The World’s Friendliest Countries
HSBC’s Expat Explorer Survey shows that New Zealand, Australia, and South Africa are the three nations where it’s easiest to befriend locals, learn the local language, integrate into the community, and fit into the new culture. New Zealand, in the top spot, had high scores in all four categories. Seventy-five percent of respondents living there reported that they were integrating well in the local community; in Australia it was 77 percent and in South Africa 79 percent. The least friendly country for expats, according to the Forbes formula, was the United Arab Emirates. And among the countries most challenging for expats overall were Saudi Arabia, Qatar, Russia, and India, according to this year’s HSBC survey results. India ranked in last place for the second year in a row. New Zealand, Australia, and South Africa were helped to the top of the list because more than half the expats surveyed there—58 percent in New Zealand, 75 percent in Australia, and 72 percent in South Africa—say they are native English speakers. Coming in just behind the top three in terms of friendliness were Canada (dropping slightly from the top spot last year) and the United States.
Expatriate Failure Rates
Expatriate failure represents a failure of the firm’s selection policies to identify individuals who will not thrive abroad.19 The consequences include premature return from a foreign posting and high resignation rates, with expatriates leaving their company at about twice the rate of domestic managers.20 Research suggests that between 16 and 40 percent of all American employees sent abroad to developed nations return from their assignments early, and almost 70 percent of employees sent to developing nations return home early.21 Although detailed data are not available for most nationalities, one suspects that high expatriate failure is a universal problem. Some 28 percent of British expatriates, for example, are estimated to fail in their overseas postings.22 The costs of expatriate failure are high. One estimate is that the average cost per failure to the parent firm can be as high as three times the expatriate’s annual domestic salary plus the cost of relocation (which is affected by currency exchange rates and location of assignment). Estimates of the costs of each failure run between $40,000 and $1 million.23 In addition, approximately 30 to 50 percent of American expatriates, whose average annual compensation package runs to $250,000, stay at their international assignments but are considered ineffective or marginally effective by their firms.24 In a seminal study, R. L. Tung surveyed a number of U.S., European, and Japanese multinationals.25 Her results, summarized in Table 17.2, show that 76 percent of U.S. multinationals experienced expatriate failure rates of 10 percent or more, and 7 percent experienced a failure rate of more than 20 percent. Tung’s work also suggests that U.S. based multinationals experience a much higher expatriate failure rate than either European or Japanese multinationals.
TABLE 17.2 Expatriate Failure Rates
Recall Rate Percent
Percent of Companies
Source: Data From R.L. Tung, “Selection and Training Procedures of U.S., European, and Japanese Multinationals,” California Management Review, Vol. 1.25, NO. 1, pp. 51–71.
Tung asked her sample of multinational managers to indicate reasons for expatriate failure. For U.S. multinationals, the reasons, in order of importance, were
1. Inability of spouse to adjust.
2. Manager’s inability to adjust.
3. Other family problems.
4. Manager’s personal or emotional maturity.
5. Inability to cope with larger overseas responsibilities.
Managers of European firms gave only one reason consistently to explain expatriate failure: the inability of the manager’s spouse to adjust to a new environment. For the Japanese firms, the reasons for failure were
1. Inability to cope with larger overseas responsibilities.
2. Difficulties with new environment.
3. Personal or emotional problems.
4. Lack of technical competence.
5. Inability of spouse to adjust.
The most striking difference between these lists is that “inability of spouse to adjust” was the top reason for expatriate failure among U.S. and European multinationals but only the No. 5 reason among Japanese multinationals. Tung comments that this difference was not surprising, given the role and status to which Japanese society traditionally relegates the wife and the fact that most of the Japanese expatriate managers in the study were men.
Since Tung’s study, a number of other studies have consistently confirmed that the inability of a spouse to adjust, the inability of the manager to adjust, or other family problems remain major reasons for continuing high levels of expatriate failure.26 One study by International Orientation Resources, an HRM consulting firm, found that 60 percent of expatriate failures occur due to these three reasons.27 Another study found that the most common reason for assignment failure is lack of partner (spouse) satisfaction, which was listed by 27 per cent of respondents.28 The inability of expatriate managers to adjust to foreign postings seems to be caused by a lack of cultural skills on the part of the manager being transferred. According to one HRM consulting firm, this is because the expatriate selection process at many firms is fundamentally flawed: “Expatriate assignments rarely fail because the person cannot accommodate to the technical demands of the job. Typically, the expatriate selections are made by line managers based on technical competence. They fail because of family and personal issues and lack of cultural skills that haven’t been part of the selection process.”29
The failure of spouses to adjust to a foreign posting seems to be related to a number of factors. Often, spouses find themselves in a foreign country without the familiar network of family and friends. Language differences make it difficult for them to make new friends. While this may not be a problem for the manager, who can make friends at work, it can be difficult for the spouse, who might feel trapped at home. The problem is often exacerbated by immigration regulations prohibiting the spouse from taking employment. With the recent rise of two-career families in many developed nations, this issue has become much more important. One survey found that 69 percent of expatriates are married, with spouses accompanying them 77 percent of the time. Of those spouses, 49 percent were employed before an assignment and only 11 percent were employed during an assignment.30 Research suggests that a main reason managers now turn down international assignments is concern over the impact such an assignment might have on their spouse’s career.31 The accompanying Management Focus examines how one large multinational company, Royal Dutch/Shell, has tried to come to grips with this issue.