Near Yellow Mountain

Sunday, March 11, 2012

"Package" deal

There are many reasons people decide to accept an ex-pat assignment.  Reasons run the gambit - from "a chance to see the world or at least a small part of it" to the opportunity to quickly skip a couple of rungs in the climb up the corporate ladder. No matter what the reason, a side benefit of going overseas is the extra benefits that come with an ex-pat compensation package.

In many large companies the extra benefits that come with being an ex-pat are clearly specified and are non negotiable. For example, international school tuition for children, housing and cost of living allowances, club memberships, home leave or equivalent cash, etc. In less desirable locations additional benefits such as hardship pay, R&R trips, car and driver also come into the mix of potential benefits. In companies with only a few ex-pats or none at all policies tend to be more limited and less clear. On the other hand, they are also more open to negotiation.

At the time, I was asked to move to Japan, my company had a clear strategy of limiting ex-pats. My division had no ex-pats and HR had no clear policy about ex-pats. Like many other things, dealing with ex-pats had been outsourced to KPMG. There was a basic policy written by KPMG from which negotiations started.

Although it is hard to believe now, in late 1999 one could not simply type a few key words into Google and get a treasure trove of info on ex-pat policies and packages. After indicating an interest in an overseas assignment, I was given the KPMG manual which became my company's "policy". At first glance the policy seemed reasonable and to cover most key points but as I started to research the ex-pat experience by contacting people at other companies, going to the library (imagine that) and even managing to get copies of former ex-pats agreements; I could see that I might be able to do much better than the policy I had been given.

In the late 1990s, like many other aspects of employee benefits, there was a trend toward "minimization and cost shifting" to the employees. Companies began to try to sell prospective ex-pats on the "long term career benefits of going overseas" and to attempt to lower the cost of ex-pat packages. Pay premiums were reduced, hardship bonuses lowered and the amount of housing allowances declined.

I was given a couple of weeks to decide whether or not I would accept the assignment. My wife and I discussed the pros and cons. I was already spending a lot of time in Japan on business trips and was confident I could succeed from a business perspective. Our children were in elementary school so the timing seemed good to give them an international experience. We also decided it would be a good chance for the family to experience other countries in the region on vacations. I told my boss that I would go IF the company offered me a reasonable package to do make the move. That is when things got interesting.

I put together a list of extra costs we would incur by living in Japan that was not covered in the ex-pat policy. Rather than mention every detail - suffice it to say the list was extensive. One example - electrical items. Although the plugs are the same in Japan and the current "similar"; most electrical equipment we had was not suitable for long term use in Japan. I felt it reasonable for the company to reimburse me for all household items we would need to buy. Our HR director asked me to be reasonable. My response was that nothing less full reimbursement for things we needed was acceptable. I also asked for some things that we really didn't need so that HR could win a few battles on the road to finalizing my package.

Finally, after two months of haggling, HR agreed to provide a side letter providing virtually everything I asked for. I accepted with the provision that the last sentence of the side letter state that "in the event of any conflict with the company wide ex-pat policy, the side letter prevails".  I felt good and as I was later to find out HR felt good too. Yes, I had gotten much more than they wanted to provide but our HR Director was very experienced and knew I could have gotten more. "Win - Win, at least for the moment.

The three year assignment turned into five. After five years the Japanese tax laws for foreigners change and the cost to the company jumps. At the same time, American companies were in the middle of the "rush to China". Our business was growing rapidly and the powers that be decided that I should move to "lower cost" China. They told me that since I had overall Asia responsibility anyway it made sense for me to be in the fastest growing market. "No thank-you" I replied.

My boss had changed. The new guy was much more aggressive and tried to convince me on the merits of China which he knew almost nothing about. For 3 months I said no. Finally on a trip back to the US I was given an ultimatum - move to China or come back to an "uncertain future". As my boss and I finished off a bottle of red wine in an upscale Charlotte, NC restaurant; I looked him in the eye and said "I am sorry but I am not moving to Shanghai". He told me that he understood and would "get someone else". Through the company grapevine, I knew he had already asked all likely candidates and had been turned down across the board. We both were unhappy. I did not want to leave Japan and return to the US and he realized his latest attempt to get me to move to China had failed.

I returned to Kobe the next day and told my family at the dinner table that we would be moving back to the US. A few seconds later I was looking at three very unhappy faces. "Dad we want to stay in Asia" was the mantra of my two daughters. My wife was not excited at the prospect of the return. Over the 5+ years in Japan, I had made over 40 trips to China and seen most of the country. My daughters had been once, stayed in a 5 star and seen all the major tourist spots in Beijing and Xian. Their perspective was clearly limited. My wife had been to China three times. "Look", I said "China is not Japan" (not my finest verbal hour). "If you want to go to China, we will go but I don't want to hear a lot of complaining after we get there". At that my point, I knew the deal was done. Fortunately my boss didn't. He called me the next day. "I want you to know that you are still the 'leading candidate' for this job. Despite being frustrated at his don't take no for an answer style; I smiled inwardly. "OK", I said, "let me talk to my family again". Game on.

I sent my boss an email the next day saying that we would consider the move but a new package had to be negotiated. I reminded him that my daughters were in Jr High and High School and we would need certain guarantees. If we went, I needed a written commitment that my sophomore daughter would graduate from high school in Shanghai. That kind of commitment is poison to HR Directors.

Long story short - our prior HR Director had retired, the new guy (had been with our company less than a month) had taken early retirement from a much larger company and had a Texas sized ego. He also knew nothing of my company's policies and was told by my boss to "do what he had to do to get me to China" - lucky for me I still had some friends back at HQ who let me know important details like that.

Many contentious phone negotiations with HR took place. In the end, I agreed to a three year deal which got my elder daughter to graduation. China was a "hardship" country which made our package more generous in several ways. At this point I was skeptical that I could work for our company in the US again so I negotiated an exit package far beyond the standard "completion" bonus.

Three years later, we were in the middle of building a plant and my boss said it was "not convenient" for me to return as agreed. By then we were used to Shanghai and I was ready to negotiated my final package but that is a story for another time.