[ Nippon Keidanren ] [ Policy ]

Strategic Approach to Overseas Transfer of Japanese Employees

- Building a successful model of overseas assignment -


November 16, 2004

Nippon Keidanren
(Japan Business Federation)

1. Introduction

The management environment of Japanese enterprises is undergoing rapid changes. To succeed in the global marketplace companies must anticipate the impact of these changes and respond effectively with enabling business strategies. It is human will and human resources that will provide business with the competitive edge necessary to meet the ever-changing requirements and survive in a competitive global marketplace. It is essential for Japanese enterprises to deploy competitive human resources throughout their global organizations. This requires a serious commitment to human resources development.

While many enterprises recognize the importance of training their human capital so that they can be depended on to work in a global environment, when it comes to making a hand on response at the organizational level the number diminishes to just a few. The truth is that most enterprises, while recognizing the need for systematic personnel training, are tied up in meeting short term operational needs instead of creating a coherent program covering all aspects of the overseas deployment of personnel including a follow-up after their return home.

This is an important issue considering the current situation affecting overseas transfers. However, there is also an increased need for localization as levels of overseas operations become more matured. It means that fewer Japanese employees sent overseas must handle expanded work and each one is expected to be better prepared to fulfill his or her expected role. This translates as a clear need to define the roles and requirements of Japanese expatriates.

As Japanese enterprises increasingly promote globalization, the challenge is not limited to the training of Japanese employees but includes the recruitment and development of capable persons on the basis of their abilities and merits regardless of nationality. Having noted this, we will focus on the transfer of Japanese staff, both short and long term, leaving to the next opportunity a discussion of global human capital development.

While it is difficult to generalize about the situations in which individual corporations find themselves, their particular stage in overseas business development, the type and scope of the industry they are engaged in, the strategic contents of their overseas operations, and regional variances affecting their policies regarding such transfers, it is hoped that this report will provide some useful references and basic directions to assist their planning.

2. Basic Perspective

From the perspective that Japanese personnel development and transfer should contribute to the strengthening of corporate competitiveness the following three points should be considered: 1) Transferred Japanese personnel should contribute to promoting localization, 2) Overseas transfers can be a positive method for training or identifying a select core of personnel for global management, 3) Sending employees abroad opens the way for diversity.

1) Transferred Japanese personnel should contribute to promoting localization

For companies that have set up overseas operations to strengthen their competitive edge in the global marketplace the issue of localization becomes urgent in relation to the time since their establishment overseas. In this paper, localization implies that local managers are well groomed to replace their Japanese counterparts in responsible positions.

In view of the progressive phases of the process of globalization of business, management in the early stages of an overseas operation would of necessity be centered on the corporate headquarters. At subsequent stages, effective utilization of local management resources should be anticipated. From the point of view of implementing expedient and efficient management in response to local requirements, making use of capable local personnel - in other words, localization - is a necessary part of the process of successful globalization.

Host countries will increasingly demand localization. In fact, there are cases in which the continued issue of working visas to Japanese is becoming a challenge. To encourage motivation among local employees they should be able to aspire to replacing expatriate personnel. At the same time, considering the relatively high cost of maintaining Japanese personnel overseas there is a considerable advantage for corporations in employing local human capital. It follows, therefore, that the number of Japanese employees to be sent abroad should be limited to necessary managers and engineers who are capable of transferring skills and know-how to local personnel.

The further evolution of their establishment overseas would require corporations to build a system that allows for effective employment of capable persons regardless of nationality - in other words, global maximization of the group's management resources. When this is realized, the result could be expected to bring about a multiplier effect of multi-cultural fusion. Localization has become an important step in that process.

Some companies, having foreseen the need for this kind of development, have begun the cycle of localization with a policy to select fewer Japanese expatriates and to promote of internationalization within its corporate headquarters. These measures should trigger localization. More important roles will progressively be assigned to local employees, ensuring a high level of their satisfaction and collaboration with Japanese managers, encouraging a further reduction of Japanese expatriates.

From this perspective, Japanese personnel sent overseas are expected to contribute actively to promote localization. In addition to realizing his own objectives, the employee must transfer to the local staff his operations and skills, because nurturing his successor is expressly considered to be one of his duties. Successful globalization at the corporate level requires expatriate managers to contribute to preparing the local office to become a full-fledged member of the corporate family.

Needless to say, there are positions that do not lend themselves to localization. Japanese personnel are important if the local business deals with Japanese business clients or requires communication with the relevant Japanese government authorities. There are of course various types of overseas operations that require a case by case response. One example would be the expansion of an overseas operation through the M&A of a local company. In such a case, it may be necessary to dispatch a larger number of Japanese personnel in order to create synergy and integration with the Japanese parent company.

Having said that, generally speaking, localization should progress unimpeded. In the final analysis, decisions must be made from the perspective of corporate governance as to what level of management should be manned by local employees or Japanese.

2) Overseas transfers can be a positive method for training or identifying a select core of personnel for global management

One of the major challenges corporations face in the process of globalization is training of core personnel who can be counted on to function globally. A cadre of those who are capable of such a role must be discovered from the middle management pool and their selection should be made irrespective of nationality. Japanese middle managers deployed overseas may become candidates for global executive training.

Naturally, all personnel are sent abroad to carry out specific operational objectives, but the period of working overseas can be an excellent opportunity to observe a candidate's aptitude. In other words, methods of training and management of overseas transfers should converge with the objectives of training core global executives. Dispatching young people overseas for training purposes can likewise be seen as an effective opportunity for the early detection of those with aptitudes for global management. This points to the advisability of a continuous process of training beginning with young recruits and following through to middle and executive management levels.

3) Sending employees abroad opens the way for diversity

Diversity among employees encourages vitality. In order to benefit from the opportunity to create new values, corporations must be prepared to change their corporate culture and actively embrace different ways of thinking and value systems. This involves a departure from the Japanese conventional wisdom of a consensual and harmonious approach to accepting differences in ways of thinking and acting. By so doing, changes in the management system and environment will contribute to improving international competitive conditions.

From the perspective of promoting diversity among personnel, consideration should be given to the effective deployment of Japanese who have returned from overseas with management skills in cross-cultural settings, capable of making independent management decisions and equipped with a global perspective and sound business sense.

The effective utilization of those who have returned from their overseas assignments and/or those with abilities regardless of national origin should in due course contribute not just to quantitative but to qualitative change in the corporate culture, thus exposing the whole workforce to the qualities needed for doing business internationally.

3. Expected roles and required skills and competencies

Employees are deployed abroad to fulfill corporate objectives including developing their own abilities, transferring technology and managing local staff. Approaches to staff selection and personnel management differ depending on the circumstances. Broadly speaking, expatriates may be classified into three categories: a) executive management of local operations, b) middle management and highly skilled engineers, and c) young employees, who are sent abroad for the purpose of training.

In particular, there will be a greater demand for sophisticating roles of b) middle management and highly skilled engineers given the growing tendency toward localization and the ever decreasing number of Japanese to be sent abroad. In this report focus is given on middle management and skilled engineers in an attempt to map out the competencies required of them to carry out their expected roles.

1) Expected roles of middle management and highly skilled engineers

a) As a promoter of localization and technology transfer

To realize the management goal of promoting localization, there is a need for corporate commitment and an effective system for local employee development and recruitment. At a practical level the task falls on the shoulders of individual expatriates. An expatriate, therefore, must have the ability to carry out his mandate, and in addition the capacity to nurture and help in the development of local employees to whom his job can eventually be entrusted. In the case of a skilled worker he must see to it that the skills in question are fully transferred. Moreover, he should transfer not just the know-how for his particular job but corporate global strategy and management principles, as well as the ability to manage relations with other overseas subsidiaries in the same region. In the case of a middle manager, he is expected to train his subordinate wherever he is, but if he is assigned overseas he is further expected to achieve all the requirements of the transfer in shorter time. He should be clear about his responsibility for training of his local counterpart and be judged on the result.

b) Role as a manager

Even a young employee in Japan is often expected to assume a managerial role as soon as he is transferred overseas. In this capacity he may have to undertake a variety of functions including overseeing local operations and personnel, and ensuring their good morale and job satisfaction. He is also expected to develop external relations with local government organizations, unions, and others. At the organizational level, he is expected to coordinate relations between the corporate head office and the local subsidiary and improve functional integration.

c) Role as a communicator

An expatriate is required to intercept and communicate management information from the corporation to the local subsidiary while at the same time relaying appropriate local information accurately to his head office. In this way he performs the function of a two-way communicator facilitating information exchange. In addition he is expected to be a coordinator in between whenever required.

d) Role as a bearer of his experience

An expatriate is expected on his return to contribute to accumulation of the corporate asset by transmitting to his successor the knowledge and experience he has gained while abroad.

For middle management and skilled engineers to fulfill these roles the following are some of the skills and capabilities required. Basically, it boils down to being a person of good character with the personal qualities to gain the respect of the local people. However, there follows a list, by no means complete, of some of the most desirable attributes.

2) Skills and abilities required

a) Operational knowledge

Having operational knowledge and the ability to perform his job are cited by most companies as the most important qualities required of an expatriate. That is logical, as he is sent overseas to conduct certain operations. Often, however, the skills developed within the scope of his duties in Japan are insufficient to fulfill the role expected of today's expatriate employee. A specialized knowledge of a given operation alone can often place him in a difficult position in carrying out his responsibilities smoothly and successfully once he is abroad. He must have the capacity to respond to local requests which often require him to have a knowledge of the local industry. He would have to be able to present his case, negotiate if necessary, and be prepared to respond flexibly.

Above all, he is expected to have the managerial skills necessary to identify underlying issues that may possibly impede a given process, sound out potential ideas for a solution and establish and lead a working team to achieve his company's objectives. The range of an expatriate's responsibilities is most likely to expand in the course of his work. This will demand drive, commitment and the ability to think clearly out of the box and beyond his particular field of expertise.

b) Management skills (including personnel management)

Personnel assigned overseas are expected to be able to manage local subordinates. In this respect the expatriate employee should possess the aptitudes to be able to lead those under him to embrace corporate policies. Important among them are his ability to overcome difficulties in human relations, and to encourage his subordinates to grow as well as lead when necessary. He must also manage personnel and work-related issues including organization building, recruiting local employees and assessing the performance of those who report to him. In addition, he is expected to have financial acumen so as to be able to ascertain how the local company's performances contribute to the financial results of the corporate group as a whole.

c) Ability to facilitate communication between the corporate head office and the local organization

In order to facilitate the exchange of information between the overseas operation and corporate headquarters, it is necessary, in addition to the raw information, to have a good command of communication skills if the expatriate employee is to communicate management philosophy with authority. In addition to his knowledge of the management philosophy, what one might call the corporate DNA, there should be institutional support from the corporation in the form of having the basic management policy translated into English and/or the local language.

The expatriate employee must also have the skills to enable him to communicate back to the corporate management local information and feedback from employees, customers, suppliers and other stakeholders. As a successful liaison officer, he would need a sense of balance and the ability to optimize the whole, not just parts, so as to create mutually smooth and profitable relationships.

d) Communication skills

Essential communication skills include language skills, understanding the need for frequent communication, exchanging information, and a friendly disposition.

A manager trained for leadership would require, in addition to language skills, having a genuine interest in a wide range of subjects and an ability to communicate often philosophical and abstract thoughts - in other words, good communication skills. Today, languages needed are increasing, not limited to English, and candidates should be sought preferably from among those who are already interested in and familiar with the cultures of the countries where they may be assigned.

Most companies, when looking for language skills, have adopted a ballpark standard of TOEIC 600, with a desired target of 730. The reality demands a higher score, and some companies have recognized that need and set a target of 900. Logical thinking, general knowledge and debating skills are also important assets. When stating one's case one should be able to do so with understanding and respect for the position of the other party.

Communication skills are fundamental to building human relations and exercising all other requirements. In fact, they are vital keys to boosting personal confidence and making the expatriate's life abroad fulfilling and productive.

e) Cross-cultural understanding and easy adaptation to a new environment

Emotional maturity and broadmindedness are required of an employee in a foreign assignment as he must be able to appreciate different cultural perspectives, lifestyles and customs. He must also know and respect religious courtesies and taboos.

f) Importance of human relations

Good human relations skills must be learned while in Japan. The employee should possess, among other qualities, a genuine interest in his fellow human beings, an ability to take the initiative in building relations, along with sensitivity, open-mindedness without prejudice.

g) Risk management skills

Differences of culture and daily customs can cause unexpected consequences. Therefore, the overseas assignment demands appropriate risk management skills.

h) Consciousness of corporate social responsibility (CSR)

The employee must respect local laws and regulations and human rights, be fair to employees and customers, protect the environment and be prepared to contribute to the local community.

While corporate social responsibility is by definition a corporate commitment it goes without saying that it has to be actively represented at the individual level. Each employee on assignment abroad must be fully aware that he is seen as the embodiment of corporate policy and philosophy, and conduct himself accordingly.

i) Physical and mental health

Performing one's job in a foreign environment requires first of all that the candidate should be healthy, physically and mentally. He is expected to have self-confidence and a sense of mission and be resistant to stress, or at least to have the personal qualities to manage it.

j) Adaptive ability of his family

Having the right aptitude has much to do with the success or failure of the overseas assignment. Such aptitude does not stop at the assignee, but applies to his spouse and family as well. Candidates must be assessed for their aptitude and if necessary have it reinforced by training. The corporation must in addition develop a system to provide mental support to the family as well as helpful information concerning, for example, education of children. Assignment to countries outside the English speaking regions may even hinder a candidate's family because of a lack of international schools. A less than desired environment for his family may adversely affect the performance of the assignee. Adequate support is indispensable in this context.

4. Overseas assignment programs: present status and issues

Most corporations are well aware of the importance of assigning capable expatriates to overseas subsidiaries. Some have put in place the required organizational mechanism for it but others are at a stage of trial and error. It is essential for any corporation to develop an international assignment program based on a long term personnel management plan in order to successfully chart its business in the sea of global competition and win and/or maintain its competitive advantage. By managing the overseas assignment program throughout the working life of an individual, starting with the selection and continuing through the pre- and post-assignment phases as well as during the period of the actual assignment, the corporation can maximize the effectiveness of the program for itself and the candidate. Below, the present approaches are analyzed and what must be done by the corporation studied.

1) Selection

While corporations are doing their best to select candidates to meet specific job requirements they often do not set clear targets either for the period of transfer or for the objectives to be achieved.

It should be borne in mind that head office department managers are naturally reluctant to let their best people go, and assignments made at the corporate management level often do not fully consider local conditions abroad or the nature of the operational setup. It is necessary as a business organization, therefore, to set certain standards for selection of people. Some companies select candidates without consulting their overseas offices, but proper consideration should always be given to their needs and wishes.

Candidates for transfer should be informed beforehand of the roles and performance expected of them, as well as the anticipated duration of the transfer. Without this, uncertainty with regard to their career plans will plague them throughout their assignment abroad as well as after their return. This applies to their families as well, as they too must plan their lives.

2) Pre-assignment phase

It is customary to provide the employee selected for overseas posting with language and cross-cultural skills as well as personal safety and health management training through seminars. He receives guidance from his predecessor, and for those with insufficient management skills appropriate training is also provided. From experience it can be said that, generally speaking, Japanese expatriates lack personnel management skills. There is a need to expand pre-assignment training to cover areas where necessary skills are considered inadequate.

Where language skills are concerned, most companies have set a TOEIC standard of 600 points or above. As may be expected, the skills actually required are superior to those needed for merely conversational competence. The ability to correctly communicate substantive information is critical.

It is often pointed out that the corporation should take more care in reducing the assignee and his family's uncertainties as well as in helping them to bridge the cultural gaps they will encounter. For example, there have been problems in the past over the lack of sufficient information concerning education of the children, housing, medical care, and security that are crucial to ensuring satisfactory living conditions.

3) During assignment

On-the-job training while on assignment is considered to be the best method for improving skills. Performance assessment is left generally to local discretion.

It is desirable that information regarding the assignee's performance should be shared between the head office and the overseas office, but in reality there has not to date been sufficient care given to personnel development nor to performance evaluation.

Another problem is that the head office does not always receive sufficient information from the overseas office to be able to objectively assess reports sent back by Japanese staff members that include observations on the management of local employees.

Worse still, in some cases there is no regular exchange of information except for an occasional verbal report when the assignee happens to be in Japan on a visit.

What sort of insecurity and dissatisfaction does the expatriate express? For lack of information he may feel isolated from what is going on in the corporation and fear that there is no personnel development plan for him.

Overseas assignment may have given him nominal promotion but he feels that this is not accompanied by the authority he needs. Often he feels the head office does not fully appreciate or understand the information he sends from the field.

Moreover, with ever-increasing international competition the assignee often experiences stress from his increased workload as well as from the unfamiliar surroundings. Health management including mental care is indispensable. A manual offering guidance in case of emergency should be provided, and a general support system, including assistance in the tax and social security aspects, should be also set up.

4) Post-assignment phase

Assignment and placement following return from overseas are managed on a case by case manner depending on the person's expertise and the nature and type of transfer. Generally speaking, most return to their former position and continue to develop their career from where they left off.

There are cases in which the employee finds it uncomfortable to continue to work in his old environment and leaves the company because his experience abroad is not appreciated or utilized.

Normally, an overseas office submits a list of requests regarding the replacement for a staff member who has returned home. In turn, the returnee prepares a detailed memorandum to assist his successor. But is it being utilized most effectively by the corporation? More often than not no provision is made for making the most of the hard-won experience of the newly returned employee.

Unfortunately, it is often those who have been most successful in adapting to the overseas environment who fail on their return to reintegrate into the typical Japanese corporate milieu and leave the company in response to another offer. An individual returnee may feel that resuming his place in the corporation is a come-down from the nominal promotion he enjoyed while abroad, and fears that there will be no opportunity for him to make use of the experience he has worked hard for. Often he is doubtful whether he can catch up with the changes that have taken place in the corporation during his absence. The contrast in his living environment may be as perplexing as that which he encounters at work. Thus it happens sometimes that success abroad does not always translate into a smooth return to corporate life in Japan. A comprehensive system is needed to enable the corporation to avoid these problems and make full use of the opportunities provided by its presence on the global stage.

5. Strategic approach-building a systematic transfer program

A glance at the current system employed by most corporations is enough to recognize the need for building a coherent program to prepare for transfers abroad. Given the need to select fewer expatriate employees to carry out the increasingly sophisticated and demanding task of managing people, transferring technologies and raising local management capacity in a relatively short period, a well worked out personnel strategy is essential, beginning with selection and continuing without interruption through training, transfer and post-return follow-up. The following is a list of necessary factors that should go into such a personnel transfer program.

1) Identification of the purpose and requirements and of an approximate period of the overseas transfer

It is needed to make quite clear the purpose of the transfer, the expected outcome and requirements for achieving the objective, and indicate a rough idea of how long it is anticipated it will take to carry out the intended mission. Although the period of transfer overseas may differ according to the nature of the business and from one corporation to another, it is important that this information be clearly stated.

2) Convincing standards for personnel selection and corporate human capital development

Personnel selection should be based on pre-determined standards and well coordinated among those concerned, including candidates' superiors and personnel department, giving full consideration to the overall corporate personnel training plan. Such a process should be made as a part of the process for selecting candidates for core global executive positions. Some corporations include experience in overseas assignments as a necessary management requirement.

3) Acquisition of skills and competencies prior to transfer

A candidate for overseas transfer should have acquired all necessary skills and competencies prior to his departure so as to effectively perform immediately on arrival. Some corporations detect potential candidates and prepare them for eventual transfer by training them in knowledge and management skills required of middle management. Candidates from certain job backgrounds may be ill prepared for personnel management. In such cases special training in personnel skills may be necessary.

There is a need for systematic education and training not just in technical skills but also in aptitude and behavioral competencies that may be called for in managers who work in an overseas environment. These are qualities that enable one to respect different cultures and understand local employees, customers, suppliers and even competitors. Sensitivity to cultures other than one's own is an important ingredient in building successful relations. At the same time, one needs to have a realistic understanding of certain common traits of the Japanese people in order to avoid the twin pitfalls of feelings of superiority and inferiority. A healthy attitude concerning his own identity should assist the expatriate to overcome initial confusion in the face of unfamiliar value systems that reflect differences of history, culture and religion. It is also helpful to realize that these differences often invite what for an expatriate may be unexpected behavioral responses. In these circumstances a sympathetic approach contributes to successful relationships and eventual outcomes.

Personnel management practices differ from region to region. It is desirable for the expatriate to have knowledge of these, at least in general, before starting his overseas assignment. It may be also effective to take a two-tier approach by making another opportunity to learn local and regional characteristics in the field some time after the transfer.

4) Appropriate assessment while abroad

Assessment of the employee while abroad should be made according to the nature of the job assigned. An accurate assessment is an important ingredient of personnel training and development. Given that job assessment is not easy while the employee is actually working abroad, it is necessary to consider what relative emphasis should be placed in grading him for cross-cultural skills, commitment to the company and job performance. It is crucial that the expatriate himself, the local office and the corporate headquarters share information on evaluation of his job performance. The expatriate himself must be fully aware of his responsibilities overseas. Competent use of IT is essential in maintaining close communications. While abroad the expatriate has opportunities to benefit from e-learning in order to keep abreast of developments and improve on his skills.

5) Support from head office to help the expatriate avoid feelings of insecurity

The corporate head office should send sufficient information to save the expatriate from a sense of alienation. Another effective measure is to have someone at the head office who can communicate, support or advise the expatriate throughout his period overseas and after his return. An arrangement that encourages discussion of any sense of insecurity or alienation is helpful. In Asia especially there is a high probability of expatriates suffering from fatigue and stress due to intense competition not just from other Japanese firms but from foreign rivals as well. It may be helpful to have a roving personnel advisor and or medical officer visit them from time to time. Sensitive interviews on their return home are also essential. These innovative support systems can contribute positively to the well being and mental health of expatriates.

6) Post-return follow-up

Effective utilization of personnel returning from overseas assignments provides corporations with an opportunity to diversify their human assets. However, in reality, post-return plans appear to be the most neglected aspect of overseas assignment programs. Corporations should prepare an integrated global managers program that includes plans for the re-absorption of returnees. At the same time, a memorandum detailing skills required and the stage of accomplishment of the mission should be prepared by the returnee for the benefit of his successor. It should be made clear what section of the corporation would make best use of expatriates' skills and experience gained abroad.

It may be desirable to give the expatriate the option to remain overseas in a different employment capacity should he so wish.

Transfer programs can always be improved by learning from past failures and shortcomings. A corporation should maintain a database to support replacement candidates.

7) Measures for supporting the expatriate's life abroad

Corporations would do well to consider taking measures in advance to support the expatriate in his work and life abroad. Some pre-transfer training programs address not just the employee but his family too. It is a good idea to establish a support team made up of the expatriate's predecessor and/or others with experience of working abroad whom a candidate can consult throughout the entire period of his overseas assignment. Issues covered may include the education of children, housing and life in general, as well as the emotional and mental health of members of his family. Making use of information technology such as the internet and e-mail would certainly help in keeping in touch with friends and colleagues back home.

6. Conclusion

Numerous new challenges regarding personnel are being created by globalization. The effective transfer of Japanese employees overseas is certainly a major issue. It is essential that a personnel development program be set up in a long-term perspective to meet the sophisticated requirements expected of transferred employees in the present business environment. A successful employee transfer cycle or model should be established to provide employees with consistent career path as well as to support the management evolution of the organization. A successful overseas assignment cycle should include: 1) identification of transfer objective 2) appropriate candidate selection 3) effective training 4) support to adaptation and 5) effective post return utilization. A successful process should enable the corporation to promote localization and develop core global executive managers, while revitalizing the organization through the input of diverse thinking and experience. The effect of implementing an overseas assignment policy along the lines suggested will not only result in improved personal development of the employees concerned but will contribute to a more mature corporate structure for the age of globalization through enhanced localization as well as corporate internal globalization.

Home Page in English