Chapter 3

IHRM: Sustaining international

business operations

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 Chapter objectives
The previous two chapters concentrated on the global
environment and organizational contexts. We now focus on
the ‘managing people’ aspect. The aim is to establish the role
of HRM in sustaining international business operations and
growth. We cover the following:
• issues relating to the various approaches to staffing foreign
operations
• the reasons for using international assignments: position
filling, management development and organizational
development
(cont.)
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 Chapter objectives (cont.)
• the various types of international assignments: short-term,
extended and longer-term; and non-standard arrangements:
commuter, rotator, contractual and virtual
• the role of expatriates and non-expatriates (international
business travelers) in supporting international business
activities
• the role of the corporate HR function.

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 Approaches to staffing
• Factors affecting approaches to staffing
– General staffing policy on key positions at
headquarters and subsidiaries
• Ethnocentric
• Polycentric
• Geocentric
• Regiocentric
– Constraints placed by host government
– Staff availability
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 Ethnocentric
• Strategic decisions are made at headquarters
• Limited subsidiary autonomy
• Key positions in domestic and foreign
operations are held by headquarters’
personnel; PCNs manage subsidiaries

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 Polycentric
• Each subsidiary is a distinct national entity
with some decision-making autonomy
• HCNs manage subsidiaries who are seldom
promoted to HQ positions
• PCNs rarely transferred to subsidiary
positions

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 Geocentric
• A global approach - worldwide integration
• View that each part of the organization
makes a unique contribution
• Nationality ignored in favour of ability:
– Best person for the job
– Colour of passport does not matter when it
comes to rewards, promotion and development

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Figure 3-1: Geocentric staffing requirements

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 Regiocentric
• Reflects a regional strategy and structure
• Regional autonomy in decision making
• Staff move within the designated region,
rather than globally
– Staff transfers between regions are rare

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Table 3-1: The advantages and disadvantages of using PCNs,
TCNs and HCNs
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Figure 3-2: Determinants of IHRM approaches and activities

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 Reasons for international
assignments
• Position filling
– Eg. Skills gap, launch of new endeavour, technology
transfer
• Management development
– Training and development purposes, assisting in
developing common corporate values
• Organizational development
– Need for control, transfer of knowledge, competence,
procedures and practices

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 Types of international
assignments
• Short term
– Up to 3 months
• Extended
– Up to 1 year
• Long term
– Varies from 1 to 5 years
– The traditional expatriate assignment

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 Non-standard assignments
• Commuter assignments
• Rotational assignments
• Contractual assignments
• Virtual assignments
Some of these arrangements assist in overcoming the
high cost of international assignments but are not
always effective substitutes for the traditional
expatriate assignment

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Figure 3-3: Factors influencing virtual assignments

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 Roles of an expatriate
• Agent of direct control
• Agent of socialization
• Network builder
• Boundary spanner
• Language node
• Transfer of competence and knowledge

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Figure 3-4: The roles of an expatriate

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 The role of non-expatriates
• People who travel internationally yet are not
considered expatriates as they do not
relocate to another country
– Road warriors, globetrotters, frequent fliers
• Much of international business involves
visits to foreign locations, eg.
– Sales staff attending trade fairs
– Periodic visits to foreign operations

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 A glamorous life?
• International business travelers cite the
positives as:
– Excitement and thrills of conducting business
deals in foreign locations
– Life style (top hotels, duty-free shopping,
business class travel)
– General exotic nature

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 But a high level of stress!
• Home and family issues – frequent absences
• Work arrangements – domestic side of
position still has to be attended to
• Travel logistics – waiting in airports, etc.
• Health concerns – poor diet, lack of sleep,
etc.
• Host culture issues – limited cultural
training
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Table 3-2: Various roles of corporate HR

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 The role of the corporate HR
function
• Can we manage our people like a global
product? The feasibility of:
– The concept of a global internal labour market
– Standardization of work practices and HR
activities
• What HR matters require central control
and what can be decentralized?

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 Chapter summary
This chapter has expanded on the role of IHRM in sustaining
international business operations. We have:

• Looked at the various approaches to staffing international

operations – ethnocentric, polycentric, geocentric and
regiocentric – examining their advantages and disadvantages and
factors that may determine the choice of these options.
• Considered the reasons for using international assignments:
position filling, management development and organization
development.
(cont.)

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 Chapter summary (cont.)
• Discussed the various types of international assignments: short,
extended and long-term (traditional); and non-standard forms
such as commuter, rotational, contractual and virtual
assignments.
• Examined the various roles of the expatriate: as an agent for
direct control, as an agent for socialization, as network builders,
as boundary spanners and as language nodes. These various roles
of the expatriate help to explain why expatriates are utilized and
illustrates why international assignments continue to be an
important aspect of international business from the
organization’s perspective.
(cont.)
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 Chapter summary (cont.)
• Recognized that non-expatriates are also critical to international
business operations. International business travelers present their
own challenges, such as the effect of frequent absences on family
and home life, the possible negative health effects and other
stress factors. The management of such individuals, however,
does not appear to fall within the domain of the HR department.
• Looked at the role of the corporate HR function as the firm
grows internationally, building on sections from Chapters 1 and
2.

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