Repatriation: An Ending and a Beginning

D.W. Kendall

21 D.W. Kendall is Personnel DirectorPacific Region for the Rohm and Haas Company in Walnut Creek, California.

You c a n go home again, but it isn't always easy. It is the responsibility of forwardthinking corporations to anticipate and ease the difficulties of making the transition from foreign to home-based assignment.
omething very interesting takes place when a manager and his or her family take a foreign assignment, live abroad, and then come home again. Most of these expatriates find it difficult to readjust to life in the U . S . financially, culturally, or professionally. As a personnel manager counseling those going to and returning from overseas assignments, I have seen this reaction time and again, and would like to explore some of the reasons for it, and propose ways to ease the transition. Managers who have lived abroad typically face certain facts of economic and political life upon their return. For many multinational companies, the financial realities of the late 1970s and 1980s (examples would be the recession, costs of regulatory compliance, competitive pressures overseas due to differing views on profit margins by our Japanese and some European competitors) have put an end to the good old days when corporate expansions at home and abroad provided almost unlimited promotional opportunities. Then, most returning expatriates came back to a promotion, whereas now, particularly

when more managers are being repatriated than sent abroad, most are lucky to come back laterallyand many come back to a lowerlevel job. Likewise, it used to be true (say, before 1974) that a dollar salary alone provided for a very nice lifestyle abroad, and allowances could be s a v e d - t o be used when the expatriate r e t u r n e d - t o b u y the "big house on the hill." This has all changed now, since the dollar has weakened against major world currencies like the yen, the DM, and the Swiss franc. Now it takes most of an expatriate's salary and allowances to live abroad and his savings don't keep up with the price of real estate in the U.S. The following is a case study describing the experience of a U.S. family who spent five years abroad and then returned home. A young, aspiring manager who had never really thought about an overseas assignment (indeed, he had never really traveled abroad), was offered a position in Europe at the corporation's office in London. This man was 31 years old, had a wife and eight-year-old daughter, and had risen fairly rapidly from a nondescript job in the Midwest to a

22 middle management position at the corporate headquarters in Philadelphia. Husband and wife were of conservative Midwestern working class stock, and had quite proudly integrated themselves into the suburban scene-nice house, big mortgage, car financed through the credit union, barbecue grill, stereo, and all the other trappings of Suburbia, U.S.A. Being fairly strapped financially, their primary entertainment was visiting other suburban friends. Culturally they were, shall we say, underdeveloped. Upon being offered the job in England, this fellow naively accepted on the spot. (He did give his wife a call from the office.) All the family members were excited about the prospects of living in England, although not one had any particular reason to know what it would be like. House and car were promptly sold, relatives were visited, furniture shipped (some stored), and the plane boarded for London. The family decided to change their lifestyle dramatically, and, rather than take a house in Weybridge or Walton-on-Thames (the stockbroker belt, where you can almost duplicate the U.S. suburban scene), they found a small flat in central London. The daughter was enrolled in the international school. The neighborhood was mixed-a sort of emerging Greenwich Village-with some 60 percent foreigners and 40 percent financially comfortable Britishers. The wife joined the American Women's Club, the family joined the American Church in London, and before they knew what was happening, they had quickly been embraced by the London overseas community. They lived so centrally that they didn't even have to have a car. Their allowances were generous enough that they could travel to the Continent three or four times per year via cheap package holiday plans. As a function of their position in the company, they frequently had to entertain visitors (or were entertained) at home or by going out to restaurants. They became interested in the t h e a t r e the West End theatre district being only ten minutes from their flat. They started going to London's art galleries and museums and developed a keen interest in the arts. Their neighbors included Lee Remick, Alfred Hyde-White, Paul McCartney, and Bernard Pomerance (author of The Elephant Man). Each year they traveled back to the U.S. for home leave, and by careful conniving they could arrange a free stopover in Miami to relax on the beach at Key Biscayne. During their stay in Europe, they visited Russia, Sweden, Switzerland, Paris, Italy, Turkey, the Canary Islands, Greece, Amsterdam, and Spain, and their daughter took separate trips with the international school to Rome, Paris, and Geneva. Professionally, this American expatriate manager took to his work. He liked the job, the people he worked with, the freedom of being away from the corporate bureaucracy, and the opportunities to do business in various countries in Europe. He developed a good deal of skill in the international aspects of his particular discipline, and became at a very young age a respected member of the European senior management team. Mind you, overseas life was not just a piece of cake for this family. They lived in a flat in central London which was quite small by U.S. standards. There was no station wagon to haul home the groceries from the supermarket-indeed, there was no supermarket. Marketing was a daily chore, and everything was carried in. Also, they experienced the heat wave of 1976, and the power, garbage collectors, and bakery strikes of 1978. The point is, however, that they were happy to make the trade-off-for a small sacrifice of material ease, this down-home Midwestern family who had never had any interest in foreign travel, living abroad, or cultural pursuits, enjoyed five years of social and cultural feast. The five years were two to three years more than the family had originally committed themselves to spend abroad. The daughter was entering high school and, by this time, had spent more of her school years outside the U.S. than inside. The parents became concerned about her missing out on a normal U.S. high school education, particularly the social aspects. To make a long story short, this family moved back to the States, the husband back to a position with less clout in the head office, the family back to the suburbs. Gone

Repatriation: An Ending and a Beginning

"Every personnel department for a multinational firm must be staffed with personnel professionals who have lived abroad. Travel doesn't count!"

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were the museums down the street, the theatre ten minutes away, the celebrity neighbors, weekends to Paris, school trips to Switzerland. Gone, too, was the discretionary income peculiar to the expatriate situation; in the U.S. most managers invest heavily in their homes. schools overseas tend to be well staffed (with the companies footing the bill), classes are small, and the students come from well-educated families and are highly motivated. Cash flow or disposable income problems. It costs a lot of m o n e y to live abroad. Estimates of cost-ofliving relationships for major cities relative to Washington (100) are: Buenos Aires, 144.8; Sydney, 127.3; Vienna, 165.9; London, 153.1; Paris, 157.4; Frankfurt, 174.8; Tokyo, 204.0; Singapore, 136.9. Because of this difference, we pay the expatriate extra cost-ofliving money, plus, of course, a foreign service allowance, and in some cases a hardship allowance. This means that the expatriate, just to live, is used to having and spending a lot of cash. This is a difficult pattern to break after coming back to the U.S., and is more difficult the longer the employee has been abroad. U.S. or h o m e country housing problems. The financial impact of reentering the U.S. housing market is so significant to the repatriate that it's worth noting separately from the point above. Most expatriates rent because the price of homes abroad is extremely high. For example, a typical fourbedroom, Western-style home costs $300,000 in a London suburb, $500,000 in Paris, $1,000,000 in Tokyo, and $1,400,000 in Hong Kong. Furthermore, it is inadvisable for expatriates to bring capital into a foreign real estate market, due to devaluation risks. Very often, managers sell their homes when they move abroad because of the difficulties of renting and overseeing them from a great distance. But there is no way for a manager to take his or her equity out of real estate for four or five years and earn nearly as much on any other type of investment. So, upon return, the employees encounter the financial and psychological setback of not being able to afford a house like they had before, even though their salary has risen over the period. Employees quickly begin to wonder if the whole thing was worth it. Job shock. Working far from corporate headquarters, in a fairly autonomous situation, with mail communications in weeks rather than days, and telex and phone communications delayed by time zone differences, most expatriates have a degree of responsibility very much greater than they had prior to moving abroad. Even when they return to a significant promotion, people tend to feel that the headquarters bureaucracy net causes them to feel less responsible than before.

What the Problems Are

rom this case, which from my experiences in repatriating people is typical, we can identify several problem areas which are c o m m o n to most repatriation cases: Leaving the expatriate social and cultural lifestyle. What is left behind varies according to where the manager was stationed. In Europe it tends to be the life outside the home, the opportunities to enjoy the arts, and to travel. In Asia and Latin America (particularly the more underdeveloped areas), what is missed is the poolside entertaining scene and the domestic help available for running the household. In all areas of the world, expatriates mind leaving a very special community that they feel genuinely a part of. Expatriates tend to cling to each other for support in a foreign country. Educational continuity problems. In "making the employee w h o l e " (one of the worst terms in international compensation terminology), companies often provide schooling for the children of expatriate managers which is better than they had prior to transfer, or will have after they return. American

What To Do About Them

"~'Tow that we've identified i N these five areas, it is possible to suggest how a wellthought-out expatriation policy can help the corporation to eliminate, or at least minimize, the impact of these problems on the organization. Social and cultural aspects of expatriate life. This is one of the

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III toughest parts of the repatriation problem to deal with, at least through policy, because these aspects are mostly perceptual and behavioral on the part of the expatriate family. Nevertheless, a well prepared personnel department in a multinational company will have a counseling capability which will at least sensitize the employee and the family to these issues prior to transfer abroad. It is m y opinion that every personnel department for a multinational firm must be staffed with personnel professionals who have lived abroad. Travel doesn't count! It is most important to start the repatriation thinking process prior to expatriation and, through ongoing contacts with the expatriate and his family, keep the thought process going while abroad. I visit expatriate families routinely while on trips overseas, and recently spent the weekend with one of our families in Japan. Through our discussions, the family was subtly reminded of the differences between life abroad and life back home. Counseling sessions during home leave also helps. Encouraging h o m e leaves (not cash in lieu of, or other travel) helps to keep the employee in touch with life at home. Educational continuity. This is another difficult problem. It is difficult for company policies to deal with the return to neighborhood public schools. At least one major company pays for private schools back in the U.S. for employees who serve four or more years abroad, the rationale being that once this pattern is set, it is hard to break. In m y opinion, however, the costs of such a policy will prevent this from becoming a trend. Many corporations, however, do handle TCNs this way, particularly ones who have served in several countries and have put their children in the American system to assure continuity at all assignments. When these people return to their home countries, where language and educational systems are different, companies will often pay for the children to finish their education at the local American school. Cash flow problems. There are several things which can be done here as a matter of policy which will help expatriates. Counseling prior to the move. The employee should know how his or her compensation package is designed, what the elements are, and for what purpose each element is intended. Well-thought-out forms for keeping the expatriate advised of currency adjustments and other matters are also important. Counseling and information sharing which keep the expatriate and the family advised of price trends back home. One of the biggest problems that employees encounter is to find when they come h o m e that prices have gone up here too! This has the greatest effect when the expatriate has been living in a country where there is galloping inflation. Paying allowances by other means than the monthly check. Up-front bonuses for foreign service premium, with the balance paid at

the end of the assignment, make sense from both the cash flow standpoint and the tax equalization standpoint. U.S. or home country housing. This is another tough issue. Basically, the first rule is that a person moving abroad temporarily (for less than ten years) should be encouraged (to the brink of threat!) to keep his U.S. house (or h o m e country house). The biggest favor a company can do an expatriating employee in this regard, is to implement a policy of protecting the employee by rental guarantees and by having an outside company manage expatriate home rentals. This is quite c o m m o n now among major multinationals, particularly for employees transferred abroad in the last two years. Companies who do not have such a program, or companies who adopted such a program recently and have expatriates returning who sold their houses prior to the implementation of such a program, can do little more than to extend interest-free or low-interest loans to employees to help ease them back into the appropriate housing situation. J o b shock. This is where the action is in terms of dealing with the problem through policy. Most importantly, and this cannot be stressed too strongly, a firm agreement must be reached prior to expatriation about the specific job assignment overseas, the term of the assignment, the over-base compensation package for the assignment, and the position, level, and location to which the employee will

Repatriation: An Ending and a Beginning

"A firm agreement must be reached prior to expatriation about the specific job assignment overseas, the term of the assignment, the over-base compensation package for the assignment, and the position, level, and location to which the employee will return."

25 return. This is best achieved through a contract! A contract does three very valuable things: a) It keeps the employee thinking about his return date; b) It eliminates the anxiety the expatriate feels about what position, and under what circumstances, he or she will r e t u r n particularly as the return gets nearer; c) It keeps company management back home focused on the return date and forces human resources planning. Managements (particularly) American ones) tend to not like the idea of a contract of employment. One hears that a contract "connotes lack of trust, . . . . limits flexibility," and "sounds too much like a union situation." There is almost unquestionable evidence, however, that industry, in order to attract the best people to work abroad, must move in the direction of contracts of employment, and, in m y opinion, it's a good thing. Both parties will benefit from a more firm commitment to the success of the expatriate assignment. Further, if other opportunities arise during the contract period, renegotiation should permit changes, assuming the changes are attractive to the employee and the company. Finally, if "contract periods" do result in management scrutinizing the planning process more closely at expatriation time, so much the better; many a career Project assignment. The way has gone on the rocks because many companies are organized, talent has been sent overseas there is a fairly complete break, without enough thought about how organizationally, when an employee to use that talent later, back home. is transferred abroad. Companies Many other things can be done would be well advised to consider to reduce job-oriented repatriation giving expatriate employees, where problems. Keeping the employee in possible, some project assignments touch with things back in the home back in the headquarters location office is important, and this can be during their time abroad. These done in several ways. assignments could be timed to fit in The "buddy system." We all with home leaves or other business remember the b u d d y system from visits. The objective here is to keep summer camp when we were kids. the employee sensitized to the difThe same concept can keep the ferences in environment which exist expatriate from getting lost. The b e t w e e n the domestic organization idea is that a manager at the home and the more decentralized remote location is appointed to look after operations. This can go far to elimthe interests of the expatriate while inate the shock upon returning. he or she is abroad. The manager stays in touch with the employee, f, in the future, we are going to monitors the performance abroad, have people who will want to and counsels him or her on various go abroad and work for our matters when he or she visits head- corporations in overseas locations, quarters on home leave or business. we must design and administer Toward the end of the expatriation policies which ensure that when the period, the " b u d d y " takes a more time comes to return home, the active role, including representing family is indeed returned and rethe expatriate's interests when job stored. From the company planning candidacy is at issue. This manager standpoint, repatriation should be is also sensitive to the "job shock" seen as a beginning, not an ending. the employee may suffer when he The company must have capable, or she gets back (ideally, the man- internationally sensitive managers ager has had the same experience) in both line and personnel positions and builds the knowledge of this at home and abroad, managers who p h e n o m e n o n into the counseling are qualified to counsel, and, most sessions. This role, b y the way, importantly, capable of developing, continues after repatriation until administering, and fulfilling expathe resettlement is deemed triation/repatriation commitments. complete. D