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Global Mobility Metrics: What is Required to Measure the ROI of International Assignment Solutions?

This series of articles on managing the costs of international assignment solutions has outlined the organizational steps that may be involved in planning and executing a successful assignment. As noted, there are numerous challenges in assessing the value and return on investment of assignments, due to the many intangible benefits that can result as well as assignment cost fluctuations.

There are several methods to establish baseline measurements and global mobility metrics to arrive at an ROI formula that corresponds to a company’s business priorities in foreign markets. The important point is that choices must be made, since incorporating every data point from an assignment may not lead to meaningful ROI reporting or use.

What Are a Company’s Choices Among Global Mobility Metrics?

Given the disparity between the purpose and objectives for different international assignments, a company will need to select the right ROI metric to align with business outcomes.  Some assignments may be evaluated strictly on the monetary result, while others may be part of a long term ROI strategy that incorporates non-financial factors.

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ROI Metrics Tailored to Specific Assignments and a Finite Time Periods

1. Assignments Costs Compared to Specific Monetary Goals

Some businesses may want to track the ROI for specific assignments, to arrive at an average ‘per assignment’ number that can be used to assess value.  This method would simply tally the related costs of any assignment listed here and compare that number to the monetary outcome associated with the assignment until its completion.

2. Assignment Costs Compared to Monetary Goals + Human Capital Variables

A more encompassing approach (but harder to quantify) is adding the intangible, human capital benefits into the ROI formula.  These include employee development, training and even executive retention as important variables that can result from an assignment.  Nonetheless, these intangibles do have significant value and may affect how assignments are viewed from the home office in terms of overall business goals.

The challenge for this approach is measurement, because some numerical value will be needed to arrive at an ROI metric that is useful.

ROI Metrics That Include Company Investment in the Location

There may be a reason for a company to set an ROI metric that accounts for overall company costs in a foreign country, and then uses that measure to establish baseline values.

1. All Assignments Include a Pro Rata Amount of Company Costs

One possible metric is to total the amount of all company-related costs in a time frame, and then divide that number by the number of assignments in the same time frame.  The pro rata amount would be added to the individual assignment cost to arrive at an ROI that is more inclusive and accurate when compared to the benefits.  Naturally, the cost per assignment would be higher, effectively decreasing ROI.

2. Annual Cost of All Assignments Compared to Annual Monetary Benefits

A foreign operation that relies on employee assignments can use an ROI formula that is similar to annual business operating reports.  The international assignment costs in a country for the year would be totaled for all employees, and then the annual revenues, profits and other monetary benefits could be compared to the annual cost.  This method could also be used for the sum of all global assignments, but may be less meaningful due to the range of costs encountered in different foreign locations.

Long Term ROI

Long term ROI global mobility metrics may be more difficult to assemble and evaluate due to intangible objectives for long term assignments, which may include leadership development, local training, customer satisfaction and basic management functions.

A company that wants to get some measure of long term ROI would most likely total all assignment costs for a given time period (3, 5, 10 years), and then decide which monetary outcomes are the most relevant and measurable.  The relationship between the two could give some idea of long term ROI in a foreign market, but the historical data needed means it will only be possible where a company has an established business presence.

Developing an ROI Strategy Based on the Priority Metrics

Once the business-relevant metrics have been selected to compute ROI, there will be an assessment stage where the actual return in a given country is evaluated.  Depending on the outcome of the analysis, an HR department can begin to develop an ROI strategy that takes into account the average return on investment from an assignment.

For instance, an assignment type and location that has a historically low ROI might be ideal for staff seeking foreign experience who will not require excessive compensation or family support.  By employing a strategy of keeping costs low, the company can justify the assignment and maintain a predictable return on investment.  Markets with a high return on investment for assignments could provide justification for higher compensation, benefits and support for high value employees.

Tracking Expatriate ROI During an Assignment

One of the crucial parts of an ROI strategy is the ability for a company to monitor and manage costs and benefits during the course of an assignment.  If there are unforeseen costs or a reduction in predicted business benefits, the ROI of the assignment may begin to weaken.

Corrective action can be taken if these metrics are tracked, and at a minimum expectations of return can be adjusted.  Because this tracking function will likely fall to the HR department, there need to be mechanisms in place or the use of third party providers to assist with monitoring both costs and benefits in the foreign market.

Using a Local Employer of Record Service to Manage and Track ROI

While many companies may initiate assignments based on desired business outcomes, ROI depends on the cost side of the equation, and any global mobility strategy will need to include tactics to manage destination and employment costs in the host country.

As discussed at length in this previous article, the use of a GEO local employer of record can be a very effective way to manage costs and predict any fluctuations in the future.  As the legal, host country employer, the GEO can give the company estimates of destination costs for each employee, including visas, work permits, taxes and statutory withholding.

If a company engages a GEO during the assignment planning stage, they will be given an overall cost evaluation before the assignment begins.  Without this assistance, companies will be challenged in arriving at a true cost estimate in a new market.  Also, because the GEO utilizes local partners, it is well positioned to learn of potential changes in costs or employment laws that could affect overall expat ROI.  For this reason, a GEO local employer of record service is a viable solution for companies of all sizes seeking cost management for international assignments.

Get in touch to find out more about how an Employer of Record Solution can help your company

The information in this article is subject to changes in local legislation.

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