As an international Serviced China HR consultant involved in expat reward and Relocation Services, I and my partner built my firm’s operations in Shanghai from scratch. Initially, we interacted a lot with expatriates, even writing up a free give-away for companies on the topic of Relocation Services. It’s been almost fifteen years now, but the lessons are still apparently apt.

The main lessons were:
* define the job you want the person to do over the length of their assignment – so many companies rely on one-year performance programs to manage their expats in China with no sight of the longer-term. Result: a continual flow of managers and higher long-term costs. My boss said: I want you to do three things over the next 5 years . . . ..

* picking the right person is crucial – in our view, unlike some of the comments above, most companies did actually send their best people for such an important role BUT they judged “best” mostly by technical competence. Our conclusion was that the cultural gap was so wide that the best people to send were “people people”. We meant that they were the most able to bridge the cultural divide and build loyalty to the expat and company and hence better able to take the local operations through change. Technical experts are needed but only occasionally on the ground.

* Language was not so important then: the cost of decent translators was relatively low. I suspect this factor is a little different today but still relatively unimportant. Attitude and ability to reach people are way more important.

* to approximate the cost of failure in relocation services, take:

.. the total cost of the expat (4xpay? – maybe more with high rents, school fees and taxes)
.. assume a level of effectiveness at the beginning of the assignment, eg 40%
.. assume a length of time to be completely effective in role, eg 2 years
Then use the formula for calculating the area of a triangle to find the cost of sending a replacement, eg, for a salary of $150,000, the answer is :
1. x $150k x 1/2 x 2 x (1-40%) = $360k.  There may be additional costs in terms of loss of future earnings and loyalty from a previously prized employee who is now likely to quit. Much more difficult to quantify.

However, there is a bigger prize here, rather than just the cost of a failed assignment in relocation services: how quickly can the company get its operations price competitive? That will involve replacing most of the expats with local people. That’s why you ideally need a longer-term perspective than just annual profit measures – a series of optimal yearly results will lead to higher cost than a longer-term perspective.

-Marion Wu