Question

Why is it important to measure return on investment of international assignments? Which indicators can be used? 200-word reference as well please

Answer 1

Introduction:

Peer behind the walls of today’s corporations and you’re likely to find executives analyzing and scrutinizing a constant stream of bits and bytes from their spreadsheets. As they sift through return on investment and net margins, long-term debt and capital expenditures, they struggle for ways to eke out ever-greater profitability and productivity. Managers know the value of their assets; they know the worth of their capital expenditures. They can print out simple arithmetic equations that show measurable results. They can produce clear statements about performance management objectives.

It’s clear that international assignments account for an ever-growing portion of today’s corporate growth. The “1996 Global Relocation Trends Survey” by the National Foreign Trade Council and Windham International, both based in New York City, suggests that 43 percent of corporate revenue is generated outside of headquarters’ countries. But, it’s not enough to examine and cut expenditures, and it’s no longer adequate simply to guess that assignees are accomplishing the business task at hand. Today’s HR managers face a more complicated job: determining whether international assignments are yielding a positive return on investment (ROI).

The critical first step is to assess and assign value and expense. Next, HR must weigh the value against the cost. But caution. We’re heading into uncharted territory. The process is likely to require a paradigm shift supported by a combination of hard, quantifiable data, technology, and good, old-fashioned intuition and management experience.

Quantify the return.
Assigning a dollar amount to the value, or the return, from an international assignment is the greatest return-on-investment challenge facing global companies today. It’s such a tough proposition because companies and consultants are still struggling to create systems and standard processes to assist with calculating value.

Use performance management systems to define value.
“When you think of companies looking at their return on investment, they usually have a dedicated group measuring it,” says Attinelly. “Have organizations really set up the infrastructure to be able to measure ROI [for international assignments]? Are companies really setting objectives when they send people overseas? Are they communicating what those objectives are? And, are they measuring against them? And, if that group of expats is helping the mission, [have the HR managers figured out how to] tie in those individuals to a percent of growth?” In most cases, the answer is, “No.”

Measure the investment.
If the first hurdle in the ROI process is to determine why you’re sending an assignee and to identify the value of the assignment, then the second one is to monitor the costs, or the investment. Unfortunately, most companies don’t keep detailed records of everything that’s spent on expatriates. They usually have a good handle on reportable information for tax returns or compliance, but that’s just a part of the equation.

Measuring ROI for international assignments is indeed a tremendous endeavor that extends throughout the scope of the global organization. It begins with identifying the strategic aims that managers believe the transferee is supposed to accomplish. Next, HR needs to develop a system for measuring value, including instruments to monitor and measure performance. Finally, it necessitates developing systems to track expenses, both long- and short-term, obvious as well as hidden, to obtain a complete picture of the costs. The process is demanding and requires careful thinking and planning, along with all the aids available today: technology, current workable systems and good, solid judgment.

Based on the findings, we have gained some key insights, which we outline below for organisations to consider in order to be in a position to maximise their ROI on International Assignments:

• Define a global assignment strategy, set objectives and link them to the business strategy. Ensure that there is an agreed and documented business case that defines assignment purpose and objectives
• Provide expatriates with practical guidelines during the whole assignment life cycle and actively promote sharing of experiences among assignees
• Actively manage expatriate performance by keeping a focus on the level of successful achievement of the assignment objective. Involve both the home and the host country in the process, as well as in the development discussions
• Be aware of individual assignees’ needs and facilitate the transition back home by following a standardized repatriation process. Ensure transfer of gained experiences and knowledge
• Track international assignments’ related costs and benefits and benchmark costs internationally, as well as with other organisations
• Introduce ROI measurement: start by defining the assignment objectives and agreeing on quantifiable measurements. Then identify financial and non-financial benefits and costs and link these to the assignment purpose. Identify HR activities that could impact ROI. Conduct the calculation at an appropriate time within the context of the assignment purpose
• Obtain a better understanding of your assignee population. Track for instance the percentage of best performers selected assignments
• Perform a retrospective analysis of each assignment, in which each evaluation area is rated as to the benefit provided, with a direct or indirect ROI impact.

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