APR I L 2010

A C H A L L E N G I N G L A N D S C A P E

N AV I G AT I N G

G L O B A L M O B I L I T Y P O L I C Y

& P R A C T I C E S S U R V E Y:

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IntroductIon and objectIves

executIve summaryTop 10 Findings

respondent metrIcsCompany ProfileAssignee ProfileDestinationsMobility ActivityAssignment Drivers

cost and related IssuesCost as a PriorityStrategic Cost Management

prImary polIcy approaches and trendsThe Need for Program FlexibilityLong- and Short-Term AssignmentsDevelopmental PoliciesLocalization and Permanent TransfersCommuter and Extended Business Travel

hot topIcs and challengesAssignment Success and FailureFuture Focus

companIes respondIng

This study was conducted in association with the National Foreign Trade Council (NFTC)

©2010 Cartus Corporation • All rights reserved • www.cartus.comCartus and the Cartus logo are pending or registered trademarks

of Cartus Corporation

Contents

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The 2010 Global Mobility Policy & Practices Survey, co-sponsored by the U.S. National Foreign Trade Council, is the fourth in a continuing series of benchmark studies begun in 2002. It was conducted in November/December 2009 and attracted responses from 196 human resources (HR) practitioners based in the Americas, Europe/Middle East/Africa (EMEA), and Asia Pacific (APAC) regions. This response rate is substantial compared to other industry surveys and not only gives a well-founded basis for making conclusions about changing trends, but also permits study of a broader range of issues because of its longevity and data integrity.

DefinitionsThe policy types we studied include the following traditional and emerging forms:

• Long-Term Assignment: from one country to another, typically greater than 12 months and up to 3 to 5 years in duration

• Short-Term Assignment: from one country to another, typically 3 to 12 months in duration

• Developmental Assignment: generally short-term in nature and typically revolving around career development and broadening the employee’s experience

• Localization: typically following a long-term assignment, integration of an employee staying on in the host country into its compensation and benefits system

• Intra-Regional: mobility in a single region

• Commuter: involving an employee who works in one or more countries, commuting frequently between these locations and the home country

• Extended Business Travel: involving an employee who does not relocate, but travels regularly to an international location for an extended period of time

• Permanent International Transfer: a one-way relocation from one country to another for an indefinite period of time

IntroductIon & objectIves

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Over the three years since Cartus last performed its Global Policy & Practices Survey, the world has changed. Multinational companies have responded with dramatic shifts in activity, demographics, and business objectives. The survey illuminates how companies are finding the best ways of staying true to strategic objectives in the face of a weakened—and shifting—economy, often with fewer resources at their disposal.

In summary, the main strategy companies have used to meet their global talent and mobility needs in the face of recent challenges is simply to reduce the cost of an individual assignment. Cost reduction may take the form of reducing benefits, refining or tiering policies, reducing assignment failure, introducing alternative strategies such as permanent transfers and localization, or applying some other strategy. In almost all companies, refinement of policy is a continuous process, driven by ever-changing balance between company and employee needs.

Following are the 10 key findings of the survey.

Assignment Activity Shifts to Newer Policy TypesCompanies reduced their assignment activity in traditional long-term assignments since 2007, but have increased the use of newer, more flexible policy types. For example, more companies report a drop in long-term assignments than a gain by 34% to 37%, but gains outnumbered losses in extended business travel (EBT) by more than 4 to 1.

Future Activity Expected to Grow Across the Board Companies expect increased growth rather than decline in all policy types, even the most costly long-term assignments. In fact, in all the policy types except for long-term assignments, companies anticipating growth in activity outnumber those expecting decline by 6 to 1.

Assignee Profiles Emphasize Young, Single EmployeesThere is a strong trend toward assignees who are young and single, with the under-30 group increasing from 19% to 29% since 2007 and single assignees increasing from 29% to 42%. This newer profile matches the emerging commuter/extended business travel policy types, which also require less financial support than married employees with accompanying families.

Assignee Destinations Expand Into Newer Emerging MarketsMultinational companies are moving assignees to many more countries than they have in the past, among them new and challenging emerging market locations. Countries mentioned among the top three destinations grew from 51 to 61 from 2007 to 2010 and include locations such as Mexico, Turkey, Vietnam, Saudi Arabia, and Egypt.

China Set to Regain Prominence In 2007, nearly one-third of companies predicted China to be their top assignment destination, but looking back at actual activity in the past three years, it was the top destination for only 20% of 2010 respondents. Nevertheless, more companies now believe China will be the most popular destination in the next two years, edging out the United States by 22% to 21%.

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executIve summary

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Short-Term Assignments Assume a Broader RoleCompanies are reducing policy features as an alternative to eliminating assignments or shortening their duration. In long-term policies, more policy features (such as foreign service premiums and temporary storage) were eliminated than added by a 2 to 1 ratio between 2007 and 2010, while short-term assignments saw twice as many policy elements increase in usage as decrease.

Talent Management Gains Renewed FocusWhile developmental policies showed the slowest rate of gain of any policy type over the past three years, they were expected to grow by the largest number of companies (49%), after short-term assignments, over the next two years. This trend is reinforced by the fact that talent management ranked #1 in program aspectsthat companies are interested in improving.

Localization and Permanent Transfers Help Companies Control CostsAs less expensive alternatives to supporting employees on assignment and to conform with companies‘ changing mobility strategies, more companies are adopting local variations to the traditional global assignment by means of localization and permanent transfers. Cost is the #1 driver for localization and the #2 driver, behind lack of skills available locally, for permanent transfers.

Commuter and Extended Business Travel Expected to Gain MomentumWhile less than half of respondents actually have commuter and EBT policies, 47% of those without either of these policies plan to institute them. These policy types offer cost control and flexibility, but demand careful tracking and management to avoid severe tax consequences relating to residency regulations.

Assessment Increasingly Tied to Assignment Success Approximately one in three companies (30%) uses assessment tools to help the company and/or the employee determine assignment suitability. Another 21% are considering adding assessment programs to help reduce the incidence of failed assignments.

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Company ProfileThe HR professionals who responded to the survey were overwhelmingly Americas based (71%), compared to EMEA (19%) and APAC (10%). Similarly, they reported their head office location as Americas in 70% of cases, followed by EMEA (21%) and APAC (9%). As demonstrated in the section on policy approaches, 66% of companies responded on the basis of a global policy, as opposed to a regional (20%) or country-specific approach (19%). The industry mix is evenly spread across manufacturing, technology, financial services, chemicals, and computer/telecommunications. The size of responding companies is again well balanced, reflecting both major multi-nationals and smaller firms (see Chart 1).

Assignee ProfileA Shift Toward Young and Single Compared to 2007, the profile of a typical assignee has changed substantially: increasingly, today’sassignee is likely to be young and single. As Chart 2 illustrates, the under-30 age group increased from 19% to 29% of the assignee population, approaching the size of the 30-39 group (36%). The 40-49 group represented 24% of assignees (down from 31%) and the 50+ group equaled 11%, essentially unchanged. Considering the trend toward commuter and EBT policies, the increase in younger assignees seems logical.

At the same time, the gender split remained essentially the same, with females actually decreasing by two percentage points since 2007 (21% to 19%). As the percentage of single assignees increased (from 29% to 42%), the percentage of married assignees accompanied by spouse or partner decreased in kind (from 53% to 38%); married unaccompanied assignees did not change appreciably. This trend is probablyinfluenced by cost, as accompanied assignees introduce incremental expenses in a number of policy areas.

This issue is well illustrated by company policies toward spouse/partner accompaniment on short-term assignments. As Chart 3 shows, only 10% allow it in all cases and 40% never allow it or allow it only by exception. The conflict centers on the reasonable assumption many companies make that assignments of less than a year do not warrant the expense of supporting family members, while on the other hand, the trend toward longer short-term assignments may pose a hardship for some assignees.

Chart 1. Distribution of Respondents by Size

Respondent MetRiCs

Number of Employees

% of Companies Responding

2004 2007 2010

<1,000 3% 4% 4%

1,001-10,000 20 26 25

10,001-50,000 43 33 37

>50,000 34 37 34

Chart 2. Assignee Profiles by Age, Gender, and Family

0%

10%

20%

30%

40%

<30 30-39 40-49 50+

19%

29%

37% 36%

31%

24%

13%11%

79%Male

21%Female

81%Male

19%Female

53%Married

(Accompanied)

29%Single

18%Married

(Unaccompanied)

38%Married

(Accompanied)

42%Single

20%Married

(Unaccompanied)

Family

Gender

Age2007

2010

2007 2010

2007 2010

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DestinationsThe World Gets Larger Respondents continue to identify the United States, China, and the UK, in that order, as their primary assignment destinations (see Chart 4). In fact, almost six in 10 companies named one of these three countries as the most frequent destination. Surprisingly, China was predicted in 2007 by 31% of companies to be their top destination, but when asked about their experience over the past three years, only 20% of companies placed China at the top. Even so, respondents predict China once again to become the most popular destination over the next two years.

Beneath this consensus lies a much more dynamic picture, however. Germany dropped from 5% to 1% as a primary destination while financial hub Switzerland rose from 3% to 4%, with aprediction to continue increasing. India fell as a primary destination, but overall is expected to grow.

Perhaps most significant is the trend toward a broader range of markets as destinations. In 2007, the number of countries named as most frequent destinations totaled 28; by 2010 it had grown to 34. Countries mentioned among top three destinations grew from 51 to 61. These incremental locations include new emerging markets that in many cases do not have established infrastructures that are prepared to accommodate assignees, similar to Tier II and Tier III cities in China and India. Among the new locations, in addition to those reflected in the chart, were Mexico, Turkey, Vietnam, Saudi Arabia, and Egypt.

Geographical Challenges The four countries deemed to pose the greatest mobility challenges were, in fact, the four emerging markets identified as the “BRIC” countries. Nearly a third of respondents (32%) named China as the most challenging destination, followed by India (16%) and Brazil and Russia (7% each).

Following are representative comments related to destination challenges, which focus on visa/immigration problems, payroll and currency issues, and a lack of infrastructure or local company footprint. Note the diversity of locations mentioned.

Chart 3. Family Member Accompaniment on Short-Term Assignments

Frequency

Yes, allowed for all short-term assignments 10%

Yes, for assignments longer than a certain timeframe

21

Yes, but only at manager’s discretion 9

No, by exception only 44

No, never 16

2007 Prediction 2010 Actual 2010 Prediction

China 31% United States 27% China 22%

United States 25% China 20% United States 21%

United Kingdom4%

United Kingdom 12% United Kingdom 9%

India Switzerland

4%

Switzerland 5%

France

3%

Singapore Singapore4%

GermanyUnited Arab

EmiratesUnited Arab

Emirates

Switzerland France and Japan 3% Japan 3%

Chart 4. Leading Destinations

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Company Verbatim Comments:Destination Challenges

• Brazil, based on lengthy visa process and lack of local support. • Russia, based on being an emerging market with a lack of local office support and difficult regulations. • China, because of remote factory locations outside of major cities.

• By legislation, pay should be delivered from Russian payroll and in the host country currency.

• China: restricted currency. • Brazil: administratively painful; need for split payroll. • India: currency is difficult and changes to PF [provident fund—a Social Security-type requirement] have made it

considerably more expensive.

• Venezuela—hardship location, difficult living conditions, government issues. • Turkey—newer to us as a high expat population area; local infrastructure for services not built or well-oiled.

• Venezuela—immigration and currency issues. • Nigeria—living conditions. • Moscow—local conditions, law (immigration, tax) and practices.

• Uzbekistan and India. Language and cultural issues / climate / access to goods & services / housing / education / social network.

• Hong Kong—cost of living is so high that it has been a challenge for us balancing budget constraints with business needs.

• High cost and unionized in Belgium. • Employment law in the Philippines.

• The cost of living in Switzerland is much higher than the U.S., but the exchange rate fluctuation results in little change in COLA. Explaining this to expatriates has been challenging.

Assignment ActivityThe View at Present: A Holding PatternIn contrast to strong increases between 2004 and 2007, companies no longer report consistently increasing numbers of total employees on assignment. Given the stiff economic headwinds companies have faced in the past three years, a drop in overall assignment activity since 2007 is understandable. Viewed by individual policy type, activity shows continued shifts toward shorter, more flexible types of moves. Chart 5 shows the full picture of trends in mobility activity, up and down, over the past three years. Increases in extended business travel (EBT) outnumbered decreases by more than 3 to 1 and in commuters by more than 4 to 1.

Localization also showed a major move, increases besting decreases by 7 to 1. Only long-term—used by 97% of responding companies—decreased for more clients than they increased (34% versus 37%). Short-term assignments showed a marked contrast—increases outpaced decreases by nearly 2 to 1 (46% versus 25%). This reflects several key concurrent trends:

• A shift from long-term to short-term benefit structures for new assignments; and

• The use of short-term assignments to serve multiple purposes.

These findings are consistent with the increases in activity between the younger, single professional population. Additionally, they coincide with a reported shortening of long-term assignment lengths, both with regard to new and in-progress assignments.

Chart 5. Assignment Activity—Past 3 YearsOverall

Long Term

Short Term

Developmental

Localization

Commuter

EBT

Permanent Transfer

200 40 60 80 100

42 28 30

34 29 37

46 29 25

30 51 19

42 52 6

36 53 11

46 44 10

36 45 19

Increase

Constant

Decrease

0.00.20.40.60.81.0

Overall

Long Term

Short Term

Developmental

Localization

Commuter

EBT

Permanent Transfer

200 40 60 80 100

42 28 30

34 29 37

46 29 25

30 51 19

42 52 6

36 53 11

46 44 10

36 45 19

Increase

Constant

Decrease

0.00.20.40.60.81.0

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Historical Perspective: Growth Expectation Not MetChart 6 shows the relationship between 2007 predictions for growth and 2010 results in six policy types. Overall activity, anticipated to rise by 61% of respondents, increased for only 42%. The pattern of not meeting anticipated assignment activity repeats itself across the board, especially with developmental assignments, which reached less than half of their predicted level. As the most strategic and least logistical of assignment types, developmental moves would naturally be among the first to be deferred in a cost-cutting environment. Meanwhile, 75% of respondents stated that the leading reason for an employee to accept an international assignment is for career development.

One should not assume that these trend data apply to all responding companies, however. For instance, less than half of survey respondents reported having actual activity within the commuter, EBT, or localization policy types.

Future Perspective: Resumed Growth AnticipatedLooking forward over the next two years, companies have moderated their expectations for growth but are still bullish. Few anticipate a decrease in the future; long-term as-signments were the only policy type that more than 10% of companies expected to decrease. This expectation of moderate growth remains remarkably consistent with opinions from 2007. Nearly one-half of companies expect no real change in activity (see Chart 7). But it may also be that companies, faced with high degrees of economic uncertainty, find it increasingly difficult to predict.

Reasons for Changes in Mobility Activity What influences companies to increase or decrease assignment activity? Some factors (mergers & acquisitions; office closures) can contribute to both. Generally, expansion into emerging markets and a gap in available local skillsare the primary reasons for increased activity, while budget constraints constitute, by far, the main motivation for decreases, cited by 44% of companies.

Viewing the factors that drive increases and decreases in mobility activity together, it is striking to note the clear conflict between the need for globalization and for cost control—a challenging mix to manage.

Chart 6. Predicted vs. Actual Assignment Activity—Past 3 Years

Chart 7. Assignment Activity—Next 2 years

Overall

Long Term

Short Term

Developmental

Localization

Commuter

EBT

Permanent Transfer

200 40 60 80 100

42 28 30

34 29 37

46 29 25

30 51 19

42 52 6

36 53 11

46 44 10

36 45 19

Increase

Constant

Decrease

0.00.20.40.60.81.0

2007Predicted

2010Actual

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Cost as a Priority Many factors influence how companies design and execute their mobility programs. These may include the company’s level of activity, desire for centralized control, global business strategies, and development of talent. But the elephant in the room is cost; everything the company plans to do is measured against its financial impact. Cost pressures, such as those present over the past three years, demand re-evaluation and modification of mobility programs at all levels.

In fact, the percentage of companies stating that focus on cost increased over the prior three years rocketed to 76% in 2010 (see Chart 8).

However, as a clear indication of the struggle to balance priorities, we asked a difficult, but not unrealistic, question of companies, “Realizing that both are critical, which of the following drivers—cost or business strategy—is more important in determining your organization’s overall approach to assignments?” The results—76% electing business strategy versus 24% cost—reflect a clear mandate (relatively unchanged since 2007) not only for global presence but also for expansion.

Asked what changes they were considering in order to achieve cost savings, companies responded with a broad range of strategies—policy changes outpolling a reduction in assignment activity by 53% to 41% (see Chart 9).

Focus on Assignment DurationAn additional cost-control strategy is to reduce assignment duration. As Chart 10 shows, more than half of companies have not taken this step either with respect to continuing or new assignments. Still, moderate or significant reductions are reported by 20% of companies with respect to continuing assignments and 23% with respect to new assignments. When asked for the reason for reducing assignment durations, three times as many companies noted budget constraints as any other factor. Similarly, nearly three times as many companies attributed early repatriation of assignees to budget constraints comparedto any other cause.

Strategic Cost Management The overriding concern with balancing business strategies and cost is reflected not only in a lack of activity growth—particularly in higher-cost policy types—but also in attention to choosing the right people for assignments, retaining them during and after the assignment, and right-sizing policy elements to make assignments more cost effective.

Cost and Related issues

Chart 8. Change in Focus on Cost Control (over the prior 3 years)

2007 2010

Increased 47% 76%

Decreased 7 3

Stayed the same 36 18

Don’t know 10 3

Chart 9. Changes Being Considered to Achieve Cost Savings? (multiple responses possible)

Frequency

Policy changes 53%

Administrative process improvement 41

Reduced number of assignments/transfers

40

External provider changes/renegotiations 31

Outsourcing 16

Reduced headcount in mobility program administration

13

IT enhancements 12

Insourcing (taking outsourced services in-house)

8

Other 6

Don’t know 5

Chart 10. Trending Toward Reduced Duration of Assignments

No Change Slight Reduction

Moderate Reduction

Significant Reduction

Current Assignments

58% 22% 17% 3%

New Assignments

52 25 18 5

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For example, an examination of policy elements typically offered in long- and short-term assignments illustrates the fact that long-term assignments are becoming leaner in benefit content: twice as many policy elements decreased as increased between 2007 and 2010 (see Chart 11). This trend suggests that while long-term assignments are becoming less numerous, those that continue to be used are often viewedas overly generous, particularly when used intra-regionally.

Compare this dynamic with short-term assignments, where twice as many policy elements increased in usage. All indications point to a certain portion of the short-term assignment category replacing part of the long-term category and beefing up their benefit level to compensate.

ROI The issue of how—and whether—companies choose to measure the effectiveness of international assignments as a business strategy is a complex one. In reality, only 6% of respondents actually measure return on investment (ROI) for global mobility. Respondents cite three main reasons for this fact, led by a lack of information necessary to calculate it, followed by difficulty/lack of precision in making the calculation, and a lack of a mandate from management (see Chart 12).

The main inference that can be drawn from the survey in this area is that return on investment is not a practical metric for justifying international assignments as a business strategy. Companies don’t say that ROI isn’t a relevant metric, just that they don’t have the mandate or the means to calculate it. Effectively measuring ROI is a complex process, but it’s one that can pay rewards. It involves taking into account both hard and soft costs, establishing firm definitions, and understanding and capturing total mobility costs. At present, assignments are essentially accepted as the price of doing business globally.

Chart 11. Benefit Level Trending for Long- and Short-Term Assignments (2007- 2010)—Policy Elements Added or Removed

Increase No Change Decreased

Long-Term 10 2 20

Short-Term 14 2 7

Chart 12. What Prevents You From Measuring ROI?

2007 2010

We do not capture enough information to calculate it

28% 37%

We have tried but found it too difficult or imprecise to

measure12 21

No mandate from management

31 20

We do not consider it a relevant metric

4 4

Other 11 6

Don’t know 14 12

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The Need For Progam FlexibilityTo understand how companies manage mobility policy, we first asked how global their policy approach is. Most respondents (74%) utilize a global approach or policy, and one-half also utilize regional or country-specific addendums. Only 11% employed a tiered policy and even fewer (5%) a core-flexapproach, both proven approaches to controlling cost. Whatever the policy approach, companies are recognizing the need to adjust their benefits at the local level. As Chart 13 illustrates, over two-thirds of respondents report that employees and businesses demand increased flexibility. Further, there is no change in the drivers or their relative importance.

The primary drivers of flexibility were budget constraints (45%) and business needs (28%). Regional addendums or policies are examples that meet budget/business and/or regional nuances. Employee needs (22%) reflect how HR organizations are meeting both the business/cost side of the equation balanced with the demands of the employee, considering changing definitions of family, career expectations, and demographic shifts from emerging markets. The final factor, regional needs, received a 21% rating.

Long- and Short-Term AssignmentsAssignment Drivers Compared More than other policy types, long- and short-term policies are counted on to advance the corporate goals that mobility supports. The reasons that employees are sent on long-term assignments have not changed appreciably, taking on a slightly more logistical character (do a job rather than develop a manager) and reflecting a weakened economic climate in the recent past. Chart 14 compares this dynamic between 2007 and 2010.

Career development has emerged as the #3 reason for short-term assignments at the same time as it has fallen off the list of top five drivers for long-term assignments (see Chart 15). The message is clear: short-term assignments now serve a purpose previously fulfilled by long-term assignments to support employee development, but at a lower cost.

Long- and short-term policies share many of the same difficulties, which increasingly feature tax and immigration compliance, managing assignment lengths and costs, and consistent policy administration. As companies send employees to more countries, each of which may have its own laws concerning payroll, taxes, and a host of other regulated issues, the challenges increase and the consequences of running afoul of local regulations become a greater threat to the success of the assignment.

Chart 13. Demand for Program Flexibility

Chart 14. Why Employees Are Transferred—Long-Term Assignments (multiple responses possible)

2007 2010

Management/leadership role

75%Management/leadership role

63%

Knowledge transfer 50Technical skill

transfer53

Technical skill transfer

47 Start-up 49

Start-up 41Knowledge

transfer 39

Career development 33 Project based 28

pRiMaRy poliCy appRoaChes and tRends

Order of 4 main drivers: Budget constraints: 45% Business need: 28 Changing employee needs: 22 Regional need: 21

Yes68%

No30%

Don’t Know2%

Chart 15. Why Employees Are Transferred—Short-TermAssignments (multiple responses possible)

2007 2010

Project based 69% Project based 59%

Technical skill transfer

57Technical skill

transfer46

Knowledge transfer 44Career

development28

Start-up 32 Training 27

Training 30 Start-up 23

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Home or Host Orientation Of particular interest to companies sponsoring assignees is the choice of home or host country approaches to compensation, taxation, healthcare, and pension (see Chart 16).

Compensation. As we look at salary structures for long- and short-term assignments, 56% of long-term assignments still remain on the home country pay structure versus an even higher percentage of short-term assignments (70%). Employee concerns in this area generally focus on a possible financial impact resulting from the assignment or relocation, as well as ensuring a good quality of life for themselves and their families. Companies continue to follow the balance sheet, or build up, approach in order to keep employees whole and ease the transition upon repatriation.

Taxation. Tax approaches appear to be fairly consistent for both long- and short-term assignments, with tax equalizationbeing the favored methodology, reflected by 75% and 60% of respondents, respectively. While the tax equalization concept is often adopted for short-term assignments, many companies continue to consult with their global tax providers first to determine if it is necessary to tax equalize based on the nature, duration, and location of the assignment. This is an area with potential to realize cost optimization while at the same time remain in compliance.

Healthcare. Sixty-six percent of respondents apply international schemes for long-term assignments versus only 35% for short-term assignments; it is no surprise that half of respondents maintain their short-term assignees in home country healthcare, wherever feasible (as contrasted to only 22% for long-term assignments). Companies should be aware that foreign nationals may encounterrestrictions in certain countries for enrollment in local benefits schemes, making it important to investigate local regulations in advance.

Pension. One of the greatest employee concerns involves security of pension and retirement-related benefits, which can become much more complicated in cross-border moves. Pension portability continues to be an important focus in the marketplace, whereby companies are challenged to prevent any potential loss in benefit. Most survey participants (79%) maintain assignees on home country pension schemes.

Developmental Policies Somewhere between the traditional long-term assignment and a typical 3-12 month short-term assignment lies a type, termed “developmental,” that serves a set of closely related purposes. Although subject to much variation, the core of the developmental assignment, and therefore of the policy provisions designated to support it, is a more strategic purpose focusing on the assignee—not just the task. The timeframe, however, is more in keeping with the trend toward shorter-term assignments.

Clearly, developmental assignments are highly valued, but not core: consequently, they tend to exhibit the largest gap between expectations for future activity and actual assignments initiated. Of all assignment types, fewer companies said that developmental assignments increased over the past three years (30%), although nearly half of companies (49%) expect growth in activity over the next two years.

Chart 16. Home vs. Host Country Approachesto Policy Elements

Approach Long-Term Short-Term

Compensation

Home country 56% 70%

Host country 18 4

Home/host split 24 7

Headquarters 8 4

Taxation

Tax equalization 75% 60%

Tax protection 10 12

Laissez faire 7 5

Healthcare

Home country scheme

22% 50%

Host country scheme

14 5

International scheme

66 35

Pension

Home country scheme

79% N/A

Host country scheme

6 N/A

International scheme

7 N/A

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Fifty-four percent of respondents offer developmental assignments and 81% of that group have formal policies in this area. Chart 17 shows how developmental policies relate to other policy types in structure, 50% of respondents saying that they are patterned after long-term assignments and only 26% after short-term.

Although developmental assignments fall somewhere between long- and short-term assignments in several surface characteristics (length, use of existing policy), they relate more closely to short-term assignments in terms of their organizational purpose. The top three drivers for developmental assignments remained the same from 2007 to 2010 and were:

1. Leadership/management skill development (61%);

2. Technical training (45%); and

3. Corporate culture transfer (27%).

Also see Chart 18 for a comparison of typical durations from 2007 to 2010, 12-18 months being the most common duration in 2010, compared to less than 12 months for 2007.

Localization and Permanent TransfersBased on survey findings, companies are increasingly looking at “going local” by means of local plus, localization, and permanent transfers in order to keep costs at bay. These types are by no means revolutionary but are likely gaining further traction and uptake due to the dramatic shifts in the economy and the steep costs associated with global assignments.

Localization Localization is defined as integrating an employee into the local compensation and benefits systems following a long-term assignment. According to our survey, companies indicated that the top two drivers behind the need for localizations were:

• to contain mobility costs (49% of respondents), and

• that it is part of their overall mobility strategy (30%).

A total of 46% of participants have a formal localization policy. The two most common approaches used to localize employees are:

• scaling back benefits (used by 48%), and

• transitioning their employees to local status immediately following a long-term assignment, ceasing all expatriate-related allowances and benefits (43%).

Localization is most often used in the United States, followed in distant second and third places by China and Switzerland. A comparison of 2007 and 2010 results shows that an increasing number of companies are choosing to handle employees on the host plan (refer to Chart 19).

Permanent TransfersAnother mobility type is permanent transfers, defined as a one-way relocation from one country to another for an indefinite period of time: 66% of survey participants reported having a formal permanent transfer policy.

Chart 17. Formal Policy for Developmental Assignments

Frequency

Yes, scaled back long-term 28%

Yes, same as long-term 22

Yes, same as short-term 13

Yes, scaled back short-term 13

Other 5

No 19

Chart 18. Duration of Developmental Assignments

2007 2010

Less than 12 months 40% 36%

12 to 18 months 31 43

More than 18 months 29 21

Chart 19. Home/Host Treatment of Pension and Healthcare—2007 to 2010

Policy Element

Host Country

HomeCountry Combination

International Plan

2007 2010 2007 2010 2007 2010 2007 2010

Pension 67% 79% 15% 3% 7% 6% 2% 5%

Medical insurance

77 87 10 13 0 3 6 6

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The driving forces behind permanently moving employees across borders versus deploying employeeson temporary assignments are:

• lack of skills available locally (46%);

• managing total mobility costs (41%); and

• being part of the company’s globalization strategy (35%).

Again, the United States was the overwhelmingly prominent location for permanent transfers, followed by the UK, Switzerland, and China.

Commuter and Extended Business TravelCost pressures, even prior to the recent economic downturn, have generated less expensive and more flexibly structured policies. These approaches—commuter and extended business travel being the standard-bearers—have increased in proportion to long- and short-term policies, even if fewer than 50% of respondents report actual activity in these areas. Companies increasingly see the need for such policies and 47% of those without current policies said that they are likely to develop policies in both of these areas in the next two years.

When respondents were asked where they have had the greatest difficulty with these types of assignments, tax compliance, visa/immigration, tracking, and cost all appeared frequently. In the case of both commuter and EBT, tax compliance and visa/immigration not only led the list in 2007 and 2010, but nearly doubled in size as challenges over the three-year period.

One likely cause is increased awareness of the “stealth expat” phenomenon that plagues these often ad hoc programs. Companies have struggled to ensure that this group of assignments is in compliance with local tax and immigration laws, a process that requires considerable rigor in order to correctly observe residence laws in a number of countries. Companies often encounter challenges in tracking because they seldom partner with a single global travel provider and because most EBTs do not funnel through global mobility channels. As expected, commuter policies are most frequently used in EMEA (because of the EU), while extended business travel is more evenly spread across regions, having increased strongly over the past three years in EMEA (see Chart 20).

Chart 20. Regional Use—Percent of Companies Using Commuter and EBT Policies

RegionCommuter Extended

Business Travel

2007 2010 2007 2010

APAC 23% 9% 38% 26%

EMEA 52 70 33 41

Americas 25 21 29 33

16

Assignment Success and FailureIf return on investment (ROI) equals the demonstrated benefit of a successful assignment, then assignment failure represents the other side of the coin: lost opportunity. Many factors influence assignment failure, among them candidate assessment, candidates accepting or rejecting assignments that are offered, meeting special family needs, assignment completion, and repatriation and retention. Our survey delved into each of these factors. Failure is defined by companies in a variety of ways, often occurring in combination (see Chart 21). As expensive as each one might be, however, the incidence of failed assignments is not major. While 88% of respondents indicated some degree of assignment failure, only 7% of respondents reported an incidence of more than 10% over the past three years. Even so, the fact that nearly half (46%) of companies saw an increase in repatriation between 2008 and 2009 points to the possibility that assignments are being terminated early, perhaps for failure to meet their objectives.

Heading the list of reasons for assignment failure were three causes that could be attributed directly to personal factors impacting the assignee or family—family failure to adapt to the host location, employee failure to adapt, and voluntary termination (see Chart 22).

Assessment Gains AcceptanceAlmost by definition, assignment success begins with selection of an appropriate candidate (and family). Assessment tools are used by 30% of companies and an additional 21% say that they are considering using assessments in the future. Two-thirds of companies use a program managed by the business or HR, half of which are formal programs. The third major category is employee self-assessment, used by 19% of respondents. Companies assess a broad range of important competencies (see Chart 23). Slightly more companies use their assessment programs for candidate self-awareness (35% of respondents) than as an actual selection tool (32%).

Willingness to Accept an Assignment By more than a 3 to 1 margin, companies reported family or personal circumstances (74%) as a reason for employees to turn down an assignment compared to any other reason. Career and compensation issues were next (22% and 18%). Specific issues of safety, schooling, and housing each drew less than a 10% response. Among the most common reasons for an employee to accept an assignment were career development (75%), followed by policy benefits (33%) and attractive compensation (30%). Fear of job loss, an increasing concern in a weakened economy, received a 9% mention.

Chart 21. Definitions of Assignment Failure(multiple responses possible)

Chart 22. Reasons for Assignment Failure (multiple responses possible)

hot topiCs and Challenges

Frequency

Not meeting the assignment objectives 54%

Voluntary termination 46

Termination for cause 40

Returning home before the assignment end date

30

Low score on performance management review during and/or after assignment

23

Other 4

Frequency

Family unable to adapt to the host location 30%

Employee unable to adapt to the host location

28

Voluntary termination 27

Stated objectives of the assignment not met 26

Termination for cause 16

Other 5

Don’t know 18

Chart 23. Competencies Being Assessed (multiple responses possible)

Frequency

Flexibility/adaptability 56%

Cross-cultural communication skills 49

Drive and enthusiasm 47

Technical skills 44

Family suitability 43

Cultural awareness 43

Other 3

Don’t know 6

17

Retention ImprovesChart 24 illustrates the percentage of assignees leaving the company within one to two years of assignment completion. Remarkably, the percentage that lost no employees nearly doubled between 2007 and 2010 (9% versus 17%). In comparing assignment loss to total company turnover, respondents again gave a relatively positive account: 44% of respondents claimed assignment loss was lower, while only 28% said it was higher. Half of respondents felt that international assignments were helpful, but not necessary, for promotion to higher-level positions in the organization; only 17% felt they were necessary. This may explain why two-thirds of companies reported that they had no formal repatriation strategy linked to career development and retention.

Repatriation Still an IssueChart 25 lists the ways companies are addressing repatriation needs, the mainactivities being advance return career planning and post-assignment debriefing. Fewer than half of responding companies employ any of these programs supporting repatriation, however.

Chart 26 demonstrates the timing of repatriation and career planning, which centers on the six months immediately preceding repatriation.

How Special Needs Are HandledIn response to increased awareness of families with special needs (such as an elderly dependent parent or a child with health or learning disabilities), we asked two questions that address the incidence of, and support for, these issues. In general, companies responded that special needs have not been significant and that they are dealing with them on a case-by-case basis.

Future Focus How do companies want to improve their mobility programs? Chart 27 illustrates the priorities, which have not changed greatly in the past three years except for a modest drop in spouse/family assistance (19% to 13%) and a more considerable reduction in global leadership development (36% to 27%). The latter statistic is consistent with a relative lack of emphasis on developmental assignments over the past three years.

Future IssuesTo illustrate the breadth of concerns companies are dealing with, following is a selection of the answers provided to the question, “What hot topic, challenge, or mobility issue do you see your organization facing that the survey did not ask about?” These comments display a variety of concerns with large-scale issues of control, consistency, and effectiveness, as well as smaller-scale technical and logistical issues. What they all seem to share is resistance to a simple solution.

Chart 24. Percent of Assignees Leaving in 1-2 Years

2004 2007 2010

None 23% 9% 17%

1-25% 69 78 68

26-50% 8 13 10

51-75% 0 0 3

76-100% 0 0 2

Chart 25. Repatriation Needs Addressed By the Organization

Yes NoDon’t Know

Advance return career planning 40% 44% 16%

Post-assignment debriefing 32 56 12

Post-assignment career tracking 19 69 12

Cross-cultural repatriation integration program

17 74 9

Spouse/partner career re-entry assistance

16 76 8

Chart 26. How Early in the Assignment Process Are Repatriation and Career Planning Reviewed?

Frequency

Six months before repatriation 49%

During annual performance reviews 11

At the time of repatriation 11

Prior to acceptance of assignment 8

Prior to commencement of assignment 4

Never 3

Don’t know 14

Chart 27. Mobility Program Aspects Most Interested in Improving (multiple responses possible)

2007 2010Change

since 2007

Repatriation and career management 54% 56% +2

Performance measurement/evaluation 47 44 -3

Candidate assessment and selection 46 44 -2

Relocation support services 33 30 -3

Compensation and benefits elements N/A 30 N/A

Global leadership development 36 27 -9

Spouse/family assistance 19 13 -6

Other 6 6 -

18

Company Verbatim Comments:Hot Topics or Challenges

• Structuring standards that are applied to all assignees with consistency

• Centralizing the management of global mobility processes

• How to tie global and regional policies with staying competitive in each region

• Using technology to help link employees on assignment

• Cost sharing between home and host businesses and its tax implications

• Taxation on benefits that may not be received until after repatriation, but which may have been earned while on assignment (deferred compensation)

• Are companies leaning away from tax equalization and looking more toward ‘local packages’ for 2-3 years?

• Short-term and long-term assignments to hazardous countries—don’t have the housing, transportation, etc., that is provided for in our policies available in such locations

• Exception management

• Managing exchange rate volatility

• Education—are companies allowing expats to select the international schools they want for their children, or in some countries are they deeming local schools or quasi-private schools good enough and not allowing the expensive international schools?

• Better link to talent management process

• Metrics, metrics, metrics

When asked to list the greatest mobility challenges in terms of their future impact on their organizations, companies listed cost control as the #1 priority (see Chart 28). Immigration increased dramatically from 2007 to 2010 (18% to 25%), reflecting the greater number of countries to which companies are sending assignees and increased difficulties with local regulations. On the other hand, stealth expats are much less of a worry (down from 15% to 9%), coincident with greater awareness of this issue and its consequences, and more effective assignment tracking toimprove tax compliance.

Chart 28. Global Mobility Challenges with Highest Future Impact on the Organization (multiple responses possible)

2007 2010Change

since 2007

Cost control 36% 35% -1

Immigration 18 25 +7

Developing global competencies 17 20 +3

Designing equitable compensation packages

23 19 -4

Measuring program/assignment success

20 15 -5

Mobility program tracking 18 15 -3

Global versus local policy development 10 13 +3

Stealth expats(outside of a formal program)

15 9 -6

Outsourcing 8 3 -5

Other 17 4 -13

19

Company Verbatim Comments:Changes in Strategic Approach Contemplated

• Will try to reduce costs per move, but will have increased activity

• Global consistency is our main objective, followed by benchmarking policy against other relevant competitors

• Increase the use of short-term assignments and improve our internal approach to candidate selection

• We need to capture the stealth population and integrate them into our mobility program, to ensure tax and immigration compliance

• Need to rethink long-term expatriates versus commuter options and telecommuting to accomplish the same work

• Increased use of localization programs with a tiered approach to benefits

• Go to a more regional, versus global, policy approach and provide more flexibility in terms of benefits and cost

• Assignments will become much more focused on career development and planned rather than just filling a gap when needed

• Develop a policy for development—younger employees that will get fewer benefits but will be more interested in career development

• Increased emphasis on international experience as a requirement for senior management positions

• Strong focus on integrated talent management to send high potential employees on assignments and track talent back and measure future success

Strategic Direction Last, respondents were asked to place the many issues in mobility into perspective in answering the question, “Taking into account all of the trends identified in this survey and anticipated business, economic, and geo-political influences, in what ways do you think your organization will change its strategic approach to global mobility over the next two years?” Following are some of the most interesting answers:

20

7-Eleven, Inc. A.T. Kearney (Australia) Abbott Laboratories Acision Alcatel Asia Pacific Headquarters Alcatel-Lucent Arch Chemicals, Inc. Automatic Data Processing, Inc. AVNET BAE Systems Barclays Bank PLC BlackRock, Inc. Boston Scientific Corporation Brambles Limited Brink’s Inc. British Airways Plc Burberry Limited Burger King Corporation Campbell Soup Company Carillion Plc Central Vermont Public Service Corporation CEVA Logistics CH2M WG LLC CHP Consulting Limited Cincinnati Bell Inc. Citigroup Computer Associates The Dial Corporation Disney Dow Corning Corporation DuPont (UK) Ltd Eastman Chemical Eaton Energie Baden-Wurttemberg AG FedEx First Data Corporation Fiserv, Inc. Flextronics International USA, Inc. Ford Werke Gate Gourmet, Inc. GE Healthcare General Electric Genzyme Corporation Gerdau Ameristeel GHD Guy Carpenter & Company Ltd The Hershey Company Hologic, Inc.HoneywellHorizon Wind Energy

IAVI IBM (UK) IBM India Pvt Ltd ICI plc J.R. Simplot Lenzing Fibers Limited Leo Burnett Company Lockheed Martin Corporation Mars, Inc. Medtronic, Inc. Mitsubishi Pharma America, Inc. Mitsubishi UFJ Securities International plc Molex Far East South Management Pte Ltd New Balance Athletic Shoe, Inc. NIBCO, Inc. NII Holdings, Inc. Nokia Siemens Networks Nokia UK Limited Owens Corning PZ Cussons International Ltd PACCAR Pacific Life PepsiCo PerkinElmer, Inc. Peter Kiewit Sons’, Inc. Pioneer Hi-Bred International, Inc. Pharmaceutical Product Development (PPD) ProStrakan Prudential Plc Quintiles Transnational Raytheon Ross Stores Sabic Innovative Plastics SAP AG Shaw Inc. Siemens AG Softtek Integration Systems, Inc. Starwood Hotels & Resorts Teach For All Textron Global Services UBS AG United States Steel Corporation (USX) United Technologies WaferTech Westinghouse Electric Company Westland Helicopters Limited Whirlpool Xyratex Teleplan Yan Tai Wan Hua Zachry Construction Corporation

The following companies gave their permission to be identified as having participated in this survey. We thank all respondents for their commitment to making this survey as representative as possible of corporate mobility practices.

CoMpanies Responding