Why Are Early Departure Rates from Foreign Assignments Lower Than Historically Reported

This paper (a) highlights the significant decline between the historically quoted premature expatriate return rates (generally cited as between 16 and 40 percent) and more recent statistics (8 to 10 percent), (b) presents reasons for this decline, and (c) discusses the impact of the decline on future expatriate studies and policies. Basically, the historically quoted rates were probably higher than the real rates; nevertheless, a combination of environmental changes and company practices are causing premature departure rates to fall further. The paper argues that attention should now shift to expatriates on-the-job performance rather than their early departure from foreign assignments. Companies may incur three types of costs when expatriate managers leave their posts prematurely: ( 1 ) decreased productivity while finding and training replacements, (2) relocation expenses for the departing expatriates and their replacements, (3) loss of headquarters' credibility with foreign subsidiary personnel because of poor decisions concerning expatriate selection, (4) hinderance in the acceptance of departing expatriates' replacements because of past turnover problems, (5) loss of the human capital investment if departing expatriates join other companies, and (6) motivational problems and/or negative perceptions of returnees because of their inability to complete the foreign assignments. The extent of premature expatriate departure from assignments is so central in the international human resource literature that an article stated "The fact that expatriate turnover is far higher than equivalent domestic turnover is well known, often falling in the range of 20%50% of all expatriate transfers" (Naumann, 1993: 499). More recently, Birdseye and Hill (1995) and Osland (1996) referred to similar turnover rates. However, Harzing (1995) and McEnvoy and Parker (1995) have questioned whether these rates are as high as reported. For example, the former stated "there is almost no empirical foundation for the existence of high failure rates when measured as premature re-entry. Unfortunately, there has been no reliable largescale empirical work on this subject for more than fifteen years. " Fortunately, two recent studies have shed light on current pre-departure rates. A 1994 survey by Windham International and the National Foreign Trade Council included over 25,000 expatriate experiences in 103, mainly U.S. multinational enterprises, and estimated that only eight percent of expatriates fail to complete foreign assignments. The Employee Relocation Council (1997) received responses from 162 companies with nearly 26,000 employees on foreign assignments in 1996. This survey did not report on premature departure; however, respondents indicated that only ten percent of foreign assignments were unsuccessful. (Failure figures have consistently been equated with premature departure in much of the international human resource literature.) It is useful to benchmark these recent studies not only against the historical reports, but also against turnover experience in domestic assignments. United States' domestic figures are particularly relevant because expatriate turnover figures are heavily biased by the experience of U.S. multinational companies. Based on U.S. domestic figures, expatriate turnover is probably lower than domestic turnover. For example, McEnvoy and Cascio (1987) and Mercer (1988) estimated annual U.S. domestic turnover at 10 percent and 12 percent per year respectively. Inasmuch as expatriate turnover rates are based on the lifetime of the foreign assignment, usually several years in duration, the current estimates of eight percent expatriate turnover and ten percent expatriate non-success, seem low even in relation to domestic assignments. The objectives of this paper are threefold: (1) to reconcile the basis of the wide disparity among reports in the extent of expatriate success and failure; (2) to use existing literature and theory to help explain why current predeparture rates from foreign assignments are apparently decreasing; and (3) to suggest directions for future efforts to improve the performance of expatriates. …