Expats are among the most expensive but least tracked part of any organisation. Why do companies often fail to assess Return on Investment (ROI) on international assignments and what can be done about it?

Some 71 percent of companies "do not attempt to demonstrate ROI," concluded Cendant Mobility's Emerging Trends in Global Mobility: Policy and Practices Survey, 2004.

ROI: a moving target?

Even among companies with a sizable expatriate staff, it is not a lack of interest in evaluating what return an overseas employee provided that hinders ROI assessment. It is the range of variables – from specific short-term goals to qualitative long-term career advancement – that can make effectively assessing ROI seem like a moving target.

"These things are not only difficult to measure but operate over different time scales," said Chris Brewster, professor of International Human Resource Management at Henley Management College in England.

ROI typically implies financial issues, said Alan Chesters, a UK-based HR consultant who worked for BP for 20 years. But for international assignments, this is problematic and companies should be looking at setting and measuring objectives.

"A lot of people are moved around either as a way of developing the individual or as a way of developing the organisation," Chesters said. "Measuring that is extraordinarily difficult."

Evaluating ROI

There are several ways to evaluate ROI, said Lisa Johnson, director of consulting services at Cendant Mobility, a provider of global mobility workforce and management development services.

One is to set specific goals, such as setting up a new IT system or opening a new office. However, said Johnson, "a lot of international assignments don't have clear-cut objectives."

In this case, companies should set expectations for several baseline competencies that will be gained from the international experience. These could include creating new networks in Europe, mentoring new hires or developing intercultural skills. Though Johnson is confident this can be done, many companies still struggle to do so.

"I don't know anybody who [sets initial objectives and goals] all the time," said Chesters.

Not only can tracking the return be tough but evaluating the costs also poses a challenge. Beyond the tangible costs, including relocation fees and housing allowances, there are qualitative aspects as well, such as the cost to a spouse putting their career on hold during the assignment.

Irrelevant measures

ROI evaluation of expatriates can also include potentially irrelevant measures, said Michael Dickmann, who runs the Cranfield MSc in International Human Resource Management and is the director of the Centre for Research into the Management of Expatriation (CReME). At CReME, Dickmann conducts research on issues such as ROI on behalf of sponsoring companies such as HSBC, Shell and Unilever.

For example, Dickmann said, academic research often determines the success or failure of an international assignment based on if the assignee returned to the home office early.

"That's fairly useless," said Dickmann, adding that an early return could mean that the task of the assignment was completed sooner than expected.

At the heart of the matter is oftentimes a corporate culture issue. ROI for international assignments is typically left to the HR mobility programme of an organisation. This makes it very difficult to evaluate the long-term gain or loss for a company once the expatriate returns to the general population.

"It requires a real corporate strategy… that is felt outside HR," Johnson said.

Corporate strategies

Johnson is starting to see a few leading-edge companies ask the entire organisation: What difference did the international assignment make to you, your career and the company?

Jan Goeman, a partner at PricewaterhouseCoopers in Antwerp, and his colleagues are starting to ask similar questions. They have begun taking a holistic, top-down approach when evaluating a company's international mobility programme.

"You run into the question: how valuable is international mobility for an organisation?" said Goeman.

They have devised a wide range of questions that organisations can use to develop a scorecard when evaluating the effectiveness of global mobility. Measuring ROI and taking a serious look at international mobility programs are becoming higher priorities for companies, Goeman said.

"It is getting more and more on the agenda," he said.

Tracking retention of repatriated employees remains a stumbling block for many organisations. Johnson said companies often tell her that attrition for their repatriated employees is about the same as the general population.

"You want your repatriated attrition to be at zero," Johnson said. "You shouldn't be satisfied if it is the same amount."

At CReME, Dickmann is researching attrition of international assignees and has found that one-third of expatriates leave the company either during the assignment or within one year of being repatriated.

"This is a huge loss," Dickmann said.

Brewster is also surprised by the lack of interest in keeping those with international experience.

"One of the things that is astounding, given the amount of money spent, is how casually companies deal with repatriates," he said.

But this may be changing. Chesters is working with the Expat Technology Forum, a UK-based association developing solutions for international human resource management issues, to develop new ways of efficiently assessing ROI for international assignments.

"Repatriation is the hot topic at the moment," Brewster said. "It's how do we get the best value for our money out of these people?"

Jennifer Hamm is a freelance journalist based in the Netherlands.

August 2004