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Driving business successGlobal Mobility Effectiveness Survey 2012

Cont

ents

2012 survey highlights 3

Introduction 5

1. Executive summary 6

2. Global mobility in 2012: an evolving — and business-critical — function 10

Section I: Mobility strategy must better align with business strategy 11

Section II: Global mobility is not yet achieving its full operational potential 16

Section III: Talent management and global mobility are working along parallel lines 28

3. Growth markets focus 34

4. Respondentprofile 42

► Short-term assignments are predicted to increase by 20% and long-term assignments by 11% in the next two years.

► Growth markets are fueling the increase in assignments, especially to China and Africa.

► Almost half of companies surveyed (48%) increased the number of people sent to growth markets. Furthermore, there is expected to be a 60% increase in the number of people in the next three years.

► Of respondents surveyed, 45% think that global mobility functions are understaffed — up by 4% from last year.

► Tax compliance and immigration are acknowledged as the top two mobility challenges, however, 68% of companies surveyed do not have a control framework to manage payroll, tax and social security compliance risks.

► More than 1 in 12 companies had at least 11% of international assignees return before the end of their contracts — at huge cost.

► Personal rather than professional issues continue to be by far the most significantfactorinfailedassignmentsanddissatisfiedassignees.

► Nearly one-fourth (23%) of respondents say their mobility policies are too complex and should be simpler to read, understand and administrate.

► Only 51% of companies surveyed have a global talent management agenda.

► Less than a quarter of senior management have been on assignment, according to a majority of surveyed companies.

► The number of assignments to growth market countries have averagely increased by 16% from 2011, and will further rise by 27% in the next three years.

3Driving business success Global Mobility Effectiveness Survey 2012

2012 survey highlights

5

Global mobility is increasingly a key feature in driving business success. As the economy remains uncertain, many leading companies are directing new investment and talent to growth or emerging markets; simultaneously trying to maintain margin and revenue in mature regions with experienced manpower and more focused strategies.

Ernst&Young’sfifthGlobal Mobility Effectiveness Survey offers a unique insight into the movement of expatriates and business travelers, and the role of the global mobility function in high-performing organizations.

More than 520 companies kindly participated in the survey. Their insights provide an invaluable snapshot of:

► How far global mobility teams are supporting business strategy and the C-suite’s pursuit of high performance.

► How mobility is executing policies and processes as risk and compliance challenges escalate.

► To what extent they are partnering with talent development and management.

► The ways organizations are channeling talent and mobility to growth markets.

► Overall, how effective the function actually is.

Among many noteworthy points, our 2012 survey reveals a real disconnect between global mobility aspirations and day-to-day operations. Last year, we observed the function’s desire to be more strategic, to build tighter links with talent development and to have greater control over cost and risk governance — and a frustration that organizations were not enabling those needs. This year, that frustration, and the tension between the function and business, is heightened. Our survey results, Ernst & Young client interviews and expert commentary illustrate the gulf between the vision and the reality.

In this report — across the results, analysis and case studies from leading companies — we have attempted to capture where mobility is today and strategies for development in the future. As we continue to weather the economic storm, we hope it will offer you alternative viewpoints, new thinking and encouragement to help increase the effectiveness of your mobility function and your wider business.

Dina Pyron

Global Director Human Capital Ernst & Young US

Kevin Cornelius

Survey Author and Human Capital Partner Ernst & Young Switzerland

Introduction

Driving business success Global Mobility Effectiveness Survey 2012

Executive summary1

6


Global mobility is not yet reaching its operational potential Oursurveyrevealsasignificantgulfbetweenglobalmobility’saspirationtobeastrategicbusiness partner and the function’s day-to-day reality.

Global mobility holds a key role in supporting company growth, both in establishing footholds in strategic markets and by giving future leaders vital international exposure. But the function is rarely given the chance: often overlooked by the executive team; excluded from decision-making, including assignee selection, and under-resourced, it lacks the tools or clout to achieve its potential.

Mobility functions have been striving to improve policies and processes but are not yet fully effective across the full range of operational needs of the organization. This means policies are often not tailored enough to strategic objectives, and mobility teams do not prioritize or embrace the extent of growing tax and compliance challenge, thereby exposing their organizationstoreputationalandfinancialrisk.

International assignments are hugely expensive, yet the survey shows mobility teams are often not cognizant of the extent of business investment, with many unclear about the cost, value, or return on investment of global postings.

Anothershortfallrevealedbythesurvey—andanothersignificantcostconcern—isthenumber of failed assignments and unsuccessful repatriations. Such failures lay partly at the door of candidate selection, which is often outside global mobility’s remit, and wider business issues. However, with personal issues outside the workplace being the main cause of early repatriation, inadequate ongoing assignee support from global mobility must play a part.

The rising tide of operational demandsGlobalmobility’sstrategicoversightsandoperationaldemandsreflecttheincreasingleveland complexity of its workload.

Teams are not only dealing with more assignees, they are going to more demanding places, requiring knowledge of constantly evolving regulatory systems. This increased complexity stems in great part from business’s increased focus on emerging markets.

Expansion into new markets is now the primary reason for cross-border mobility. In 2012, almost half of companies surveyed increased the numbers they sent to emerging markets, withChinatheleadingdestination.Thesearesignificantandseniormoves;aroundoneintwo assignees heading to Africa, Brazil, Russia, India and China are senior managers going on long-term assignments.

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1

The challenge of emerging marketsEmerging markets are both a world apart from developed countries and very different to each other, providing multiple challenges to global mobility teams. Apart from very different legal and cultural systems, they often present assignees with challenging security issues and less developed schooling, housing and social infrastructures. Survey resultsrevealedthatattractingpeopletotheselocationsoftenrequiresgreaterfinancialincentives, and overall, preparing employees and their families for these environments can be an arduous process.

Theinfluxtotheemergingmarketsispushingexistingglobalmobilitypolicies,processesand systems to the limit. This is not just an irritation for the function: the lack of control frameworks for managing payroll, tax and social security-related risk, for example, is exposingbusinessestosignificanthazard.

Global mobility’s operational effectiveness is also being hindered by its own organization. Remarkably, swift employee moves are slowed down more by internal delays than by external obstacles, such as issues around immigration and regulation.

However,themostsignificantinternalobstacletothefunction’seffectivenessremainsa lack of integration between talent management and global mobility. Barely half of companies surveyed have a global talent management agenda, and less than one-third of global mobility teams are involved in assignee selection. With the two teams working along parallel lines, it is unsurprising that so many assignments and repatriations fail, at such great cost to assignees and their businesses.


Toward a strategically aligned global mobility functionTo help global mobility teams — and their organizations — reach their full potential, we believe businesses should take several crucial steps:

► Better align mobility strategy with business strategy.

► Review global mobility teams in the light of current needs and give them the right toolsforthejob(includingeffectiveandflexiblepolicies,processesandsystems).Particularlywhenitcomestoemergingmarkets,onesizecannotfitall.

► Businesses should offer — and assignees should receive — a consistent and joined-up HR experience. Crucially, talent management and global mobility must be integrated.

Global mobility in 2012: an evolving — and

business-critical — function

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10


Section IMobility strategy must better align with business strategyContinued and increased demand for international staff means the global mobility function has, potentially, a pivotal role in supporting and driving company growth.

The function holds the key to giving managers the international exposure they need to become effective leaders of tomorrow. It has the potential to transform itself from an administrative, transactional function to a true strategic business partner — if it gets the chance, that is. In previous surveys, we demonstrated a gap between the strategic desire of global mobility and the reality of deployment. The 2012 results provide evidence that this problem remains and is becoming more apparent.

The function’s strategic agenda is very clear from our survey: 77% of respondents say businessdemandsdrivetheirassignmentpolicies,withtheirtopprioritiesbeingfulfillingbusiness needs and contributing to an international talent pool of future leaders.

However,thisdoesnotmeanthatthemobilityteamsarefulfillingtheirstrategicambition.If we consider how the function measures up against the business imperatives of leading organizations,1 mobility fares poorly:

► Market reach: 45% of companies surveyed have understaffed mobility functions and 71% of functions are not involved in the assignee selection process.

► Operational agility: the most pressing demand for improvement is around internal processes.

► Cost competitiveness: while 89% of surveyed mobility functions perform assignment cost calculations, only 45% actually assess the return on investment against using local talent.

1 Competing for growth: How business is growing beyond boundaries, Ernst & Young, 2011.

70%60%40%20% 50%30%10%0%

Source: xx.

Just right 51%

Understaffed 45%

Overstaffed 4%

Do you believe that your global mobility team is currently overstaffed or understaffed?

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2

► Stakeholderconfidence:nearlyhalfofsurveyedcompaniesdo not have a global talent management agenda, while some 60% of respondents say less than a quarter of their senior management have been on an assignment — facts that challenge how advanced global companies are in their approach and ability to be successful on the international stage.

Such results suggest many functions are not true strategic partners to the business. This is not universal, of course. Chris Debner, Ernst & Young Human Capital Executive Director, believes the function is evolving.

What percentage of your top leaders such as C-suite, vice president (VP) and directors have been on an international assignment within your organization?

Percentage

Less than 25% 60%

25% to 49% 22%

50% to 75% 12%

More than 75% 6%

“ Often, the operational workload keeps mobility functions away from strategic thinking, and in some cases they still operate in silos with no proper connectivity to other relevant company functions such as tax, legal and talent management. This disconnect from the wider business disadvantages both parties. The business can be hasty in decision-making, hiring international staff and initiating assignments without consulting those “in the know.” This often leads to unforeseen burdens on the mobility team and a disappointing outcome for the business unit’s aspiration. However, we are now seeing that there is a clear trend toward mobility functions becoming more strategic. It is sometimes the push from talent management and, in other cases, cost pressures that lead them [mobility functions] to consider a stronger strategic alignment.”Chris Debner Human Capital Executive Director Ernst & Young

Please rank the top three immediate needs for improvement in your global mobility function

Choice First Second Third Rank

Processes 21% 25% 16% 1

Policy 25% 7% 8% 2

Knowledge sharing and communication 12% 13% 12% 3

Tax and compliance 9% 14% 10% 4

Assignment administration 7% 12% 14% 5

Technology 8% 9% 11% 6

Cost control 8% 9% 10% 7

Payroll 4% 5% 9% 8

Vendor management 3% 5% 9% 9

Other 2% 1% 1% 10


Bridging the gulf between vision and realityYet, unarguably, a disconnect between the mobility ideal and the true reality prevails in many companies. We believe this arises from stretched resources, short-term business pressure, and — crucially — a lack of executive understanding or focus to help mobility achieve its strategic potential.

Our view, backed by research into leading companies, is that organizations should strive for an improved alignment between mobility strategy and business strategy. We believe thiswilldelivertangibleimprovementsinservice,returnoninvestment,flexibilityandspeed of deployment, and growing and nurturing key talent.

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Case studyKraft Foods

Anja HansesSenior International

Assignments Manager

Anja Hanses, Senior International Assignments Manager at Kraft Foods has a clear vision of Kraft Foods’ global mobility goals for the immediate and long-term future.

“We will certainly be taking advantage of our IA technology to streamline our processes across our regions. Our aim is to reduce time the teams spend on administrative tasks. These tasks will be incorporated into our wider HR structure and completed by HR experts as part of our HR Solutions Team. As with most businesses, the IA function is part of the HR or reward function, and we need to excel in our administrative services to deliver hygiene factors to international assignees at a high-quality level. By doing so, we, the IA Team, can then focus much more on our IA strategy and how this connects to global talent management, ensuring we place the right talent in the right international jobs,” says Anja Hanses.

Kraft Foods’ acquisition of Cadbury in the UK in 2010 meant that integration and reorganization activities in all parts of the Kraft world have taken up considerable time, resulting in a more re-active than pro-active approach to the strategic alignment of IA activities, which is now a priority for Kraft.

“Any global business which underwent a major acquisition will agree that the alignment of global mobility with the overall business strategy isachallengeinthefirstwaveofintegration.Weneedtofirstensurethatour supporting HR structure and processes are aligned globally to support our overall aim. Any global organization of our size will have to grapple with the alignment of processes and intelligence in each country of the world. Major acquisitions really require all hands on deck and I believe we have managed this successfully, due to fantastically committed staff, who supported our great Kraft values during very demanding times.

“We are now in a position to focus on aligning global mobility needs with our overall talent strategy for our snacks business which will be known asMondelēzInternational,Inc.afterthespin-offofourNorth-AmericanGrocery business. We will take advantage of this spin-off to re-evaluate our strategic goals.”

Against the background of the major business changes discussed above, the new business will tackle strategic goals in stages, on a regional level. Forexample,thefirstadvancementtowardglobalmobilityandtalentishappeninginAsiaPacific,amodelwhichmaybereplicatedinotherregions.ThisreflectsKraft’sstrongbeliefthatitdoesn’thaveto“reinventthe wheel”, but can learn from colleagues and processes elsewhere.

“Our developing markets are strong growth markets, and the talent in those emerging markets may have different needs and require a different mobilityapproach.Wemighthavetoreflecttheseneedsinourmobilitypolicies,” says Hanses.

“We are dealing with high attrition rates in some markets and might have to rethink our mobility offerings for those particular niches, to ensure that we nurture the best globally mobile talent.

“Economies in developing markets are moving fast, and businesses will have to adjust their thinking and strategies a lot faster too in order to retain talent, as it has never happened before.”

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15

“We had an American assignee in Africa who was frightened of snakes — and you get a lot of those in rural areas. They freaked him completely. This is one of the reasons why he ultimately went home early.”

Such a mismatch of assignee personality and posting, as recalled by SABMiller Group Expatriate Tax and Mobility Manager Barendine Duvenhage, can prove extremely expensive for a business. It is one of the reasons why Duvenhage thinks global mobility functions — with their understanding of what characteristics are best suited to international assignments — should be involved in assessing the suitability of candidates and their wider families. Currently, brewer SABMiller does not incorporate global mobility in assessing the suitability of individuals.

The company’s mobility function is also not closely involved in talent management. We do not have a specialised global HR function that looks after performance management and development for expatsspecifically.Apartfromseniorexecutives,whoaremanagedbytheglobalHRfunction,performance management is handled locally.

She believes talent management is done locally partly due to the wide spread of SABMiller assignees. “Where you have many expats in a country, it is relatively straightforward for global HR to manage talent and career development. Where you have just one or two, it is more complex, purely due to time and resource constraints.”

She believes increased interaction between talent management and global mobility is required. “I think sometimes we lose good people because they don’t see a career path. Also I think, on occasion, the wrong people can be appointed.”

SABMillerhasamassiveinternationalstaffingportfolio.Activein75countriesacrosssixcontinents,it is expanding in both developing and mature markets. Its portfolio includes the largest brewer in China and the second biggest in India and the US.

Duvenhage believes it is important to align global mobility activity with corporate strategy but says thefar-flungbusiness’simmediatedemandsmeanitisnotalwayspossible.“Wecanbecomesofocused on getting things done that we do not always fully consider the implications. For example, if we have to get a brewery built swiftly it’s all “go, go, go” and we might not weigh up such things as whether a local candidate would be better than an expat.”

Looking forward, she says SABMiller intends to forge a more integrated and strategic approach to global mobility. So that, in the next three years, it will aim to minimize exceptions to its global mobility policy, ensure businesses are fully aware of the total costs of expat recruitment and localize long term expats.

Case studySABMiller

Barendine DuvenhageGroup Expatriate Tax and

Mobility Manager


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Section IIGlobal mobility is not yet achieving its full operational potentialEffective mobility teams can deliver real competitive advantage to companies with growth ambitions.

Their insights can help shape the corporate agenda, including decisions on expansion and new market entry. They can deliver the management information to help companies decide what skills are essential, where they should optimize their mobility investment, andhowquicklyandeffectivelyresourcescanbedeployed.And,tothebenefitofthebusiness and employees, they can help assignees prepare for and manage the challenges of relocation so that assignments are successful and deliver good and tangible returns.

However, our survey suggests that global mobility teams are not yet achieving their full operational potential. Global moves may be at the top of the agenda for the business, but the global mobility function itself does not always prioritize strategic activities. This wavering focus diminishes the effectiveness of both the function and the business. Additionally, obstacles both from within global mobility and from other parts of the businessarehamperingefficiencyfurther.

The challenge of coping with increasing numbers of assignees does not make the function’s task easier. On average, survey respondents forecast that both short-and long-term assignments will continue growing over the next two years by 20% and 11% respectively.

Please indicate the expected number of the following in your company in 2012, 2013, 2014

2

Choice Average

2012 — Total number of employees on short-term assignment (less than 1 year) 329



2012 — Total number of employees on long-term assignment (more than 1 year) 1,350




We believe that the pursuit of operational effectiveness is a realistic goal: one that, arguably, should be reached en route to the strategic vision. Leading organizations with strongmobilityfunctionsfindeffectivenessbrings:

► Enhanced deployment, with assignees being evaluated, selected and transferred more efficientlyandflexibly

► More corporate information, enabling the business to measure performance and return on investment, and to support talent management and career development

► Better information and systems to support corporate compliance and reduced risks and costs

Essentially, the right person, at the right time, in the right place, for the right cost

The corporate compliance area suffers the biggest shortfall in operational effectiveness. To raise revenue and protect domestic labor markets, tax and immigration laws and penalties have stiffened in many countries. Governments have also increased enforcement and pushed more compliance demands onto employers. Some of the biggest — and apparentlymostrisk-averse—globalbusinesseshavesufferedgreatfinancialandreputational loss in recent years by breaching regulations. Yet, although income tax reporting and withholding is recognized as the biggest risk and tax compliance challenge, this is only considered the fourth most pressing area requiring improvement, behind processes, policy, and knowledge-sharing and communication. Almost half of respondents,

Please rank the top three global mobility challenges for your company

Choice First Second Third Total Rank

Tax compliance 19% 19% 12% 50% 1

Immigration 18% 13% 6% 37% 2

Compensationandbenefits 16% 12% 10% 38% 3

Housing and schooling 13% 8% 9% 30% 4

Policy management 13% 8% 11% 32% 5

Payroll 5% 7% 8% 20% 6

Labor law issues 4% 7% 6% 17% 7

Exchange rate issues 2% 5% 6% 13% 8

Social security 1% 5% 8% 14% 9

Global health care 2% 4% 6% 12% 10

Pensions 3% 4% 5% 12% 11

Security 2% 2% 4% 8% 12

Share plans and stock options 1% 2% 4% 7% 13

Relocation and shipping 1% 1% 3% 5% 14

Other 1% 1% 2% 4% 15

Insurance 0% 1% 1% 2% 16

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46%,considerprocessestobethefirstorsecondmostpressingareainneedofimprovement, compared with only 23% citing tax and compliance. While one might suppose respondents want improved processes to deliver better data for compliance, further scrutiny dispels this inference.

2

Please rank the top three compliance risks to your global mobility process


Income tax reporting and withholding 39% 15% 16% 70% 1

Short-term business travelers 21% 13% 14% 48% 2

Immigration 11% 15% 16% 42% 3

Social security reporting and withholding 5% 23% 23% 51% 4

Corporate tax (e.g., permanent establishment, recharge)

9% 15% 15% 39% 5

New or changing legislations 9% 9% 9% 27% 6

Employment law 3% 5% 5% 13% 7

Global equity 3% 5% 5% 13% 8

Please rank the top three immediate needs for improvement in your global mobility function


Processes 21% 25% 16% 62% 1

Policy 25% 7% 8% 40% 2

Knowledge sharing and communication 12% 13% 12% 37% 3

Tax and compliance 9% 14% 10% 33% 4

Assignment administration 7% 12% 14% 33% 5

Technology 8% 9% 11% 28% 6

Cost control 8% 9% 10% 27% 7

Payroll 4% 5% 9% 18% 8

Vendor management 3% 5% 9% 17% 9

Other 2% 1% 1% 4% 10

Payrollrepresentsaglobalandlocalcorporateresponsibility,chargedwithbothdeliveringpayandbenefitsandensuring appropriate reporting and withholding of tax and social security. We consider payroll to be mobility’s biggestareaofcorporaterisk,asgovernmentsrequirecompaniestofulfillobligationstoreportbothcurrentpayand trailing liabilities relating to equity incentives and bonuses, often paid long after assignees have gone home. Yet payroll is the top improvement priority for just 4% of respondents, despite, as mentioned above, income tax andreportingbeingidentifiedasthetopcompliancerisk.


This is a worrying gap in operational effectiveness. More than two-thirds, 68%, of surveyed respondents do not have a control framework in place to manage payroll tax and social security compliance risks. This is likely to stem partly from a lack of clarity as to which corporate function is responsible for averting and managing such risks. In manyorganizationspayrollisalocal,notglobal,responsibility,sittingwithinfinance,HRor another administrative unit. Often, payroll departments do not communicate cross border, nor have they the mechanism or remit to do so. The question, therefore, remains as to which team is actually responsible for cross-border reporting of different assignee pay elements. Until effective tracking and procedures are in place, accountability is likely to continue to be shrugged off — until crisis strikes.

Unexpected outside scrutiny can force oversights into the light at any time. If a company relies on a domestic team to be compliant when an international assignee is deployed, there is huge scope for error. They require advice and support from specialists in expatriate issues — regulations in differing jurisdictions being so diverse and complex. Apayrollreviewwillnotonlyexposeinsufficienciesindocumentationandrecordkeeping on the side of the company, but potentially also have a knock-on effect at the corporateandpersonaltaxlevel.Thiscanbeanadministrativeandfinancialnightmare,and departments will be quick to assign blame elsewhere. The reputational damage in these circumstances should also be considered, as well as disgruntled assignees who are personally affected. Keeping your assignee happy can be challenging enough, without giving them the added headache and stress of additional paperwork. This all leads to unforeseen additional demands on the global mobility team, scrambling to react.

Inadequate tracking systems also mean that business leaders and external stakeholders are kept in the dark, making decisions without being armed with the pertinent facts. This is a poor precedent. Ernst & Young’s research has found that inadequate reporting is characteristic of low performers. “Regardless of performance, [high performing] companies report their perspective of the business’s prospects in the markets in which they operate, and this includes a discussion of risk.”2

Operational ineffectiveness also burdens management of short-term business travelers. Almost two-thirds (65%) of surveyed organizations do not have a formal tracking process for cross-border business travelers, despite survey participants identifying this as the second largest compliance risk. And, from our experience, of the 35% that say that they have formal tracking processes, many are under construction. This opens businesses up to serious risk in numerous countries, with organizations facing escalating costs and challenges in tax, social security, immigration and permanent establishment risk.

2 The world is bumpy: Globalization and new strategies for growth, Ernst & Young, 2012.

“ Unfortunately, many companies will wait until they have a major compliance failure before they have the internal mandate to deliver on the control frameworks and procedures to ensure a higher level of risk management related to their short-term business visitors.”Jay Sternberg Global Leader for Short-Term Business Visitor Ernst & Young US

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Sternberg also says that, “these organizations need to commit resources and management commitment to avoid the inevitable risk of compliance failure, cost, reputation risk and unhappy employees.”

Deployment is also not pursued with optimum operational effectiveness, although the trends are less pronounced. When asked if there were additional costs associated with assignments into growth market locations and whether these delivered appropriate business value, one-third of respondents did not know or were unsure. Interestingly, in terms of priority for improvement, only 8% of companies surveyed saw cost control as an imperative, ranking it seventh out of nine key needs.

This is worrying, particularly in the context of the spiraling cost of development in growth markets, a current focus of many businesses. One-third of 900 CFOs surveyed recently by Ernst & Young admitted that investment in growth markets is proving more costly, time consuming and riskier than they anticipated.3

The high volume of unsuccessful assignments and premature repatriations suggests significantissuesinthechoiceandsupportofassignees.Twentypercentofcompaniessurveyed saw 6% or more of their international assignees return before the end of their contracts, with some companies seeing a failure rate in excess of 20%.

The numbers of “fails” may not seem highatfirstglance,butthelossesintime, resources and costs — and the risks involved—aresignificant.Whenacompanysends someone on assignment, the cost is often estimated at between three and six times higher than keeping the employee at home. The lack of return on investment in the case of failed assignments is therefore substantial. The additional time for HR and global mobility in dealing with failed assignments should also not be underestimated.

Personal rather than professional issues are often behind failed assignments. Challenges relating to family or spouse and location or cultural issues are considered thefirstandthirdmostcommonareasfailing to meet expectations, cited by 95% of respondents. Issues concerned with work itself, such as lack of job satisfaction, are considered least important, noted as a factor for failed assignments by just 15%.

In addition to these measurable failings where assignments are cut short are the “hidden” failings. Our survey shows that more than one in four (27%) assignees

2

70%50%30%10% 60%40%20%0%

Repatriation 31%

Family or spouse issues 61%

Compensation package 45%

Location or cultural issues 34%

Position-related issues (e.g., unsatisfactory

position)15%

Other 9%

What are the most frequently addressed issues for international assignees? What most often does not meet expectations while on assignment? (Check all that apply)

What is the approximate percentage of international assignees in 2011 who returned from their assignment before the contractual end date?

Percentage

Less than 2% 59%

2%–5% 22%

6%–10% 12%

11%–20% 5%

More than 20% 3%

3 What Lies Beneath? The hidden costs of entering rapid-growth markets, Ernst & Young, 2011.


returntotheiroldjobsand11%changefirmswithintwoyearsofcompletingassignments.In such cases, businesses clearly fail in their intention to use assignments to develop leaders with a greater understanding of the global business and marketplace. This failing isparticularlysignificantwhentopexecutivesleave.Only18%ofourrespondentsreportthat more than half of their senior managers have been on international assignment for their company. One can hypothesize that many of them have been abroad for previous employers and subsequently left.

Withintheglobalaveragefiguresforfailedassignments,thereareclearregionaltrends.African companies lose 26% of returning assignees within two years of repatriation, comparedwithAsiaPacificcompanies,whichlose10%.NorthAmericancorporationsmanage 72% of their returning assignees into new positions or assignments but still lose 12% to resignations. European organizations, with 64% and 11%, and South American businesses, at 60% and 10%, are some ways behind.

Many assignment failures are probably due to the wrong candidates being picked, and as explored later in this report, selection is usually outside the global mobility remit. That said, with failed assignments often being due to assignees and their families receiving inadequate assistance from the home or host business, global mobility must bear some of the blame.

Assignees are always in danger of falling between home and host; logically, global mobility could function as a bridge between the two entities and operate at a global level to support travelers. In reality, the function often becomes preoccupied with the practicalities of actually getting people in post and overlooks the need to offer solid support once they are there. Whichever link in the global mobility chain breaks, the cost of failed assignments is high.

Thecostisnotjustfinancial.Thetimespentfindinganddeployingareplacementmeanslost head-start advantage. If they are not careful, companies can lose the individual assignee altogether, particularly if they feel their assignment failed due to poor backup from the home business. Employees developed through international assignments are just the sort of people companies do not want to lose — or their competitors to gain.

Global mobility’s challenges in strategic and operational effectiveness stem partly from its roots as an administrative, rather than strategic, function. Seen as a backroom unit, it hasoftenhadalowprofileandbeenunder-resourcedandundervalued.Thestatisticsalsosuggest that teams are swamped with a rising tide of operational demands.

Individual global mobility employees now have more to do. There was a rise, of 5% to 26%, in those handling 25 to 49 assignees each, with fewer handling under 24. (The numbers handlingmorethan50stayedbroadlythesame.)Significantly,thenumberofrespondentsthinking that functions are understaffed rose by 4% to 45% from the prior year.

�During�the�first�two�years�after�repatriation�or�localization�in�2011,�what percentage of your assignees

Choice Average

Return to another position 46%

Return to their previous position 27%

Accept another assignment 20%

Resign from your company 11%

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The increasing numbers of assignees destined for emerging markets (see growth markets feature later in this report), which have unfamiliar regulatory environments and different ways of living and working, inevitably expands the time global mobility employees spend on individual assignees. Housing and schooling rose up the ranking of global mobility challenges from sixth to fourth place, illustrating the shift in priorities due to a focus on emerging markets.

Global mobility policies provide the cornerstone for many mobility functions. In 2012, there was an increase in bespoke policies for different types of assignments. Those with long-term policies total 87%, compared with 74% last year. Meanwhile, 80% have short-term policies, up from 79% in 2011.

Such evolution is consistent with what we see in the market as companies seek to be more effective and consistent in mobility deployment. That said, the complexity of the needs of the global organization is leading to more differentiated policies, such as interregional measures, to accommodate different types of roles. A variety of strategies is also apparent, with 27% of organizations reporting an increase in the use of host-based assignments, while in contrast, 17% embraced more home-based approaches. There is also an increase in companies operating both approaches for different types of assignee.

Consistent with the pace of policy development we have seen in previous years, 14% of organizations currently have

new policies under construction. The reasons for change are clear: 80% of respondents saytheyneedflexibilitytograntpolicyexceptionsoroffergreatercompensation.

2

50%30%10% 40%20%0%

Source: xx.

Relocation and shipping

Share plans and stock options

Other

Insurance

Global health care

Social security

Pensions

Security

Payroll

Policy management

Labor law issues

Exchange rate issues

Immigration

Tax compliance

Compensation and benefits

Housing and schooling

1%

1%

1%

0%

2%

1%

3%

2%

5%

13%

4%

2%

18%

19%

16%

13%

1%

2%

1%

1%

4%

5%

4%

2%

7%

8%

7%

5%

13%

19%

12%

8%

3%

4%

2%

1%

6%

8%

5%

4%

8%

11%

6%

6%

6%

12%

10%

9%

SecondFirst Third

Ranking distribution: top three global mobility challenges for your company


Which policies for internationally mobile employees exist in your company? (Check all that apply)

Percentage

Long-term policy 87%

Short-term policy 80%

Transfer policy 56%

Foreign local-hire policy 35%

Regional policies 30%

Commuter policy 28%

Other 11%

Percentage

Flexibility to move talent — the business needs the freedom to grant exceptions or increase compensation where needed

80%

Expense for some assignments 76%

Policy too complex — should be simpler to read, understand and administrate 23%

Other 5%

Are there business demands that affect your international assignment policies? (Check all that apply)

“ It is very different to ask someone to move to the UK than to Kenya. Companies need to understand these differences and adjust their programs so that needs are met. As we move more and more into the growth markets, companies need to stop and ask: ‘Can I truly have a single global policy that meets the needs of all of my assignees?’”Leslie Fiorentino Partner, Human Capital Ernst & Young US

24

2

Meeting the challenge: delivering full potentialIt is unsurprising that mobility teams do not always meet their potential — they have not been given the license or resources to do so.

Operational demands have meant that strategic elements that enable visibility in planning currentandfutureneeds—suchascost-benefitassignmentanalysesandpost-repatriationattrition rates — have not been prioritized. The growing and increasingly complex workload facing many global mobility teams means such strategic considerations are likely to become further marginalized.

The function also suffers from a lack of direction. Almost half of respondents say their most immediate needs are better policies and processes, which suggests many are unclear about exactly what they should be doing and how.

Moreover, the two largest barriers to effective service delivery are seen as their own business and external governance issues. Internal issues, such as information being provided late and slow decision-making, are perceived as the greatest barrier (36%) to effective service delivery, although external barriers, such as foreign visa, regulation and housing issues, are not far behind (35%).

The alignment of global mobility strategy with business strategy, as outlined above, isthefirststepinplottingasurecourseforthe function. The second step is to look at the function with fresh eyes — in the light, not of what the team is and does now, but of how it should operate to achieve current and future strategic goals.

70%60%40%20% 50%30%10%0%

Source: xx.

Internal barriers within global mobility (home and HRs not responding quickly enough)

Internal barriers within global mobility (we do not have

enough resources)

Barriers from the business (information provided late, decision-

making is not quick enough etc.)External barriers from

intended country (visa, regulations and housing)

8%

Barriers from assignees (negotiations around package and policy)

5%

35%

36%

16%

9%

12%

28%

26%

23%

1% 2%Other

Ranking distribution: what are the two most frequent barriers that block service delivery within your assignment process, and what prevents you from moving people quickly?


In particular, we believe companies should:

► Analyze the role and remit of their global mobility team, particularly in the light of business’s increasing focus on growth markets. Key to this analysis should be a conclusion of what the business wants from global mobility. Does it want a strategic function that helps plan, place and continuously develop international staff, or does it want a slick “rapid-response force” that provides immediate support, as and where required? Or does it want both?

► Review global mobility resources, processes and systems and secure the investment to enable the team to work effectively and strategically in pursuit of business goals. In assessing their own teams, businesses should seek to learn best practice from proven leaders in global mobility, both within their industries and beyond.

► Consider the whole HR department’s involvement in international resourcing with the goal of creating a joined-up, collaborative team (see subsequent section for more about the intersection between talent management and global mobility).

A systematic evaluation of existing global mobility operations will be essential to any functional review. Governance, in particular, should be scrutinized, with:

► A full risk assessment of current processes, especially around control frameworks for managing payroll, tax and social security-related compliance risks, and systems for identifying business travelers in high-risk locations. Businesses may wish to consider a common global risk methodology to protect their organization and its reputation.

► A review of existing policies, as a step to establishing a comprehensive, accessible and flexibleframeworkofhigh-qualitypoliciesthatarestrategicallyalignedandfitforthelong term. Repatriation should be a particular focus, due to the high levels of broken contracts,leadingtoamoregenerallossoftalentandthepoorreturnonfinancialinvestment. Companies may wish to develop modular policies, so that future revision can be swift and straightforward.

Tools, processes and systems will also need to be reviewed. Administrative tasks could be outsourced or, following assessment of appropriate IT systems, managed electronically, thus freeing up global mobility staff to focus on more strategic activity. For example, global databases for administering assignee data, compensation accumulation, tax returns, cost estimates and balance sheets can save both time and money.

If teams are required to have a more strategic role or greater business understanding, they may need to expand their skill mix, either through recruitment or development.

HR directors and global mobility functions may also need to educate colleagues from outside their department. Decision-makers in the business need to be made aware of the realities and challenges of moving staff, and of how obstructive behavior on their part can severely hinder global moves. Cooperation, swift decision-making and information-sharing are the keys to success.

26

2

“People now go on international assignments for very different reasons. It used to be about getting your ‘ticket punched’ so you could be promoted. Now it is much more strategic. It is about senior managers going out and training future leaders in-country,” says Caterpillar’s Susan Meinert.

ThismorestrategicfocusisoneofthemajorchangesinglobalmobilityidentifiedbyMeinert,International Service Employee Tax Manager at the construction and mining equipment, engine and gas turbine manufacturer. She thinks it is a change that is making the function both more respected and more effective.

She also highlights the increasing challenge of compliance — particularly around the use of “business travelers”, who are not on formal assignments but do cross borders. Across all industries, businesstravelersaregivingrisetounintended—andoftenunidentified—complianceandimmigration risks, including immigration delay or denial, employee deportation or prosecution, increased costs and audits and, most worryingly, damage to corporate reputations.

“I am entirely comfortable that our known expats are 100% compliant when it comes to income tax and social security. The real risk is those who do not go through the normal processes and channels, particularly business travelers,” she says.

Meinert, who has been tasked with resolving the business traveler risk at Caterpillar, feels the problem has become more pressing for two main reasons.

“The economic downturn encouraged companies to use more business travelers, to mitigate the heavy costs of full expats. At the same time, countries have got smarter at tying immigration to tax as a means of securing revenue,” she says.

Meinert sees another emerging trend — and compliance challenge — involving operating businesses challenging company mobility policy to secure talent. For example, if the business opts to pay an assignee an allowance that the central global mobility function has turned down, this can raise the question of who should pay tax on the extra amount: the central business, the operating company or the individual.

In referring to such a situation, involving housing allowance, in Caterpillar’s Singapore operation, she says: “I see this as the tip of the iceberg. We can deal with one exception; we cannot deal with 50.”

Case studyCaterpillar

Susan MeinertInternational

Service Employee Tax Manager


“Creating a center of excellence for global mobility at Westpac has helped make the function a true business partner,” says Janelle Parkinson.

The Australian-headquartered bank moved mobility from being a local HR-administered service to becoming a centralized specialist function in late 2010. This has included streamlining processes and overhauling company policies, to make them more market aligned and tighter on exceptions.

Parkinson,HeadofGlobalMobility,Recognition&Benefits,says:“Ourpriorityishelpingtheorganizationtounderstandtherisks,challengesandbenefitsofmobility—beitusinglong-orshort-term assignees or business travelers — rather than just focusing on policing or governance.

“We have lifted the bar. We now have much more of an advisory relationship with the business, rather than being seen as an operational function. The businesses come to us for advice and, in most cases, the team works with them seamlessly.”

Westpac’sprimaryassigneedestinationsareNewZealand,theUK,theUS,thePacificIslandsandAsia — the latter having grown in importance in recent years, as more customers are doing business between countries in Asia and Australia and New Zealand.

Parkinson says that, with the central mobility hub now established, the function will focus on developing optimum relationships with suppliers — and the “talent issue.”

In regard to talent, she feels that short-term thinking in the business sometimes leads to the best people being overlooked for overseas roles, and repatriations that do not always provide the best experience for employees.

Inparticular,shefeelsthatassigneeswhogototheremotePacificIslands,suchasFiji,PapuaNew Guinea and the Solomon Islands, have the biggest challenges repatriating back into a role in their home location. To counter this, Westpac is trying new approaches, such as selecting younger assignees, encouraging expats to retain their business networks and making assignments contract posts, so that repatriation is not even required.

She also feels that educating the wider business — and local HR teams — about the nature and expense of global mobility is a priority, as this will help build the case for the use of talent.

“If you asked a people leader if they were happy to give someone a US$500,000 bonus, versus spend this much on an international relocation, I am sure you would have very different reactions,” says Parkinson.

“The business should understand the importance of international experience and realize that, if it is going to invest so much money in assignees, it is essential that it sends the best people. It should not justbeaboutfillingvacancies.”

Case studyWestpac

Janelle ParkinsonHead of Global

Mobility, Recognition &Benefits,

Group Reward

28

Section IIITalent management and global mobility are working along parallel linesTalent management and global mobility teams may be part of the same HR function, but our survey suggests they are not always working toward the same goal.

Although placing the right people with the right skills in the right place is essential to success, in most businesses, getting people there is separate from the process of attracting, selecting, developing, engaging and retaining them. This dislocation lets down both functions’ core constituents: the business and its people.

Oursurveyconfirmstheclearseparationofglobalmobilityfromtalentmanagement:

► Barely half of companies surveyed (51%) have a global talent management agenda.

► Within the above average, there are quite distinct regional differences. Over half (59%) of European companies have a global talent management agenda, compared with 50% of African businesses, 48% of North American organizations, 41%ofthoseinAsiaPacificandaremarkablylow13%ofSouthAmerican companies.

► Picking the right person for a particular job is, self-evidently, the most important step in getting the job done well. Yet, despite their experience of what working overseas involves and the characteristics required, just 29% of global mobility professionals are involved in selecting assignees.

► Against this reality, 84% of respondents say mobility staff should be involved in selecting assignees.

Source: xx.

51%

49%

Yes No

Source: xx.

29%

71%

Yes No

Do you have a global talent management agenda?

Is your global mobility staff involved in the selection process of assignees?

2


100%80%60%40%20%0%

Source: xx.

Analyzing the business case for the use of an expatriate,

as opposed to local talent45%

Performing cost-benefit calculations for the

assignment89%

Analyzing the skill set of the potential assignee 22%

Analyzing the psychological profile and character fit

of the assignee14%

Which of the following tasks for a particular assignment are you involved with? (Check all that apply)

70%60%40%20% 50%30%10%0%

Source: xx.

Global mobility in our organization is about meeting the needs of the business today,

you cannot plan long term regarding talent27%

The global talent management team designs assignment programs to grow individuals that will serve as future leaders of our organization

40%

On a case-by-case basis, individuals are selected for certain assignments because of

their planned long-term career paths68%

We are only involved in deploying services 17%

Other 6%

What is the link between global mobility and the global talent management agenda within your organization? (Check all that apply)

70%60%40%20% 50%30%10%0%

Yes 42%

Case by case 42%

No 16%

Do you believe that the global mobility staff function should strategically be involved in the selection process of international assignments?

Global mobility is seen as being about “today,” with talent management concerned with “tomorrow”:

► Over one-third (38%) agree that “the global talent management team designs assignment programs that support the development of future leaders of our organization.”

► In addition, 29% believe that “global mobility in our organization is about meeting the needs of the business today. You cannot plan long term regarding talent.”

► Likewise, half of the companies surveyed stated that global mobility movesarefirstandforemosttofulfillbusiness needs for the current year.

Encouragingly, there has, however, been a rise in the number of mobility staff doing tasks that are strategic, such as analyzing business cases for expatriate versus local resource, or that are talent related, such as assessing assignees’ skill sets and psychologicalprofiles.

Our survey also looked at how companies approach talent and mobility from a diversity and inclusiveness perspective. Of our participants, 12% reported an increase in the number of assignees being selected from minority groups, while 32% said there was no change. Curiously, the results intimate that 69% of respondents know, or have statistics to provide, such information, which is inconsistent with the hypothesis that there is a gap between talent and mobility.

100%80%60%40%20%0%

Rapid development of services 17%9% 19%

Contribution to an international talent pool of future leaders

within our organization20%18%24%

Successfully moving the assignee 28%24%15%

Fulfillment of business needs for the current year 9%27%50%

No complaints from management 10%2% 6%

No noise from assignees 1%5% 13%

SecondFirst Third

Ranking distribution: top priorities for global mobility service within your organization

30

2

“ The low corporate use of social media represents�a�significant�opportunity�to enhance engagement with globally mobile employees.There are strong precedents. Companies are increasingly using social media to both engage in the marketplace and integrate employees. In particular, it is being used to align and enhance organizational identity, establish and strengthen relationships, share knowledge and collaborate, develop people, and coach talent. Mobile employees are often companies’ most talented, high-performing and culturally responsive staff — the sort of individuals critical to global growth aspirations. Such people require a higher degree of engagement and inclusion. Social media can become an effective engagement tool for all employees and, when leveraged correctly, may increase assignees’ sense of connectedness with their home base and enhance effectiveness.”Elizebeth Varghese Principal, Human Capital Ernst & Young US

We also asked participants if they use social media to communicate with their talent and assignees. An overwhelming 92% of organizations said no.


Meeting the challenge: integrating talent management and global mobility In HR, as in many other areas, the whole is greater than the sum of its parts.

We believe organizations should integrate their talent and mobility teams in order to ensure that:

► Expertise and experience are exploited to the best advantage

► Mobile and home country-based employees have a consistent HR experience

Both teams should learn from each other. In selecting the right candidates for overseas jobs, for example, talent management could learn from global mobility’s experience of what traits are best suited to international roles. To reduce premature repatriation, global mobility could learn about the ongoing support, motivation and development of assignees from talent management colleagues.

Combining talent management’s expertise in skill set and global mobility’s knowledge of cost, challenges and logistics is the only way for businesses to achieve a full return on their investment.

The established markets can suffer from the problem of stagnant, out-of-date policies that fail to adapt to a changing global climate. However, in emerging markets (discussed in detail in the following chapter), where mobility is still in its infancy, this issue of strategy focus and integration between talent management and global mobility is more visible.

Tatiana Ponte, Human Capital Partner in Brazil, notes; “We continue to see Brazilian companies moving toward internationalization. Phase one was to enable global mobility. Therefore, topics such as global policy, tax and immigration compliance and global payroll dominated HR attention.

As the front-runners move out of that initial establishment phase, the challenge is no longer “howdowemoveourpeoplesafelyandefficiently?”but“whoshallwemoveandwhy?”This is when the link between global mobility and talent management becomes crucial.

HR managers in Brazil are now starting to address the challenge of assuring a consistent and attractive global compensation philosophy, and establishing a more sophisticated global structure for people management, such as global employment organizations.

As companies move into the next phase, the challenge will be facilitating repatriation, since the senior executives that were sent to deploy new markets will be coming back. This will be an interesting area to monitor, particularly in terms of talent retention.”

Integrated teams should combine skills and experience to review and strengthen core mobility processes, as part of the wider review of global mobility functions discussed above.

Areas for consideration include:

► Long-termcareerpaths,whichshouldbeanabidingconsideration—fromthefirstassignment preparation phase onward

► International assignment selection panels, which should include HR professionals from both talent management and global mobility

► The repatriation process, which should be linked to the global talent management agenda, with home-country reward and recognition

32

2

Integratingglobalmobilityandtalentmanagementteamscanbeasignificantstepin executing successful international resourcing. Complemented by the strategic realignment and operational improvements outlined above, it can give a company the competitive advantage to succeed in today’s challenging business environment.

When we asked C-suite executives to comment on the importance of integrating global mobility and talent management, we received strong supporting comments, such as one from the CEO of one of the largest global consumer products company in the world in over 150 countries saying:

“It is critical for mobility to be tightly integrated to the overall talent strategy in any global company, otherwise neither one can be fully optimized.”

A senior vice president in one of the largest agribusiness and food companies in over 40 countries remarked:

“Successful global growth and integration of our business depends on effectively linking sound talent management to global mobility. ... These critical international assignments must enable the careers and professional development of our future leaders.”

In fact, a newly released Ernst & Young global talent management survey, Growing pains: companies in rapid-growth markets face talent challenges as they expand, found a majority of respondentslackconfidencethattheirorganizationhasorcanbuildaneffectiveinternationalmanagementteam.Onlyoneoffour(24%)C-suiteexecutivesareconfidentthattheircurrentmanagement team has the international experience to effectively manage globally.

So how can companies effectively build future management teams today with the right international experiences to manage in tomorrow’s global markets?

“I personally don’t see how a global organization can effectively globalize without integrating talent management and global mobility,” says Bill Leisy, Global Talent Management Practice Leader, Human Capital, Ernst & Young. “We are seeing more and more global organizations aligning talent management to business strategies and using global mobility to effectively execute these business strategies, especially in the emerging markets.Theseleadingpracticesarenotonlyreapinghigherandsignificantfinancialreturns organizationally, but also delivering higher employee retention, career development and satisfaction. And, as this integration becomes an integral part of leadership development, career development, succession planning and other key talent management areas, the organization creates a wonderful external employer brand that effectively supports the organization’s ability to recruit, retain and engage their desired workforce.”

“ We are seeing more progressive global companies utilizing best practices around defining�which�specific�positions�will�need�international�experiences,�what�type�of international experiences are needed (from emerging to developed markets), building these experiences into career and leadership paths, and strategically using global mobility to achieve these objectives. Talent management and global mobility integration does not just happen! This integration must be well planned, executed and continuously improved to create a true competitive edge.”Bill Leisy Global Talent Management Practice Leader, Human Capital Ernst & Young US


The strategic necessity of a strong international workforce is driving core HR functions closer together, believes Craig McEvoy of mining group Vale.

“Therehasbeenadefinitecomingtogetherofglobalmobilityandtalentmanagementinrecentyears,” says McEvoy, who, as Head of Global Mobility for Brazil-based Vale, is overseeing an increase in international assignees to deliver expansion plans in selected geographies.

“Thiscloserlinkbetweenmobilityandtalentreflectsagrowingrealizationthatinternationalexperience is critical to achieving our overall company strategy.

“To increase the availability of international experience, senior leaders require us to not just provide therighttools,policiesandbenefits,buttobemorecloselyalignedwithworkforceplanning,talentmanagement and organizational development.”

McEvoy stresses that an integrated HR function is not just key to getting the right people in the right place; it is also about boosting employee satisfaction — and retention.

“Our industry is very competitive. There is always the risk of losing people to competitors.

“An integrated HR offering helps people feel valued. If the function is not connected — across its ownteamsandwiththewiderbusiness—employeeswillnotnecessarilybenefitfromapositiveorconsistent experience. Importantly, an integrated HR function is increasingly important in ensuring closer alignment with the business needs and requirements.”

Although both talent management and global mobility are working toward the same goal, McEvoy admits that total alignment is not always possible. “Career development and succession planning mightnotalwaysfitinwiththeneedortimelinesstodeliverbusinesscriticalprojects,”hesays.

McEvoy says Vale’s globalization increased the need for leaders to gain international exposure, to raise both cultural awareness and to ensure a broader global mindset is leveraged throughout the organization.

“We are a Brazilian company, with the majority of our leaders located in Rio de Janeiro, but much of our planned growth is in Africa and other chosen geographies. It is very important that we expose our people to other markets, both at senior and junior levels,” he says.

“We are an international organization so we need global insights and inter-cultural experience. These skill sets cannot necessarily be fully achieved by remaining in one country.”

Case studyVale

Craig McEvoyHead of Global

Mobility for Brazil-based Vale

Growth markets focus3

34


Oursurveyreflectsthedramaticimpactonglobalmobilityofbusinesses’strategicambitions in growth markets.

Countless companies are staking their future prosperity on developing markets, which, despite recent slowdowns, are still the world’s growth engine. Ernst & Young’s April 2012 Rapid-Growth Markets Forecast predicts that nearly half of global growth will come from developing markets in the next few years. These countries are tipped to achieve 5.3% growth in 2012, compared with an anticipated contraction of 0.6% GDP in the Eurozone.4

But strategic ambition in growth markets can only be achieved with the right team. And, as Ernst & Young points out in The world is bumpy: globalization and new strategies for growth,“Goodpeoplearehardtofind.”

“In rapid-growth markets, increased competition for talent from local players compounds the problem. Developed markets have too many candidates for too few jobs; rapid-growth markets may offer plentiful labor, but the skills available may not match those required.”

Our survey explores in detail how the global mobility agenda — like the strategic agenda — is being shaped by the new demands and opportunities of growth markets and the pressure that the need for good people in these regions is putting on global mobility teams.

It shows that:

► Expanding into new markets is now the primary reason for cross-border mobility, with50%ofcompaniessurveyedcitingitasthefirstorseconddriverforinternational moves.

► In 2012, almost half of companies surveyed (48%) raised the number of people they sent to growth markets in comparison to other locations. This growth market focus is particularly clear in sectors that exploit natural resources, such as mining and oil and gas.

► A further 42% maintained the same level of growth market placements as seen in the 2011 survey, which was itself a year when the majority of respondents sent increased numbers to these regions.

► Six out of ten respondents expect this trend to continue, and anticipate a further increase in deployment to growth regions in the next two to three years. It is foreseen that in 2015 the assignments in BRIC countries and Africa will increase by 13 to 56%.

4 Eurozone Forecast — Ernst & Young, April 2012.

36

Within the growth countries, China is the most common destination (as was the case in our 2011 survey), followed by Africa and India. These areas are tipped to continue proportionally increasing their level of inbound assignees, and to maintain the same top three pole ratings into 2015.

All levels of staff are being sent to establish, expand and run growth market operations. However, the strategic priority being placed on these regions is underlined by the fact that:

► Having established that moves to growth regions increased compared with other locations and that this trend is likely to continue, the survey shows that most international assignments (53%) are driven by managerial or strategic concerns.

► Of assignees to the four BRIC countries, between 44% (India) and 59% (Brazil) are primarily senior employees.

► Managerial and strategic goals are cited as the top driver for moves in all BRIC countries.

► The majority of companies surveyed indicate that assignments in these regions are primarily long term. The higher costs and risks involved with longer assignments at more senior levels illustrate the extent of this wide-scale investment.

Relocating large numbers of senior staff to growth markets is both costly and disruptive to the home organization. Many individuals demand a premium to go. “Flexibility to move talent,” is, thus, the primary demand shaping international assignment policies. Global mobility teams want to be able to compensate above the policy norm to attracttalent.Reflectingthis,thetoptwoincentives attracting assignees to growth markets are location allowance or hardship premium and elevated compensation.

70%60%40%20% 50%30%10%0%

No change 42%

Yes, we had an increase 48%

Don’t know or unsure 7%

Yes, we had a decrease 3%

70%60%40%20% 50%30%10%0%

Source: xx.

No change 21%

Yes, we had an increase 60%

Don’t know or unsure 15%

Yes, we had a decrease 4%

Did your company change the number of assignees deployed into growth market countries, in comparison with other locations, in 2011?

Do you expect a change in the number of assignees deployed into growth market countries, in comparison with other locations, over the next 2–3 years?

3

37

That companies are willing to make such significantinvestmentsinstrainedtimesisyet another indication of the priority being placed on these markets.

That said, Ray Harraway, Partner, Human Capital — Performance and Reward in Ernst & Young South Africa, cautions companies against using money as the only lure.

“Assignments premised solely on reward have a higher risk of failure,” he says. “One should appeal to broader career and developmental opportunities. We are seeing a shift in attitude from both younger single employees — who are at that stage in life where they are looking for something extraordinary in their work and are seeking out assignments in developing economies to get their career going — and senior seasoned employees who are looking to end on a high.”

Two-way growth market�trafficThe survey shows that fewer senior staff are leaving the BRIC countries and Africa to go to other regions than are entering them. However, the number of outbound senior employees is still high, as companies strive to develop leaders from growth markets through exposure to established markets: ratios range from 28% to 35%, with China sending out the fewest senior managers and Brazil the most.

NickPond,theAsiaPacificAreaLeaderin Human Capital observes: “Mobility in Asia is at a turning point. We are seeing a shift in what have long been predominantly inbound markets, as locally headquartered companies look to expand globally. Just asthoseenteringthegrowthmarketsfindnew, unique mobility challenges, many of

60%50%40%30%10% 20%0%

Source: xx.

Brazil

Russia

India

China

Africa

46%

50%

42%

44%

47%

Primarily long-term assignments over 12 months

Percentage of outbound assignments that are over 12 months in length

50%30% 40%10% 20%0%

Source: xx.

Brazil

Russia

India

China

Africa

39%3%

36%23%

39%4%

35%23%

37%4%

36%23%

39%2%

35%24%

35%3%

38%23%

DevelopmentalProject-based work

OtherStrategic or managerial

Percentage comparison: inbound assignment types to growth countries

100%80%40% 60%20%0%

Brazil

Russia

India

China

Africa

42%

42%

37%

42%

45%

35%

33%

30%

28%

30%

24%

25%

33%

31%

25%

Primarily junior employeesPrimarily senior employees An equal number of senior

and junior employees

Outbound�employee�profile�

“ Assignments premised solely on reward have a higher risk of failure.”Ray Harraway Partner Human Capital — Performance and Reward Ernst & Young South Africa


38

thecompaniesexpandingfromgrowthmarketsarestrugglingtotakethefirststepsontothe global stage. Processes and policies need to be developed to facilitate these ambitions of expansion and create successful assignments in a changing environment.”

Furthermore, Tatiana Ponte notes that: “There has been a large movement of senior executives from one growth market to another. For some companies, “going global” happened inorganically through merger or acquisition. Therefore, there was a need to react quickly to send senior executives to establish the business in the new market and spread the organization culture. Unplanned movement at a senior level has led to gaps in the local market, intensifying the war for talent and making staff development and retention even more crucial.

“In addition, the speed of these deployments, in order to get ahead, meant that proper costandbenefitanalysiswassometimeslacking.Therefore,whiletop-linegrowthhasbeen achieved on growth markets, companies are now facing the need to rethink and recoverprofitabilitybyexploringsynergyandallkindofcost-reductioninitiatives.”

A common goal — uncommon challengesWhatever their location or history, companies have the same ambition for activity in developing markets — growth. However, the challenges they face are likely to have very different emphases, depending on which geography they are in.

The thorny issue of compliance is just one area where countries offer contrasting experiences. It is the main challenge facing global mobility teams in most developing countries, but in China in particular. Of those surveyed, 41% cite compliance as the country’s main issue, 6% ahead of the next most challenging countries, India and Brazil.

In Africa, however, security is felt to be the greatest challenge, given as the primary obstacle by 40% of respondents. This focus sidelines compliance, seen as the major concern by a relatively low 23%, making Africa the only region where compliance is not the prime preoccupation. The downplaying of compliance may, however, say more about the magnitude of security problems in Africa than about the ease of regional compliance.

3

80%60%40%20%0%

Source: xx.

Russia

India

China

Africa

41%

36%

35%

36%

23%

11%

15%

9%

7%

6%

18%

17%

17%

14%

15%

SecondFirst Third

Brazil

80%60%40%20%0%

Source: xx.

40%

24%

17%

8%

7%

13%

19%

15%

20%

10%

18%

22%

20%

9%

10%

SecondFirst Third

Russia

India

Africa

China

Brazil

Percentage of respondents who ranked “compliance issues” as the�first,�second,�or�third�largest�challenge�from�a�global�mobility�perspective, in each country

Percentage of respondents who ranked “security issues” as the first,�second,�or�third�largest�challenge�from�a�global�mobility�perspective, in each country


Elsewhere,thesignificanceofsecurityvaries widely among the BRIC countries. In Brazil, it is seen as the main issue for almost one-quarter (24%) of respondents, and in Russia for 17%. However, in India and China it is highlighted by just 8% and 7%, respectively.

The struggle to meet the personal and social needs of assignees and their families is felt in all growth markets. The availability of suitable housing and schooling is among the top four priorities in Africa and in each of the BRIC countries (although considered less important than compliance, security, immigration and elevated compensation). However, once again, these social issues are seen as a much bigger problem in some countries than others.

In India, 11% of respondents consider the availability of suitable housing to be a major challenge, more than double that for China and Africa, at 5%, and almost four times greater than the ratio for Brazil and Russia, at 3% and 2%, respectively.

Schooling is seen as a particular issue in China, where it is the main challenge for 6% of respondents; for the rest of the BRIC countries and Africa, it is the primary issue for between 1% and 3%. With China likely to remain a focus for a long time to come,thisdeficiencyislikelytocauserealproblems in settling long-term assignees and their families.

Brazil

India

China

80%60%40%20%0%

Source: xx.

Russia

Africa

11%

5%

5%

3%

3%

19%

15%

15%

18%

14%

15%

12%

10%

8%

10%

SecondFirst Third

Africa

Brazil

India

China

80%60%40%20%0%

Source: xx.

Russia

2%

3%

6%

2%

1%

17%

15%

12%

11%

8%

16%

15%

14%

11%

8%

SecondFirst Third

Africa

Brazil

India

China

80%60%40%20%0%

Russia

12%

18%

15%

13%

11%

12%

10%

7%

9%

10%

19%

13%

16%

15%

13%

SecondFirst Third

Percentage of respondents who ranked “availability of suitable housing”�as�the�first,�second,�or�third�largest�challenge�from�a�global mobility perspective, in each country

Percentage of respondents who ranked “availability of suitable schooling”�as�the�first,�second,�or�third�largest�challenge�from�a�global mobility perspective, in each country

Percentage of respondents who ranked “elavated compensation required�as�an�incentive”�as�the�first,�second,�or�third�largest�challenge from a global mobility perspective, in each country

40

Reflectingthisunevenpicture,oursurveyacknowledges that certain markets are implicitly less attractive as expatriate destinations. Between 11% and 13% of respondents believe a particularly lucrative package is necessary to attract assignees to Brazil, Africa and Russia. When it comes to India, it is a priority for 15% of respondents and, for China, a notable 18%.

Whatever the reason to relocate, the individual growth markets have different success rates at keeping assignees in post. Retention is least problematic in India (2%), rising to 5% in Russia and 6% in

China. The impact of such failures, in costs, disruption and lost competitive advantage, will be immense.

While we have a tendency to view the growth markets as one entity, the constituent nations and regions are not homogenous. As well as straddling several continents, they have diverse political and regulatory systems, contrasting cultures, and varying levels of infrastructure development.

To build successful teams and to deliver in growth markets, companies must understand the unique characteristics of each emerging market and give global mobility teams and individual assignees the right tools for the job. In the Ernst & Young summer 2012 Rapid Growth Market Forecast5, we refer to a “mixed picture” of growth, saying, “Whether itbeinflationinIndiaoracommitmenttoopennessinMexico,executivesincreasinglyneed to tune into the national mood music wherever they are doing business to avoid surprises.” The same attention to “national mood music” is key to successful global mobility.Totrulydeliverinemergingmarkets,onesizecannotfitall.

Africa

Brazil

India

China

80%60%40%20%0%

Source: xx.

Russia

6%

5%

2%

4%

3%

15%

10%

8%

9%

7%

7%

6%

10%

6%

4%

SecondFirst Third

Percentage of respondents who ranked “retention of assignees” as�the�first,�second,�or�third�largest�challenge�from�a�global�mobility perspective, in each country

5 Rapid-Growth Markets Forecast, Ernst & Young, July 2012.

3


Case studyColgate-

Palmolive

Traci Hughes-Velez

Vice President Human Resource

Mobility today involves rethinking the assumptions of the past, according to Colgate-Palmolive’s Traci Hughes-Velez.

“For one,” says Hughes-Velez, VP, HR, for Colgate’s Africa and Eurasia division, “companies need to consider a new model — and life stage — of expats.

“Spending time as an expat has always been part of Colgate’s DNA for business success. But we perhaps need to look to getting that experience at an earlier stage in people’s lives.

“The typical model of the expat family, where the husband has the lead career and packs up his wife and family at a mid-stage in life to go abroad, is now being challenged, simply due to the number of dual-career couples in the workforce. It just does not work for dual earners or, indeed, for single people with responsibilities for aging parents.”

In reappraising common practices, businesses must also realize that what makes sense in one environmentmaybackfireinanother.

“Global mobility professionals tend to be very focused on their area of specialty. I suggest that they getoutoftheofficemore,tounderstoodhowthingsactuallyareinthefield.

“For example, the function might question why assignees need a driver in Russia. It’s only when you are actually there that you appreciate that, with road signs in Cyrillic script, without native drivers non-Russian assignees would have no idea where they were going.”

Hughes-Velez says the differences between countries within developing markets can be as surprising as the gulf between mature and emerging markets.

“Not all developing markets are created equally,” she says. “When you go into a new area, you often need to ‘unlearn’ what you think you know.

“For example, in Eurasia, in regard to talent, my experience is that Turkey is more like Europe than Asia. And Russia is big, complicated and very regulated, rather like Western Europe. That said, on the ground, people are people the whole world over, and we need to understand what makes or breaks a successful assignment and build what we can in to our programs to ensure they meet both the business and the expats’ needs.”

Respondent�profile4

42


With over 520 participants, the Ernst & Young 2012 Global Mobility Effectiveness Survey is our most wide-reaching research to date. Since the survey began in 2008, the global mobility world has been evolving dramatically. This year, we have captured a wealth of data from diverse geographic regions across the industry sectors:

Other

15.0%5.0% 10.0%0.0%

Source: xx.

Health insurance

Airlines

Private equity

Not-for-profit

Asset management

Government and public sector

Provider care

Media and entertainment

Real estate

Transportation

Aerospace and defense

Mining and metals

Telecommunications

Retail and wholesale

Power and utilities

Insurance — life, property and other

Automotive

Diversified industrial products

Professional firms and services

Chemicals

Life sciences

Banking and capital markets

Consumer products

Technology

Oil and gas

0.0%

0.5%

0.5%

0.2%

1.2%

2.1%

0.7%

0.7%

2.6%

2.6%

2.3%

2.3%

3.5%

3.8%

3.1%

2.6%

4.5%

4.9%

6.6%

6.6%

5.8%

5.1%

9.9%

12.0%

8.4%

7.3%

Which of the following best describes your industry sector?

44

Source: xx.

86%

14%

Yes No

Do you work in global mobility in your organization? For example, do you manage or process international assignments?

50%40%20% 30%10%0%

Source: xx.

South America 3%

Asia Pacific

Africa 2%

Europe 39%

13%

North America 42%

Middle East 1%

Where is your company headquartered?

4


Please indicate the number of worldwide, short-term, and long-term employees in your company in 2011

Choice Average

Worldwide in 2011 15,000

Short-term assignment (less than 1 year) 15

Long-term assignment (more than 1 year) 80

70%60%40%20% 50%30%10%0%

6–10 staff 12%

0–5 staff 65%

11–25 staff 10%

More than 25 staff 13%

In 2011, how many dedicated global mobility staff were in your company? (number of FTEs)

70%60%40%20% 50%30%10%0%

Global or regional employment organizations 9%

HQ and selected countries 19%

6%

HQ and regional centers 29%

Only HQ 42%

7%

How are your global mobility staff members deployed geographically? (check all that apply)

While the majority of respondents represent multinational organizations, the scale and structure of the mobility function of survey participants varies widely.


Growing pains Companies in rapid-growth markets face talent challenges as they expand Getting the talent equation right has never been easy for businesses, butascompaniesglobalizeitisprovingexceptionallydifficult.Oursurveyidentifiesfourmajortalent-relatedchallengesorganizations in today’s volatile economy face when building and executing effective talent management strategies. For rapid-growth market companies expanding into new markets, this challenge is particularly acute. emergingmarkets.ey.com/growing-pains

Talk, talk, talk about it: what business leaders should know about tax risk and controversy This report looks at the issue of tax risk and controversy through a C-suite and audit committee lens, setting out in non-technical language the rising corporate impacts of tax risk and controversy, as well as theinterestoftaxadministratorsintryingtogettaxfirmlyontothe corporate responsibility agenda. Increased media focus on how businesses pay taxes is part of the riskiest tax controversy environment in years. How are leading companies reducing these risks?

This report examines the rising corporate impacts of tax risk and controversy,aswellastheinterestoftaxadministratorstogettaxfirmly

onto the corporate responsibility agenda. We identify key focus areas that can help effective tax risk and controversy management. www.ey.com/taxrisksurvey

T Magazine (Issue 07)In the April 2012 issue of Ernst & Young’s periodical magazine T Magazine, we look at the emergence of a new generation of “global executives,” either traveling frequently, or else shifting from one international posting to the next. We consider how companies are developing global talent management processes to build talent pipelines for the future, and explore the tax implications of this increasingly mobile workforce. tmagazine.ey.com/issue/issue-07

Ernst & Young thought leadership

About Ernst & YoungErnst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 167,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.

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© 2012 EYGM Limited. All Rights Reserved.

EYG no. DL0660

In line with Ernst & Young’s commitment to minimize its impact on the environment, this document has been printed on paper with a high recycled content.

This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.

The views of third parties set out in this publication are not necessarily the views of the global Ernst & Young organization or its member firms. Moreover, the views should be seen in the context of the time they were expressed.

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