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Trade Routes: The Hidden Cost of Expatriate Executives

By: Michael Wynne
Posted: October 26, 2006, from the October 2006 issue of GCI Magazine.

How would you like a job as a top executive for an American company in a foreign country? Pay could be one and a half to two times your current salary. In addition, you would receive extra cost-of-living pay, a company car with chauffeur, country club membership, paid vacation airfare back to the U.S., and an ample expense budget.

That might be the typical compensation, benefits, and perks package for an expatriate’s assignment in a foreign country. Sounds expensive for the company, right? You bet, but it’s only part of what it might cost the company.

Most major companies, regardless of industry, already are aware of the expense of paying out-of-country executives higher compensation packages and benefits. What they may not realize is the huge hidden cost of these workers’ mistakes while they go up the learning curve abroad.

I know this from personal experience, having followed other expatriates in overseas positions. I was more fortunate in that I already had substantial experience in living abroad, adapting to cultures, learning the languages, and running overseas businesses. My predecessors were not as fortunate, which made my job that much more challenging.

Expatriate workers tend to make their most expensive and damaging business decisions during their first 18 months in a foreign country. Two major causes of their mistakes are communications and cultures.