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Measuring Return on Investment for Global Mobility

The practice of sending employees on international assignments is not a new trend, but there is a growing need for companies to measure the return on investment (ROI) for their global mobility efforts. Part of the challenge in measuring ROI for global mobility lies in identifying where there is value added, and how to measure the real expense of an overseas assignment when there can be so many unforeseen costs.

Despite the inevitable challenge, the ability to measure ROI may emerge as a priority considering that a recent survey by PWC which revealed that 89% of companies will increase the number of mobile employees in the next two years, and 76% plan to have some method of measuring ROI in place in the same time frame.

While 98% of the CEOs surveyed state that they use global mobility to “meet business needs”, only 8% of companies can pinpoint the accurate cost of an overseas assignment, and only 9% currently attempt to measure the ROI at all.

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These responses underscore the need for companies to become more specific in identifying the metrics for measuring ROI of global mobility efforts.

The PWC survey lists the basic questions that must be addressed:

  • Do you know what you are spending?
  • What does your business need?
  • What value are you getting?

Key Metrics for Measuring ROI of Global Mobility

Since so few companies have taken the step of measuring ROI on employee assignments abroad, there is an open question on what specific metrics could be used.  A standard business ROI measurement has been suggested with the following simple analysis:

  1. Number of new assignments
  2. Cost per assignment
  3. Failure rate
  4. Potential Saving

While this might seem straightforward, it overlooks some of the hard to identify variables associated with global mobility.  Other factors that would affect global mobility ROI include:

  • Business growth and revenue in the assigned location
  • Financial performance and meeting overall business needs
  • Talent retention during and after the assignment
  • Hidden or unanticipated costs and enterprise risk

Recognizing Talent Retention as A Core ROI Metric

Talent retention in particular is getting more attention as an intangible company benefit from international assignments.  Given the projected surging growth in global mobility over the next ten years, this may be an important but hard to measure aspect of developing and retaining company leadership.  The concern is that there are few companies that use global mobility to increase retention of key employees or management, and they risk losing talent by either not offering an overseas assignment, or failing to plan for the employee’s return to the home office.

As one CEO stated:  “A main driver to increase employee engagement is personal development. Driven by challenges and career growth, top performers are looking for international exposure and experience, and therefore, global mobility is crucial.”

Meeting Business Needs

Meeting business needs is an almost universally mentioned reason for global mobility, but many overseas assignments are not part of the overall corporate financial strategy.  Although a foreign office or branch may be seen as an essential operating resource, the actual return on the investment may be hard to measure if the employee assignment does not have any direct financial effect or benefit.  For example, a foreign branch that is primarily customer service oriented may not demonstrate its real value, except in terms of goodwill and customer satisfaction in the region served.

While some aspects of long term growth and financial performance are measurable, the challenge for companies lies in identifying which types of employees and skills will bring about the desired result in real business terms.  Access to and use of this data will be essential for measuring ROI, and HR departments will be challenged to collect and assemble the right set of data points.

Managing the Costs of Global Mobility

The main culprit in finding a workable set of ROI metrics for global mobility is the variable costs and risks associated with an international assignment.  Overseas assignments are more difficult to manage at both a HR and expense level, given the potential for unexpected costs.

Ad Hoc Global Mobility Practices

In many cases, an assignment abroad may be the result of an urgent need for skills and resources that must be filled at a specific location, and cost is not a primary factor.  This ad hoc approach is clearly adding to the expense of global mobility, and as a result decreasing financial return.  Only a concerted attempt to integrate global mobility with both corporate and HR strategies can manage the number and costs of unanticipated assignments.

Enterprise Risk

Every overseas assignment carries enterprise risk in several key areas: tax compliance and payroll, immigration and permanent establishment.  Assessing the costs of each of these items for every employee assignment will play a role in arriving at a complete ROI analysis.

  1. Immigration

Managing the costs and effort of obtaining visas and work permits is dependent on the length of the assignment and the specific country.  Using short-term assignments and “business travel” could save on this type of expense, but exposes the company to the risk of non-compliance and immigration restrictions in the future.

  1. Payroll and Taxation

Establishing a compliant payroll and withholding taxes is essential for subsidiary companies and some types of branch offices with foreign employees.  Failure to comply could result in penalties and back taxes for the company and employee.

  1. Permanent Establishment

If your overseas office engages in formal business operations, concludes contracts or otherwise creates taxable revenue, then there may be permanent establishment factors resulting in business taxes.

It could be easier to manage and anticipate the costs and risks of a foreign assignment by using a GEO service to act as an employer of record.  This would allow a company to know their costs up front for each employee, and reduce compliance risks.  This is an ideal solution for last minute assignments, or when the company is exploring a new market.

Conclusion

As companies increase their commitment to global mobility there will be a demand for the data, metrics and strategies that can lead to a more conclusive ROI measurement.  Intangible benefits must be taken into account, as well as the known costs and compliance risks of sending employees abroad. This process will require the engagement of human resources, financial officers and company leadership to arrive at a workable formula that can be used to manage the costs and increase the return for overseas assignments.

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