brain drain, where the talent flow was<br />
one-way, is now changing to what he terms “brain<br />
circulation,” with mutual sharing of talent and<br />
learning. In an increasingly interconnected world,<br />
this circulation will only continue to increase. And<br />
those capturing the top minds, regardless of their<br />
origin, will benefit most.<br />
¥1m<br />
The one-time, tax-free cash<br />
allowance that one of China’s<br />
initiatives – The Thousand<br />
Talents Program – offers to top<br />
researchers to come home,<br />
amounting to about<br />
US$159,000.<br />
70%<br />
The approximate percentage<br />
of expatriates, as a proportion<br />
of the total population, in the<br />
United Arab Emirates, the<br />
highest such ratio in the world.<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 35
Management Leading virtual teams Credit: Keystone / MaxPPP / Leemage<br />
Managing in a virtual world<br />
A globalized economy is allowing companies to tap into talent<br />
from around the world. But effectively managing such virtual, multinational<br />
teams requires both new tools and different approaches.<br />
36 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong>
Videoconferencing, as it was<br />
envisioned in 1910, one of a series<br />
of prints commissioned in France<br />
to imagine the world in the year 2000.<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 37
Management Leading virtual teams<br />
Summary<br />
The rise of<br />
globalization and<br />
technology has seen an<br />
increase in the use of<br />
virtual teams. Despite<br />
this, relatively little<br />
is yet known about the<br />
best practices of<br />
how to manage such<br />
teams, from the tools<br />
required to alternative<br />
management practices.<br />
97%<br />
Percentage of Accenture<br />
employees in an internal poll<br />
who agreed that new<br />
videoconferencing technology<br />
was a good substitute for<br />
face-to-face meetings.<br />
$2.2b<br />
The estimated size of the<br />
telepresence videoconferencing<br />
market at end 2010, which is<br />
expected to more than double<br />
to US$4.7 billion by 2014.<br />
• By Kim Thomas<br />
The days when a team consisted of a group<br />
of people who arrived at the same office at<br />
9:00 a.m. each day are long gone.<br />
Knowledge workers now often work from home,<br />
and may live in different parts of the country or<br />
even across several countries and time zones.<br />
This change has been driven by a combination<br />
of factors: a recognition that staff may need to<br />
balance work with family commitments; an<br />
awareness that the ability to work offsite is a<br />
useful option during epidemics, riots or bad<br />
weather; a desire to save on travel and office<br />
costs, especially during difficult economic<br />
conditions; increasingly capable and cost-effective<br />
technology that can help make collaboration far<br />
easier and more effective; and ongoing<br />
globalization, which makes cross-border global<br />
teams a now common and essential part of doing<br />
business. In her recent book, The Shift, London<br />
Business School Professor Lynda Gratton argues<br />
that virtual working will largely become the norm<br />
for most office workers in the coming decade.<br />
There are some clear benefits to this approach,<br />
not least of which is the opportunity to bring<br />
together different experiences and perspectives.<br />
But it also brings obvious challenges for<br />
managers: in a team of people who rarely see<br />
each other, individual members can feel isolated,<br />
and may lack the opportunity to share ideas or<br />
engage in casual conversation that can spark a<br />
fruitful idea. While research shows that people<br />
who work from home tend to be more productive<br />
than those working in an office, the opposite is<br />
the case for virtual teams, according to a recent<br />
study from The Society for Human Resource<br />
Management. As Richard Edwards, Principal<br />
Analyst at Ovum, points out, even in co-located<br />
teams, managers need to accommodate the fact<br />
that people have different styles of working. “It<br />
can exacerbate and challenge team-working more<br />
if you are separated,” he says.<br />
Rethinking virtual management<br />
So what is the secret to managing a virtual team<br />
successfully? INSEAD Professor José Santos has<br />
found that teams where each member has a<br />
clearly defined role and focus work better than<br />
ones where roles are loosely defined. The<br />
measurement of performance also needs to<br />
adapt – toward a system where team members<br />
are measured on outputs. “You have to focus on<br />
performance rather than on how people are<br />
behaving with you,” says Bill Shedden, Director<br />
of the Centre for Customised Executive<br />
Development at Cranfield School of Management.<br />
Other things can help. Although it’s not always<br />
feasible, teams that have had a chance to meet<br />
before they start working virtually tend to be<br />
more effective. Without this, team meetings can<br />
be challenging, especially for a team that spans<br />
multiple cultures. Some may wish to speak but<br />
find it difficult to interrupt a conversation in<br />
mid-flow and so will opt to stay silent.<br />
Until recently, videoconferencing has<br />
remained an imperfect alternative, often with<br />
out-of-sync audio and video, or an inability to see<br />
participants clearly. This is quickly changing.<br />
Sales of telepresence videoconference<br />
technology, which uses multiple screens and<br />
high-quality audio to simulate people sitting at<br />
the same table, have increased rapidly. In 2010,<br />
the market grew 18%, totaling US$2.2 billion, and<br />
analyst firm Frost & Sullivan expects it to more<br />
than double to US$4.7 billion by 2014. Already,<br />
as costs reduce, such systems are becoming<br />
more widespread. Accenture is just one example<br />
of a multinational that is rolling out a significant<br />
number of telepresence systems globally; it<br />
already had over 50 in place by early 2010. In an<br />
internal poll, 97% of Accenture employees said<br />
that the technology was a good substitute for<br />
face-to-face meetings. “To see people’s faces<br />
makes the discussion just more productive,” says<br />
Thomas Efkemann, an Executive Director for<br />
Assignment Services at <strong>Ernst</strong> & <strong>Young</strong>. “You see,<br />
for example, when someone doesn’t agree with<br />
your comments – how someone is shaking their<br />
head or trying to get into a call.”<br />
Technology isn’t the only answer<br />
But technology alone is not the answer;<br />
management practices have to adapt too. “One<br />
consideration is to reduce the number of<br />
meetings,” says Efkemann, “but to make sure<br />
that those you do hold have very clearly defined<br />
aims.” Shedden agrees, not least due to often<br />
challenging time zone considerations. “You’ve<br />
got to pay a lot of attention to the managing of<br />
the team in terms of who’s going to be there,<br />
what’s the purpose of the meeting, what are the<br />
outcomes we expect, because for some people it<br />
will be at an unsocial time. You also want to<br />
ensure that you stick to time, because a person<br />
might be waiting to go home – he might be<br />
waiting till eight o’clock at night because he’s in a<br />
different time zone to you.” To grapple with this,<br />
some teams opt to rotate the times of meetings.<br />
Managers also need to ensure that everyone<br />
has a chance to speak, particularly when there<br />
isn’t a common first language. With meetings<br />
typically defaulting to English, some team<br />
members may need more thinking time, rather<br />
than being rushed into a response. One way of<br />
helping this along is to give team members in<br />
different locations a turn at chairing meetings, so<br />
it’s not always the same manager who chairs.<br />
Another common solution is to record a<br />
teleconference and make it available later for<br />
those who were unable to take part, allowing<br />
them to add written comments.<br />
A further consideration relates to cultural<br />
differences. Team members in different countries<br />
will be used to different meeting styles. In an<br />
38 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong>
Credit: Cisco Pics<br />
Virtual technology is shrinking the business world by connecting team members from across the globe.<br />
article for Forbes magazine, INSEAD Professor<br />
Erin Meyer identified that Swedish teams, for<br />
example, make decisions through lengthy<br />
consensus building, while in Japan, decisions<br />
tend to be made in informal one-on-one<br />
discussions before larger meetings. “Trying to<br />
force these different styles into a single mold can<br />
be tricky – but can also be seen as an opportunity<br />
to do things differently,” says Efkemann.<br />
“Sometimes it’s good to learn how the different<br />
ways are successful, because you may want to<br />
apply them to one of your future projects.”<br />
Going social<br />
Of course, meetings are only one part of keeping<br />
the team running smoothly. What happens<br />
between meetings can be even more important.<br />
While email and phone are tried-and-tested ways<br />
of staying in touch, they can suffer from being<br />
overly formal and stilted. In recent years,<br />
however, a range of new enterprise social<br />
networking software tools, such as Yammer or<br />
IBM Connections, have emerged. These mimic<br />
consumer applications like Facebook and Twitter<br />
as a more effective way of holding informal<br />
discussions, sharing tips and ideas or getting a<br />
group conversation started. Edwards describes<br />
such tools as a “glue to provide the<br />
connectiveness that we have lost as we become<br />
more distributed in our working locations.”<br />
These methods of working enable those who find<br />
it difficult to speak up in meetings to express<br />
themselves in their own time, thinking through<br />
their response. They can also be a valuable way<br />
of sharing personal and organizational insights,<br />
which a number of multinational companies are<br />
now adopting as part of a suite of collaboration<br />
tools. Gratton argues that such tools are even<br />
helping to deformalize organizational structures,<br />
replacing traditional hierarchies with a more<br />
meritocratic structure. Furthermore, many are<br />
realizing the potential for such social-style tools<br />
to help cut email overload, freeing up workers to<br />
collaborate more effectively.<br />
As part of this, Efkemann also suggests using<br />
what he calls a “virtual coffee corner” – a web<br />
space where team members can just chat,<br />
whether it’s about personal issues or work issues,<br />
without the pressure of an agenda. Others make<br />
much use of instant messaging tools, which can<br />
be a useful replacement for either the phone or<br />
email for quick, informal communication. This is<br />
especially popular among younger employees<br />
who have grown up with the technology.<br />
Even with all this, some of the basics of<br />
management remain the same: focus on what<br />
the team has to achieve, keep lines of<br />
communication open between meetings and<br />
make sure issues are brought out in the open<br />
and dealt with swiftly. “You can’t just go into the<br />
corridor and shout three people in for a<br />
meeting,” says Shedden.<br />
Virtually there<br />
Technology vendors such<br />
now provide dramatically<br />
more capable<br />
videoconferencing systems,<br />
known as telepresence, to<br />
better facilitate virtual<br />
meetings for teams<br />
scattered around the world.<br />
As costs have fallen,<br />
corporate uptake of such<br />
systems has increased<br />
markedly, not least as<br />
travel budgets come under<br />
pressure.<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 39
Gareth Williams<br />
__ is Human Resources<br />
Director of Diageo, a<br />
premium drinks business<br />
that employs 25,000 people<br />
around the world. Over the<br />
past decade, the firm has<br />
steadily expanded its<br />
business geographically<br />
and now sells its products<br />
in most countries around<br />
the world, providing a range<br />
of assignment<br />
opportunities for its<br />
workforce.<br />
40 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong>
Credit: Diageo / Tim Bishop<br />
• By Bill Millar<br />
International experience is becoming<br />
increasingly valuable in a world where<br />
globalization continues to deepen. To succeed<br />
at a senior level, executives need an<br />
understanding and awareness of different<br />
cultures. And perhaps the best way of developing<br />
this experience is through a series of temporary<br />
foreign assignments or secondments.<br />
Moving executives around the globe can be a<br />
valuable way of developing<br />
Summary<br />
Secondments abroad<br />
represent a valuable<br />
opportunity for<br />
employers and<br />
employees alike. But<br />
companies need to<br />
take steps to make<br />
sure that employees<br />
still feel valued once<br />
they return.<br />
the managerial skills and<br />
knowledge that are<br />
necessary for an<br />
international business, but it<br />
can be challenging to get<br />
right. One of the biggest<br />
problems is the regular<br />
departure of executives after<br />
the completion of a foreign<br />
assignment, especially in the<br />
The reintegration process Management<br />
immediate 12–24 months after repatriation.<br />
Over the years, countless surveys have shown<br />
that expatriates who have recently returned<br />
from a secondment are much more likely to leave<br />
the company than those who have not been<br />
away.<br />
This sounds counterintuitive. After all, if a<br />
company is willing to invest time and money to<br />
build the international experience and knowledge<br />
of its high-potential managers, surely those<br />
executives would be more likely to remain loyal.<br />
In fact, the opposite is true. One of the main<br />
reasons for this is that, on return, expatriates<br />
find that the dynamics and management teams<br />
in their home country have changed, leaving<br />
them without their original sponsors or mentors.<br />
“They can return to a sort of vacuum, with no job<br />
and no one looking out for them,” says Marion<br />
Festing, Professor at the Berlin campus of the<br />
ESCP Europe Business School.<br />
A weak economy exacerbates this problem. In<br />
the current environment, many executives are<br />
Welcome back.<br />
Now – please don’t leave!<br />
Departure rates among executives returning to their home country<br />
following an offshore secondment are well above average. Stemming these<br />
losses requires careful planning and constant communication.<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 41
Management The reintegration process Credit: Corbis / Xinhua Press / Zhang Jinqiao<br />
Diageo’s global expansion into many new global markets has been supported by its detailed expatriate management programme.<br />
Global growth<br />
Diageo now trades in<br />
approximately 180 markets<br />
globally, employing a<br />
workforce of almost 20,000<br />
people, with dedicated<br />
offices in 80 countries.<br />
returning to a company where there are fewer<br />
senior positions to fill. “Companies send<br />
managers on expatriate assignments with the<br />
expectation that they will fill another more<br />
senior position upon their return,” says Festing.<br />
“But with many companies either downsizing or<br />
cutting back on expansion plans, there’s often no<br />
position available.”<br />
Another common problem is that returning<br />
executives experience a sense of loss or<br />
diminishment. As David Rooney, an Executive<br />
Director in Human Resources at <strong>Ernst</strong> & <strong>Young</strong> in<br />
Frankfurt explains: “Expatriates on assignment<br />
away from the headquarters are treated almost<br />
regally. The company will often attend to – and<br />
pay for – many of their needs, from housing and<br />
transportation to their children’s education.<br />
Their total reward will typically be higher than in<br />
their home country.”<br />
Returning executives can feel deflated<br />
because there may be a perception that they<br />
have less influence than they had overseas.<br />
“Expatriates are often big fish in a small pond,”<br />
says Rooney. “When they come back, they return<br />
to a big pond. They may be a bigger fish than<br />
when they departed but, overall, they are often<br />
left feeling as though they’ve been demoted.”<br />
There are other potential problems.<br />
Sometimes an expatriate, away for a long<br />
assignment, no longer feels at home upon<br />
return. They have established strong<br />
connections with the country they have just left.<br />
In addition, they may realize that their skills or<br />
abilities, no matter how well developed during an<br />
offshore assignment, no longer align with the<br />
organization’s needs. In these situations, it is<br />
unsurprising that these executives will actively<br />
Returning executives may feel<br />
deflated, perceiving less influence<br />
than when abroad<br />
seek a way to return to their former standing or<br />
location. “They want what they’ve lost and, if the<br />
parent company can’t provide such an<br />
opportunity, they begin to look elsewhere,” says<br />
Rooney.<br />
Stemming the loss<br />
Addressing the problem starts with the selection<br />
process. Companies need to set expectations<br />
carefully and ensure that expatriates are aware<br />
that there is no guarantee of promotion on return.<br />
There should be a similar discussion about<br />
compensation. Although an executive may be well<br />
42 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong>
paid while on assignment, they need to<br />
understand that the same level of pay is not likely<br />
to continue when they return. “It’s vital not to<br />
overpromise,” says Festing. “Be honest and<br />
explain that this is valuable experience, but it’s<br />
only an assignment and there are no guarantees.”<br />
By setting expectations in this way, companies<br />
are more likely to select the right person for a<br />
position. As Rooney explains, the ideal candidate<br />
is someone who goes into the assignment for all<br />
the right reasons. “If they’re looking for<br />
something you can’t provide, they’re not right for<br />
the posting.”<br />
Companies should ensure that there is a<br />
strong channel of communication between their<br />
home country office and expatriate. Often, a<br />
formal mentoring relationship can be a good way<br />
of ensuring that managers do not feel cut off<br />
from corporate headquarters. This relationship<br />
should be tracked formally and included as an<br />
element of performance evaluation for both the<br />
mentor and the expatriate.<br />
Finally, there should be a formal process that<br />
prepares for the expatriate’s return. Preparations<br />
should be made well in advance to ensure that the<br />
transition is smooth. “You don’t want to wait until<br />
they are back before you make plans for their next<br />
job or their next assignment,” says Rooney.<br />
Many executives returning from secondment<br />
complain that their new skills and experience are<br />
not sufficiently valued. Companies can avoid this<br />
problem by ensuring that the executive’s new<br />
role makes use of these new capabilities and<br />
experience. It can be a good idea to arrange one<br />
or more seminars or talks where the returning<br />
expatriate can share their experiences and<br />
lessons with others in the company. This not only<br />
spreads knowledge, but also gives the executive<br />
a sense of accomplishment.<br />
The embodiment<br />
International experience is crucial for the drinks<br />
manufacturer Diageo, which owns a range of<br />
globally recognized brands, including Guinness,<br />
Smirnoff and Johnnie Walker. At any one time, it<br />
has around 400 managers in its “expatriate<br />
pool,” who are all gaining overseas experience in<br />
order to develop their skills and build long-term<br />
careers with the company.<br />
This pool includes executives from a wide<br />
range of positions. Some are short-term<br />
pragmatic assignments, such as bringing specific<br />
brewing experience to get a new operation up<br />
and running. But most are long-term<br />
assignments, lasting two or three years, which<br />
tend to be occupied by managers and senior<br />
executives who have been selected especially for<br />
the role.<br />
These assignments have two primary<br />
objectives in mind. “One is that we want these<br />
executives to get the job done,” says Gareth<br />
Williams, Director of Human Resources at<br />
Diageo. “But the second objective is to provide<br />
these executives with valuable experience that<br />
can benefit the company. These are highpotential<br />
individuals in whom we’ve chosen to<br />
invest because we believe in them.”<br />
Executives on secondment at Diageo remain<br />
closely connected with head office via a series of<br />
formal processes. This involves ongoing<br />
discussions about performance in the position,<br />
personal growth, challenges and training<br />
requirements. “Wherever they are, they are still<br />
tracked within our global talent processes,” says<br />
Williams. The company also thinks ahead to<br />
ensure that the expatriate’s next steps are<br />
carefully considered. “Even though the current<br />
assignment might not be over for another 12–18<br />
months, we’re already making plans for the next<br />
one,” says Williams.<br />
But of all the mechanisms that optimize talent<br />
development and minimize attrition rates,<br />
perhaps the most valuable, according to<br />
Williams, is the initial selection process. This<br />
requires detailed up-front conversations about<br />
every aspect of the candidate’s personality,<br />
including their family situation and aspirations.<br />
Plan ahead 12–18 months;<br />
certainly before the current<br />
assignment is over<br />
“You need to get an idea of how they might get<br />
on in a more developing, as opposed to more<br />
developed, country,” says Williams.<br />
Finally, it is also very important to nail down<br />
the particulars. “We have a conversation where<br />
we say: “Here’s your base package. Here’s your<br />
expatriate package. Here’s who you will work for<br />
and report to. Here’s what we’ll take care of for<br />
you and these other areas will be your<br />
responsibility,” says Williams.<br />
More taxing matters<br />
Given current economic conditions, it is not<br />
surprising that host nations are becoming more<br />
aggressive in their pursuit of expatriate tax<br />
revenues. This highlights the importance of<br />
being clear with expatriates about<br />
responsibilities for different aspects of tax<br />
compliance. “Administrations are paying closer<br />
attention to due dates – and they’re tougher<br />
when deadlines are missed,” says Williams.<br />
“We devote a good deal of effort and<br />
discipline to make sure our very considerable<br />
expatriate programs are meeting their tax<br />
obligations.”<br />
An investment in talent<br />
Executives returning from an international<br />
assignment are typically much more valuable<br />
than when they left. Yet despite this, there is a<br />
high risk of them leaving the company. By being<br />
more proactive and, in particular, by applying<br />
formal processes, companies can reduce the rate<br />
of attrition and thereby improve returns on their<br />
investments in human capital.<br />
Effectiveness of the<br />
organization's repatriation<br />
process<br />
Good<br />
Satisfactory<br />
Scope for improvement<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 43<br />
49%<br />
20%<br />
31%<br />
Source: <strong>Ernst</strong> & <strong>Young</strong>’s Global<br />
Mobility Effectiveness Survey 2011<br />
400<br />
The number of managers<br />
that Diageo keeps within<br />
its “expatriate pool”<br />
at any given time,<br />
as part of its skills and<br />
careers development.
Management Succession planning<br />
Who’s next?<br />
An effective CEO succession planning strategy is crucial<br />
to the long-term success of any company. Yet all too often this is something<br />
that corporate boards fail to plan for effectively.<br />
35%<br />
Proportion of global companies<br />
that have a succession plan in<br />
place and are ready to deal<br />
with a CEO's departure,<br />
according to Korn/Ferry.<br />
• By Fergal Byrne<br />
In an increasingly competitive business<br />
environment, the role of the chief executive is<br />
more demanding than ever. As a result, the<br />
average length of CEO tenure is shrinking, while<br />
failure rates are climbing. All this makes effective<br />
succession planning crucial to a company’s<br />
long-term success. For those that don’t, the risks<br />
are high: badly planned succession processes can<br />
become prone to internal politics, with firms<br />
risking the loss of their best talent, and,<br />
increasingly, bad publicity. Bank of America’s long<br />
and circuitous search for a chief executive is just<br />
one example of this, taking two-and-a-half-months<br />
to complete, amidst constant media and industry<br />
speculation.<br />
This global phenomenon can be even more of a<br />
challenge in emerging markets that don’t have<br />
strength in depth at higher executive levels. Yet<br />
despite all this, the overwhelming majority of<br />
companies do not plan for succession. According<br />
to a December 2010 Korn/Ferry survey, only 35%<br />
of global companies have a succession plan in<br />
place and are ready to deal with a CEO’s departure.<br />
In his book The CEO Within, Joseph L. Bower<br />
suggests a figure of about 40%.<br />
Olga Gorbanovskaya, Head of Human Capital at<br />
<strong>Ernst</strong> & <strong>Young</strong> Ukraine, believes that firms cannot<br />
underestimate the importance of good planning.<br />
“Having the right people, in the right place, at the<br />
right time, particularly when it comes to the CEO,<br />
is a pre-requisite for long-term resilience and<br />
success,” she says. “This is especially true as<br />
current demographic trends suggest that a<br />
shortage of the appropriate talent is becoming a<br />
major issue for businesses."<br />
Companies with a well-planned, fair and<br />
objective succession process not only have better<br />
chances of securing the best leaders, but also find<br />
it easier to attract and retain key talent. A sideline<br />
benefit is less internal politics, with a tighter focus<br />
on achieving the organization’s goals.<br />
Credit: Muir Vidler<br />
Given such benefits, why has succession been<br />
poorly dealt with for so long? One reason is that<br />
the outgoing CEO often manages the process. And<br />
as Sacha Sadan, Director of Corporate Governance<br />
at Legal & General Investment Management (LGIM)<br />
notes, chief executives often don’t want to hand<br />
over power. “Historically, I think CEOs overstaying<br />
their welcome has been a problem in the UK,” he<br />
says. “When CEOs stay on too long, they get tend<br />
to get stale, or overconfident, or too dominant.<br />
And the company ends up losing key people, as<br />
talented employees give up trying to be the CEO.”<br />
Rakesh Khurana, Marvin Bower Professor of<br />
Leadership Development at Harvard Business<br />
School, and author of Searching for a Corporate<br />
Savior: The Irrational Quest for Charismatic CEOs,<br />
believes that the real legacy of a CEO should not<br />
only be measured by their own performance, but<br />
the performance of their successor. “In many ways,<br />
I think that’s ultimately the real judge of the quality<br />
of the CEO,” he says.<br />
More succession attention<br />
In the UK, Sadan has noticed a substantial<br />
improvement over the past decade in the<br />
professionalism of approach to succession, with<br />
a positive impact from better stewardship and<br />
corporate governance codes in particular. “It is<br />
much more professional now than it used to be,”<br />
he says. “It’s not perfect, but I see much more<br />
evidence that CEOs are thinking about their<br />
support staff, thinking about who is going to get<br />
the job, and good CEOs are moving their<br />
lieutenants around the business to try and get<br />
them the skills that may be needed next.”<br />
Gorbanovskaya also notes that succession is an<br />
increasing focus of many companies, not least to<br />
support talent retention. “Our research suggests<br />
that development and retention is the number one<br />
issue on the agenda of HR managers at the<br />
moment, especially bearing in mind the overall<br />
increase in personnel mobility, which we have<br />
noticed during 2010–11.”<br />
44 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong>
Sacha Sadan<br />
__ Director of Corporate<br />
Governance at Legal &<br />
General Investment<br />
Management, argues that<br />
the past decade has seen<br />
substantial improvements<br />
in corporate governance,<br />
which in turn has pushed<br />
corporate boards to<br />
take succession issues<br />
more seriously.<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 45
Management Succession planning<br />
There are a number of factors that are driving<br />
companies to take succession more seriously.<br />
Increased competition is one. “It’s simply become<br />
harder for companies to succeed, in virtually every<br />
industry,” says Sadan. “It is imperative that<br />
companies recruit the best people. At the same<br />
time, they can’t afford to lose the best people.”<br />
Another factor is greater engagement at board<br />
level, which Sadan believes is largely due to the<br />
UK’s 2003 Higgs Report on the role and<br />
effectiveness of non-executive directors. Similarly,<br />
more chairmen are taking the issue seriously. “I<br />
think many of the new chairmen coming through<br />
now are much more proactive. They’ve all been<br />
CEOs in the past, or most of these new chairmen<br />
have been, and they understand this is crucial.”<br />
The increasing involvement of stakeholders is a<br />
further factor: investors do not like uncertainty,<br />
and CEO succession is receiving unprecedented<br />
scrutiny. In 2009, the US SEC, for example,<br />
proposed more transparency and shareholder<br />
disclosure about succession risk.<br />
While more companies are looking at succession<br />
more closely, many of those that do engage in<br />
succession planning are unhappy with the quality<br />
of their planning. Korn/Ferry’s research suggests<br />
that less than 1 in 10 UK business leaders, for<br />
example, rate their own company’s succession<br />
planning practices as ”excellent.” So what<br />
elements constitute best practice here?<br />
1. Start the succession process early<br />
The first element is that succession planning<br />
can’t be started too early. “The succession<br />
process is never-ending,” says Gorbanovskaya.<br />
“The best companies view this as an ongoing,<br />
real-time process. Companies should try and<br />
create a self-renewing succession culture that<br />
develops leaders at all levels.”<br />
Khurana points out that succession is not a<br />
punctuated event. “Succession is a process that<br />
should be part of board-level discussions<br />
throughout the year. Leadership development is<br />
not a decision to be made in weeks, but something<br />
to be made over years,” he says. “In really good<br />
companies, it’s something that boards get involved<br />
in years in advance of the tenure of the CEO.”<br />
2. Focus on strategy, not personalities<br />
Any well-planned succession should start with a<br />
thorough review of the business strategy, says<br />
Gorbanovskaya. Unfortunately, this rarely<br />
happens. Khurana’s research suggests that<br />
boards often start thinking about the people<br />
first: “Too often it ends up being a contest of<br />
personalities,” he says. “Companies should first<br />
think about the company’s strategic direction,<br />
and only then think about the necessary skills<br />
and backgrounds of the leadership team, not<br />
only the CEO, that are going to be needed to<br />
meet those challenges.”<br />
Furthermore, moving away from a focus on<br />
skills – assessing people against the strategy and<br />
the skills that you’re looking for – can unduly<br />
magnify the strengths of outsider candidates,<br />
while discounting weaknesses, argues Khurana.<br />
This helps explain why many companies turn to<br />
external CEOs, which can be risky. A study by AT<br />
Kearney on S&P 500 companies in the US,<br />
between 1988 and 2007, identified 36 highperforming<br />
companies and argued that much of<br />
their success was due to “home grown” talent.<br />
Gorbanovskaya notes that one of the main CEO<br />
succession challenges concerns the reluctance of<br />
current leaders to create a strong pool of<br />
candidates to replace them. To counter this, she<br />
recommends creating a blend of material and<br />
non-material incentives for current leaders to put<br />
succession planning on their agenda. To ensure<br />
this is embedded, it can be formalized within a<br />
management scorecard and linked to a significant<br />
part of an executive’s bonus (in certain cases, up to<br />
30% of the total).<br />
3. Give HR a seat at the table<br />
Somewhat surprisingly, HR is all too often<br />
excluded from the process, and merely treated<br />
as a support function. Khurana notes that the<br />
best companies respect the importance of HR<br />
and invest very deeply in their internal<br />
development process. “If you look at successful<br />
companies HR is seen as key to the company’s<br />
success. They spend a lot of time and attention<br />
on developing people,” he says.<br />
Companies that realize the importance of<br />
talent give HR a major role. “The head of HR is<br />
usually treated as equivalent to functions like<br />
chief financial officer. In these companies, HR is<br />
given a seat at the table in succession<br />
discussions and is integral to the process,” he<br />
says.<br />
4. Define the role of external recruiters<br />
External consultants and recruiters often play an<br />
important role in sourcing a new CEO. But some<br />
worry that companies expect too much from the<br />
executive search firms. Khurana believes that<br />
the roles of the search committee and external<br />
recruiters need to be clearly distinguished. A<br />
good search committee needs people with a<br />
deep understanding of the context and the<br />
functional backgrounds and requirements for<br />
senior positions, and who are cognizant of their<br />
own biases. For example, one bias to overcome is<br />
that of the stereotype CEO, to ensure a broader<br />
variety of candidates is attracted. “There’s a<br />
dangerous ’ideal form’ as to what a CEO should<br />
look like,” says Khurana. “It’s typically a male<br />
who’s over six feet tall and of European descent.<br />
In the global world, those biases will kill you.”<br />
One thing is certain. Given the changing<br />
balance of the global economy, the future<br />
stereotype of a CEO is sure to include an executive<br />
with considerable experience in rapid growth<br />
markets. Being able to demonstrate an<br />
understanding of the diversity between different<br />
cultures and a global mindset will be essential for<br />
tomorrow’s CEOs.<br />
Credit: Keystone / Ria Novosti / Ruslan Krivobok<br />
Kraft Foods Ukraine has been one of the company’s top performing divisions globally.<br />
Case study<br />
Kraft Foods Ukraine’s<br />
succession success<br />
Planning ahead<br />
The departure of a<br />
veteran CEO, along with a<br />
management reshuffle,<br />
helped prove the resilience<br />
of the firm’s in-depth<br />
transition planning.<br />
Kraft Foods Ukraine (KFU) faced a major<br />
succession challenge in 2011, when the<br />
company’s veteran Ukrainian-American CEO<br />
George Logush left to work for local poultry<br />
producer MHP. Logush had played an integral<br />
role in the company’s growth and success over<br />
the prior 16 years, so this was a hard blow for<br />
the company. During his tenure, Kraft’s sales in<br />
Ukraine had grown more than 100-fold to some<br />
US$500 million in 2011, helping to make the<br />
Ukraine one of the US food giant’s 10 priority<br />
emerging markets.<br />
The succession challenge was exacerbated by<br />
the fact that three other KFU senior managers<br />
were moving on to other internal roles at the<br />
same time, while several changes were also<br />
taking place in the company’s board. All this<br />
came after a full decade with zero turnover in<br />
KFU’s top management. “This was not something<br />
we could have expected to happen<br />
simultaneously, but when the opportunities<br />
arise, and when you have the talent in the<br />
pipeline, you have to be able to respond to these<br />
opportunities,” says Oksana Semenyuk, the<br />
company’s HR Director.<br />
In the end, the transition process for the top<br />
job went smoothly, which Semenyuk credits to<br />
the attention that senior management pays to<br />
succession planning in the business, with Taras<br />
Lukachuk, a Ukrainian national who had worked<br />
for Kraft for more than 10 years, taking the<br />
helm. “The whole succession had been preceded<br />
by years of preparation, so there were no conflict<br />
or arguments,” she says. “Everything was<br />
planned ahead, with a deep bench of senior<br />
management talent developed over years, and<br />
Mr Lukachuk knew several years in advance that<br />
he was the preferred successor, so underwent a<br />
period of targeted training.”<br />
As part of the succession management<br />
process, and to provide him with the necessary<br />
managerial experience, Lukachuk had been<br />
appointed several years earlier as the General<br />
Manager of the subdivision in charge of all 11<br />
markets under KFU’s control. He also worked<br />
intensively with a management coach to prepare<br />
for the role. Today, he represents the first of a<br />
new generation of local managers playing a<br />
senior role in running the multinational’s local<br />
operations in the Ukraine.<br />
One of the direct benefits of the firm’s longrunning<br />
career development program is its<br />
ability to help with talent retention. This is a key<br />
focus within KFU. “Being able to offer long-term<br />
career development, particularly with an<br />
international dimension, undoubtedly helps with<br />
our management retention,” says Semenyuk.<br />
“KFU has about 3% employee turnover<br />
compared with a figure of five or six times that<br />
for the Ukrainian economy as whole.” This is<br />
helped by the ability of local business units to<br />
develop customized employee development<br />
programs and tools, including programs to help<br />
address work-life balance issues of employees.<br />
Succession is seen as a key part of this<br />
integrated talent management process, and is<br />
directly linked to performance management,<br />
leadership development, reward and recognition.<br />
“Talent management is about getting the right<br />
people, with the right skills, into the right jobs,”<br />
says Semenyuk. “It starts with the definition of<br />
the goal and strategy of the business. We have<br />
our main financial target, brand strategies and<br />
the overall strategies. We need to translate all<br />
these business objectives into people<br />
management strategies to help the organization<br />
to achieve its overall objective. The foundation<br />
of KFU’s success is our people strategies.”<br />
HR plays a major role in this too, along with<br />
senior management, as part of a program that<br />
works on developing successors for all key<br />
positions in the company. “All employees have<br />
their own three- to five-year career path<br />
development plan, divided into stages with<br />
specific goals. And it is essential to meet these<br />
goals if managers wish to progress in the<br />
company,” says Semenyuk.<br />
Indeed, KFU’s track record on management<br />
development has been excellent. Over the<br />
previous decade, it has developed a number of<br />
top managers for Kraft’s headquarters and other<br />
regional branches of the company, including vice<br />
presidents in Central and Eastern Europe,<br />
directors who used to work in South Africa and<br />
middle managers who worked in assignments in<br />
their worldwide head offices in Chicago, USA.<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 47
Outlook Global leaders Credit: Philippe Aubry<br />
Manfred Kets de Vries<br />
48 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong>
Biography<br />
A clinical professor of<br />
leadership and<br />
organizational change,<br />
Manfred Kets de Vries<br />
holds the Raoul de Vitry<br />
d’Avaucourt Chair of<br />
Leadership Development<br />
at INSEAD, France,<br />
Singapore and Abu<br />
Dhabi. He is the Founder<br />
of INSEAD’s Global<br />
Leadership Centre and<br />
the program director of<br />
INSEAD’s top<br />
management seminar:<br />
“The Challenge of<br />
Leadership: Creating<br />
Reflective Leaders.” His<br />
most recent book is The<br />
Hedgehog Effect: The<br />
Secrets of Building High<br />
Performance Teams<br />
(John Wiley & Sons,<br />
2012).<br />
Developing global leaders<br />
There are few greater challenges than leading a<br />
large organization in today’s fast changing and<br />
competitive world. Leaders face a baffling<br />
array of questions: How do you create highperformance<br />
organizations? How can you design<br />
effective teams? How do you hold virtual and<br />
cross-cultural teams together, working for a common<br />
purpose, in complex, matrix-like structures?<br />
As the pace of economic globalization continues,<br />
senior leadership teams are becoming increasingly<br />
diverse. And with the growing importance of the<br />
developing world, this trend is only going to continue.<br />
Although most large corporations try and create all<br />
encompassing homogenous global corporate<br />
cultures — that only goes so far. To succeed, CEOs<br />
and senior leaders need more than ever to<br />
understand the international dimension of leadership<br />
– to learn how to work with a diverse group of leaders<br />
from different countries and cultures. Present-day<br />
leaders need to be savvy in building networks in<br />
these organizations through co-creation. They need<br />
to know how to tap the brains of an increasingly<br />
diverse workforce.<br />
Managing a diverse team is challenging<br />
because people tend to like the familiar, what<br />
they know well and understand. Executives<br />
feel most comfortable working in teams where team<br />
members share the same background, values and<br />
experience: in such instances, they know what to<br />
expect. But executives can be challenged when faced<br />
with the unknown, when they have to deal with<br />
individuals whose culture or mind-set is unfamiliar to<br />
them. And in some cases this can trigger certain<br />
defensive psychological behaviours and fears — not<br />
least as our evolutionary history has programmed us<br />
to expect the worst when we do not understand<br />
something, which can lead to seemingly paranoid<br />
reactions. This potential has become exacerbated in<br />
recent years because we now live in an age of virtual<br />
teams, where members need to work at a distance.<br />
To be successful, leaders must learn to overcome<br />
and to manage these responses. They must<br />
understand that they do not always make decisions<br />
rationally and that they may have blind spots in their<br />
decision-making processes. My work with CEOs<br />
focuses on helping them to become self-aware, to<br />
sensitize them to how and why they make decisions,<br />
to help them become more authentic, reflective<br />
leaders; to help them engage in the delicate<br />
balancing act between “doing” and “being.”<br />
The best global leaders are open to new<br />
experiences. They are able to suspend disbelief when<br />
dealing with new cultures and different perspectives.<br />
They are able take into account contextual factors<br />
and have a measure of flexibility. In addition, leaders<br />
must be resilient because they can be subjected to an<br />
enormous amount of stress.<br />
I<br />
also like to emphasize that the most effective<br />
leaders are emotionally aware. They have a high<br />
degree of empathy that enables them to get along<br />
well with people from diverse backgrounds and<br />
cultures. They know how to listen to other people’s<br />
stories, and can integrate these stories into the<br />
organization’s narrative.<br />
How do you help leaders to become better global<br />
leaders? I have learned from experience that one of<br />
the best ways to build trust is to get leaders together<br />
in a workshop situation to share and learn about<br />
each other. We are, after all, a story-telling species!<br />
I have found that this group leadership coaching is<br />
a very effective intervention method to help<br />
organizations to become more agile. The impact of<br />
group coaching can be even stronger – and more<br />
beneficial for the organization – if the intervention<br />
method is applied to “natural” working groups, in<br />
particular top executive teams. To jump-start the<br />
process, an in-depth leadership audit will precede the<br />
intervention to collect material that can be shared.<br />
Critical insights are requested from a wide variety of<br />
people, not only individuals at work but also friends<br />
and family members. This material is then used for<br />
participants to deepen their understanding of<br />
themselves and each other.<br />
This kind of leadership coaching has proven to be<br />
highly effective in breaking down barriers and<br />
preventing silos. By building trust, which is essential<br />
for successful teamwork, and enabling leaders to<br />
understand themselves more deeply, it can help to<br />
create “boundary-less” organizations. The process<br />
also helps executives to deal with lingering<br />
“elephants in the room” – conflicts that should have<br />
been dealt with years ago but that continue to create<br />
major problems.<br />
What’s more, this intervention method also helps<br />
leaders to become more authentic. A good example<br />
of this is Nelson Mandela, who remains the world’s<br />
most respected living leader because he lived<br />
according to his ideals and his values. His authenticity<br />
provides an inspiring lesson for leaders today.<br />
Manfred Kets de Vries,<br />
Professor of leadership and organizational<br />
change at INSEAD<br />
<strong>Ernst</strong> & <strong>Young</strong> Issue 07 T <strong>Magazine</strong> 49
Publications<br />
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Issue 10 | April 2012<br />
Thspitaqu iduntiatem. Ferupit<br />
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sam es peditatus erumquae pre<br />
ium voluptae simus, quia percitam, soluptate inihil ipic<br />
sita comnis raepedit, totas ulparum accusam, cus.Ut<br />
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niminve rnatem dolorror re volupta dolutemquis<br />
volupta tiamus aut maximus que officae pore laut<br />
volupitia dolupti cus que nus maio.<br />
voluptae ipsam Nem remporporro<br />
Tax Policy and<br />
Controversy Briefing<br />
Global Tax Policy and<br />
Controversy Briefing<br />
See More | Growth<br />
<strong>Ernst</strong> & <strong>Young</strong>’s quarterly<br />
briefing is aimed at helping<br />
companies keep pace with a<br />
rapidly evolving tax policy<br />
environment. It provides<br />
detailed and practical advice on<br />
current tax issues, as well as<br />
viewpoints on topical themes<br />
and proposed changes.<br />
Preview<br />
In issue 8 of T <strong>Magazine</strong>,<br />
which will also be<br />
published as an insert<br />
in the Financial Times, we<br />
will focus on the changing<br />
landscape of global<br />
indirect taxes. Topics<br />
covered will include:<br />
• The outlook<br />
for indirect tax<br />
• The role of<br />
technology in<br />
compliance<br />
• Indirect tax in<br />
Africa<br />
• The rise of customs<br />
unions in regional<br />
trading blocs<br />
• Taking on board<br />
indirect tax within<br />
M&A<br />
It’s more than the numbers ISSUE TWO | SPRING 2012<br />
Reporting<br />
Out<br />
of the<br />
shadows<br />
The growing drive to<br />
report on human capital<br />
On the road<br />
How to prepare a compelling<br />
investor roadshow for different<br />
parts of the world<br />
Efficiency drive<br />
An effective finance function has<br />
become a source of competitive<br />
advantage for global companies<br />
Reporting<br />
Early adapters<br />
Why it’s important to take<br />
a strategic approach to<br />
sustainability-related risks<br />
Reporting magazine addresses<br />
the broad issues around<br />
reporting and governance. Not<br />
limited to technical and financial<br />
reporting, the magazine<br />
contains a mixture of business,<br />
regulatory and investor issues<br />
and reflects the divergent views<br />
of different stakeholders and<br />
international businesses.<br />
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Tax Policy and<br />
Controversy Outlook<br />
Europe, Middle East, India and<br />
Africa (EMEIA) 2012<br />
Photo: Stone archway, Italy<br />
2012 Europe, Middle East, India and Africa<br />
(EMEIA) Tax Policy & Controversy Outlook<br />
EMEIA TP&C Outlook<br />
2012<br />
This report introduces the key<br />
trends and themes that our<br />
Tax Policy & Controversy<br />
network has observed in EMEIA.<br />
In addition, it provides readers<br />
with some leading practices to<br />
consider in the areas of tax<br />
policy and managing global<br />
tax controversy.<br />
Now on<br />
iPad too<br />
50 T <strong>Magazine</strong> Issue 07 <strong>Ernst</strong> & <strong>Young</strong><br />
T <strong>Magazine</strong> 07<br />
<strong>Magazine</strong><br />
Tax insight for business leaders<br />
The global<br />
executive<br />
1<br />
07<br />
Tax as a factor<br />
in employee relocation<br />
A new breed of manager The rise of the stateless<br />
employee<br />
takes center stage<br />
The challenges of<br />
managing virtual teams<br />
Rapid-growthmarkets<br />
<strong>Ernst</strong> & <strong>Young</strong> Rapid-Growth Markets Forecast Spring edition — April 2012<br />
Rapid-growth markets<br />
While rapid-growth markets are<br />
proving resilient to the fragile<br />
global economy, more<br />
divergences are emerging<br />
between them. In this issue, you<br />
will discover why over the<br />
medium term Rapid Growth<br />
Markets will be an increasing<br />
source of global growth and<br />
trade flows.
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All Rights Reserved.<br />
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