Cultural Training & Coaching as insurance for optimizing expatriation success
By
Olivier Soumah-Mis Intercultural Coach 33 years’ experience:
Don't
forget that according to studies, notably that of INSEAD, 30% of expatriations
are failures, and that the main cause of these failures are unmanaged or poorly
managed cultural differences.
This
article is a case study that highlights the ratio between the cost of cultural
preparation and the cost of failure. Companies shouldn't skimp on the 1,250 USD
it costs to prepare a day's worth of cultural preparation.
The cost of
a failed expatriation for a CEO in Mexico can vary widely depending on factors
like assignment duration, CEO compensation, and local conditions. Below is a
detailed breakdown of potential costs, categorized by stage:
- Recruitment/Selection:
- External hire: 20–30% of
annual salary (e.g., 300kCEO→300kCEO→60k–$90k).
- Internal hire: Minimal cost.
- Legal/Immigration: Work permits, visas, and
legal fees (5k–5k–15k).
- Cultural Training: 5k–5k–20k.
- Relocation Planning: 2k–2k–10k.
Total: 12k–12k–135k.
2.
Relocation Stage
- Moving Household Goods: International shipping (15k–15k–50k).
- Temporary Housing: 1–3 months in Mexico (5k–5k–15k).
- Travel Costs: Flights for family and pets (10k–10k–20k).
- Settling-in Allowance: 5k–5k–10k.
Total: 35k–35k–95k.
3.
On-Site Costs (First Year)
- Housing Allowance: Annual rent in major cities (50k–50k–150k).
- Cost-of-Living Adjustments: 20k–20k–50k.
- Education: International school for 2
children (40k–40k–80k).
- Security: Risk-based measures (20k–20k–100k).
- Tax Equalization: Compliance and advisory fees
(10k–10k–30k).
Total: 140k–140k–410k.
- Reverse Relocation: Shipping belongings back (15k–15k–40k).
- Lease Penalties: Breaking housing contracts (5k–5k–20k).
- Repatriation Support: Career coaching, temporary
housing (10k–10k–30k).
Total: 30k–30k–90k.
5. Lost
Productivity & Business Impact
- CEO Salary (Unproductive
Period): 3–6
months (75k–75k–300k for a $300k salary).
- Temporary
Leadership/Consultants: Interim CEO fees (100k–100k–300k).
- Missed Revenue/Opportunities: Varies widely (100k–100k–500k+).
Total: 275k–275k–1.1M+.
6.
Legal/Compliance Costs
- Severance/Termination: Local labor laws may require
3–12 months’ salary (75k–75k–300k).
- Dispute Resolution: Legal fees if litigation
occurs (20k–20k–100k).
Total: 95k–95k–400k.
7.
Miscellaneous
- Replacement Training: Cultural prep for new
candidate (5k–5k–15k).
- Emergency Costs: Unplanned trips, evacuations
(10k–10k–50k).
Total: 15k–15k–65k.
Estimated
Total Cost Range
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High End: 1.5M–1.5M–2.5M+ (external hire, prolonged failure, litigation, significant business loss).
Key
Variables Influencing Cost
- Timing of Failure: Earlier failure reduces
on-site costs.
- CEO Compensation: Higher salary increases
severance and lost productivity costs.
- Local Market: Housing/security costs vary
by Mexican city (e.g., Monterrey vs. Mexico City).
- Legal Complexity: Mexican labor laws may
escalate termination costs.
This
framework provides a structured estimate, but actual costs depend on
organizational specifics and external factors. Companies should conduct risk
assessments and include failure contingencies in expatriation budgets.
This
failure can represent up to 3-5 times the CEO's annual salary, including the
long-term impact on plant performance. Rigorous preparation and regular
monitoring are essential to reduce these very costly risks for the company. Cultural
training is your best insurance to optimize the success of your expatriates'
expatriations.
