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Happy Birthday ECA!

06 Sep 2011


As ECA reaches 40, Ian Ridgwell, Managing Director of ECA International,  looks back at the evolution of international business since the company's inception.

ECA was founded in 1971, as this issue of Newsline celebrates. The world 40 years ago was a very different place: it was only 26 years after the end of World War II, and although many countries had rebuilt their economies, international travel was still rare as there was neither the infrastructure nor the wealth to support it. Mass intercontinental travel was still in the future – the 747, the workhorse of the skies, only made its first commercial flight in 1970.
 

The typical expatriate landscape c. 1971

A person willing to be expatriated was, therefore, highly valued and the exception to the norm. Compensation for international assignments, whilst developed, was hampered by the lack of international banking infrastructure. The global banks of today did not exist. Developing countries tended to be dominated by banks from whichever country had been the imperial power, money transfer was complex and expensive, and neither the individuals nor the companies had any real capacity for risk offset. The salary delivery system was then evident: pay untaxed, offshore in the most appropriate hard currency. Given the state of the world, the expat could make a currency gain – most developing countries had weakening currencies – and the company could cite this as a benefit.
 
This payment method led to the next expat advantage – tax. This was left to the individual and most countries only taxed income brought into their country. The result was elaborate use of overdrafts and minimising official bank transfers. Governments were frequently not knowledgeable about expatriate packages and often had no powers to act. As I learned from personal experience, the Government of St Lucia would have had no powers to stop me leaving the country before paying my income tax, but Barclays Bank did have the right to have me stopped at the airport as I had a residual overdraft. Today, governments are far better informed and companies take responsibility for compliance – a shift which has been frequently painful and expensive.

As companies’ expatriate workforces grew, they recognised the need to build on the knowledge they gained from managing each individual assignment and recognised the pressing need to establish a system for creating fair pay. ECA was established by just such companies.

 

ECA and the growth of the IHR expert

Such was the typical expatriate landscape. In 1971, there were travel guides but they were tourist-oriented. Beyond this, the key source of information for preparing an expatriation was the experience of previous assignees. Not surprisingly, company managers were increasingly cynical about the upwards only direction of packages. As companies’ expatriate workforces grew, they recognised the need to build on the knowledge they gained from managing each individual assignment and recognised the pressing need to establish a system for creating fair pay. ECA was established by just such companies to consolidate the knowledge gained and provide all the information an international HR manager would need to organise the expatriation and design the compensation package.
 
Such information crystalized into reports that ECA still provides today, albeit in more sophisticated and detailed format and accompanied by tools and software. These include Country profiles, tax information, housing information, labour law, salary surveys and cost of living.
 
As ECA developed data production systems to cover all the elements required to design and execute compensation policies, a parallel requirement grew inside the owner companies to develop expertise in using the data efficiently. Thus the 1970s and early 1980s saw the growth of the international HR expert, capable of understanding environments both at home and abroad. This was a completely new skill set and those who acquired it became much sought after. ECA’s constitution enabled it to capitalise on this development to its advantage, as these experts became ECA’s Directors.
 
As I write this I am in contact with our Asia Director waiting for his bags at the carousel in Kuala Lumpur. In 1971 international telephone calls went through an operator, had to be pre-booked person-to-person. They were also subject to rationing and very expensive. In 1971, by the time Head Office knew of any major problem in another country, the expatriate had usually already solved the problem. Today, the international HR manager receives live Blackberry images as the news occurs. Whilst this greatly improves the expatriate lifestyle, it puts increasing pressure on IHR managers and takes away the luxury of thinking time.
 
The changing role of ECA Understandably, ECA's role and function has also changed since this long-ago time. Originally, as a 'clearing house' of information provided by its member companies, it was clearly understood that it was those companies’ responsibility to ensure that expatriates filled in questionnaires about cost of living. But times change. Today, companies want to buy information that they can access without having such an active role in its development. ECA now uses multiple sources for all of its products and the responsibility for providing accurate data across the world rests firmly on its own shoulders.
 
As international moves increased, the demands on ECA changed. No longer was it sufficient to be a data supplier. The first generation of IHR experts came to retirement, and the new generation of IHR managers brought a distinct change. Increasingly, international HR became part of the career ladder for generalist HR or compensation and benefits managers. The rising stars of these disciplines passed more quickly through the international HR department than their predecessors, creating a new demand for high class service and support from ECA – an extra department and corporate memory, almost, to be relied upon for a solid understanding of the evolution of companies' expatriate policies and the provision of solutions.
 
In researching this article I came across the following statement from the company in 1972. It highlights both the change in ECA and in the world’s attitude to service:
 
"In addition we will use our best endeavours to answer any reasonable enquiry from you concerning employment conditions abroad in those areas. It is recognised however that our ability to answer enquiries during the first years of operation of this service will be limited and accordingly we must reserve the right to decline to answer an enquiry, if answering would in our opinion place an unreasonable burden upon our facilities."
 

As international moves increased, the demands on ECA changed. No longer was it sufficient to be a data supplier and the new generation of IHR managers brought a distinct change creating a new demand for high class service and support from ECA

From paper to software solutions

The massive increase in the number of expats over the forty years since ECA's inception has inevitably led to demand for better tools to manage them. In 1971 computerisation was in its infancy – machines housed in air-conditioned rooms with positive gravity. Analysing a survey of one hundred cities could take ten weeks. Today, 400 cities can be analysed in far less time.
 
From the customer perspective, computing has removed the requirement to look up data manually and work out the tax calculation and cost of living adjustment on a calculator. Computers allowed the development of spread sheet solutions and the evolution of Lotus/Excel heroes. However, even this method was highly manual and came under pressure as volumes rose. Instead hosted software programs tailored to accommodate a company’s specific policies have become an option, performing calculations and scenario costings, housing salary data and tracking assignments.
 
This jump from paper-based tables in 1972 providing basic data, to the ECAEnterprise system providing a customised, immediate full balance sheet and cost projection in minutes is immense. It is fascinating to reflect that in 1999 when ECA moved away from paper, there was a debate as to whether to move straight to the internet or to provide a CD-Rom. A poll of our clients proved that very few HR departments had access to the internet and ECA only launched the data provision element of its website in 2001. The interview with Barry Rodin (ECA through Barry's eyes) gives a personal insight into how it has been working at ECA during these exciting years.
 

Today’s assignee

Before I close, a word on terminology. You will note that I have referred often to 'expatriates' in this article. In English, this word carries with it all the old connotations of privilege, easy money, private clubs and private schooling. In today’s global world, where international moves are commonplace, this image is increasingly seen as outdated, expensive and even damaging. The words have changed to reflect the new reality, and companies increasingly use the terms assignment
and assignee in preference.
 
And finally, perhaps the most dramatic change of the past 40 years. In 1971 'Go west, young man' was the accepted mantra. The US was dominant and the 'green card' nirvana. Today, we hear more 'Go east, young person' as Asia increasingly is the target of assignments and China overtakes the USA with the largest number of hits on our website – and the personal profile of the mobile management tier reflects the more egalitarian modern times.

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