Most HR professionals would argue that global mobility adds value to an organisation and individual careers, but how can they demonstrate this to other senior leaders? Jose Segade looks at how to demonstrate the return on investment (ROI) of international assignments.
The traditional thought process around how to measure the ROI of almost anything is in financial terms; how much income has been generated for the business, and what was the financial outlay to the business of doing it?
Global mobility resources
Seems simple, doesn’t it? But can we apply the same principles to measuring the ROI of an international assignment? What happens when an employee goes into a role in a business cost centre such as HR or R&D?
What happens when unexpected, unbudgeted costs are incurred, such as additional school fees, temporary accommodation costs due to a lack of available housing in the host country, or unforeseen tax costs?
Does this then mean that an otherwise successful assignment where business goals and objectives were achieved should be deemed as unsuccessful?
What happens when a global mobility department just can’t get hold of financial information relating to assignment costs because departments just don’t keep or share this information about assignees, or assignment costs are shared among multiple cost centres so aren’t easily identified?
The RES Forum recently conducted a survey of 52 in-house global mobility departments around the globe, with the aim of finding out exactly what organisations did to measure the ROI on their mobility programmes, and whether or not they were successful in doing so.
Of the organisations that took part in the survey, typically between 70% and 90% prepare a cost estimate for traditional assignment types; such as long or short term international assignments or a local plus assignment (where employees receive similar compensation to local workers at their place of assignment, plus additional compensation and benefits).
This seems like a good start. But when we look at the figures for new assignment types, such as commuter assignments, things start to come unstuck.
Half of commuter assignments have an accompanying cost estimate, but a staggeringly low 3% of business travellers have a cost estimate prepared for their assignments.
Perhaps this doesn’t seem so bad – maybe a three day trip to the USA twice a year? But business travellers can spend months travelling back and forth between two or more countries incurring dual tax liabilities and earning enough air miles to take their families on a summer holiday to the Caribbean.
Yet mobility teams don’t even have a way of keeping a track of the costs, let alone working out whether or not the costs represented a good return on investment.
Things become more critical when we realise that of those responding organisations that do prepare cost estimates; only 39% describe them as an accurate numerical estimate of the total cost of the assignment, with a further 31% describing it as “an indicative (ballpark) estimate of the total cost of the assignment,” and 22% describing it as “an indicative (ballpark) estimate of annualised assignment costs.”
Asked how the cost estimate was reviewed, 40% indicated that the cost estimate was reviewed by several senior business stakeholders and approval/rejection given accordingly, while a further 25% said it was reviewed by a single stakeholder.
Just under one-fifth indicated a brief review of the cost estimate, while a worrying 10% reported no review of the cost estimate.
Our research also revealed that:
- only 14% of respondents feed cost estimates into an integrated budgeting process across all sectors of the business;
- 29% said the cost estimate is isolated and has no connection at all with budgeting;
- 10% have no process in place for budgeting for assignment costs; and
- just 22% accurately project assignment costs and have good visibility and understanding of annual mobility programme spend.
Neither budgeted or understood
So, if mobility spend is neither budgeted for nor understood in so many organisations, how can these organisations accurately show an ROI for their programmes and their value to the business?
If mobility teams want to earn the all important seat at the table where strategic business decisions are made, they must find other ways of demonstrating their programme’s value.
But how? For a team that’s just starting out on the journey of understanding how to manage a mobility programme and assignment ROI, the key is to start simply.
For example, a client satisfaction survey is a low cost initiative that can have rapidly visible results.
Between 6% and 34% of survey respondents are already doing this (depending on assignment type) — setting up a simple survey via an online platform allows organisations to quickly and cheaply identify what is working well and what isn’t.
Being able to present statistics, in particular longitudinal patterns over several months or years, and, as a result, make changes to programmes and policies, is an easy way to demonstrate the value of the function to senior management.
Adding career value
Tracking career progression and post assignment retention rates are also very simple and cost effective ways of showing the value of global assignments.
This kind of tracking, particularly for smaller programmes with limited budgets, can be set up using the most basic of technology and by collaborating with HR teams and talent management teams, which hold such employee data anyway.
Providing data to show that employees who have been on international assignment on average progress twice as quickly or have an average of one performance rating higher than their non-expatriated peers is hugely valuable, and can aid senior management teams to make strategic business decisions about the movement of employees.
Conversely, a mobility team that can demonstrate that returning expats are twice as likely to leave their organisations in the five years post repatriation can nudge businesses to look closely at their reward and retention programmes.
However, only 15% of responding organisations track career progression and only 9% track post assignment retention, according to our survey.
A staggering 60% of responding organisations noted that they didn’t place importance on tracking the ROI of their programmes as there was no business appetite to do so.
If heads of mobility want to play a more prominent role in making strategic business decisions, they need to find ways of demonstrating their value where businesses may not even realise there is a need for their input.
Once they have found a way of doing this on a small scale, they will find it much easier to convince business leaders to provide budgets to upscale and start tracking ROI at a much higher level.
Arguably, only then will they have the tools to be able to justify their place in the organisation and to influence strategic business decisions about people movement before the decisions are actually made.