Introduction Globalization And Expatriation Management Essay
Literature review is a summary of past paper that conducted by the previous researchers and explanation about the terms involve during this study. It aims on the critical points of current knowledge on a particular topic. This chapter is important because it can be a guideline on how the study can be done.
Simon Reich states that, globalization constitutes a multiplicity of linkages and interconnections that transcend the nation states (and by implication the societies) which make up the modern world system. It defines a process through which events, decisions and activities in one part of the world can come to have a significant consequence for individuals and communities in quite distant parts of the globe. According Laurence E. Rothenberg, globalization is the acceleration and intensification of interaction and integration among the people, companies and governments of different nations. According to Farhad Nezhad Haj Ali Irani globalization typically refers to the process by which different economies and societies become more closely integrated, and concurrent with increasing worldwide globalization, there has been much research into its consequences
According to Britannica Concise Encyclopedia, globalization is a process by which the experience of everyday life, marked by the diffusion of commodities and ideas, is becoming standardized around the world. Factors that have contributed to globalization include increasingly sophisticated communications and transportation technologies and services, mass migration and the movement of peoples, a level of economic activity that has outgrown national markets through industrial combinations and commercial groupings that cross national frontiers and international agreements that reduce the cost of doing business in foreign countries. Defined broadly, globalization is the process of integrating nations and peoples-politically, economically, and culturally-into a larger community (Gale Encyclopedia of US Foreign Policy). With business becoming increasingly global, employees with international experience have become an increasing important issue for multinational corporations (Hyder and LÃ¶vblad, 2007).
We live in a world in which barriers to cross border trade and investment are declining. Transportation and telecommunication technologies are constantly making the world feel smaller. Material culture seems similar the world over; and national economies are merging into an interdependent, integrated and global economic system. Globalization is the reason for this incredible shift (Hills, 2007). It is a process that describes the integration of the world community into a common social or economic community. In layman’s terms, globalization means the free flow of goods and services across borders (Joanne Claire Miranda, 2009).
Globalization has resulted not just in goods and services travelling across borders. It has also resulted in people moving across borders for better employment opportunities and thus better wages (Joanne Claire Miranda, 2009). Due to that, it gives positive and negative effects. Positively, people move easily to benefit from their skills and experience. Firms are able to enter new market. Negatively, however, as firms enter these new industries or markets, they lack the skills and expertise required for that industry and they face not only the challenge of sourcing for the right candidate but also there is no guarantee that there would be continuity of service by the skilled staff. The right candidate should be able to work in the present environment as well as be able to teach the team members. If this is not managed properly, it may well become firm’s biggest obstacle. In order for these companies to have the competitive edge in this global marketplace, they need to have the right person at the right posting (Hills, 2007).
The effects of globalization have resulted in the number of expatriates rising in the developing countries including Malaysia. When Aida and Maimunah did their study on ‘Cross Cultural Challenges and Adjustment among Expatriates in Malaysia, 1999’ (Aida and Maimunah, 2007) the number of expatriates they reported was 21,859, a figure they obtained from the Immigration Statistics. In October 2007, the immigration record showed the total number of expatriates in Malaysia is at 35, 583.
Expatriation in Malaysia is not a new phenomenon. The country has gone through three waves or phases of incoming expatriates. The first group of expatriates that came to Malaysia is the Britons. They were found in private sector and big organizations such as Shell, ICI, Dunlop, Guthries, Harrison and Crosfield and British Petroleum. Other than that, in the government sector, the expatriates are mainly posted as advisors, diplomats, academics and technical specialists. The second phase of expatriates came from United States of America and other European countries whom were assigned in large multinationals such as, Phillips, Siemens, Volvo, Nestle and Esso. Finally, the third wave of expatriates came to Malaysia which were mainly represented by the Asian group of managers mainly from Japan, Taiwan and Korea along with some other European and American expatriates. This third wave resulted from the “Look East” policy by the Government in 1980s as well as due to closer relations with Australia and the Newly Industrialized Countries in Asia specifically, along with the high growth of electronics industry in Malaysia. (Aida and Maimunah, 2000)
2.2 Expatriation Cycle
The pre-departure phase involved effective selection and preparation of expatriate. Most often expatriates are selected from within the corporation. The rationale is that current managers possess the technical expertise and they are more in sync with the company’s culture. (Maali H. Ashamalla, 1998) According to Luftans and Doh, making an effective selection decision for an overseas assignment can prove to be a major problem. Typically, this decision is based on international selection criteria which are factors used to choose international characters. Those criteria are:-
a) Adaptability to cultural change
Overseas managers must be able to adapt to change. They also need the degree of cultural toughness. Research shows that many managers exhilarated at the beginning of their assignment. After a few months, however, a form of culture shock creeps in.
b) Physical and emotional health
Most organizations require that their overseas managers have good physical and emotional health. The psychological ability of individuals to with-stand culture shock also would be considered as would the current marital status as it affects the individual’s ability to cope in a foreign environment.
c) Age, experience and education
There is evidence that younger managers are more eager for international assignments because they tend to be more “worldly” and have a greater appreciation of other cultures than older managers do. On top of that, many companies consider an academic degree, preferably a graduate degree to be of critical importance to an international executive.
d) Language training
Language can be a very critical factor and international experts have referred to it as “a most effective indirect method of learning about a country”.
e) Motivation for foreign assignment
Although individuals being sent overseas should have a desire to work abroad, this is usually is not sufficient motivation. Experts believe that candidate also must believe in the importance of the job. Other than that, applicants who are unhappy with their current situation, desire for adventure or a pioneering spirit, desire to increase one’s chance for promotion and the opportunity to improve one’s economic status are also viewed as great motivators.
f) Spouses and dependents or work-family issues
Experts believe that if the family is not happy, the manager often performs poorly and may either be terminated or simply decide to leave the organization.
However, according to Maali H, Ashamalia, qualities that are looked for are:-
a) Cultural empathy
The ability to appreciate and respect beliefs, values, behaviors and business practices of individuals and groups from other culture.
b) Awareness of environment constraint
In a foreign country, an expatriate is faced with unfamiliar sets of environmental forces that can be very different from those of the home country. Ability to identify forces and function within their constraints becomes instrumental to the expatriates for effective decision making.
c) Interpersonal skills
These skills involve effective verbal and non-verbal communications, the capacity to build trust and the ability to utilize referent power in managing within a foreign environment. It also involved the understanding of differences in value orientations such as in the power distance orientation identified by Hofstede.
d) Managerial and Decision Making abilities
It is highly required particularly when a manager is operating under conditions of isolation or physical distances from the centre of decision making in the home office. These competencies are also necessary in situations where expatriates have full autonomy in their foreign positions.
e) Other crucial qualities
Foreign language proficiency, flexibility, adaptability, entrepreneurship, self-motivation, tolerance for ambiguity, and sensitivity to world events and their impact on long-range perspectives of the business are considered as crucial qualities for expatriate’s selection.
Other than that, Ashamalla also argued that a rigorous selection program should also include the utilization of appropriate selection devices, consideration of the candidate’s self-evaluation, time devoted for the selection process where it must be adequate and strategic evaluation of the overseas operations on a frequent basis. The selection plan should also include the expatriate family. In addition, intensity of intercultural relation, pre-departure preparation, cultural training, multicultural personality, and technical competent and socio cultural knowledge is vital in order to determine expatriate, spouse and family adjustment effectiveness (Awang-Rozaimie, 2011)
2.1.2 During Assignment
Support during the assignment is believed to be essential for moral and psychological sustenance as well as for performance effectiveness of international managers. Superiors and HR professionals in the home office need to give adequate consideration to the importance of keeping in close touch with their expatriates and providing them and their families with the needed support. A major source of concern for the manager while abroad is the loss of visibility to those in the home office. Sense of isolation from the domestic realities of the firm and feelings of being away for the corporate centers of the power are other sources of concern for managers while on overseas assignments. During assignment, support may involve a wide range of formal and informal activities. (Maali H. Ashamalla, 1998)
On the other hands, the Brookfield’s Global Relocation Trends Survey 2010 indicated that, six percent of international assignments fail. Therefore, it is essential for expatriates to understand specific psychological traits of Malaysian that contributed to their business performance. Primarily, cultural competency support expatriates’ psychological well-being and socio cultural adaptabilities (Awang- Rozaimie, 2011)
However, adapting to the new environment takes several months. A model developed by Oberg (1960) describes expatriate adaptation as a four-phases process. These phases are honeymoon, culture shock, recovery and adjustment. Going through these phases in the long run results into successful adaptation in the new environment (Teodora G. Nikolaeva, 2010)
Table 1: Oberg’s phases of adaptation
The first phase of this process is the so called honeymoon phase
(Oberg, 1960). This stage usually lasts from several days to several weeks and is characterized by the positive attitude of the expatriates about the host country, its culture and everything new they are meeting. In this stage the employees feel more like tourists than expatriates. They are excited by the new and are really enthusiastic about their job. The expatriates are intrigued and curious about everything that is different from what they are used to and at the same time amazed by cultural similarities. All of this is a result of the pleasant conditions the expatriates are offered upon their arrival. They stay in luxurious hotels where they communicate with compatriots or natives who speak their language or perhaps they have even been appointed a translator; They are busy with being shown the sights of the town, finding an accommodation, school for the children if they are accompanied by their families, and depending on the significance of the international assignment they can even be giving press interviews (Oberg, 1960).
b) Culture Shock
As previously mentioned the “honeymoon” stage lasts from several days to several weeks. After this period is over, the expatriates get hit by the new culture and everything they have found amusing until now starts being irritating which results in culture shock (Oberg 1960). Oberg (1960) defines this phenomenon as the “occupational disease” the expatriates experience because of the constant interaction with the new environment and the different situations the host country offers:
“Culture shock is precipitated by the anxiety that results from losing all our familiar signs and symbols of social intercourse. These signs or cues include the thousand and one ways in which we orient ourselves to the situations of daily life: when to shake hands and what to say when we meet people, when and how to give tips, how to give orders to servants, how to make purchases, when to accept and when to refuse invitations, when to take statements seriously and when not. Now these cues which may be words, gestures, facial expressions, customs, or norms are acquired by all of us in the course of growing up and are as much a part of our culture as the language we speak or the beliefs we accept. All of us depend for our peace of mind and our efficiency on hundreds of these cues, most of which we do not carry on the level of conscious awareness.”
All expatriates can be affected by culture shock, but the degree to which they suffer depends from the host country and its specific cultural characteristics, the personality of the employees and how effective they are in doing their job, their attitude towards the people from the host country and vice versa, and the significance of the international assignment Depending on these factors, culture shock can result into confusion about one’s actions, anxiety, frustration, exhilaration, actions that do not suit the norms of behavior, inability to do one’s job and thus not being able to sign an important deal, isolation and depression (Teodora G. Nikolaeva, 2010).
In the recovery stage the individuals start dealing with their emotions and create a positive attitude towards the surrounding people and environment of the host country (Oberg 1960). As previously mentioned, learning the language is a beneficial factor in understanding the foreign culture. If the expatriates have gained some knowledge of the language, they are able to communicate with their colleagues and instead of criticizing them they start making jokes of them and even start being sarcastic about their dire straits. In addition to that, the employees accept that they have some problems and start asking for help from their coworkers and gradually reaching the last phase of their adaptation (Oberg 1960).
The final phase of the adaptation model is adjustment. At this point all the six aspects of the culture shock are gone and the expatriates are able to perform their job in the most effective way. This is due to the fact that they start accepting and adapting to the new environment. The food, the drinks, the people and the customs that used to be perceived as “foreign” are now seen as delightful and enjoyable; The individuals become so accustomed to the country and the people so when the assignment is over and they return home, they start missing all that which at some point of their stay was irritating and even disgusting (Oberg, 1960).
Luftans and Doh defined repatriation as the return to one’s home country from an overseas management assignment. The most common reason for expatriation is that the duty is over. However, other reasons might be expatriates want their children educated in a home-country school, they are not happy with their overseas assignment and failure to do a good job. Ashamalla argued that there is evidence that indicate repatriation is not simple and that a repatriate manager may experience professional as well as personal re-entry problems.
2.3 Factors contribute to challenges faced by expatriates
There are many factors that could be the reason of the challenges faced by the expatriate. These factors are realized through the flow of expatriation cycle.
2.3.1 Selection does not based on IHRM guidelines.
According to Bonache, Brewster and Suutari, decisions on expatriate selection are usually made in a less than organized and coherent manner, and often take by line managers who simply ignore the laid-down criteria espoused by the HR department. They prefer to draw from a restricted pool of candidates about whom they feel confident; often people like themselves or those among that group who are readily available or have shown some interest in an international element to their career.
2.3.2 Accepting international assignment for the wrong reasons.
Some expatriates were thinking of moving abroad in an effort to leave behind the accumulation of frustration, misery or boredom in the current life. Others might accept the international assignment due to their own expectation and assumption based on the experience they had when visiting to that country for a holiday. Due to that, they will face difficulties when reality or the situation does not meet their expectation.
2.3.3 Inability to adapt
Cultural surprises, shock, discomfort, difficulties, stress and incompetence occurred due to inconsistent expectation and inability to acquire appropriate cultural knowledge and skills of host culture. Incompetence or disability of expatriates to adapt and adjust their cultural mindset caused early return, incomplete assignment goal and put additional cost to organization for replacement of new personnel.
2.3.4 Family issues
It is generally the trailing spouse who suffers the greatest culture shock in the new country. The result can be an unhappy spouse who does her best to impair the performance of the expatriate manager. Most expatriate managers are challenged and excited to be in their new postings. They need to spend a lot of time at work since they are under pressure to adapt to the new culture and their overall responsibilities are often larger than they have experienced before. As a result, the wives of expatriates spend a lot of time by themselves and are cut-off from their own family and friends. At the same time, the wife is usually dealing with problems for which she has no previous experience. Therefore, the challenges expatriates faced during expatriation could be precipitate from the pressure from home
2.3.5 The location of the assignment
The location of the international assignment can determine the challenges faced by expatriate. Commonly, expatriates come from well developed countries; due to globalization and the demand of global market, developing countries, mostly from South East Asia, have a high demand for expatriate. The differences between the culture of the expatriates’ home country and expatriation location will present cross cultural challenges to expatriates.
2.4 Challenges Commonly Faced by Expatriates
2.4.1 Preparation for departure doesn’t seem enough.
Due to the fact that management chose the candidate for expatriation based on their preference with disregard of IHRM guidelines, it does not only affect the staff but the family member as well. Firstly, the spouse usually questions whether the decision to move abroad is really the best decision for them.
2.4.2 Communication and language barriers
They are expected to master the local language and culture, especially because more and more local workers may have the competitive advantage of local knowledge and connections, as well as strong English skills acquired while studying abroad. Other than that, expatriate faced difficulty in communication within the first few weeks and to some, it took several months to adjust.
2.4.3 Adjusting to the local working culture
Every country has different working culture. Therefore, expatriates might find it challenging to understand how things work in the office in a manner where they are trying to understand the administrative and bureaucratic arrangements. Most of the expatriates came from highly industrialized nations whereby people are used to living in the fast lane and having more established and efficient services. Since the previous working trend differs from the working style they are currently in, it posed as a challenge for most expatriates.
2.4.4 High level of bureaucracy
People at the high management level of their hierarchical positions acquire strong control over the issues at the workplace. Therefore, it affects the flow of work among the locals and the expatriates. Decision making processes and duration of task completion took longer than expected. This was a challenge that expatriates encountered which required some skills of cross cultural negotiations to adjust and to overcome any related problems arise. Generally, the locals’ working habit seemed to collide with the expatriates’ working habits. Since most of expatriates were come from well-developed nation, their working pace is faster and planning becomes more efficient. Thus, when the new environment is working in much slower pace, it could become a conflict between the expatriates and locals.
2.4.5 Adaptability to new environment
Expatriates and family often find it challenging to adjust with the routines. Trailing spouse might have problem in term of creating a home in rented accommodation with limited personal belongings and often find herself home alone whilst the partner departs on the business trip in as many weeks. This will cause the exhaustion the working partner as they try to balance work and home demands. The challenge of creating a meaningful life for the non-working partner which often involves overcoming a sense of having lost all personal identity which comes with losing the normal social, familial and work based cues. This will lead to homesickness and loneliness where they may long for the familiar and comfortable. Other than that, the children might have problem adjusting with school environment and new education system. Beside individual struggle, parental challenge such as providing a stable home environment for children, finding appropriate healthcare when it is needed and finding the appropriate and suitable school for children are occurring as well.
2.4.6 Lack of value placed on their international experiences.
It appears that many global firms do not assign much value to the international experience. Therefore, expatriates expectation to career advancement are not usually realized. Many Western countries are placing increasing emphasis on standards and qualifications, credentials, and professionalization of careers. Individuals who have been working abroad may find themselves left behind and no longer even qualified for the level of work they had done prior to departure.
2.4.7 Re-establishing a professional network can also be challenging.
Due to inadequate communication during the overseas assignment, an expatriate loses touch with changes that take place in the corporation. An expatriate might return to find that the company has changed beyond recognition and this will lead to career disaster. Even those professional colleagues who stayed in touch through an expatriate’s years abroad, may not feel comfortable speaking to the repatriate’s level of qualifications, especially if they haven’t formed a clear picture of the day- to-day responsibilities handled in the international workplace.
2.4.8 The expatriate and family members may also experience reverse culture shock. Many repatriates are not prepared for the culture shock that they experience upon returning home. Although culture shock is a challenge anticipated by most immigrants and expatriates as they prepare to move abroad, it can catch repatriates off guard. Many have struggled with adjusting to the weather, food, lifestyle, and even basic domestic chores and driving; especially if returning from a country where the norm was to hire domestic help. Repatriates may also find local biases offensive, particularly if targeted at a culture or group with which they have become quite familiar and which they have grown to appreciate.