Expatriate Return on Investment Yvonne McNulty ~ Supervisors: Prof Helen De Cieri, Assoc Prof Kate Hutchings Department of Management, School of Business and Economics Monash University, Caulfield East VIC 3145 email:

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Expatriate Return on InvestmentYvonne McNulty
Supervisors Prof Helen De Cieri, Assoc Prof Kate
HutchingsDepartment of Management, School of
Business and EconomicsMonash University,
Caulfield East VIC 3145 email
yvonne.mcnulty_at_buseco.monash.edu.au
Introduction Obtaining a return on investment
from expatriates is viewed as important in many
global firms, as evidenced by the considerable
efforts to reduce the costs of mobility programs.
Yet our current understanding of expatriate ROI
is limited as there are no published empirical
studies specific to the topic. Using transaction
cost economics theory and the systems approach to
HRM, this research examines how expatriate ROI is
measured for long-term assignments in 50 global
firms, representing a total population of 56,000
expatriates (including 37,000 long-term
assignees), across 18 industries, and with
headquarters in North America, UK, Europe,
Africa, Asia Pacific and Australia.

• Research questions
• How is expatriate ROI defined in global firms?
• Do managers use measures of expatriate ROI that
  are appropriate to a firms global strategy?
• What barriers prevent managers from measuring
  expatriate ROI?
• What variables influence changes in expatriate
  ROI for the firm?

Methodology In-depth interviews were conducted
with 50 mobility managers in global firms using a
theoretical sample based on purposeful sampling.
The majority of the firms are classified as a
Fortune 500 company (60) 80 percent are public
companies. Interviews were conducted over a
2-year period from 2004 to 2006. NVIVO (7) was
used to analyse the data, and an inter-rater
reliability score of 98.5 percent was achieved.
K E Y F I N D I N G S
Findings indicate that large global firms do not
formally measure expatriate ROI due to
operational, cultural, and strategic barriers.
The availability of meaningful data from which to
calculate returns appears difficult to obtain and
is too dependent on managers having the time,
resources and appropriate management software to
capture it. When informal measures of expatriate
ROI are used they typically produce quantitative
outcomes (e.g. turnover and promotion rates,
failure statistics, and financial costs) but
these statistics are often not linked to the
original purpose of the assignment or a global
strategy. These statistics also do not
demonstrate the mechanisms by which they
inter-relate with each other to impact expatriate
ROI and overall firm performance. There is also
scant evidence that firms use their informal ROI
procedures as a tool to manage or improve their
international assignments. And although half of
the managers have a sense whether their
international assignments are achieving good or
poor rates of return (8 percent rate it as
excellent or very good, 42 percent as good, and
50 percent as either fair or poor), the question
is whether knowing this rate of return or using
these informal practices supports or impedes a
firms ability to achieve their global
strategy. The challenge is that most firms take a
relatively short-term view of expatriate ROI
informal procedures measure more immediate
outcomes up to two years post-assignment (e.g.
repatriation turnover), yet mobility strategies
and objectives are usually much longer-term in
nature. The resulting ROI is a short-term measure
that remains disconnected from the perceived
value from expatriates and how that is linked to
the firms longer-term objectives. Overall the
findings indicate that measuring expatriate ROI
is a challenging and complex process that
managers are not equipped to address.
We have someone in Beijing, a very senior
individual, and within three months of him
relocating his family decided they wanted to go
back to the United States, so his family has
left. He is still here running the business, but
the question is - is he as effective as he could
be because his family is not with him? So, even
though he is staying and probably completing his
assignment, would we deem that to be a success,
and how would we measure ROI if we were going to
try and measure it, because without knowing what
he could have achieved had he had his family here
or being able to measure the impact of that, I
don't know whether there is any way to come up
with a return on investment for him ... I just
don't know if there is an easy way to measure and
define ROI. I think it is very subjective ...
Executive Director Human Capital, Banking, Hong
Kong, 435 expatriates
I think we make a lot of mistakes, but so far
my only success story in getting people to think
about the return on investment is that Ive
gotten all the businesses to take note that its
not the policy or the compensation program that
creates challenges about expatriates for us
its that we have 7500 of them where our
competitors only have 3500 a cadre of 7500 may
not be the right number maybe we should be
looking at this closer we know that the low
hanging fruit, the big money, is in cutting the
number of expats, not in cutting the policies
Global Expatriate Policy Manager, Energy
Utilities The Netherlands, 7500 expatriates
There really is no focus on it it is all
about the bottom line from a revenue standpoint
when you look at the producing divisions, they
generate all the money and it really boils down
to how much money this person is generating. We
don't care what the assignment costs, as long as
he's bringing in the money Regional Mobility
Manager (Asia) Business Services, Beijing, 370
expatriates
Publications and Conference Presentations
Measuring Expatriate Return on Investment
Empirical Evidence from Global Firms, McNulty,
Y., De Cieri, H., Hutchings, K., U.S. Academy
of Management Meeting, Philadelphia,
Pennsylvania, 3-8 August 2007 McNulty, Y. M.
Tharenou, P. 2006. Moving the research agenda
forward on expatriate return on investment. In M.
J. Morley N. Heraty D. G. Collings (Eds.),
New directions in expatriate research 18-38.
Hampshire, UK Palgrave-MacMillan. McNulty, Y.
Tharenou, P. 2004. Expatriate return on
investment A definition and antecedents. Journal
of International Studies of Management and
Organization, 34(3) 68-95. McNulty, Y.,
Tharenou, P. (2004). Expatriate return on
investment. In K.M. Weaver (Ed.), 2004 Academy
of Management Best Paper Proceedings. CD-ROM.
U.S. Academy of Management Meeting, New Orleans,
Louisiana, 6-11 August. CD Rom, IM F1-F6.