M O B I L I T Y I N S I G H T S

Cross-Cultural and Language Training: Measuring Return on Investment BY JENNY CASTELINO, DIRECTOR, ASIA PACIFIC INTERCULTURAL LANGUAGE SOLUTIONS

This issue of Mobility Insights provides a new perspective on measuring return on investment, from assignees receiving cross-cultural and language training.

I N T R O D U C T I O N : T H E N O W A N D T H E N

Being an expatriate 25 years ago was a dream job in comparison to the challenging environment faced by the modern day international assignee. For a start, the traditional expatriate of yesteryear was often considered to be a rare breed of individual since they were ready to face off-shore challenges in remote lands. In return, they were often handsomely rewarded from a financial and career perspective.

Fast forward two decades and the world is a very different place. Today’s global marketplace can be defined by Volatility, Uncertainty, Complexity, and Ambiguity (VUCA, a term which derives from the U.S. military), and as such, the modern international assignee has to contend with a social, economical and political quagmire that includes:

• The deepest and longest global recession in recent memory and therefore a ‘do more with less’ expectation by the company.

• An expectation that employees will relocate and have the skill set to operate effectively across multiple markets and time zones.

• Regional responsibility for an assignment, with a global and international outlook required.

• An increased focus on often unknown and challenging developing markets.

• Moving to an emerging market location that may not have adequate infrastructure (eg housing, schooling, healthcare) or a hardship location with political instability.

• Withdrawal of traditional full expatriate packages for leaner assignee programs that increasingly lead to localization.

• Spouses with career commitments and children with educational goals that may not be compatible with relocation.

N O T A L L A S S I G N E E S A R E C R E AT E D E Q U A L

Considering these factors, it is unsurprising that international assignments have a high failure rate of anywhere between 10% and 30%, which increases for relocations to developing markets. India and China, the two fastest growing economies in the last decade, produce assignment failure rates that are double that of other markets.

Interestingly, many companies do not have measurements in place to accurately gauge ‘assignment success’ unless the assignment is specifically tied to a measurable initiative. This means that companies may not have a way to identify an assignment that is going poorly until it has already failed, suggesting a focus on recovering from failure rather than preparing for success.

This is not to say that companies do not see the link between cultural adaptation and assignment success. Cartus’ 2012 Trends in Global Relocation Survey found that 71% of respondents thought cross-cultural training is necessary to promote assignment success. A further 75% of respondents stated families as well as assignees should receive cross-cultural training.

P A G E 1 O F 4

Information from Cartus to keep you informed on news that may impact your international assignment programme.

Today’s global marketplace can be defined by Volatility, Uncertainty, Complexity, and Ambiguity (VUCA) and as such, the modern international assignee has to contend with a social, economical and political quagmire.

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M O B I L I T Y I N S I G H T S

Most significantly and more importantly, controllable assignment challenges in emerging markets are nearly always associated with a lack of adaptation. According to the results of our recent Mobility Challenges in Emerging Markets Survey, three of the top six challenges in emerging markets relate to the difficulty in adapting to the new host location. These include:

• Employee’s ability to adapt successfully to the location - 42%

• Attracting candidates with the required language and intercultural skills - 34%

• Employee’s ability to complete the assignment - 16%

M E A S U R I N G T H E I M PA C T O F L O W A D A P TAT I O N T O A S S I G N M E N T

Most organizations measure assignment success purely by focusing on early return or immediately visible mistakes. However, many other (less) visible issues may exist and are often overlooked. These include; extended brownouts, where an assignee completes the assignment but struggles on various fronts; disrupted relations with overseas nationals, both internally and externally; damage to the company’s image; lost opportunities for both the company and assignee; a damaged career path; marital or family problems; a negative impact on successors; poor re-entry integration upon repatriation and a high level of repatriation turnover.

L I N K I N G R E T U R N O N I N V E S T M E N T ( R O I ) T O C R O S S - C U LT U R A L T R A I N I N G

Many companies recognize the value of cross-cultural training in not only preventing failure but increasing assignment success. However, in times of uncertainty and financial hardship, the dollar is king, cost cutting prevails and ‘investments’ are seen as another cost. With a recessionary backdrop, the main focus of business leaders shifts to one of where is the return on investment?

D E F I N I N G R E T U R N O N I N V E S T M E N T ( R O I )

To discuss how best to measure the return on investment (ROI) from cross-cultural and language training, we first need to define the term.

For example, if the ROI percentage is equal to 150 percent this means the program yielded 150 percent return on money invested, that is, the program yielded US$1.50 for every dollar that the program cost. Therefore, the calculation looks to quantify the value of investment in comparison to the total cost of that investment. Simply put, the greater the value side of the scale and the lower the cost side, then the greater the ROI.

I n R e a l i t y, H o w B i g i s t h e ‘ I n v e s t m e n t ’ ? If a typical relocation is broken down by cost, cross-cultural training represents a very small proportion. For example, US$1.4 million is the average cost for a three year relocation for a family of four in Shanghai, with a net salary of US$100,000. In this scenario, cross-cultural training usually equates to less than 0.5% of the total cost of relocation.

Cartus’ 2012 Trends in Global Relocation Survey found that 71% of respondents thought cross-cultural training is necessary to promote assignment success. A further 75% of respondents stated families as well as assignees should receive cross-cultural training.

ROI (%) = Benefit – Cost x100Cost

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M O B I L I T Y I N S I G H T S

D E T E R M I N I N G R E T U R N O N I N V E S T M E N T F R O M S U C H A S M A L L E X P E N S E

Determining ROI from such a small expense can be challenging because whilst the cost of delivering cross-cultural training is immediate and tangible (cost of training and time away from work to attend the course), the return or value created by the program is inevitably intangible and extends over time. One major challenge is to ensure the traditional focus is on financial ROI, which can be difficult to measure when related to training because:

• it assumes that the only way to measure assignment success is by counting early termination of assignment;

• it is difficult to measure the causal nature of results;

• ROI measurement requires converting qualitative behavior into quantitative measurements;

• destination services and cross-cultural/language training are sometimes viewed as interchangeable;

• there is a perception that success in a previous location is likely to reflect success in a new host location;

• there is debate as to whose opinion matters the most, the client’s, assignee’s or their family’s.

Additionally, when discussing the value of cross-cultural or language training with business leaders, relocation executives are often faced with a number of incorrect assumptions that have to be addressed:

A s s u m p t i o n O n e - “Our rates of pre-termination of assignment are low, which shows that our assignees are doing fine without the training.”

This does not look at the possibility of reduced or stunted productivity and reduces assignment success to a linear timeline, as opposed to a dynamic opportunity for growth, both for the company and the individual.

A s s u m p t i o n Tw o - “We already select those who have a proven track record, to ensure that they are likely to succeed.”

The challenges an assignee may face are unique to each country and business culture and they may not know where to get information on overcoming these challenges. Furthermore, the assignee may not even realize that they are struggling, for example an American assignee in Japan – not knowing the etiquette of exchanging business cards – may bungle a multi-million dollar contract due to a perceived lack of respect.

A s s u m p t i o n T h re e - “Language training is a waste of time since the assignee and family are only going to be there for a few years.”

Aside from the need to function outside of work, this can display a lack of respect and interest in the host location as anything other than a marketplace. Conversely, learning the language only brings benefits. Adaptation to a new location is related to one’s ability to communicate with local nationals, increasing one’s independence and sense of being integrated into the local community. Assignees gain respect from local nationals if they are seen to be investing time in getting basic language skills or increasing their proficiency.

Essentially, it is imperative that the perception of the strategic value of cross-cultural and language training in your business is increased.

If a typical relocation is broken down by cost, cross-cultural training is a relatively small proportion.

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Source: *Bhaskar-Shrinivas, P., Shaffer, M.A. and Luk, D.M. (2005). Input-based and time-based models of international adjustment: meta-analytic evidence and theoretical extensions. Academy of Management Journal, page 273.

The information in this Mobility Insight publication is provided in good faith, however Cartus accepts no liability for the data and information included within and the document is not intended to provide specific advice or to take the place of either written law or regulations.

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P A G E 4 O F 4

M O B I L I T Y I N S I G H T S

Adaptation to a new location is related to one’s ability to communicate with local nationals, increasing one’s independence and sense of being integrated into the local community. Assignees gain respect from local nationals if they are seen to be investing time in getting basic language skills or increasing their proficiency.

R E C O M M E N D AT I O N S

Best practices for measuring and maximizing ROI from cross-cultural and language training:

• Conduct candidate assessment for key positions and for moves into developing/emerging countries.

• Provide a shorter course for single/married assignees and a more comprehensive one for those moving with families.

• Mandate cross-cultural and language training for challenging locations including emerging market locations.

• Make group training available to short-term assignees at less senior levels.

• Provide training for host country nationals on how to work with senior incoming expatriates.

• Combine face-to-face language training with self-paced tools for frequent business travelers.

• Implement virtual training (webinars) for geographically dispersed participants.

For those who are yet to be convinced of the link between cultural training and the speed of adjustment into the host location, it is worth pointing out that a meta-analytic study of 8,474 expatriates in 66 studies concluded that cultural adjustment is “perhaps the strongest determinant of disengagement and withdrawal decisions.”* This establishes a clear relationship between levels of adjustment and overall performance.

For further information on this or any other aspect of your international assignment program, please do not hesitate to contact your Cartus

representative or email trustedguidance@cartus.com