Brookfield Global Relocation Services. Global Relocation Trends

Transcription

1 Brookfield Global Relocation Services Global Relocation Trends

2 2010 Brookfield Global Relocation Services. All rights reserved. This book may not be reproduced, in part or in whole; in any form, or by any means, without the expressed written consent of Brookfield Global Relocation Services. Printed in the United States of America.

3 Global Relocation Trends Brookfield Global Relocation Services, LLC Brookfield Global Relocation Services is the trusted leader for the design and management of domestic and international relocation and assignment services throughout the world. We passionately believe that our integrity, transparency, flexibility and commitment to our clients and each other enable us to deliver a cost effective Premier Service experience to everyone we serve. Our 800 employees operate from regional offices in Asia, Europe and North America to support the success of our clients and their relocating employees around the world. We have the local knowledge and worldwide presence to develop and implement global employee relocation solutions. Brookfield Global Relocation Services is an operating company of Brookfield Residential Property Services, a leading global provider of real estate and relocation services, technology, and knowledge. To find out more visit us at: brookfieldgrs.com, or us at reloadvisor@brookfieldgrs.com.

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5 Contents Introduction 5 AN INDUSTRY STANDARD 5 IN THIS REPORT 5 Purpose and Methodology 6 NUMBER OF EXPATRIATES PER COMPANY 6 PARTICIPANT REPRESENTATION BY INDUSTRY 6 INTERNATIONAL RESPONSE RATES 7 Key Findings 8 THE EXPATRIATE POPULATION 8 EXPATRIATE SOURCES AND DESTINATIONS 9 ASSIGNMENT TYPES AND BENEFITS 9 GLOBAL BUSINESS STRATEGY 10 CULTURAL AND FAMILY ISSUES 11 ASSIGNMENT EVALUATION AND COMPLETION 12 COST ESTIMATES, TRACKING, AND COMPARISONS 13 OUTSOURCING 13 Table of Contents Survey Highlights 15 THE EXPATRIATE POPULATION 15 EXPATRIATE SOURCES AND DESTINATIONS 15 ASSIGNMENT TYPES AND BENEFITS 15 GLOBAL BUSINESS STRATEGY 16 CULTURAL AND FAMILY ISSUES 16 ASSIGNMENT EVALUATION AND COMPLETION 17 COST ESTIMATES, TRACKING, AND COMPARISONS 17 MEASURING RETURN ON INVESTMENT 18 COMPENSATION 18 OUTSOURCING 18 NEW AND INNOVATIVE PROGRAMS 19 Survey Findings in Detail 21

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7 AN INDUSTRY STANDARD The 2010 Global Relocation Trends Survey Report is the 15th annual report issued by Brookfield Global Relocation Services (Brookfield GRS). These reports constitute one of the industry s most reliable sources of global relocation data and trends. The longevity of this report enables us to compare each year s results with historical averages that include data from the current year and previous years; this helps readers to gauge the relative importance of annual variations. Each year, this report is used as a benchmark for policy development and it is cited in major business publications and journals that specialize in international business. IN THIS REPORT This year s survey contained 120 questions and was available online. It comprises the following characteristics: Introduction It reflects information current through the close of January It elicits details pertaining to expatriate demographics, key destinations, challenging destinations, expatriate program management structure, assignment expense management, assignment types and policy structures, localization considerations and practices, expatriate compensation management, repatriation policies, expatriate attrition rates, cross-cultural training, return on investment, assignment evaluation and failure, and the management of outsourced services. The 120 respondents represented small, medium, and large organizations with offices located throughout the world. Participating companies ranged in size from having as few as two international locations to 4,050 branch locations. Together they managed a total world-wide employee population of nearly 5.8 million. 55% of the responding companies were headquartered in the Americas; 43% were headquartered in Europe, the Middle East, and Africa; 2% were headquartered in the Asia-Pacific region. In most cases, respondents were senior human resource professionals and/or managers of international relocation programs.

8 Purpose & Methodology Expatriate Population NUMBER OF EXPATRIATES PER COMPANY The percentage of respondents who represented companies with small expatriate populations (one to 25 expatriates) continued to be low (18%) compared to previous years. The percentage of respondents with slightly larger populations (26 to 50 expatriates), however, was the largest (20%) in the history of this report. The number of companies with 501 to 1,000 expatriates also was the largest (12%) in the history of this report. Percentage of Responding Companies by Size of Total Expatriate Population / / % 29% 32% 54% 41% 36% 35% 29% 48% 27% 21% 15% 17% 18% % 16% 15% 15% 17% 14% 13% 13% 14% 13% 13% 15% 15% 20% % 18% 14% 11% 13% 15% 13% 18% 9% 9% 10% 12% 18% 14% % 26% 29% 16% 17% 22% 25% 29% 21% 31% 33% 35% 32% 26% 501-1,000 8% 8% 6% 3% 5% 5% 8% 6% 2% 7% 9% 10% 10% 12% Over 1,000 6% 3% 4% 1% 7% 8% 6% 5% 6% 13% 14% 13% 8% 10% PARTICIPANT REPRESENTATION BY INDUSTRY As in past years, respondents represented a range of industries, and an authorized list of participating companies appears at the end of this survey report. Participation by companies in the following categories was higher than in all or most previous reports: Construction, Engineering Transportation Participation by companies in only one category was lower than in all or most previous reports: Services (Publishing, Advertising, Hospitality, and Entertainment). Industry Segment Survey Participants by Industry Percentage of Firms / Information Technology * 19% 18% 20% 14% 15% 24% 17% 14% 20% 18% Machinery, Shipbuilding, Manufacturing, Aerospace 18% 19% 17% 11% 17% 8% 11% 12% 15% 12% Consumer Products, Retailing 12% 10% 9% 14% 8% 13% 13% 10% 13% 12% Finance, Insurance, Real Estate 16% 15% 14% 14% 10% 14% 11% 16% 8% 12% Energy, Utilities, Mining 8% 8% 10% 6% 8% 6% 8% 8% 7% 8% Construction, Engineering 3% 3% 4% 3% 2% 4% 5% 7% 7% 8% Services (Publishing, Advertising, Hospitality, Entertainment) 8% 10% 9% 9% 14% 10% 9% 9% 12% 7% Pharmaceuticals, Medical Devices, Healthcare 6% 1% 6% 10% 10% 9% 11% 9% 7% Transportation 3% 1% 1% 3% 2% 7% 8% 3% 7% Chemicals, Agriculture 8% 6% 8% 9% 7% 2% 5% 3% 3% 6% Other 5% 4% 6% 11% 9% 7% 5% 2% 3% 3% * The information technology category includes electronics, computers, software, e-commerce, and telecommunications

9 INTERNATIONAL RESPONSE RATES Since 1999, we asked companies to identify the location of their headquarters. In the current report: 55% were headquartered in the Americas. 43% were headquartered in Europe, the Middle East, and Africa. 2% were headquartered in the Asia-Pacific region. The following table summarizes all previous and current responses: Location of Company Headquarters Year Americas EMEA Asia Pacific % 43% 2% % 40% 1% % 48% 2% % 49% 3% % 46% /4 79% 21% % 23% % 17% % 10% % 8% - Purpose & Methodology

10 Key findings THE EXPATRIATE POPULATION Once again, concerns about the economic climate affected the size and composition of the expatriate population. Last year (2009 report), 33% of respondents predicted growth, but only 27% could demonstrate an increase in the current report. It was the second-lowest increase in the history of this report (2001 report holds the record for the lowest increase in expatriate population). In the same vein, last year only 25% expected a decrease in the population, but 46% reported a drop in the current report. Those who expected the population to remain unchanged were even less accurate with 42% predicting stability last year and only 27% currently reporting no change. The variation between the predictions of volume and what actually happened is clearly a reflection of the uncertain economy and the difficulty of coming up with a clear strategy to address both short term pressures and longer term business plans. Validating these findings, respondents adopted a cautious approach toward hiring. Only 8% of expatriates were new hires. It was the lowest percentage in the history of the report, and it compared to a historical average of 12%. It is possible that a drop in graduate recruiting contributed to the decrease. Despite the drop in expatriate population and apparent hiring freeze, respondents expressed cautious optimism about the future. Only 12% expected a decrease in the expatriate population (compared to 25% in the 2009 report); 44% expected an increase, and another 44% expected the population to remain the same. The data may reflect the variety of destinations to which expatriates were sent. Consequently, future growth and optimism may be experienced by companies that send expatriates to Brazil, Russia, India, and China (BRIC). We also recorded a retrenchment that was reflected in the age, gender, and marital status of expatriates as well as in a number of accompanied assignments. Most fundamentally, the expatriate population became older as companies selected more experienced employees for assignments. Expatriates in the 40-to-49- year group increased from 37% to 40%, and those in the 50-to-59-year group also increased from 14% to 16% during the past year. At 17%, the percentage of female expatriates in the current report was the lowest since the 2001 report, when it was 16%. In addition, the increasing age of expatriates also was linked to an increase in the percentage of married males. At 63% it was higher than at any time since the 1999 report. In yet another area, the increasing age of the expatriate population was linked to a drop in the percentage of accompanying children. Employees in the 40-to-59-year age group typically have fewer children at home and attending school than employees in the 30-to-39-year group. Consequently, the percentage of expatriates with accompanying children was the lowest in the history of this report at 47% (compared to a historical average of 56%). In a related trend, the percentage of expatriates accompanied by spouses fell to 79% the second-lowest percentage in the history of this report (the historical average was 85%). We also connect these results with other findings, particularly those around commuter assignments which are typically unaccompanied. We found that 35% of respondents indicated that they utilized commuter assignments, as opposed to 29% for 2009, and that 36% are considering using a Commuter policy as opposed to 30% in We believe that dual career and the education needs of older children impact whether or not spouses and families accompany the expatriate on assignment. Finally, it became more difficult for previously employed spouses to obtain employment during assignments. Only 9% were employed both before and during assignments, compared to a historical average of 14%. In contrast, 50% of partners were employed before (but not during) assignments, compared to a historical average of 48%. We suspect that the difficulties in finding partner employment were related to economic conditions or to the locations where expatriates were posted. Language and cultural difficulties may inhibit employment and the challenges of immigration may make potential employers unwilling to consider an expatriate spouse candidate who would need immigration support.

11 EXPATRIATE SOURCES AND DESTINATIONS The current report reflects a continuation of the globalization trend. For example, only 56% of assignments involved relocation to or from a headquarters country. This was the lowest percentage in the history of the report and it compares to a historical average of 62%. It also signals an increase in reliance upon thirdcountry nationals for assignments (transferees between locations that do not include the headquarters). Furthermore, there has been an increase in the percentage of intra-regional transfers from 22% in the 2009 report to 27% in this report. Among companies that rely on intra-regional transfers, 49% took place within Europe, the Middle East, and Africa; 26% within the Americas; and 25% within the Asia-Pacific region. The United States and China were the top expatriate destinations reversing the order of the 2009 report. The United Kingdom remained in third position. The results for emerging assignment locations, however, were surprising. While China remained in the top position, Singapore moved from fourth to second place. While India fell from second to fourth place, the United States rose to third place climbing from its nineteenth position in the 2009 report. Another unexpected change was Russia; it fell from third position in the previous report to twenty-first position. We believe that this is possibly a reflection of the continuing strains in the Russian economy. Key findings China, India, and Russia led the list of countries that were most challenging for expatriates making this the fourth consecutive report without a change in the ranking. This year, India took the top position as the most challenging destination for program managers replacing China, which had held the top position since the 2003/4 report. Russia remained in third position, which it has held since the 2006 report. To obtain more specific information about key areas of concern, for the first time we asked which countries were most challenging for housing, temporary accommodation, and immigration. For both housing and temporary accommodation, China and India were the most challenging. For immigration, Russia, the United Kingdom, India, and the United States were the most challenging. The United Kingdom, ranking in particular, is a reflection of changes to immigration law and the United States continues to mirror ongoing security concerns. As in the 2009 report, China and India topped the list of locations with the highest rates of assignment failure, and the United States was in third position (replacing the United Kingdom). ASSIGNMENT TYPES AND BENEFITS There was a slight increase in the percentage of long-term assignments, from 61% in the 2009 report to 64% in the current report. The percentage for short-term remained unchanged and for one-way assignments it actually decreased 1% from 12% to 11%. With regard to expectations about assignment length, respondents presented a more complex picture: On one hand, they expected more assignments of six months to one year 15% in the current report compared to 11% in the previous report. On the other hand, for assignments of one to three years in length, there was a decrease in expectations from 55% to 47% in the current report. At the same time, there was an increase in the number of expected three-to-four-year assignments from 13% to 18%. The shorter assignments may be less costly and less disruptive, and are sometimes easier to approve than longer assignments. However, in spite of this, it is only the expectation of an increase in short term assignments that we see so far and it remains to be seen if this translates into an actual increase. With regard to the expected increase in three-to-four-year assignments, we believe that companies are hoping to keep expatriates on existing assignments for an extra year rather than to replace them with another expatriate, which is very costly, or possibly if there are no open positions available for the expatriate upon their return. We also noted a shift in the percentage of assignments that were completed on schedule. Compared to the 2009 report, there was a 3% decrease in assignments completed on schedule from 62% to 59%. The

12 Key findings top responses to the question why some assignments required additional time to complete were a change in business needs, expansion in the project scope, and because there was no successor ready to replace the expatriate. All of these reasons speak again to the less predictable economic times that companies are facing. It is possible that assignment duration is positioned optimistically as part of the approval process but that reality intervenes later and assignments are then extended when necessary. While assignment extensions are unavoidable at times, we urge mobility managers to avoid the practice of transforming short-term assignments into long-term assignments because of the corresponding tax implications and additional expenses. Regarding policies that are currently in place, we noted increasing use of policies for localization (from 52% to 58%). We believe that this reflects the fact that localization was once only a practice and a recent increase in use of this practice has prompted companies to develop corresponding policy. The increase in local-hire policies from 37% to 38% and the increase in commuter policies from 29% to 35%, however, are certainly in line with trends we have seen developing over recent years. On the other hand, the percentage of extended business travel policies has fallen from 47% to 44%. This may signal another shift. Extended business travel was once viewed as a cheap alternative to an assignment, but it is difficult to administer in terms of taxes and immigration and carries a great deal of compliance risk if not done well. Furthermore, when we asked which policies are being considered for the future, commuter assignment policies increased from 30% in the 2009 report to 36% currently. This again is consistent with the significant increase within the industry in this type of assignment. We also noted that the practice of localizing expatriates after five or more years was at an all time high: 44%. We believe that this is a result of companies experiencing increased pressure to reduce costs and the administrative burden of assignments by shifting long-term expatriates to local status. Furthermore, we noted the following developments regarding the benefit-transition schedule: There was a reduction in the percentage of respondents that transitioned expatriates immediately to the local benefits structure from 43% in the 2009 report to 37% in the current report. At the same time, there was an increase from 7% to 11% in respondents who transitioned expatriates during a one-year period. These results can be explained by acknowledging that localization has become a more common practice in the current economic climate. However, in many cases, the lack of a transition period seriously inhibits the ability or willingness of expatriates to accept a localization. In response to expatriates reluctance to localize, companies may be providing an incentive to make the transition to local benefits by offering a structured transition to local benefits over the period of one year. GLOBAL BUSINESS STRATEGY This report documented a record high percentage (58%) of revenue generated outside of the headquarters country; the historical average was 44%. It is therefore not surprising that only 56% of expatriate assignments involved relocation to or from a headquarters country. For the first time, we asked respondents to identify where the mobility function reports within the corporate structure. There has been some excitement about closer collaboration between international mobility and talent management functions, but when we tabulated the results, only 4% indicated a reporting line to talent management. In fact, 56% of respondents reported to corporate human resources, and 31% reported to the compensation and benefits function. The lack of innovation in the traditional pattern of reporting relationships perhaps speaks to the difficulty of making the significant organizational changes that would be required in order for mobility to report to talent management. The centralization of the decision-making process has reached the highest level in the history of this report: 96% of respondents reported that relocation decisions were made globally at company headquarters. At the same time, regional decision-making fell from 7% in the 2009 report to 2% currently. This reinforces our perception that companies are exercising more top-down governance. Driven by the need to manage costs more closely in a weak economy, central human resource departments are issuing guidelines for policies and processes, and they are keeping tighter control of the relocation process than ever before. 10

13 To prepare for global expansion, companies continue to pursue centrally directed strategic practices. For example, the choice to evaluate programs to ensure that needs are met remained in the top position at 80%. It shared that spot with align global business objectives and needs, which historically held the first position most often. In both cases, companies are exercising a greater degree of governance as they evaluate and adapt policies and processes to respond to current conditions. In addition, the choice to identify a pool of potential candidates was less of a concern. It slipped from 64% in the 2008 report to 49% in the 2009 report and 45% in this report. This trend is an understandable consequence of reduced business activity and the decreasing need to have a pipeline of available candidates. When asked about their method of policy standardization, global policy standardization rose to a historical average of 69% while regional standardization fell to a historical average of 20%. Divisional standardization remained at 4%. Verbatim comments indicated that the core-flex methodology has gained in popularity. Moreover, we do not believe that regional policies have been as effective as hoped. We believe that the reason for this is related to the fact that companies often find that there is no real justification for offering a different package for intra-regional assignments to that offered for inter-regional assignments. Key findings Seventy-two percent (72%) of respondents indicated that companies were reducing expenses (versus a historical average of 63%.) Furthermore, 84% of respondents reported an increase in pressure to reduce costs compared to a year ago. Companies are finding that there are a number of ways in which to attain these reductions. So while they continue to reduce or modify policy options as their primary method, they also are scrutinizing policy exceptions more carefully and they are increasing their reliance on local hiring. Attempts to reduce vendor fees, however, have been nearly abandoned as a method of cost reduction (it fell to 2% of respondents). Respondents realize that continuous reductions in this area can jeopardize the quality of service. Instead, they are adopting a pro-active stance and are structuring their policy options and benefit packages accordingly placing heavier reliance on short-term assignments and localization. Not surprisingly, the stated objectives for embarking on an assignment have changed to reflect the new culture of cost-consciousness. While filling a skills gap and building management expertise continue to be cited as top reasons, launching new endeavors has fallen in rank for the third straight year declining to fifth place in the current report and losing its former position to technology transfer. In response to significant relocation challenges, participants once again displayed concern about costs, but appear determined to make strategic decisions that help them to manage costs, not simply reduce them across the board. For example, the leading challenge remains cost of the assignment, but it was followed by controlling policy exceptions, which had moved up to fifth position in the 2008 report and to third position in the 2009 report. We believe respondents are attempting to obtain greater value by managing both policy design and the way exceptions are managed. Furthermore, the decline in employment opportunities was reflected in the decline of finding suitable candidates to third place. CULTURAL AND FAMILY ISSUES While 80% of responding companies provided formal cross-cultural preparation, the percentage that provided it on all assignments dropped by 8% (from 35% in the 2009 report to the current 27%). More companies provided it only for some assignments (an increase from 46% in the previous report to 53% currently). Usually the decision to offer it was based on the destination country (57% of respondents). At the same time, fewer companies mandated cultural preparation only 17% in this report compared to 22% in the 2009 report and 25% on average. Since cross-cultural preparation is widely accepted to improve expatriate performance and 83% respondents believe it has good or great value, the lack of a practice that makes the benefit mandatory is disappointing. We assume that the difficulty of quantifying the benefits to be derived from this type of training continues to inhibit the way it is offered. As alternatives to face-to-face cross-cultural training, 35% of respondents provided media-based or web-based cross-cultural training an all-time high. More companies (25%) use it to supplement formal training, and its portability is cited as a chief reason (20%) along with cost (20%). Only 5% of companies provided it as the only type of training offered (a decrease from 19% in the 2006 report). When asked which family challenges were critical to companies, respondents once again cited family 11

14 Key findings adjustment, children s education, and partner resistance as the top three reasons. Similarly, when asked to rank the most commonly cited reasons for candidates turning down assignments, respondents once again cited family concerns, partner s career, and employee career aspirations as the top choices. Family concerns also topped the list of reasons for early return from an assignment (although 7% was not a high percentage). With such widespread agreement about the nature of these challenges over such a long period of time, the lack of apparent success in addressing them is puzzling and they continue to appear year after year. On one hand, it is possible that companies have not adequately addressed the career aspirations of partners, concerns about children s education, the career aspirations of employees, or concerns about family adjustment during an assignment. On the other hand, it is possible that these concerns are unavoidable in any transfer involving a two-career family with children enrolled in school. Again, the difficulty in providing a quantifiable cost benefit analysis means that justifying the cost of additional support is problematic and so is rarely pursued. If we take a closer look at how companies assist spouses or partners, once again, the top three choices were language training, educational assistance, and company-sponsored work permits. Furthermore this year, assistance with career planning moved up from sixth to fourth position. Spouses and partners feel strongly that their professional lives are valid concerns both during and after international assignments. After all, 50% of spouses were employed before such assignments. Consequently, they are demanding that companies assist them in maintaining their careers especially when economic conditions make this difficult. ASSIGNMENT EVALUATION AND COMPLETION The ranking of the top three performance review methods was nearly the same as it has been for the past four reports: performance review in the host country, performance review in the host and home locations, and performance review in the home country. In the current report, however, 18% of respondents replied that they did not know how expatriate performance was measured an increase from 6% in the 2009 report. It is possible that mobility departments realize that they are separated from the talent management process. Nonetheless, by noting this shortcoming, they at least indicate an awareness of the importance of knowing how expatriates are evaluated. It remains to be seen if this surprising lack of information will be remedied in the future. When asked about the career impact of international assignments, respondents reported that expatriates received promotions more quickly (33%), which has been the first choice historically. In equal percentages (28%), respondents indicated that expatriates more easily obtained positions in the company and changed employers more often. We wonder if these responses were based on documented records or if they represented only an impression that mobility professionals have of the career impact of assignments. The responses regarding promotion and obtaining a new position, appear to contradict the conclusions that might be inferred from the data on post assignment attrition, i.e. that 38% of expatriates leave their company within a year of repatriating and 23% leave between one and two years of repatriating. How would expatriates themselves answer this question? We believe that there may in fact be a significant difference between how mobility professionals and expatriates themselves perceive the career impact of assignments and that more integrated processes between the mobility and talent management functions might be used to gain more information in this regard. There appears to be increasing agreement that successful repatriation is an integral part of the international assignment cycle. For example, 74% of respondents now have written repatriation policies compared to 70% in the 2009 report. In addition, 92% of respondents held repatriation discussions with expatriates compared to 91% in the 2009 report and a historical average of 73%. Unfortunately, most of these discussions (38%) take place less than six months before assignment completion, and only 25% take place before departure. Moreover, only 12% of companies require a clear statement about post-assignment expatriate duties. In an uncertain economy, it may be difficult to make extended post-assignment commitments, but these discussions should be had at least for the expatriates that companies wish to retain. This is another area where a closer collaboration between the mobility and talent management functions is likely to be beneficial. At a minimum, companies should attempt to hold repatriation discussion 12 months before the end of an assignment, and they should develop the processes 12

15 and milestones, during an assignment, for opening and progressing these discussions. While 95% of companies helped repatriating employees to identify new jobs within the company, mandatory assistance was offered by transferring departments at only 31% of companies. Otherwise, employees had to rely on formal job postings (24%) or informal networking (23%). 20% of respondents cited an increase in expatriate attrition, compared to 10% in the 2009 report, and more expatriates have been leaving companies during the first year after repatriation 38% in this report compared to 35% in the 2009 report and a historical average of 22%. We believe that employees were unable to find jobs at these companies upon returning because of the weak economy and were perhaps laid off yielding the current high percentage. Historically, the highest attrition occurred more than two years after returning from an assignment (39%), but for the current report, only 22% of repatriated employees left their companies after two years. We believe that it is reasonable to assume that employees, having noted that there were fewer job opportunities outside of their companies, chose to remain with their companies in order to remain employed. Key findings COST ESTIMATES, TRACKING, AND COMPARISONS Respondents revealed an increased level of formal governance over expatriation. 75% of companies required a clear statement of assignment objectives before obtaining funding for expatriate assignments compared to a historical average of 65%. Among companies that required such statements, 11% required approval by the chief executive officer (CEO), 41% by the business unit, and 17% by corporate human resources. We believe that CEOs immediately became more involved in assignment approval during 2008 as the economy weakened. Consequently, the level of CEO approvals was higher (17%) in the 2009 report than in the current report. Now that companies have instituted stronger assignment-approval guidelines and oversight, CEOs have become less engaged in the process. Similarly, 46% of responding companies required a cost-benefit analysis to provide justification for an assignment compared to 39% in the 2009 report and a historical average of 43%. This is good news and particularly understandable, given the current economic situation. In addition, 75% of companies prepared cost estimates before initiating all assignments, and 14% did so only on certain assignments. Considering the inherently high cost of assignments, particularly the less obvious costs such as host taxation, the requirement to consider a cost estimate as part of the assignment approval should be a bare minimum and basic process to manage costs. During assignments, however, only 64% of companies actually tracked costs compared to 68% in the 2009 report and a historical average of 70%. We believe that this decline reflects two circumstances. On one hand, the number of destination countries and the complexities of managing and collecting data contribute to a decline in cost tracking. On the other hand, there may be fewer resources for tracking costs as companies reduce the size of the mobility function in an effort to cut costs. Reductions in the size of the mobility function also may explain the declining percentage of companies that compared actual with estimated costs only 33% in this report compared to 35% in the 2009 report and a historical average of 37%. We also believe that the complexity of gathering and tracking cost data is a key reason why so few companies (8%) measure their ROI for assignments. Without data, ROI cannot be calculated. OUTSOURCING When asked about the necessity of making headcount cuts within mobility departments and any associated trend towards increasing reliance on outsourcing, the responses seem to indicate stagnation on this point in that companies have had to make staff cuts but at the same time they have not been able to rely on outsourcing to bridge the gap. On the other hand, when asked about general trends towards outsourcing, responses indicate a gradual build over time towards an increased reliance on outsourcing but seem also to show that the build has slowed and has become rather flat. Companies clearly still value the benefits of outsourcing, but these benefits have become very clearly focused on outsourcing s ability to support the management or cutting of costs, i.e. identifying costs, better reporting and facilitating 13

16 Key findings headcount reductions are now the top three perceived benefits. Cutbacks in the mobility function also explain why respondents have indicated that less is being measured in other parts of this report such as the tracking of assignment costs and the comparison of actual versus estimated costs. There are simply too few people remaining to carry on these functions. As a result, perceptions about the benefits of outsourcing now focus on identifying costs, reporting, and reduced staff instead of specialized expertise. 14

17 THE EXPATRIATE POPULATION Only 27% of respondents believed the number of expatriates increased in 2009, the second lowest percentage in the history of this report; 44% expected the number to increase in % of all employees had previous international experience, and 8% of current expatriates were new hires (the lowest percentage in the history of this report). 17% of expatriates were women, the lowest percentage since the 2001 report. 48% of responding companies deployed 100 or more expatriates. Only 10% of expatriates were 20 to 29 years old; 40% of expatriates were in the year age group (a tie with the 2003/4 report for the all-time high). 70% of expatriates were married. The percentage of married men (63%) was higher than at any time since the 1999 report. Only 47% of expatriates had children accompanying them, an all-time low. Spouses/partners accompanied 79% of expatriates; the second lowest percentage in the history of this report. 50% of spouses were employed before an assignment (but not during); 4% were employed during an assignment (but not before); 9% were employed both before and during the assignment. Survey Highlights EXPATRIATE SOURCES AND DESTINATIONS 56% of expatriates were relocated to or from the headquarters country, the lowest percentage in the history of this report. 27% of transfers were intra-regional; 49% of these transfers took place within Europe, Middle East and Africa; 25% within the Asia-Pacific region; 26% within the Americas. The United States, China, and the United Kingdom were the most frequently cited top destinations. China, Singapore, the United States, and India were the primary emerging destinations. China, India, and Russia were the most challenging locations for expatriates (same as the past three reports). India, China, and Russia were the most challenging for administrators. For the first time in the history of this report, China was not in the top position. China and India were the most challenging destinations for housing and for temporary accommodation; Russia, the United Kingdom, India, and the United States were the most challenging in terms of immigration. ASSIGNMENT TYPES AND BENEFITS 64% of assignments were long term, 22% short term, and 11% one way. 21% of assignments were initially expected to be for less than 1 year in duration, 65% for 1 to 4 years, 7% for more than 4 years, and 7% permanent. 9% of assignments were completed in less time than estimated, 59% on schedule, and 32% exceeded the estimated time. More time was required because of a change in business needs (69%), expansion of the project scope (50%), and because there was no successor/replacement ready (39%). 97% of respondents had long-term assignment policies, 84% short term, 58% localization, 55% one way (permanent), 44% extended business travel, 38% local hire, 35% commuter, 25% developmental, 9% graduate, and 7% virtual-team policies. For the future, 36% of respondents were considering commuter policies, 35% localization, 28% extended business travel, 21% short term, 16% long term, 16% developmental, 15% one way (permanent), 11% local hire, 4% graduate, and 3% virtual-team policies. Factors considered in localization policies included expatriate wishes to remain in the host country (38%), a predetermined assignment length (20%), cost (19%), and no position at the home location (10%). Among companies that relied upon localization, 21% localized immediately, 35% localized in 1 to 4 years; 44% localized in a period of 5 years or more. 15

18 Survey Highlights When transitioning away from their expatriates original benefits structure to local standards, 37% transitioned immediately, 11% used a one-year transition, 9% a two-year transition, and 17% used a three-year transition. GLOBAL BUSINESS STRATEGY 58% of company revenues were generated outside the headquarters country, a record high that compares to a historical average of 44%. At 56% of responding companies, the global mobility function reports to corporate HR, at 31% to compensation and benefits, and at 4% to talent management. For 96% of respondents, relocation assignment policy decisions were made globally at headquarters (the highest percentage ever), 2% regionally, and 2% country by country. 80% of respondents reported that their companies prepared for global expansion by evaluating programs to ensure that needs are met, 80% aligned objectives and needs, 45% identified a pool of potential candidates, and 45% planned long-term career paths. In response to economic conditions, 72% of companies reduced assignment expenses, 84% reported increased pressure to reduce costs compared to a year ago. The primary areas for cost reduction were reduced policy offerings (29%), scrutiny of policy exceptions (19%), local hiring (11%), and short-term assignments (9%). The most common assignment objective was filling a managerial skills gap (22%), followed by filling a technical skills gap (21%), building management expertise (17%), technology transfer (16%), and launching new endeavors (13%). Critical relocation challenges included cost (37%), controlling policy exceptions (33%), finding suitable candidates (32%), career management (29%), retention of expatriates (27%), inability to use experience after repatriation (23%), and compliance (23%). 69% of companies use a global approach to policy standardization, 20% a regional approach, and 4% a divisional approach. CULTURAL AND FAMILY ISSUES 80% of companies provided cross-cultural preparation (53% on some assignments and 27% on all assignments). Where it was offered, 57% made it available in certain countries, 8% at employee request, and 2% by grade of employee. Only 4% limited training to employees; 38% made it available to the employee and spouse, and 55% provided training to the entire family. Cross-cultural training was mandatory at 17% of companies. 83%, however, rated it as having good or great value. 35% of respondents used media-based or web-based cross-cultural programs an all-time high. 25% considered such programs as additional support to reinforce in-person programs; 20% cited portability, 20% cost, and 15% used them as stand-alone alternatives. The most critical family challenges were family adjustment, children s education, spouse/partner resistance, and cultural adjustment. The top reasons for assignment refusal were family concerns (83%), spouse/partner s career (47%), employee career aspirations (28%), and compensation (27%). 85% of respondents supported spouses with language training, 38% provided education/training assistance, and 34% sponsored work permits. 8% of responding companies assisted expatriates with elderly family members usually (63%) by relocating them to the assignment location or supporting expatriate visits to the home country (63%). ASSIGNMENT EVALUATION AND COMPLETION To monitor assignments, 35% of respondents used host-country performance reviews and 27% used both home- and host-country reviews. Regarding the career impact of expatriate assignments, 33% believed that they led to faster promotions, 28% to finding new positions at their company more easily, and 28% to changing employers more often. 16

19 7% of assignments were incomplete because expatriates returned early; families returned early 7% of the time and left expatriates behind. Reasons for early return from assignment included family concerns (32%), a new position at the company (21%), and early completion (17%). 92% of respondents held repatriation discussions; 25% discussed repatriation before assignment departure, 29% more than 6 months before return, and 38% less than 6 months before assignment completion. 74% of companies had written repatriation policies, but only 12% required a clear statement of expatriates post-assignment duties. 95% of companies identified new jobs within the company for repatriating employees. This was accomplished through the transferring department (31%), formal job postings (24%), and informal networking (23%). Attrition for all employees was 13%, equal to the historical average. 17% of expatriates left the company during an assignment, 38% within one year of returning, 23% between the first and second year, and 22% after two years. 65% of respondents indicated no change in the assignee attrition rate since last year, 20% an increase, and 15% a decrease. To minimize expatriate turnover, 36% of respondents cited opportunities to use international experience as the best method, followed by choice of position upon return (24%), and recognition during and after an assignment (17%). Respondents indicated that 6% of assignments fail. Key factors leading to assignment failure were spouse/partner dissatisfaction (65%), inability to adapt (47%), other family concerns (40%), and poor candidate selection (39%). China, India, and the United States were cited as the locations with the highest rate of assignment failure. Survey Highlights COST ESTIMATES, TRACKING, AND COMPARISONS 75% of responding companies required a clear statement of assignment objectives before funding an assignment where approval was required (compared to a historical average of 64%), 11% required CEO approval, 41% the business unit, 17% corporate HR, 1% home-country HR, 0% host-country HR, and 4% on a case-by-case basis. 46% of companies required a cost-benefit analysis to justify relocation assignments. 75% of respondents prepared cost estimates before an assignment, and 64% tracked costs during an assignment. 33% of respondents compared estimated with actual costs. For those who compared costs, 21% reported that their estimates were accurate. MEASURING RETURN ON INVESTMENT 8% of respondents formally measured return on investment (ROI). Of those who did, the factors considered included expatriate compensation (75%), the cost of relocation support (75%), business revenue generated (75%), administration costs (63%), completion of objectives (38%), and employee management development (38%). 89% of respondents defined ROI as accomplishing assignment objectives at the expected cost. 89% of respondents rated their ROI as good or very good (none as excellent). 33% of respondents had programs to improve their ROI for expatriates. The top initiatives to improve expatriate ROI included better candidate selection and assessment (30%), career planning (26%), effective communication of assignment objectives (15%), and better preparation (8%). 17

20 Survey Highlights COMPENSATION 65% of respondents used a home-country approach to determine compensation for long-term assignments; 26% used a combination home/host-country approach. 88% of respondents used a home-country approach to determine compensation for short-term assignments; 6% used a combination home/host-country approach. To determine host-country income tax liability, 78% used a tax-equalization approach; 5% provided tax protection; 8% provided no compensation for the differential. To determine home-country income tax liability, 74% used a tax-equalization approach; 4% provided tax protection; 10% provided no compensation for the differential. 19% of respondents used a split pay to manage fluctuations in exchange rates for expatriate compensation; 42% made periodic adjustments, 11% provided exchange-rate protection, and 28% provided no compensation. When asked how often they adjusted compensation to accommodate exchange-rate fluctuations, 14% made quarterly adjustments, 16% biannually, 26% annually, 8% case by case, and 17% never during an assignment. OUTSOURCING Respondents believed that the key benefits of outsourcing were identifying assignment costs (53%), better reporting (45%), staff reduction (40%), service quality (28%), consistent policy application (23%), and cost reduction (20%). 35% of respondents currently outsource international assignment programs. 30% of respondents reported staffing cuts in assignment management departments; among them, 50% reported increased reliance on outsourcing as a result. Among all respondents, 45% increased reliance on outsourcing since last year (a new record high exceeding last year s), 48% reported the same level of reliance, and 7% decreased reliance since last year. 14% of respondents who did not outsource international assignment program administration were considering outsourcing within two years. Compliance (including taxes, social security, and immigration) was the most commonly outsourced service, followed by financial management, program administration, vendor management, and policy consulting. 41% of respondents managed multiple vendors themselves; 24% outsourced vendor management tasks; 32% used a mix of both types of management. Respondents ranked global HR experience as the chief outsourcing criterion, followed by pricing, geographic reach, and service philosophy. For 82% of respondents who outsourced all or part of their international assignment program, expectations were met or exceeded. 50% of respondents measured their supplier s performance. Among respondents that did not measure supplier performance, 42% had an internal service level agreement. NEW AND INNOVATIVE PROGRAMS We asked respondents to describe innovative programs instituted in the last year, and we received a wide range of comments. Innovative Programs Policies, Programs, and Components: a regional mobility policy was recently developed to allow for greater movement of assignees and job opportunities within intra-asian countries currently working on intra-regional assignment policy to reduce costs for certain assignments between countries which closely resemble one another introduction of a formal commuter policy local-plus (expat light) policy 18

21 mandatory cultural training, increased destination support, increase utilization of preview trips more tailored to the destination; more thoughtful planning around the purpose of the assignment and expected ROI; improved policy design to accommodate terms of assignment new global assignment policy; implementing a local-plus compensation structure; developing a center of excellence for international mobility; investing in software to assist with capturing and storing assignment data new global policy; reviewed all current procedures; introduced an exceptions policy our policy is being reviewed recently developed a scalable development policy revision of short- and long-term assignment policy; new localization policy ROI program being planned (2010) temporary transfer programs we are currently reviewing and benchmarking our current policies; we hope to have a revised international assignment policy in place in the first quarter of 2010; we hope to revise our current housing and cost-of-living allowances we are in the process of developing a new international assignment policy which will provide a global overlay but still allow for localization to respect and recognize the local market norms and practices currently just bringing in a relocation vendor to help policy and process development; very early stages of having a true GM [global mobility] program Cost-Saving Measures: Asian intra-regional associates, who were initially hired on a prior employer s comparative expatriate package, have been moved to an allowance pool with no tax assistance or other expatriate allowances; they may apply the allowance pool to taxable or non-taxable costs; the allowance pool is determined as a percentage of base salary budget constraints are focusing on elimination not implementation switching to experienced purchaser rates; putting caps on certain other allowances; requiring cultural training for the full family; cost-sharing on host-country vehicle testing minimized provisions to accommodate employee requests and business needs (on assignment and moving to minimally supported assignment) we are transferring Filipino ultrasound techs whom we employ in the U.K. to the U.S.A.; we are also hiring new ultrasound techs directly from the Philippines and moving them to the U.S.A. under H2-B seasonal peak-load visas all extensions must also be justified and a cost estimate prepared; this must be approved before an assignment is extended we have moved away from expense reimbursement for many allowances and implemented a lump-sum payment approach; this has reduced the number of exceptions for items covered under lump sum, reduced administration, and has provided flexibility to assignees in managing their spending, which has been largely welcomed by them implemented use of the Modified Efficient Producer Index for paying goods and services differential versus using the Standard Index our company did restructure the international assignment program in 2009; we changed from host-based pay to home-based pay; changed all allowances so that the overall package is less lucrative; brought most aspects of the package down to the market median Survey Highlights Procedures and Models: assignment cost sharing between assignment location and function the current approach is to keep transferees on the home-country payroll system; if there are no implications in the long-term plans, we are now evaluating the possibility of enrolling transferees in the host-country payroll as an opportunity for cost savings implemented expat management program for data and payroll process more competitive and benchmarked against other companies overhauled spouse support web site [and] the schools/child-care database talent management department will be reviewing performance of proposed long-term assignees prior to administration of assignment we are creating HR managers in all our offices and having bi-annual global HR meetings to ensure that everyone understands the group policies and knows how to work together to ensure the success of moving staff from office to office we have started to employ our expat build-up salary calculation (excluding incentive allowance) to calculate salaries for short-term project assignments rather than using daily allowances 19