International human resource professionals need to re-define the meaning of return on investment for the globalising organisation — at least when it comes to trying to evaluate the benefits received from international work

Creating the global vision

Human resource departments and professionals represent more than just a particular function at their corporate headquarters: in the increasingly global world of work, international human resource professionals become those most responsible in an organisation for driving the kind of change necessary for the organisation to succeed in the global environment of the new millennium.

HR has become responsible for changing the way the organisation must think and act to be successful across time zones, cultures and geographies and also for disseminating the knowledge needed to develop the skills required for effective global work.

Examining the evidence

Let's start by looking at some sobering statistics regarding global work; approximately 60 percent of all cross-border joint ventures fail, approximately 30 percent of all expatriates return from assignment abroad prematurely, approximately 48 percent of all repatriates leave their company within two years of returning home.

Each of these statistics represents a gross human resource failure, and the enormous capital investment that is lost as a result. They are also reflective of the failure of the organisation to recognise the impact that culture has on its ability to succeed globally.

For example, when those involved in failed international joint ventures are interviewed about the reasons for their failure, they do not cite a lack of talent, will, financial commitment, or resources; instead, the single greatest cause for the failure is consistently identified as the inability of both parties involved in the joint venture to recognise that they were approaching the tasks in different, and incompatible, ways— that their cultures failed to align toward a common goal.

When we interview the expatriates who return home early from an overseas assignment on why their assignment failed, the greatest single cause is identified as their—and their partner's— inability to adjust to the culture. And when we interview exiting repatriates, they identify the single greatest reason driving their exit to be their inability to adjust to the rigours of coming 'home', which are. Surprisingly, almost always seen as more difficult than the initial expatriation.

Soft issues count

In short, the inability to consider the 'soft issues'—culture's impact—in all cases, was the primary reason for the failures that represented significant loss on a number of key measures, to the 'international' organisation. Therefore, a better understanding of culture, and how it impacts our international work, is critical to managing its impact for positive results, success and reward.

When we try to measure these costs, we recognise that there are expenses associated with each international assignment, for example. The average international assignment will 'cost' the organisation, on average, about one million dollars. This includes the consideration of all the expenses associated with the successful assignment, such as COLA, tax offset, salary increases—often to compensate for the lost salary of the accompanying partner— housing allowance, actual relocation and education costs.

In fact, the successful international assignment has traditionally been measured as such on the gross measure of non-early returns—if the family stayed on assignment and we brought them back alive, it was a success.

Early or premature returns, in fact, will double and triple the actual 'million-dollar' investment of the 'successful' assignment. These 'blackouts'—gross measures such as early return—traditionally were the only way to measure return on investment (ROI) made by the organisation that was bearing the costs of the international assignment.

However, a significantly more important measure are 'brownouts', where international assignees stay on assignment, do not return home early, but who may not be performing at the same levels of excellence as would be required of them if they were home. These brownouts represent a far greater percentage of expatriates, and perhaps a greater, hidden cost in ROI.

Looking past the 'tourist' phase

If an international assignee does not understand the culture and the language, but somehow manages to stay unmeasured in their performance, how well can we say they are actually performing, and how much ROI is the organisation actually receiving?

Adjusting to life abroad, like all life adjustments, follows a pattern that can be tracked through three stages: the 'tourist' phase, where things different are not understood, yet found to be charming, and non-problematic.

Within a few months, a slow decline ensues, where the expatriate family enters the 'adjustment' phase, where daily living requirements are still not understood, but the differences are no longer seen as charming: they are problems, and challenge the energy and activities of the expatriate and family.

Helping your expats to adapt

Finally, the family enters the third, or 'adaptation' phase, whereby enough information has been garnered—usually over the course of the first year—so that the expatriate no longer compares life 'here' with life "there", and they settle in to a pattern of acceptance with their new environment.

Given that this process can take a year, and presents a risk of early return at critical junctures, the organisation usually doesn't see a return on its investment, while running significant risks, until this entire cycle has been passed through. In addition to providing expatriates and their families with the 'nuts and bolts' information and services they need to survive, such as schools, medical care, housing, they need to have the cultural information in order to thrive.

The first step toward cultural awareness is to see oneself as 'cultural being', as someone who carries a set of behaviours and values and attitudes particular to their home culture that may be different or similar to those of their new host country. Cultural learning requires that we not only understand the 'other', but that we first understand ourselves.

Culture is also about predicting group patterns of behaviour, and should not be seen as an attempt to prescribe individual behaviours, either in the expatriate or in their new neighbours.

Finally, we can also think of culture as an 'iceberg', where the visible culture, as represented by the visible 1/10 top of the iceberg is, indeed, merely the tip: the significant part of culture, around 90 percent of it, is often under the surface, invisible, and represents the unseen values, attitudes and traditions that drive the behaviours that are visible. To be effective in a new culture, we must understand both the visible part that is perceivable as well as the invisible set of values, and traditions that can only be learned.

When we look at the different perceivable behaviours at the top of the iceberg, certainly in work situations, we see that cultures present, and can differ about, issues of punctuality, dress, socialising, dining, the giving of gifts, negotiating, running meetings and so forth.

Hidden values

But all of these issues are defined by the hidden values under the surface of each iceberg we may be working with. All cultures must answer a set of questions, which determine their value systems and traditions, and these are under the surface, for all of us. Some cultures value individualism, while others value group orientation.

Some cultures build relationships as a pre-requisite to accomplishing tasks, while others build relationships only after the task is achieved. Some cultures follow the rules despite the situation, while others have rules that are made to be broken. Some cultures find organisation in hierarchy and status and rank, while others dismiss structure as secondary to efficiency, informality and egalitarianism.

Some cultures view time as imposing itself on us, something to be managed, organised, compartmentalised, while other cultures see time as something that stands in the background, of which there is always enough, and which is flexible enough to bend according to the human needs of the moment.

Finally, some cultures are comfortable moving quickly, taking risks, while others move slowly, and require much information before even taking a baby-step. Some cultures feel comfortable confronting disagreements directly, while others put all their energy into avoiding confrontation, speaking indirectly. Some cultures value the process, while others see the result as justifying the means.

Understanding these deep under-the-surface value systems of the country to which one is relocating to is critical to being able to function there on a daily basis.

However, in today's global world, forces of globalisation are shining on every cultural 'iceberg', and these universal global forces are re-shaping all the cultures. The degree to which these forces are affecting either the exposed 'top' or hidden 'bottom' of the iceberg remains to be seen, but we do know that forces of globalisation certainly Are changing the way cultures interact with each other.

A step beyond the basic culture issues

It is no longer enough for relocating assignees to understand the culture that they are going to, but they must also understand the cultural dynamics of globalisation and other regional cultures with which they will also have work responsibility while on assignment in a discreet host country.

In the 'new' global world, cultural behaviours, which could have been attributed to specific cultures, have now become 'cultural archetypes', behaviours that are available to all, and no longer the province of any one individual culture. From this perspective, differences in cultures, rather than being seen as problems to be overcome, become increased options for all of us and for global organisations, wherein we may find the solutions to our problems.

Effective global organisations, therefore, adopt a spirit of 'cultural ecology', whereby the different ways of doing and seeing things from various parts of the world, are seen as advantages, treasured ways of doing things which must be valued, and protected, if we are to find the solutions we need to do things globally.

This new perspective of 'cultural ecology' also re-defines for the globalising organisation the meaning of ROI, at least when it comes to trying to evaluate the benefits received from international work.

Global organisations can now expand their concept of ROI to go beyond merely measuring blackout costs, or quantifying the expense of the international assignment against the profits received from the immediate project; rather, true ROI should be measured against the degree to which cultural knowledge has become so available throughout the organisation that all its managers in all locations know the best practices of all in order to find the best solutions to their local problems, wherever they may be.

This will retain global talent, insure against blackouts and brownouts, and allow the organisation to claim the title of being truly global.

September 2004 (updated October 2005)

Dean Foster is President, Dean Foster Associates. www.learnaboutcultures.com

Dean Foster has written the four-part Global Etiquette Guide book series (which include "The Global Etiquette Guide to": Europe – Asia – Latin America – Africa & the Middle East), and the book "Bargaining Across Borders".