Managers' Forum ~ Business Case Reviews

Recognized throughout the world as having a comprehensive plan for international career development, Colgate-Palmolive (C-P) was having trouble finding adequate recruits to fill their expatriate manager positions.  This business case discusses the history building up to this dilemma and some possible solutions.

C-P had established itself as an international corporation almost from the beginning.  The company is the result of a 1928 merger between Colgate and Company and the Palmolive-Peet Company.  By 1938 foreign sales accounted for 28% of the companies revenues and 41% of its profit.  Overseas activities eventually grew to 53% of company sales and 78% of profits with products being sold in 85 countries.

Throughout this time of rapid expansion C-P used expatriates to develop new markets and found subsidiaries.  These managers usually spent a few years in one country before moving on to another.  Eventually these expatriate
managers found themselves rising through the ranks and assuming executive positions in headquarters.  It became an unwritten company policy that if you were going to get to top management, you needed to have foreign service
experience.  During this time C-P did not have a clear foreign assignment policy.  The expatriate manager was given a salary and bonus, but no help with housing, education for the children or anything else.  For the most part
this informal approach worked very well, placing capable managers where they needed to be.  The biggest drawback was the differences in cost of living that were not accounted for.

In 1983 C-P developed their International Assignment Policy to standardize the arrangements for expatriates.  The policy was intended to be "progressive, comprehensive, and sensitive to employee needs."  The plan provided for a brief familiarization trip to the foreign assignment and language classes after acceptance.  Medical exams were provided prior to departure and during the foreign stay.  Annual trips home were reimbursed as well as tuition to private schools.  To prevent undo hardship, C-P had a tax equalization policy that through a hypothetical tax ensured the expatriate would only pay the equivalent amount of income tax if they were in the U.S.  A goods and services allowance was included as a means of providing a cost of living adjustment for the foreign assignment.  A housing allowance, including utilities was also provided to defray the increased housing costs of living abroad.  To help compensate for enduring hardships of less than desirable in country conditions, C-P provided a post allowance.  To assist with relocating, C-P provided a cash relocation allowance in addition to moving household belongings and providing for temporary living prior to departure and after arrival.  C-P also assisted with the rental or sale of the expatriate's home.  One of the plan's weaknesses is the minimal amount of orientation that is provided to the expatriate and his/her family to minimize the culture shock.  An extensive orientation about the country's culture, living conditions, language, etc., would be a big benefit in the initial adjustment.  C-P's plan includes an extensive reimbursement list, but more important than reimbursement is in country assistance when trying to find a home, setup utilities, locate schools, etc.  The International Assignment Policy should also have included a reorientation to coming back home for the expatriate and his/her family because the adjustment upon returning can be more difficult than the initial culture shock.

In the early 90's C-P was having less and less success recruiting managers for foreign assignments.  After reviewing a survey of its employees they found that one of the main objections to the International Assignment Policy had to do with spouse relocation in dual career families.  The original plan allowed for a one-time payment of $7500 to the spouse to help defray the costs of finding a job or start a new business.  C-P was now considering what it should do to modify its foreign assignment policy.  Options ranged from providing additional money, one-time lump sum payment of $10,000 to "income replacement" for up to 3 months, to reconsidering the unwritten policy of foreign service to be considered for upper management.  I think that no matter how much money C-P provides (unless they reimburse the full salary with pay increases) to the spouse it won't be enough.  C-P's focus shouldn't center on monetary reward, but more on the personal growth that can come from
a foreign assignment.  The best solution to this dilemma is to eliminate the requirement to have foreign experience to be considered for senior positions within the company.  It could still be preferred and if two equally capable
individuals are applying for the same position, the one with foreign experience would get the job.  C-P needs to put the motivation for foreign assignments with the employees seeking career advancement instead of trying
to force it.  The employee needs to see it as an opportunity worth making sacrifices if necessary.

Having been an expatriate myself, I found this business case to be very interesting (and appropriate!).  There are serious decisions to be made, by both the company and the individual, when considering a foreign assignment.
What most companies neglect is the culture shock experienced by the expatriate when he returns home.

Bartlett, Christopher A. & Ghoshal, Sumantra, "Colgate-Palmolive:  Managing International Careers", Transnational Management, Irwin McGraw-Hill, 1995, pp. 622-637.

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