The expatriate Return on Investment (expatriate ROI) that companies receive from their global mobility efforts has come under increasing scrutiny as budgets have tightened. At the same time, companies are sending more people overseas on assignment. Global mobility programmes are still often seen as a necessary expense of doing business for international companies and cost measurement is typically complex. The pay back companies receive for the investment they make is less well understood, though it is often conceptualised in terms of the international working experience and leadership experience people gain whilst on global assignment. But now it is clear that the world is moving towards a knowledge economy where competitive advantage comes from the ability to leverage knowledge, innovate and create other forms of human capital. We know that within a knowledge economy competitive advantage comes from people but the exponential impact of digitisation and hyper-connectivity means that competitive advantage is going to come, in particular, from helping people to think and act differently and to leverage the value in those differences. The response to this has been a clarion call for more co-operation between the talent management and global mobility functions within companies, and a greater alignment of both with the strategic objectives of the company. Global mobility is, therefore, a key conduit for creating the conditions where new forms of human capital can grow and lead to greater competitive advantage. The consequences of failing to embrace and develop global talent at a time when your company needs to maintain competitive advantage within a hyper-connected, digitised global market could be dire. Innovations rise and fall with increasing speed. It is therefore becoming even more crucial to understand the value-creation side of the global mobility ROI equation, and particularly to understand the forms of knowledge capital global mobility creates for companies, employees and the environment in which each operates, particularly those that contribute to competitive advantage. A Return on Investment approach provides a rigorous framework from which to set forth an exploration of the value created by global mobility. Yvonne McNulty and Kerr Inkson took critical steps to outlining these forms of value creation and investment costs in their book ‘Managing Expatriates: A Return on Investment Approach’ (2013)[1]. They defined expatriate Return on Investment as:
“A calculation in which the financial and non-financial benefits to the firm are compared with the financial and non-financial costs of the international assignment, as appropriate to the assignment’s purpose.” (page 28)
They go on to further define expatriate ROI as a combination of Corporate Return on Investment, which is the return on investment to companies, and Individual ROI, which is the ‘perceived benefits that accrue to expatriates arising from international assignment experience in relation to personal and professional gains’. Expatriate ROI is therefore made up of both corporate ROI and individual ROI. This dual focus within the expatriate ROI formula is critical as companies are dependent on the intellectual, social and personal development of their employees in order to grow.

The Challenge of People Analytics and ‘Big Data’ for Expatriate ROI.

As soon as efforts to quantify any kind of ROI begin, you end up in the realm of Big Data. Expatriate ROI is no exception. These days, the specialist press and organisations such as the Harvard Business Review, McKinsey and Deloitte are challenging HR professionals to integrate a people analytics approach to their business to inform HR strategy development and quantify the impact of HR progammes. If you want to measure eROI, you will have to embrace Big Data. There are some fundamental keys to success when it comes to interrogating big data sets. First, you must understand and define the models and assumptions underpinning your analytical efforts. Big Data sets are so vast that you can become lost in the possibilities of what to measure and what not to measure. In addition, we now have so much analytical processing power at our fingertips that we can, in fact, use Big Data to prove almost anything. You are cruising in an ocean of data with a huge motor to help you cut through the water. But where should you go? To get to the right destination, you need to use a reliable map. In the context of Big Data, that means approaching your data set with an evidence-based model in mind. Failure to approach Big Data sets in a structured, evidence-based way results in what researchers call ‘G.I.G.O.’ or ‘Garbage In, Garbage Out’. You can create beautifully impressive but highly misleading statistics, which can be worse than no statistics at all.  I set out to explore what could be a model for informing a Big Data exploration of expatriation ROI that brings together corporate ROI and individual ROI but found there was a fundamental barrier hampering company’s efforts to throw light in this area. The barrier came in the form of the model that currently underpins much of the thinking within the international mobility industry: the U-shaped model of cultural integration.

The Zero Sum Problem Undermining Efforts to Measure Expatriate ROI.

The U-shaped model of cultural integration was first described by Lysgaard in the 1950’s (Lysgaard, 1955[2]) and has been further developed and refined over the years (e.g. Gullahorn & Gullahorn, 1963[3]). At its core, the model describes the experience of cultural adaptation and refers to stages of ‘culture shock’, ‘honeymoon periods’, ‘recovery’ and ‘adaptation’ that take place over a period of months or years.

Figure 1: U-shaped Integration Curve and Work Performance model derived from Lysgaard (ibid)

This model and its derivatives have become an almost universally adopted and highly influential mental model within the global mobility industry and across companies. But there is a key problem with the U-shaped model when it comes to measuring expatriate ROI. The U-shaped model defines expatriate ROI as something approaching a zero sum game. When we approach global mobility Big Data analyses with the U-shaped integration curve as the guiding model, we are looking at an ROI approach that will describe small positive returns at best and struggle to define tangible positive outcomes. Indeed, this outcome has been borne out in companies, as described by McNulty & Inkson (ibid) for example:
“..the reality is that many [companies] still struggle to define what international assignment success really means and have made little or no progress.…The Brookfield 2012 Global Relocation Trends Report shows that there has been very little improvement in eROI-based management techniques…None of the companies rated their ROI from expatriation as “excellent”. While 42% estimated their ROI as very good or good, 58% said it was fair or poor. In our view, these figures indicate a massive waste of time, money, and resources to secure a return on investment that is considered marginal at best….” (page 23)
This is because the U-shaped curve model shapes our approach to measuring expatriate ROI by focusing attention on what the assignee is losing in the move, that is, the space between the branches of the U. The end point of the U marks a return to previous levels of success. The key indicator that you may be applying an inherent zero sum approach to your quantification of expatriate ROI is when you base your global mobility policies on gap analyses, looking primarily at what people are losing in the move and trying to replace that in the most appropriate, cost effective way in order to ensure a return to successful performance. The model leads us to ask questions like ‘how quickly can we get our employees back to full functioning?’ (i.e. how narrow is the U-shaped curve?) and ‘how can we avoid or prevent the worst effects of mobility?’ (i.e. how much has our mobility approach reduced the depth of the curve?) The consequences of this model are apparent when companies focus mostly on the cost of mobility and have relatively little data regarding the benefits of the programme to the global assignees, their host environments, the teams around them and the company on the whole. The consequences are also apparent around the meeting table when company global mobility professionals say that ‘you can’t measure the tangible benefits’ of a global mobility program. In effect, the U-shaped curve model imposes a thinking silo that excludes clarity around the value creation side of the expatriate ROI equation. The aim to have a return to previous levels of success becomes a limiting belief that leads to the zero sum game being played when trying to quantify expatriate ROI.

What If We Ask a New Question about Expatriate ROI?

As a behavioural scientist, I am fascinated by the power we have to reshape our world when we ask different questions. Applying that curiosity to the challenge of measuring expatiate ROI, I wondered how we could conceptualise the way that people and organisations flourish together using global mobility within a knowledge economy. This is not a futuristic, blue-sky question. People and companies do flourish in the here and now because of the stimulating effects of global mobility activities. We see it all the time, anecdotally. What we struggle to do is define it and then measure it. What I wanted to do was build a model that interlinked the value created by people and companies together (i.e both individual ROI and corporate ROI) so that we could define, shape and measure the value creation side of the expatriate ROI equation in a more integrated and systemic way. My framing question became: how can people and organisations flourish together using global mobility within a knowledge economy, in a way that creates competitive advantage for all? When we approach the question of measuring the impact of global mobility with this new question in mind, it becomes evident that far from being a fundamental truth, it’s not necessary for people to experience a U-shaped curve after a global assignment. The question itself precludes a U-shaped curve answer. The clear alternative model for the global mobility experience is, in contrast, the S- or sigmoid curve.

Figure 2: S-curve model of Value Creation through Global Mobility

This curve is a mathematical model that has been used to describe the trajectory of every successful human system. Rather than describing a downturn like the U-shaped curve, the S-curve charts an initial period of experimentation and learning, which is followed by a time of rapid growth and development. The curve eventually levels as growth slows. The key difference for expatriate ROI analyses is that the S-shaped curve model describes a positive trajectory of economic behaviour by a global assignee. It therefore opens up new questions and modes of thinking around global mobility value creation, making it possible for us to devise methods and measurements without inadvertently planning for and creating ROI zero sum outcomes.

New Models Lead to New Questions and Solutions

The parallels with global mobility are clear as we fast forward to the dawn of the 4th Industrial Revolution. At the moment, global HR directors are wondering how to plot the spread of innovation and new forms of human capital as they move knowledge workers around the world, and global assignees are wondering how to grow their career in meaningful ways as they make successive overseas moves. The use of the S-curve not a radical or new idea when it comes to describing human behaviour. It is, however, an approach that has been lost to common knowledge through the passage of time and through the popular take-over of the U-shaped model of cultural integration. Back in 1890, Gabriel Tarde[4], the French sociologist, used the S-curve to explain the diffusion of innovation in society. His particular focus was on how individuals shared, created and adopted new technologies and new knowledge. More recently, for example, Charles Handy (1995[5]) used the sigmoid curve to describe human and management change processes.

Moving Beyond the Zero Sum Game in Expatriate ROI

The critical first step in successfully quantifying expatriate ROI is recognising the analytical straight jacket that has been imposed by the U-shaped curve model. This model has been leading companies to implement systems, policies and processes that accept a downturn in performance as the inevitable consequence of global assignments. It is a model that encourages us to remain fixed on the ‘return to previous levels of success’ end point for corporate and personal investment in the global assignment, thereby creating the expatriate ROI zero sum game. An even more important corollary of changing this limiting mental model we have been using is that we can start to change the questions we ask and the solutions we perceive when it comes to harnessing the co-creative power of a globally mobile human system such as a multinational company. We can change our approach to global mobility so that we place the S-shaped human growth model at the forefront of our global mobility approach and end our frustrations with the expatriate ROI zero sum game. If you would like to learn more about measuring the effectiveness of your global mobility programmes in creating value for your company, or if you would like to support your talents on global assignment, please contact Wendy You can download a shareable pdf of this article here: The-Expatriate-ROI-Zero-Sum-Game   References: [1] McNulty, Y. and Inkson, K. (2013). Managing expatriates. New York, NY: Business Expert Press. [2] Lysgaard, S. (1955) Adjustment in a foreign society: Norwegian Fulbright grantees visiting the United States. International Social Science Bulletin, 7, 45-51. [3] Gullahorn, J. and Gullahorn, J. (1963). An Extension of the U-Curve Hypothesis. Journal of Social Issues, 19(3), pp.33-47. [4] Kinnunen, J. (1996). “Gabriel Tarde as a Founding Father of Innovation Diffusion Research”. Acta Sociologica 39 (4): 431. [5] Handy, C. (1995). Gods of management. New York: Oxford University Press.