International Management January 15, 2010, 11:11AM EST

Should Your Business Axe Overseas Assignments?

Assignments abroad can cost six figures or more, but don't let budget constraints panic you into missing out on lucrative ventures

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As businesses continue to navigate their way through—and out of—the global economic crisis, almost every multinational organization is looking to tighten purse strings as we head into another year of what promises to be cautious spending. Unfortunately, expensive international assignment programs are often one of the first areas of focus for wary managers, who could pare down or even temporarily oust these assignments from the budget.

Nonetheless, strategically deploying talent worldwide can contribute to a company's bottom line in a big way. If cost-control efforts lead potential assignees to turn down transfers or grudgingly accept them, the focus on cost reduction may defeat the company's ultimate business objectives. So how can a company find the right balance?

Consider the Assignment

The overall goal of human resources seems simple: Put the right person in the right job, in the right place, at the right time and the right cost. By looking at the project's responsibilities and goals, management must determine if an expatriate or a local employee would be the ideal fit. If the analysis favors an international assignee, HR should consider the potential benefits for both the company and the employee. While the employee gains international experience and a potential career boost, the company achieves its goals. But at what price?

Consider the Cost

With any international assignment, management must scrutinize all the extra costs—housing, travel, and settling-in expenses, school tuition, tax liability, and hardship premiums—while still taking care to support the needs of the family unit.

For example, if an organization wants to relocate the family of an employee making $200,000, the overseas assignment is likely to cost the organization $800,000 annually when factoring in all the extra costs. While it may seem excessive, companies must realize they will most likely reap the difference in various ways through a successful assignment.

Yet with a mandate from senior management to cut expenses, HR managers struggle to reduce any allowances that seem unnecessary or too generous. The critical point is to determine which expenditures will have motivational impact and which ones you can trim away without damaging the employee's acceptance or morale.

What helps HR make the right decision is discovering what employees value. Do they care only about financial gain, or are they interested in career opportunities? Will they want cultural orientation programs or dual career assistance for their spouses? In addition, if family members are accompanying the employee, managers need to listen and respond, when reasonable, to their needs. This can go a long way toward increasing an employee's productivity on assignment.

Increasingly, companies are relocating employees on different types of assignments for varying lengths of time involving multiple home and host locations. As a result, some employers no longer assume a traditional "one size fits all" policy will work. Many are finding that multi-tier policies have become essential to meeting their business needs.

For example:

• For strategic positions with high business and career development values, employers are likely to relocate employees with a full set of expatriate incentives and allowances. In turn, companies expect a decent return on the investment from these high-potential individuals.

• A skilled position, where the assignment has high business but low developmental value, may or may not require an expatriate. The employer may deploy an expert to meet the immediate need until local talent can be trained to fill the position. The company might provide a pay package at the traditional level if the assignment is long term. But for assignments of brief duration, companies will use a short-term package with smaller allowances since the family will likely stay home.