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Global Mobility at Shell Royal Dutch Shell is a British-Dutch multinational oil and gas company, founded in 1907, that is headquartered in the Netherlands and incorporated in the United Kingdom. The company is one of the world’s largest oil producers with revenues of about $388 billion (profit of $24 billion) and operations in more than 70 countries. The company has some 82,000 employees, of which about 7,000 employees are at any one time on expatriate assignments outside their home country. A crucial task for Shell is to manage this extensive population of expatriate workers in order to meet its commercial goals and transfer valuable technical and managerial knowledge across operations located in different nations. It’s no easy task. Shell’s long-term goal is to develop local talent wherever possible, thereby leveraging local employees’ networks, market knowledge, and language skills, while also minimizing costs. However, there are many cases where deploying foreign nationals makes the most commercial sense. First, there is often a shortage of skills in certain locations. Shell has found this to be a vital issue in the Middle East and North Africa, where the company often works with local joint-venture partners or third parties. Moving Shell employees from other countries to work with partners and transfer expertise is often a key part of the company’s strategy. Second, Shell recognizes that the skills of staff and senior leadership are improved by significant exposure to overseas markets. In other words, in a multinational like Shell, high-potential employees need to understand what it is like to live and work in other countries-to get a sense of the conditions on the ground. Third, in many instances, senior Shell employees need to be on the management boards of local subsidiaries in order to effectively monitor and control those operations and keep the head office informed of developments. As Shell has found, however, moving employees to other countries raises a number of important challenges. It’s not always easy to recruit skilled personnel to work in different locations. A survey of expatriate personnel at Shell found that five issues had the greatest impact on the willingness of an employee to accept an international assignment. In order of importance, these were (1) separation from children during their secondary education, (2) harm done to a spouse’s career and employment, (3) failure to recognize and involve a spouse in the relocation decision, (4) failure to provide adequate information and assistance regarding relocation, and (5) health issues. The underlying message was that the family is the basic unit of expatriation, not the individual, and Shell needed to do more to recognize this. To deal with these issues, Shell implemented a number of programs designed to address some of these problems. To help with the education E: ? o AA G To deal with these issues, Shell implemented a number of programs designed to address some of these problems. To help with the education of children, Shell built elementary schools for Shell employees where there was a heavy concentration of expatriates. As for secondary school education, Shell worked with local schools (e.g., often providing grants) to help them upgrade their educational offerings. It also offered an education supplement to help expatriates send their children to private schools in the host country. Helping spouses with their careers is a more vexing problem. According to the survey data, half the spouses accompanying Shell staff on assignment were employed until the transfer. When expatriated, only 12 percent were able to secure employment, while a further 33 percent wished to be employed. Shell set up a spouse employment center to address the problem. The center provides career counseling and assistance in locating employment opportunities both during and immediately after an international assignment. The company also agreed to reimburse up to 80 percent of the costs of vocational training, further education, or reaccreditation. Shell set up a global information and advice network known as “The Outpost” to provide support for families facing the challenges of global mobility. The Outpost has its headquarters in The Hague with about 50 local offices around the world. The center recommends schools and medical facilities and provides housing advice and up-to-date information on employment, study, self-employment, and volunteer work. Finally, there are also important issues with expatriate pay. An expatriate’s basic salary and bonus are linked to what they would receive in their home country. Additional pay is given to expatriates moving to more expensive locations so they can maintain their standard of living. Shell also recognizes that employees often need additional financial incentives to persuade them to leave family and friends and location “premiums” to persuade them to move to less popular expatriate destinations, such as Kuwait and Iraq. Shell also uses tax equalization as part of its expatriate pay approach. Specifically, home country taxes are deducted from an expatriate’s pay, while the host country taxes are paid by the company. Of course, all of these added factors make expatriates an expensive resource that can cost up to three times as much as a local employee. Sources: Aysha Binbraik, “International Mobility at Shell,” Mercer Management Consulting, 2016; J. DeGraff, “Single System Expatriate Compensation,” Cornell HR Review, April 7, 2010; J. Barbian, “Return to Sender,” Training, January 2002, 40-43; and J. Mainwaring, “Shell Schools: Supporting Expat Families,” Rigzone, June 21, 2012. Page 593 Case Discussion Questions 1. Royal Dutch Shell is one of the largest companies in the world and has been for years. With sales approaching $400 billion and 82,000 ! { a AA Snell also recognizes that employees often need additional inancial incentives to persuade them to leave family and frienas and location “premiums” to persuade them to move to less popular expatriate destinations, such as Kuwait and Iraq. Shell also uses tax equalization as part of its expatriate pay approach. Specifically, home country taxes are deducted from an expatriate’s pay, while the host country taxes are paid by the company. Of course, all of these added factors make expatriates an expensive resource that can cost up to three times as much as a local employee. Sources: Aysha Binbraik, “International Mobility at Shell,” Mercer Management Consulting, 2016; J. DeGraff, “Single System Expatriate Compensation.” Cornell HR Review, April 7, 2010; J. Barbian, “Return to Sender,” Training, January 2002, 40-43; and J. Mainwaring, “Shell Schools: Supporting Expat Families,” Rigzone, June 21, 2012. Page 593 Case Discussion Questions 1. Royal Dutch Shell is one of the largest companies in the world and has been for years. With sales approaching $400 billion and 82,000 employees worldwide, including some 7,000 employees on expatriate assignments, the company is large, complex, and powerful. Compared with retail or consumer companies, Shell is much more narrowly focused and much more technical in orientation. How do you think this narrower focus and technical orientation affects global human resource management at Shell? 2. Shell’s long-term goal is to develop local talent wherever possible, thereby leveraging local employees’ networks, market knowledge, and language skills, while also minimizing costs. Moving Shell employees from other countries to work with partners and transfer expertise is often a key part of the company’s strategy. Can this be done effectively in all world regions (e.g., Middle East and North Africa), where potential local employees do not have the educational background in many cases? How would you solve the education, skill, and knowledge gaps if you were a Shell C-suite leader? 3. Spending significant time (e.g., three years) on an expatriate assignment has significant family and professional implications, as can be seen in the Shell survey that was mentioned in the case. How would you feel if you were given an expatriate assignment today? How would you feel about it if you were 25 years old? 35? 50? Design elements: Modern textured halftone: ©VIPRESIONA/Shutterstock: globalEDGE icon: globalEDGE: All others: McGraw-Hill Education