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Feature The global executive
people on assignment is hugely important,
agrees Ferrigno. “You see people go with the
wrong expectation to markets, thinking they are
there to show and tell when they should be there
to listen and learn,” he says. Indeed, appropriate
metrics are a central part of defining the
assignment properly. Global executives should
not be evaluated against traditional business
measures such as revenue goals, but they
should also be measured on how well they are
adapting to their assignment. “From there you
can quantify the return,” says Schupp.
A clearly defined assignment also helps
significantly in finding the right person for the
job. The ideal attributes of potential
international executives is one of the most
studied aspects of global transfers. But barring
some obviously useful aspects – cultural
sensitivity, ability to interact with others, and a
desire to succeed – no definitive list exists.
Inevitably, choosing a candidate is a balancing
act between the talent available, the ability of
candidates to thrive in a foreign environment,
and the skills needed to do the particular job at
hand. “There is no perfect test. Each case has to
be looked at individually,” says Steele.
Practical issues
Once the job is defined, and the correct person
found, international assignments throw up a wide
range of challenges for the sending company.
Many of these have long been present - from the
basic need for appropriate visa and working
permits, to the more complex need to align
assignment strategies with overall business goals
- but several are worth noting here given how they
are changing. All of these issues are discussed in
greater detail in other articles throughout this
issue of T Magazine. Nevertheless, as the list
highlights, there are many practical complexities
of using global executives.
The social network
Any transferring executive has a network of social
connections at home that will be disturbed as a
result. This is especially true of close family. “It is
also increasingly difficult to move some
employees on assignment when their spouses
work,” says Waty. “We do provide spousal support
to find work in the new location and support to
complete further education. Very often we can
‘sell’ the assignment on the basis that it is a great
experience for the whole family in terms of
personal development.” A separate issue is that
an increasing number of people may be together
but not married, raising challenges over
immigration rights. Addressing family issues is
more than just a practical matter: it may define
how well international executives fulfil their
assignments. “Very often, if an executive has
been successful, it is thanks to a spouse and
family who have a global mindset,” says Waty.
“Companies are not doing enough to assess how
well the family can adapt.”
Compensation arrangements
As the goals of international placements evolve,
payment arrangements need to keep pace. “If
you send people around as part of their
development, you are going to need to look at
how these costs get people to take on the right
challenges without overly enriching them,” notes
Ferrigno. It might be valuable, therefore, to tie
compensation to metrics designed around those
challenges. Another current trend is for
companies to use “localization” packages, with
executives receiving a lump sum up front to
cover moving costs, but then being compensated
in the same way as their new local peers,
including in terms of eligibility for bonuses. Not
only does this control costs, but it leads to
executives being taken more seriously by their
colleagues because they now have an obvious
stake in local success.
Dealing with tax
International employment has always brought
income tax complications, but the current
economic climate can make this even tougher.
“Many countries are looking for additional
sources of revenue, so revenue agencies are
turning over rocks to make sure organizations
are compliant on income or payroll tax,” notes
Schupp. Over half of companies polled by
Ernst & Young describe tax compliance as very
challenging. Although the most pressing specific
issues vary by jurisdiction, some tax issues have
a growing profile internationally. For example,
the payment of stock options to executives.
Depending on where the executive is resident
for tax purposes when these are earned and
exercised, a variety of countries – which may
or may not have relevant double taxation
treaties – might wish to tax the proceeds.
There is also the important need to adhere to
social security obligations in all relevant
jurisdictions.
Bringing them back again
“Assigning a person abroad creates a retention
issue. It is not always easy to bring back a former
assignee,” says Waty. Indeed, Ernst & Young
research indicates that just over 1 in 10 executives
resign within two years of returning from foreign
assignments. Given the significant investment
made into the development of these executives,
this can be a costly loss for any company.
The broader picture is that the expat has, in
recent years, evolved into the global executive.
Within this, the key factors of who is being sent,
why they are going, and where they are headed
to, are all changing as companies have
transformed themselves from centrally run
multinationals to globally diverse enterprises.
In order to manage this new species, however,
businesses have to keep up. In particular,
different functions in the company need to work
together in a way that too few are currently
doing.
Percent of the total number
of employees are long-term
assignees (>12 months)
12 T Magazine Issue 07 Ernst & Young
2008
21%
2011 2%
9%
18%
7%
6%
9%
73%
64%
Source: Ernst & Young’s Global Mobility
Effectiveness Survey 2011