Toyota’s Expatriate Management Policy

Executive Summary

The internalization of companies has enacted the rising needs of expatriates worldwide. Multinational Companies are emerging into newer places to have an efficiency of their operations. Daniels, J., Radebaugh, L., & Sullivan, D., (2008) mentioned that expatriate stands for the workers living and working rather than the native country. The expatriate is the corporate person who works for the corporation in foreign countries. The expatriate management includes the selection of appropriate employees with enough acquaintances to be migrated to desired subsidiaries. These corporations have to handle various issues including family matters, compensation, and remuneration schedule withholding currency conversion and tax liability, other foreign service-related allowances and benefits, cross-cultural problems termed as the cultural shock and the reverse cultural shock, development through the training programs, and the repatriation of these employees. The repatriation though has been overlooked but has a profound impact due to previous promises and the employees’ new job placement.

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Toyota has been exerting better expatriate managerial results over periods of operation. It has its standalone policies regarding expatriate management when enough provisions regarding the above-stated issues of expatriate management. There are ten competencies of the expatriates that are the basis for setting allowances. The family of the expatriates is also given equal importance regarding the foreign assignment. The pension scheme and health benefits are also up to date. During the assignment period, the employees are given facilities to maintain a link with their families and relationship with the organization. At the crucial part, repatriation, the corporation has clear provisions of equalization and performance appraisal. Therefore, the repatriates have become examples of motivating others to go for foreign assignments.

 Introduction

Tayeb M. H., (2005) pointed out that globalization has had profound impacts on human resource policies worldwide, especially in MNCs (Multinational companies). There is also a profound increase in the usage of expatriates in the subsidiaries by the parent corporation. By definition, expatriates are the parent company’s professional and managerial staffs who are employed in the company’s subsidiary as a temporary migrant (though some are employed for high tenure) for equipping the nationals with organizational activities and to show them how things should be completed. Internalization in the present business world increases the necessity of expatriation, hence, the MNCs on average expend between US$300,000 and US$1,000,000 annually for a single expatriate. Black et al. (1999) stated that the international assignment is the standalone strategy for the success of today’s multi-country businesses. Tayeb M. H. (2005, pp-182) stated that sending employees to foreign countries is also aimed at learning cross-cultural lessons to improve corporate culture. Harry (2003, p.28) stated that the roles performed by expatriates such as most companies employed their trusted employees in the key role in their foreign operations to ensure controlling, since enough skilled employees from the host country are acute expatriates are the best option, they bear the organizational culture to the foreign operations, and they symbolize the commitment toward the organization as well as to the new employees.

There are some essential requirements for being an expatriate such as adaptability to a new environment, lenience of vagueness, behavioral flexibility, openness to new people, goal orientation, and enthusiasm to pass barriers in the job place. Tayeb M. H. (2005, pp-182) argued that MNCs usually select staff as expatriates not only for his/her technical know-how but also for cross-cultural adaptability. The family has been a burning question for the expatriate migration and hence, various MNCs usually include family in the selection process. This happens due to the belief that equipping families will lessen expatriate failure. The performance of expatriates is also a burning topic since these people usually like to be evaluated by the parent company, not by the subsidy.

Another relevant issue is the training of the expatriates. Pre-departure training to these departing employees increases the success rate, at least reduces the failure rate. The training usually includes cultural training for the adoption of a new cultural environment, language training for the better understanding between host people and the migrant, and a preliminary foreign country visit for the earlier inauguration of the role.

The most burning issue relating to expatriates is the setting up of compensation and remuneration. The schedule should include compensation for Foreign Service, equalization of the tax burden, health benefits, and compensation for incurred expenses. The compensation schedule must consider Purchasing Power Parity (PPP) to gain better employee responses. Finally, repatriation must also be designed beforehand to attract potential expatriates quite easily to employ in subsidiaries. Since the repatriation can result in high skilled employee loss, devaluation of the foreign assignment, and loss of enthusiasm of employees regarding foreign assignments.

Toyota, the world’s number third automotive car seller, has its subsidiaries in different countries such as the United States of America (USA), Germany, Australia, United Kingdom (UK), etc. Since the corporation is an MNC and hence it has to employ a lot of expatriates around these subsidiaries to employ their Japan expertise and to gain success like Japan. Therefore, the corporation also requires well-defined rules and processes for its expatriates’ management.

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Pre-Assignment

How does Toyota select the right candidates?

Toyota ensures the highest level of effort to select appropriate candidates for the assignments. The ultimate target is to get knowledgeable and efficient employees who can effectively enhance the outcomes of assignments. It takes an approach that is an automated and interactive application process. This process helps the candidates with the opportunity to apply for any position through telephone or the internet. The application process needs only 10 minutes for a candidate to apply. The automated process then assesses each application and thus the qualified candidates are selected instantly through the automated system. To select as an assignee, the knowledge and expertise of the English language is a must. After that, the selected candidates are asked to come for an interview. Here the candidates are mainly assessed for the relevant assignments. Here the respected officers assess the candidates in many ways. Those who give satisfactory answers are selected later on. This virtual selection process is mainly facilitating Toyota in many ways. It does not have any traditional way to select candidates and fully uses technologies like the internet, telephones, fax and e-mail. The total assessment and selection process is automated using computers and a candidate can act with the assessment within just 90 to 120 minutes (Select International, 2006).

How does Toyota manage pre-assignment logistics?

Managing the logistics for a giant company like Toyota is not easy. It has a group of people to act with the logistics and they use the Vehicle Logistic system for the job. Toyota ensures its maintenance of logistics in two stages. These are before an assignment and after an assignment. Before the assignment, the vehicle logistic group carefully studies all relevant and possible logistics options. Then they ensure the use of the most efficient and environmentally friendly process in the assignment. Modes of transport with lower-level environmental effects are selected on a regular basis. There are some logistic resources available for Toyota. It locates its regional parts depot very closely to ensure not only the satisfaction of suppliers and end-users but also for the prevention of unnecessary stretched resources of its logistics. These processes are also done before an assignment is going to be started. Toyota has different operations in a different countries. In a different country, the logistics are different. As an example, the environmental policies are quite different from country to country. Where it has major operations, it ensures local environmental initiatives within the communities. Before the assignment, Toyota also files the probable effects to the relevant authority like the emission level of CO2. (TMC Environmental Committee, 2004).

How does Toyota relocate the employee and family?

Toyota does not think that individual employees should own their standardized work. For this reason, it always rotates the employees. To ensure the motivation of the employees it persuades the employees to relocate along with their families. For this relocation system, no one employee thinks of anyone’s job as his own. All the relocation system is backed by a well-managed job designing system. Before the relocation of an employee, Toyota does some initial work. The members of a pilot team, who are basically engineers, developed the work matched accordingly with the employee. In the selection process, the employees are ensured as the efficient ones for any kind of relevant job. Thus, the relocation process empowers the employee through various types of initiatives to work along with the local suppliers in development, production, and purchasing divisions. The main objective of relocating an employee is to improve productivity and ensure the highest quality standards. Toyota makes its employees a diverse and developed asset for the organization through this relocation system along with effective training (Toyota Motor Corporation, 2008).

What basis Toyota used for calculating pay and allowances?

Employee payment and allowances are an important concern of Toyota. The basis of the payment is the work, transparency, obedience, skills, and efficiency in the field. That is the calculation of the payment and the allowances are mainly based on the performance of the employees. The employees are now assessed on the basis of two major things. These are achievements and applications of competencies. Achievements are governed by the actual realization of agreed objectives. That is the more any employee reach closer to the objectives the more he/she can achieve. There are almost 10 core competencies such as fact-finding and analysis, perseverance, problem-solving, and many more. Those who have more of these competencies are treated as more eligible for allowances. (Toyota).

What should Toyota do about pensions and social security?

Toyota has many types of employee welfare schemes. Its pension schemes should be also directed to employee welfare. It has unfunded pension liabilities of 128.6 billion yen in 2008. These liabilities are expected to meet by future cash contributions. Toyota has anticipated contributing 153030 million yen in the fiscal year 2009. It has a plan to fund instantly when a retirement date of an employee comes. But there are risks associated with this approach. Many employees need money just after their retirement. So, Toyota must take an effective pension management system. In September 2006, the FASB asked all employers to measure the status of the funded defined postretirement benefit plans and to engage it in the financial statement by the amended FAS 158. To maintain these restrictions Toyota should increase the funded pension benefit high. To overcome misassumption about the pension scheme, the pension policy of Toyota must be made transparent.

Besides the pension scheme of Toyota implies that any employee must complete a three-month probationary period to get the pension. This system should also be considered as treated the probationary employees as employees (Toyota Motor Corporation, 2008).

What are the health benefit solutions in Toyota?

Toyota always thinks for the betterment of the employees. It thinks that to get proper productivity the employees must be made satisfied and happy. Besides, it treats the health of the employees as the route to make the employees happy. It provides additional healthcare schemes like long-term disability plan leave for illness and many more. It thinks that these policies will contribute to increase the member’s quality of life and thus the productivity of the company will also increase (Toyota).

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During Assignment

How does Toyota manage employee performance?

The success of Toyota is depending on the not only manufacturing process of products but also on building the relationship between customers and employees. In the assignment of Managing expatriates, where Toyota is adopting Human Sigma, which is determining the employees’ differences in the organization’s performance. This process is focusing on the improvement of employees and their engagement with customers, which will earn profitable business outcomes and the value of shareholders.

For example, in the assignment of Japan, the process of marketing, distribution, selling, and service vehicles are located in a dealer system, which is independent franchises of United States sales services. The employees of Japan are motivated to do activities of production design, customer relationship build-up, development of a brand, advertisement, and sales promotion (Morrison, 2003).

But in this assignment, Toyota is applying the developed principles and practices of employee performances with the evolution process. This process is successful to increase the learning capabilities of employees. The employees have to focus on not only market share and accessibility of resources, but also customers’ value, continuous improvement of employees’ engagement in the working process.

The labor and employees of Toyota in expatriates have been agreed to the system of performance-based pay in mechanical and skilled workers. This system is running since April 2009 in the US. But, if the employees are aged, then they are benefited from the seniority-based promotion of their given services, which is first establish in Japan, by eliminated the system of the merit-based wages system.

For effective management of employees’ performances in the UK’s production process, the employees are also encouraged and developed their skills and capacities by training to specific job requirements (Toyota).

How do Toyota’s employees maintain links with home?

Toyota Company is highly effective in maintaining the level of communication between employees and their families during this assignment. They are also encouraged to share their views, feelings, and moments of life with their family members. Good communication is important for employees to emphasize more on their performances.

On the first production system of Toyota, the employees are not preferred to communicate with their families, and some of them were very upset to have no link with their home.

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The employees can also maintain the communications with their home by getting occasional off from working times. The plants of Toyota are shut down in summer, a week after Christmas, and some other official holidays of the regional continent.

In this system, the employees are getting a chance to go home by alerting their managers, which will reduce the payment, which they would get on their given performances. To maintain their home or otherwise higher wages, are fully controlled by the employees, which they prefer most. They can maintain personal schedules by cutting their wages, which will not affect the company’s reputation by not linking up their employees with families (Toyota).

How are pay and allowances reviewed and when should employees consider localization?

When Toyota as Japan’s leading automobile company is considering the fact of employees’ localization in their efficient services in the production and manufacturing process, the company also has to consider special pay and allowances of their services given to the company.

If the example of North American Toyota Company is given, then the employees of Japan are pay on the basis of the quality of their workforces and infrastructure of their services. They are treated as significantly as international employees with potential efforts given in the operation process. By considering localization, employees are planned to pay high allowances in the new plant of assignment.

The employees, who work overseas, also pay personal expenses and transportation costs of linking with their families. In 2008, Toyota is focused more on the growth and efficiency of their employees, by identifying their demand for financial services, like an easy payment plan, domestic revenue base wages, promotion regarding global risks in funding, and operational improvement efficiency by training.

In the operating activities of employees, the company is given ¥2,981.6 billion worldwide. The incremental portion of cash payments is given for overseas employees mainly, to motivate themselves in their workforce efficiencies (Toyota Motor Corporation, 2008).

This payment and allowances are focused on the success of after hour kaizen, which is considering overseas employees. The employees are working full time to improve efficiency and product quality in the factory. The workers are also paid high compensation for their overtime efforts in the factory. The company is also fulfilled the workers’ job requirements according to the allowances paid by the company.

What impact do family issues have on employees and how can these be managed in Toyota?

In Japan, the manufacturing processes of products are mainly dependent on quality workers, who are driven by their wives and families. Their wives are emphasized on their husbands’ services, who are giving their efforts for hours, not possible without their wives. Their wives are also contributing by maintaining personal needs, which is helpful for them to give efficient and effective services to the operational activities.

Toyota also gives allowances in high for overseas employees, who are facilitated by their family supports in their services. The company is also maintaining social interactions between the employees of Japan and America, as informal cultural activities of employees.

The company is supporting various cultural activities, families, materiality, and children of the employees.

Toyota is joined with National Centre for Family Literacy (NCFL) in the Family Literacy Programme for immigrant families of employees, who are below literacy skills. Now the company is allowing $3.2 million to establish a Family Literacy Programme of employees, by giving this large amount to NCFL in five major cities of Toyota operational service sectors with three-year period investments.

Toyota has also established the Institute for Child and Family Health (ICFH), which is a private and non-profit organization by providing health, behavioral health, education, and prevention services to the family members of employees, who live overseas, and away from the families. They are supporting 25,000 children and families every year (Liston & Venable, 1995).

Repatriation

The often-overlooked topic in the expatriation program is the repatriation of the expatriates after they accomplish a job or tenure. Though the companies are not well planned and pre-scheduled about the reentry of expatriates but the eventual result is that these people have to reentry the parent corporation with some exceptions. Though repatriation is not given emphasis adequately but there are several reasons for the repatriation of employees and their families. The MNCs should have a corporeal repositioning arrangement, a changeover arrangement, and a grant for readjustment for the repatriates. There could be cultural shock and reverse cultural shock to the employee and their families. Hence, these things demand more concentration in the foreign assignment. Sometimes the career advancement after repatriation is coupled with the success of the foreign assignment and thereto this type of early assurance should be honored later. The employees, migrants to a subsidiary, also have the fear of not getting a suitable placement after reentry.

How will Toyota’s employees move to the next stage of his/her career?

Toyota has its standalone system for expatriation management. It usually couples repatriation schedules with a review before the repatriation. Like other companies, Toyota usually couples career advancement with the success of the foreign assignments when there is high competitiveness and vagueness. And where the situation is mild and in the control of the firm, repatriates usually get a similar placement as they had before their migration. Toyota has different performance appraisal systems for different levels of the organization. The employees returning from the subsidiaries are also evaluated through the performance evaluation system explicitly adjusted for their managerial level. Some of the employees are also working as expatriates by leaving one foreign assignment and joining in a newer foreign assignment. For example, the administrator-level employees of Toyota can get their promotions within occupational classes by having a rank class promotion in their employment path. In every promotion, the employees are being coupled with higher remuneration benefits. The employees through the employment path could reach the lead administrator position. Since the organization has a flat organizational structure, hence, the promotion and advancement of employees are completely coupled with vacancy availability. Moreover, the employees are required to exert continuous performance over a couple of years for advancement in the career path to express the suitability for the post (Toyota Motor Manufacturing (UK) Ltd.).

 How does Toyota ensure consistency of remuneration and benefits provided with its existing workforce?

The company directors have been deciding the corporation’s salary structures. The successive year’s pay and benefit bills are usually set according to the previous year’s pay bills. There are several pay grades in the salary structure of Toyota along with the basic job portrayal which defines relevant duties withholding the corporation’s basic principles such as team working, continuous improvement, and innovation. As the employee walks along with the advancement path, the complicacies of jobs also rise. The job objectives set for the individual employee are coupled with the bonus and additional payments. Since the repatriates of Toyota usually either get a promotion or remain in the same employment level according to rank class, hence, remuneration and benefits provided are changed to the usual system of payment. But there is complicity because these repatriates may become frustrated because receiving lower payment than that of their expatriation period. For example, an employee of administrator rank is entitled to get £16,725 as basic salary which is coupled with a pension, life assurance (insurance facility), personal fitness care, striking car facilities, overtime payment, an annual paid holiday of 25 days (+ bank holidays), corporate bad health benefit, workwear freed, subsidized restaurants facility, a nursery in the workplace, and relocation assistance (which is the most important in expatriation and repatriation) (Toyota Motor Manufacturing (UK) Ltd.).

 What can we learn from this assignment?

The holistic expatriate management can be learned from the assignment i.e., employing every perspective and issue of expatriate management. The learning can be classified into several classes as the following:

  1. Recruitment:Such recruitment is essentially internal in nature that is the selected managers are acting employees of the corporation. The reasons behind the recruitment include unavailability of skilled (technically or in management talent) host nationals, facilitation, and maintenance of control in the foreign country, etc.
  2. Selection: Such selection is essentially seeking out the adaptability and cultural flexibility of the candidates. The basic characteristics followed are adaptability of the expatriates and their family members withholding provisions about religion, cross-cultural acquaintances, environmental suit, cross-cultural understanding and openness to new people, ability to sustain in a completely different life, acquaintance in verbal and oral communication, etc.
  3. Failure of expatriates: The failure of expatriates is linearly related to direct and indirect costs since usually the expatriates are well paid and there might be a loss of business in the subsidiary. The repatriation of the failed expatriates is also problematic because of certainly having no pre-prepared schedule for such failure.
  4. Problems regarding repatriation: Repatriation is the least emphasized issue in expatriation management. The problems can result in the loss of highly skilled employees, the indifference of accepting foreign assignments, and devaluation of skills. These problems may evolve due to strategic misplacement of employees in the host corporation and the subsidiary. To limit repatriation problems a corporation must employ mentors for expatriates to help them keeping continuous relationships with the organization, couple foreign assignments in the long-term career advancement schedule, preplanned reentry schedule and schedule for a tenure of the actual assignment, and employ expatriates to develop new expatriates for the newer foreign assignments.
  5. Challenges of expatriate management: there are a lot of challenges regarding expatriates such as cultural shock and reverse cultural shock, power distance between coworkers, individualism as a result of societal differences, uncertainty avoidance tendency, long tenure career advancement expectation, family problems in international employment, etc.

Conclusion

Multinational Companies restlessly are opening their subsidies to increase their regime throughout the world. Hence the necessity of expatriates comes into play. It has been the most challenging for the companies since there are challenged by various crucial factors that have been described in the paper earlier. Therefore, the management of expatriates also becomes a challenging task for the organizations. The expatriates for being the companies’ employees require many provisions such as family migration, Foreign Service allowances, remunerations coupled with tax liability provisions, and other allowances and benefits. The expatriates must have adaptability in the new cultural dimensions, to new people, and to new environment both natural and working adaptability. Toyota regarding its expatriate management is much outstanding. The organization has a standalone procedure for recruitment, development, logistics support of the expatriates. The family migration (so-called relocation) along with continuous organizational relationships has been working as the tonic for the success of its migrant employees in foreign assignments. The repatriation system of the corporation has also increased the success rate. The repatriates of Toyota usually have the usual career achievement path embedded with the host career achievement schedule. The monetary benefits are also equalized for the repatriates in the foreign assignment and after reentry into the organization.

Bibliography

  1. Daniels, J., Radebaugh, L., & Sullivan, D., 2008, International Business, 12th Edition, London: Prentice Hall; ISBN-13: 978-0136029656.
  2. Toyota UK, 2008, Toyota Motor Manufacturing (UK) Ltd.
  3. Tayeb M. H., 2005, International Human Resource Management.
  4. Select International, 2006, Best Practices in Employee Selection: How Toyota Created a World-Class Workforce.
  5. TMC Environmental Committee, 2004, 5 Logistics.
  6. Toyota, 2008, Salary and Benefits.
  7. Toyota Motor Corporation, 2009, Human Resources at Toyota Manufacturing UK.
  8. Toyota Motor Corporation, 2008, Sustainability Report.
  9. Morrison, M., 2003, Toyota Applies Quality Management to People.
  10. Toyota Motor Corporation, 2008, Annual Report 2008 of Toyota Motor Corporation.
  11. Liston, L. & Venable, T., 1995, Toyota Parks $450 Million, 1,200-Employee Plant in Toronto Area.
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