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The Double-Edged Sword of Overseas Experience- Valutrics

Bottom Line: Executives who accumulate international experience are no more likely than others to advance their career at multinational companies.

Thanks to the increased emphasis on globalization and the continued emergence of multinational firms, the number of executives being transferred from their company’s world headquarters to foreign markets is on the rise. A prominent 2013 study  predicted that over the next 10 years, those assigned to international posts would increase by 50 percent as firms seek to improve their global strategy by having people in place to work with foreign partners, subsidiaries, and managers.

In turn, it’s been suggested that international experience is a must-have on the modern CEO’s resume. But according to a new study, accruing foreign know-how boosts executives’ careers only up to a point, and spending too much time working abroad may actually delay, rather than accelerate, an executive’s climb up the corporate ladder.

Foreign-based top managers’ time away from the central corridors of power seems to act as a double-edged sword: Although it affords them international experience, it also deprives them of the face-to-face networking opportunities at headquarters that are so crucial to career advancement, the study suggests.

The authors of the study surveyed 163 CEOs at some of the largest publicly listed firms with home offices in the United Kingdom, Germany, the Netherlands, and Switzerland. Not only do those four places boast some of the leading stock exchanges in Europe — meaning (pdf) they are also host to many large multinational companies that seek to groom CEOs with diverse backgrounds and international credentials — but the sample also allows for some stark comparisons between markets of different size. Germany and the United Kingdom are powerhouses on the global stage, whereas Switzerland and the Netherlands are smaller but fully developed economies whose firms tend to expand internationally early in their life cycle as a core strategy for gaining foreign customers and securing overseas investments.

Accruing foreign know-how boosts executives’ careers only up to a point.

From annual reports, company websites, and biographical reports, the authors gleaned demographic information and compiled career histories for the executives in the sample.

The authors measured the “time to the top” — the total years between each CEO’s first professional job and the appointment to the top position in his or her current firm — and also accounted for the length and breadth of the executives’ foreign assignments. To do so, they calculated how many years the CEOs had spent working abroad, along with the number of countries they had been stationed in. The researchers also controlled for the size of each firm and its top management team, along with the CEOs’ level of education, tenure, and nationality.

Overall, the career trajectory of the internationally experienced executives resembled an upside-down U-shape, the authors found. At the earliest phases, acquiring knowledge of different foreign markets tended to speed up executives’ career path. But after a certain point, extensive employment in international zones tended to hold back executives, presumably because accumulating so much foreign experience means they haven’t been able to network at home, the authors suggest.

This backs up previous research that has found that people who work closer to the heart of a company — meaning they have more access to the decision-making processes, information flow, and social contacts — than their peers scattered around the globe typically advance faster in their careers. Executives who have indirect or remote contact with their firm’s brain trust tend to miss out on promotions and take longer to reach the executive suite.

Further proving the importance of centrality, executives who spend more time working in countries that lie in close geographic proximity to their headquarters rise up the hierarchy faster than their counterparts in far-flung locales, the researchers found. This jibes with other studies that have shown that multinationals tend to promote executives who have worked in countries in their neighborhood and who have formed valuable business ties with companies operating in their immediate region.

The findings lead the authors to suggest that internationally oriented companies should devote more HR energy to making sure people with extensive experience abroad can still stay connected to key decision makers at central headquarters. To fully cash in on their international capabilities, the authors further recommend that firms should also strive to construct a top management team with a blend of executives who have experience in both proximate and distant foreign markets.

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So the prevailing view of “the more international experience, the better” doesn’t necessarily hold true. Executives who combine their work life between home and foreign markets are more likely to rise up the ladder, and so-called pragmatic career players — who value career advancement above any idealistic dedication to a particular company — should select international assignments that keep them close to home, earn them visibility, or enable them to network with other executives.

In essence, the authors advise that executives “should continue to engage in international assignments but, at the same time, they should not assume that extensive levels of international mobility will necessarily lead to faster career progress. To quickly advance in their careers, executives should acquire international human capital and, at the same time, maintain strong network ties with key decision makers in the firm.”

Source: “Too Much of a Good Thing: Does International Experience Variety Accelerate or Delay Executives’ Career Advancement?” by Dimitrios Georgakakis (University of St. Gallen), Tobias Dauth (HHL Leipzig Graduate School of Management), and Winfried Ruigrok (University of St. Gallen), Journal of World Business, Apr. 2016, vol. 51, no. 3