Survey: Despite Cost Pressures, Multinationals to Increase International Assignments

New York — July 23

Although the majority of multinationals anticipate major global mobility challenges over the next two to three years, a new survey from global professional services firm Towers Watson and Worldwide ERC, a workforce mobility association, found that nearly half of multinationals expect to increase traditional international assignments over the same period.

While companies in all regions anticipate increased cross-border moves, on average, U.S.-headquartered multinationals anticipate transferring more employees internationally, compared to those headquartered in Europe or Asia.

The Towers Watson/Worldwide ERC 2012 Global Talent Mobility Study found that 45 percent of global multinationals expect traditional expatriate assignments to increase through 2014, while only 18 percent expect them to decrease.

More than half (54 percent) of those headquartered in the U.S., 43 percent of those headquartered in Asia and 26 percent of those headquartered in Europe, said that they expect these assignments to increase. However, European multinationals remain cautious, with 40 percent anticipating a decline in international assignments.

The findings come at a time when challenges to global mobility abound: Almost seven in 10 (69 percent) cited prohibitive costs as a major challenge, while more than half cited high housing costs (55 percent) and high cost-of-living allowances (51 percent).

The most frequent reason cited for international assignments was business expansion overseas, named by 87 percent of multinationals. The second most cited impetus was knowledge transfer (65 percent), followed by career development (47 percent).

While the reason behind increased expatriate moves seems to be strategic, the policy followed for making these moves is sometimes not: Only half (50 percent) of the respondents use a planned talent management process for making international assignment decisions, and 47 percent assign primary responsibility for talent management to the HR department only. In addition, more than a quarter (27 percent) do not have a global approach at all.

For Asia, the number is even higher — almost half (49 percent) say they do not have a global approach.

Other difficulties stand out: When selecting candidates to be transferred, business needs are consistently cited as the most popular criteria. While this is a significant standard, multinationals may be overlooking equally important, but “softer,” criteria.

For instance, only 16 percent of companies consider family circumstances, despite the fact that family/personal situations and a family’s inability to adapt to the host country culture — cited by 57 percent and 21 percent of respondents, respectively — are reported as the primary reasons for failed assignments.

Other key findings from the report include:

Sixty percent of Asian companies and 40 percent of U.S. companies transfer traditional expatriates to China, while their European counterparts prefer to transfer within Europe, particularly the U.K. For short-term assignments, China remains the most popular, followed by the U.S.

Roughly two-thirds of companies report spending roughly two to three times the assignee’s annual salary on each traditional expatriate assignment. The U.S. has the highest percentage of companies (54 percent) with an average expenditure of approximately three times an assignee’s annual salary, while Asian companies overall have the lowest average expenditure for a traditional expatriate assignment, with over half (53 percent) spending twice an assignee’s annual salary.

Traditional expatriate assignments continue to dominate: More than half (53 percent) of international assignments are traditional, followed by short-term assignments, representing 18 percent of assignments. Localizations are currently the least popular (7 percent).

Even though in practice multinationals are still reluctant to enforce localizations (particularly for critical talent), the global financial crisis has encouraged more organizations to introduce or consider a formal localization policy to manage the transition of assignees away from a traditional expatriate package.

Source: Towers Watson