GLOBAL HRM

UNIT 1

INTERNATIONAL HRM

INTRODUCTION AND MEANING:

The advent of the era of liberalization and globalization along with the
advancements in information technology (IT) has changed the world around
us. This has led to the internalization of business, which in turn, has great
influence not only on labour markets and staffing requirements but also on
HR practices across the globe. International business must procure,
motivate, retain and effectively utilize services of people both at the
corporate office and at the foreign plant.
The process of procuring, allocation, effectively utilizing human resources in
an international business is called International Human Resources
Management (IHRM). IHRM is basically the HRM practices at international
level. Typically, HRM refers to those activities undertaken by an
organization to effectively utilize its human resources. These activities
include the following:
(i) Human resource planning.
(ii) Staffing (recruitment, selection, placement).
(iii) Performance management.
(iv) Training and development.
(v) Compensation (remuneration) and benefits.
(vi) Industrial relations.

A model developed by Morgan presents IHRM on three dimensions:

1. HR Activities: The broad human resource activities of procurement,

allocation and utilization. (These three broad activities can be easily
expanded into the six HR activities listed above.)
2. Types of Countries: The national or country categories involved in
international HRM activities:
(a) the host-country where a subsidiary may be located;
(b) the parent-country where the firm is headquartered; and
(c) 'other' countries that may be the source of labour, finance and other
inputs.

3. Types of Employees: The three categories of employees of an

international firm:
(a) host-country nationals (HCNS);
(b) parent-country nationals (PCNS); and
(c) third-country nationals (TCNS).

Thus, for example, the US multinational IBM employs British citizens in its
British operations, often sends US citizens to Asia- Pacific countries on
assignment, and may send some of its Singaporean employees on an
assignment to its Chinese operations. The nationality of the employee is a
major factor in determining the person's 'category', which in turn is
frequently a major driver of the employee's compensation and employment
contract.

DEFINITIONS OF IHRM:

1. Morgan defines IHRM as the interplay among the three dimensions of

human resource activities, type of employees and countries of operation. In
broad terms IHRM involves the same activities as domestic HRM however,
domestic HRM is involved with employees within only one national
boundary and usually one culture.

2. IHRM can be defined as "set of activities aimed at managing

organizational human resources at international level to achieve
organizational objectives as well as competitive advantage at national and
international level."
3. IHRM can be explained as "The set of distinct activities, functions and
processes that are directed at attracting, developing and maintaining an
MNCS human resources. It is the aggregate of the various HRM systems
used to manage people in the MNC, both at home and overseas." (Taylor,
Beechler et al. 1996)

IHRM is concerned with the HRM issues that cross national boundaries or
are conducted in locations other than the home country headquarters. It is
concerned with the relationships between the HRM activities of
organizations and the foreign environments in which the organizations
operate. It also includes comparative HRM studies, like, differences in how
companies in Japan, India, China etc. plan for upgrading of employee skills
and so on.

FEATURES OF IHRM:

IHRM is the study and application of all HRM activities as they impact the
process of managing human resources in enterprises in the global
environment. The features of IHRM are:

Wide Scope: IHRM covers a greater number of activities such as

recruitment, selection, training, compensation and management of
employees at international level.
More Knowledge: IHRM requires the HR managers to have a broader
knowledge of the laws, rules and regulations of foreign country and global
organizations. He needs to possess knowledge of international taxation, rate
of inflation, cost of living, including currency fluctuations.
Complexity: IHRM demands companies to handle large flow of components,
products, resources, people etc. This involves a complex process of
coordination and cooperation involving strong cross-unit integrating
devices, a strong well-developed worldwide corporate identity and
management perspective.
Added Responsibilities: IHRM requires HR managers to fulfil additional
responsibilities like translation of language, both at headquarters and at the
subsidiary level, organizing housing for expatriates, schooling for their kids,
jobs for and providing other administrative services. their spouse
Culture: Culture plays a very important role in IHRM. It and external
perspectives of affects both internal management and there is diversity
management as managers have to deal with people from different cultural
background and gender differences.
Pressures of Globalization: Globalization is the system of interaction
among the countries of the world in order to develop the global economy. It
involves technological, economic, political, and cultural exchanges made
possible largely by advances in communication, transportation and
infrastructure.
Increased Risk
Public Relations (PR): IHRM demands additional PR work to enhance the
multinationals image and deal with human rights, NGOS and various
interest groups operating in different countries.

OBJECTIVES OF IHRM:

An international organization or firm is the one in which operations take

place in subsidiaries overseas, which rely on the business expertise or
manufacturing capacity of the parent company. Such companies or
organizations bring with them their own management attitudes and
business styles. Some of the objectives of IHRM are as follows:

1. To Ensure Availability of Right People: The primary objective of HRM

is to ensure the availability of right people for right jobs so the organizational
goals are achieved effectively. This could only be possible by utilizing the
employees' talent and ensuring that they remain competent and motivated.
2. To Effectively Deal with Diverse Workforce: One of the most
challenging objectives of IHRM is to handle and deal with workforce of
varied nationalities and culture.
3. To provide Job Satisfaction: IHRM is responsible for providing job
satisfaction and self-actualization as well as maintaining cordial relations
between the management and the employees.
4. To Maintain Standard of Work life: IHRM is required to maintain the
standard of the work life and help in the practice of ethical behaviour and
policies in the organization.
5. To Remain Competitive throughout the World: IHRM is concerned
with the management of the company's diversed work force and their output
despite being geographically divided by boundaries. It ensures that the
company receives competitive advantage both locally as well as globally.
6. To Decide on Fair Benefits and Compensation: In the increasingly
diverse and globalized world, benefits and even more attractive
compensation have become an objective for HR. The managers try and
decide on fair benefits to be given to employees.
7. To Retain Employees: Skilled employees are one of the organization's
most effective resources as they help to face competition effectively.
International HR managers have to ensure that they retain the employees as
organization has to invest lot of resources in procuring and managing them.
8. To Fulfil International Legal Compliance: As organizations expand into
foreign markets or hire employees that are nationals of other countries, they
must be familiar with the labour and tax laws of many different
jurisdictions. Keeping abreast of these laws and how they affect the
organization is an extremely important objective for global HR because
failure to follow the law may result in the business being held legally or
financially liable.

EVOLUTION OF IHRM:

Till the 1960s, firms operating internationally maintained organizational

structures with centralized technical and managerial resources,
manufacturing ability and the access to d control of the capital (Doz &
Prahalad 1981). As exports with centralized technical and creased, it was
seen as more attractive to establish sales subsidiaries in other countries,
staffing them with skilled personnel from the home country.
These expatriates had the necessary product knowledge, and could even
initiate local manufacture, but also had a perceived primary loyalty to the
home company and country culture. This was also an era of 'convergence'
thinking (usually towards the dominant U.S. culture), with little attention
being given to national sensitivities and cultural beliefs and behaviour.
With the developing internationalization of many firms in the late 1960s and
early 1970s, companies established overseas plants and entered joint
ventures with foreign firms. Firms sought commercial success through
moving closer to their customers by employing more host-country nationals.
In some situations, they aimed at being perceived more as 'local' rather than
'foreign', for various reasons.
In the 1990s, not only had the practice of IHRM become more sophisticated,
but research into its policy and practice established. It had a developing
body of research and practice which is regularly considered at dedicated
conferences, and published in general management as well as HRM
journals. Increasingly, international HRM is being taught in university
faculties of business management courses, and management MBA
graduates, as well as graduates in HRM, are now more frequently aware of
the issues involved, and the functions of HRM in an international context.

REASONS FOR EMERGENCE OF IHRM:

Some of the reasons for emergence of IHRM are:

(1) Global Competition: Due to the increase in information technology,
global linkages have become more extensive Production and transportation
have to be co-ordinate worldwide. Companies that need highly skilled labour
require to perform technical jobs are more driven by competitive pressures,
requiring well defined HR policies to retain the valuable manpower. E.g.:
Nokia has faced a lot of pressure due to competition from Samsung.
(2) Mergers, Acquisitions and Alliances: Organizations today are acquiring
or merging with different firms. There are many HR issues related in such
mergers and acquisitions due to blending of diverse cultures and
operations. There is a possibility that the talented employees would quit due
to differences in the corporate cultures. In such situations, IHRM has a
leading role to play.
(3) Organizational Restructuring: Organizations need to be restructured in
order to be more competitive. Restructuring can be done by closing various
facilities, elimination of layers, laying off workers etc. Thus during
organizational restructuring there are many challenges faced by HR
executive.
(4) Technological Advancements: The increase in technology jobs was due
to the rapid increase in the use of information technology. HRM in the new
economy has to be human centric with a strong focus on technology. Focus
on emerging technologies is required to better satisfy the wants and needs
of the knowledge workers, and in the process, build a competitive
advantage. E.g.: Attraction and retention of talent have become the main
external influence on Nokia's human resources strategies, as other
companies also strive to be the employer of choice.
(5) Workforce Diversity: The workforce has been changing dramatically. It
has become more diverse racially. More over the number of women in the
workforce have also increased than ever before. As a result of such diversity
well defined HR policies to manage the women expatriates becomes
necessary.
(6) Skill Shortages and the Rise of the Service Sector: Expansion of
service-sector employment is linked to a number of factors, including
changes in consumer tastes and preferences, legal and regulatory changes,
advances in science and technology that have eliminated many
manufacturing jobs, and changes in the way businesses are organized and
managed. Service, technical, and managerial positions require proper formal
education. Most available workers are unskilled to fill such jobs. Supply of
skilled labour has reduced, thus proper basic training to make up for the
shortcomings becomes necessary.
(7) Rapid Change in the External Business Environment: Many
organizations face a volatile environment in which change is constant. If
they are to survive and prosper, they need to adapt to change quickly and
effectively. Human resource department is always the most affected with
these changes.
In fact, IHRM has emerged because there are rapid change, in the external
business environment.

SIGNIFICANCE OF IHRM IN INTERNATIONAL

BUSINESS:

HRM in an international business plays a significant role a the strategic

level. The HR manager in an international business actually acts a decision
maker and strategic partner of the business organization. The role of HRM
in an international business should be oriented positively along with the
identification of the strategic role that must be executed. The significance of
IHRM in International Business can be explained as follows:
(1) Culture: It is important for managers to know how organizations are
established, leadership style, human resource practices etc. that can be
affected by national cultural differences across the world. These differences
are more evident when the company starts operations in various countries.
2) Availability of Right People: IHRM ensures the availability of right
people for right jobs so the organizational goals are achieved effectively
across the globe. This could only be possible by utilizing the employees'
talent and ensuring that they remain competent and motivated. Further
there is lot of emphasis on training of employees to meet the expectations of
the international firms.
3) Job Satisfaction and Boosts Employee Morale: IHRM is responsible for
ensuring that employees are satisfied with the terms and conditions of the
international firms. It further helps to meet their higher level needs such as
the esteem needs and self-actualization needs, as well as maintain cordial
relations between the management and the employees.
4) Emphasis on Core Competency: Post-liberalization, many organizations
have started focusing their Core on competencies and businesses are being
organized around that. A core competence is unique strength of an
organization which may not be shared by others. This may be in the form of
unique financial resources (finance available at a much lower cost),
manpower resources, marketing capability, or technological capability. If the
business is organized on the basis of core competency, it is likely to
generate competitive advantage. organizations have Because of this reason,
many restructured their businesses-divesting those businesses which do
not match core competence such as Tata Group divesting many businesses
and acquiring Tetley, a UK tea processing company. The organization of
business around core competence has changed the mind set and in this
change, more emphasis has been given to human factor.
5) Competition for Human Resources: With the entry of foreign firms in
the Indian industrial scenario, the nature of competition for human
resources has changed. Foreign firms, particularly those operating in
sectors such as consultancy, merchant banking, investment banking, etc.
and computer software companies of Indian origin, have put lot of
competition for acquiring managerial talents.
6) Stages of International Involvement: An organization that initiates
international operations has passed through various stages of operations
namely, Domestic Operations, Export Operations, Joint Ventures or
Subsidiaries, Multinational Operations and so on. As the organization
passes from a lower stage to a higher stage, the human resource functions
need to be more adapted to the diverse economic, cultural, legal and
political environments. Thus the international involvement of firms enhance
the importance of human for resource management multinational
companies.
7) Need for Workforce Empowerment: Throughout the world, there has
been increasing emphasis empowerment, that is, giving them authority
matching their on workforce responsibilities. For workforce empowerment,
there has to be a change in mind-set as well as there should be change in
skills of workforce. The role of HRM is crucial in both these respects. With
the increasing role of human resources and their management,
organizations have given HRM a higher status than what it previously was
few years back.
8) Technological Changes: With the removal of restrictions on technology
import and acquisition, many organizations have opted for newer
technologies. Increased use of computers has added another dimension to
technological innovation. As the result, old skills are fast becoming obsolete.
In their place, the operative staff has to acquire newer skills. This leads to
increased training needs in organizations, and as such the HR departments
have to be more active.

SCOPE/FUNCTIONS OF IHRM:

International human resource management has a vast scope and includes

managing an organization's employees and labour policies across national
and cultural boundaries. It places much emphasis on diversity, cross-
cultural communication and innovation. The preliminary function of
International Human Resource Management is that the organization carries
a local appeal in the host country despite maintaining an international feel.
The scope/functions of IHRM are as follows:
1) Recruitment and Selection: This is the basic function of IHRM, where
the company employs new qualified candidates for international operations.
Selection requires choosing from a pool of candidates whose qualifications
most closely match the job requirements. Staffing is a complex function of
IHRM. In fact, staffing and on boarding of employees' remains a critical
activity because of the unevenness of the demand and supply in the market
for talent. In global firms, the managing and staffing approach strongly
affects the type of employee the company prefers. In a company with an
ethnocentric approach, parent country nationals usually staff important
positions at headquarters and subsidiaries. In recruitment and selection
methods, firms consider both headquarters' practices and those widespread
in the countries of its subsidiaries. Local culture also has a significant
impact on recruitment and selection practices, and in some countries, local
laws require a specific approach. In choosing the suitable candidate, it is
needed to make balance between internal corporate consistency and
sensitivity to local labour practices.
2) Training and Development: This function of IHRM is aimed to offer
sufficient training to personnel in a company and enable them to fulfil
organizational as well as their own goals. At global level, HR development
experts have the responsibility for training and development of employees
the world, provide specialized training to prepare expatriates for
assignments abroad and development of a special group of worldwide
located in subsidiaries around like-minded managers. International human
resource development programs may be centralized and decentralized. In a
centralized approach, training originates at the headquarters and corporate
trainers travel to subsidiaries, often adapting to local situations. Trainers
could also be sent from various positions in either the headquarters or
subsidiaries to any other location in the company. In a decentralized
approach, training is given locally. When training is decentralized, the
cultural backgrounds of the trainers and trainees are usually similar. Local
people develop training materials and techniques for use in their own area.
3) Career Planning and Development: This function is closely related to
training, however training needs are centred around the organization's
processes and procedures, career and professional development is about
providing employees with opportunities for growth and education on
individual basis. Many human resource departments offer an career
enhancement/professional development opportunities to their employees by
sponsoring them to visit conferences, external skills training days or trade
shows.

(4) Employee Welfare: This particular aspect of IHRM deals with not only
the working conditions and amenities but a wide array of responsibilities
and services such as safety services, health services, welfare funds, social
security and medical services in international firms. It also relates to
supervision, employee counselling, establishing harmonious relationships
with employees etc. Employee welfare is about determining employees'
needs and fulfilling them.
5) Performance Appraisal: Performance evaluation is the effective function
of international human resource management. In companies, the
performance evaluation is regularly performed for administration or
development. Usually, administration conducts evaluation when there is a
need of performance evaluation on work conditions of employees,
promotions, rewards and/or layoffs.
In multinational companies, performance appraisals are usually done
annually using a standardized evaluation form. Performance evaluation is a
complex task for International HR managers because the HR managers have
to evaluate employees from different countries working in different
subsidiaries, Performance evaluation depends on the organization's overall
human resource management strategy.

6) Remuneration: Remuneration of employees plays an important role in

hiring new employees because pay is the major deciding factor to join the
organization. To develop an international system of compensation and
benefits, firms have two primary concerns:
(i) Comparability: A good compensation system disperses salaries to
employees that are internally equivalent and competitive within the
marketplace. The international organization must also consider the salaries
of people who may transfer from other locations.
(ii) Cost: Organizations struggle to reduce all expenses, and payroll is one of
the largest.
7) Fulfil International Legal Compliance: As organizations expand into
foreign markets or hire employees that are nationals of other countries, they
must be familiar with the labour and tax laws of many different
jurisdictions. Hiring someone from another country might, for example,
require human resources to apply for visas, calculate tax rates in a different
manner or provide data to Immigration and Nationalization Services.
8) Labour Relations: Labour relations function of IHRM describes the role
of management and workers in the workplace. In many countries, the
government regulates the labour relations practices.

DIFFERENCE BETWEEN INTERNATIONAL HRM AND

DOMESTIC HRM:

By the name itself, one can get an idea that IHRMS work internationally or
beyond national borders, whereas its domestic counterpart works within the
set, local, national borders. In this connection, it is also expected that the
IHRMS follow not just more rules and regulations but also more strict
international policies like those related to taxation at the international
location of work, employment protocols, language requirements, and special
work permits. For local HRM, the rules and regulations to be followed are
just regarding local taxation and ordinary employment-related issues. One
of the differences between IHRM and HRM is that IHRM being
unpredictable, is influenced more by external factors, requiring more
functions, having continuously changing perspectives, requiring more
intervention in employees' personal lives, and being more risky. The
complexity of operating in different countries and employing different
national categories of workers is another major difference between domestic
and international HRM. The other differences between International HRM
and Domestic HRM:
International HRM Domestic HRM
1 The IHRM department has to The HRM department does not have
overcome multi-cultural differences to deal with cultural differences as
to run a local subsidiary of the majority of the employees belong to
parent country. the same social community.

2 Since IHRM involves international Domestic HRM involves local

employees, it brings with it a employees, it has a narrow
broader range of perspective. perspective.

3 There are three types of employees There are generally local employees
to be handled through IHRM to be handled through domestic
practices: Parent Country Nationals HRM practices
(PCN), Host Country Nationals
(HCN) and Third Country Nationals
(TCN).
4 IHRMs have more functions, are Domestic HRM has comparatively
subject to more stringent lesser functions and lesser rules.
international rules and are more
exposed to a wider array of activities
as opposed to domestic HRMS.
5 There is a need for greater There is no felt need for greater
involvement of the private lives of involvement of the private lives of
employees in IHRM. employees in domestic HRM.

6 There is no felt need for greater There is comparatively less risk

involvement of the private lives of involved.
employees in domestic HRM.

7 Requires knowledge more and Requires comparatively lesser

expertise. knowledge and expertise.

8 There is public more relations There is comparatively less public

work to enhance the MNCS image relations work to enhance the image
and deal with various interest of the domestic firm.
groups

APPROACHES TO IHRM:

Corporate management philosophy is an important issue because it decides

how a firm views the world in relation to itself and how it wants to manage
human resources in different countries. HR manager at international level
must not only select people with skills, but also employees who can mix
with the organizations culture. General Electric, for example, is not just
hiring people who have skills required to perform particular jobs, it wants to
hire employees whose style, beliefs, and value system are consentient with
those of the firm. Corporate culture and management philosophy, to a great
extent decide the formulation and implementation of corporate and
operational strategies and their evolution into various stages of
internationalization. HRM uses four terms to describe the approaches
adopted by MNCS, to staffing and managing their subsidiaries: (1)
Ethnocentric. (2) Polycentric. (3) Regiocentric. (4) Geocentric.
The suitability of the type of staffing policy adopted depends on the strategy
used by the organization.
1] Ethnocentric Approach / Strategy: The initial orientation of many
managers, especially those from a more homogeneous national population
and culture or from a country with strong patriotic culture, is one of
ethnocentrism. In this orientation, managers use a home-country standard
as a reference in managing international activities. The outlook is one of
centralized decision making and high control over operations. Managers
with such a mind-set are likely to follow an international strategy of
maintaining control from the home country and parent-firm headquarters,
and replicating home-country systems and procedures and structure
abroad. In this approach, all key management positions are held by parent
country nationals, e.g., Toyota, Samsung, Procter and Gamble, Philips etc.
Few foreign subsidiaries have autonomy but the strategic decisions made at
are headquarters. The key positions at the domestic and foreign operations
are held by the management personnel of headquarters. In other words,
subsidiaries are managed by expatriates from the home country (PCNS).
This strategy may be appropriate during the early phases of international
business, because firms at that stage are concerned with transplanting a
part well in their home country. Ethnocentric corporations believe that
home country nationals are more intelligent, reliable and trust worthy than
foreign nationals. In this approach, all important positions in MNCS are
filled up by PCNS in the early stages of internalization. Apart from this, the
ethnocentric approach is significant for certain business-related reasons: A
perception that qualified HCNS may not be available for the units; To
ensure that coordination and communication are maintained adequately in
headquarters. However, there are several problems in adopting the
Ethnocentric approach. Some of them are: An ethnocentric staffing policy
limits the promotion opportunities of HCNS, which may lead to reduced
productivity and increased turnover among that group.
The adaptation of expatriate managers to host countries often takes a long
time during which PCNS make mistakes and may take poor decisions. When
PCN and HCN compensation packages are compared, the often considerable
income gap in favour of PCNS is viewed by HCN, as unjustified. For many
expatriates, a key international position means new status, authority and
an increase in standard of living. These changes may affect expatriates
sensitivity to the needs and expectations of their host country subordinates.
Apart from this, the cost of maintenance of expatriates is quite high. This
approach is not only reflected in the staffing policy but in all other areas
such as performance appraisal where evaluation format is designed and
administered by parent nationals and new product development is done in
the home country. Many international companies exhibiting difficulty the
ethnocentric philosophy have in communicating in different languages and
accepting cultural differences.
2] Polycentric Approach / Strategy: The MNC treats each subsidiary as a
distinct entity with some decision making autonomy. Subsidiaries are
usually managed by local nationals (HCNS) who are rarely promoted to
positions al headquarters. Polycentric staffing requires host country
nationals to be hired to manage subsidiaries, while parent- country
nationals occupy key positions at corporate headquarters. Although top
management positions are filled by home-country personnel, this is not
always the case. They see profit potential in a foreign country but find the
foreign market difficult to understand. Governmental pressure and foreign
laws often necessitate polycentric approach. The local government may be a
major customer and insist on local ways to be adopted.
Some of the advantages of the Polycentric approach are:
Employing HCNS eliminate language problems for the expatriates and their
family members, reduces cost on the awareness training programs, and
takes care of the adjustment problems to a large extent. Even though high
salaries may have to be given to attract HCN applicants, it still works out
cheaper for the company in the long run as compared to employing PCNS.
The crucial problem of turnover experienced when be avoided effectively by
employing PCNS can employing HCNS, since they are more stable and can
help in maintaining the continuity in managing subsidiaries more
efficiently.
Some are the problems are as follows:
Bridging the gap between HCN subsidiaries - Managers and the PCN
managers at headquarters is a major problem, especially with regard to
language barriers, conflicting national loyalties and differences emanating
from personal values, attitudes to business and so on.
Lack of exposure to international assignments among PCN managers at
headquarters and lack of career mobility among HCN managers due to their
stagnation in subsidiaries will ultimately affect the strategic decision-
making capabilities, reducing their marke share and customer base and
their position in the foreign country as well as their competitors.
3] Regiocentric Approach / Strategy: These are regionally oriented
organizations. A Corporation implements a regional strategy when
synergistic benefits can be obtained by sharing functions across regions.
The international staff is transferred within the same region they work. Like
the geocentric approach, it utilizes a wider pool of managers but in a limited
way. Personnel may move outside their countries but only within the
particular geographic region. Regional headquarter organizes collaborative
efforts among local subsidiaries, it is responsible for the regional plan, local
research and development, local executive selection and training, product
innovation, cash management, capital expenditure, public relations and se
on. Regional managers may not be promoted to headquarter positions but
enjoy a degree of regional autonomy in decision-making.
Advantages:
It allows interaction between executives transferred to regional headquarters
from subsidiaries in the region and PCNS, posted to the regional
headquarters.
It reflects some sensitivity to local conditions, since local subsidiaries are
staffed almost totally by HCNS. It can be a way for a multinational to more
gradually from a purely ethnocentric or polycentric approach to a geocentric
approach.

Limitations:
It can constrain the organization from taking a global stance. While this
approach does improve career prospects at the national level it only moves
the barrier to regional level staff may advance to regional headquarters but
seldom to positions at the parent headquarters.
4] Geocentric Approach / Strategy: This staffing philosophy seeks the
best people for key jobs throughout the organization, regardless of
nationality and is most consistent with the underlying philosophy of a
global corporation. The MNC is taking a global approach to its operation,
recognizing that each part (subsidiaries and headquarters) makes a unique
contribution with its unique competence. It is accompanied by a worldwide
integrated business and nationality is ignored in favour of ability. It is an
unbiased philosophy that pools the right candidate from across the world.

There are three main advantages to its approach:

(i) It enables multinational firm to develop an a international executive
team which assists in developing a global perspective and an internal
pool of labour for deployment throughout the global organization.
(ii) It overcomes the drawback of the polycentric approach.
(iii) It supports cooperation and resource sharing acrose units.

There are some limitations of the Geocentric Policy:

Bridging the gap between HCN subsidiary managers and the PCN managers
at headquarters is a major problem, especially with regard to language
barriers, conflicting national loyalties and differences emanating from
personal values attitudes to business and so on.
Host government want a high number of their citizens employed and may
utilise immigration controls in order to force HCN employment if enough
people and adequate skills are unavailable.
Many western countries need extensive documentation if they wish to hire a
foreign national instead of a local national, which is time consuming,
expensive and at times, futile.
A geocentric policy can be expensive to implement because of increased
training and relocation costs. A related factor is the need to have a
compensation structure which may be higher than national levels in many
countries.
Lack of exposure to international assignments among PCN managers at
headquarters and lack of career mobility among HCN managers due to their
stagnation
in subsidiaries will ultimately affect the strategic decision-making
capabilities of both the groups of managers. This will affect the firms, the
quality of their business decisions and their resource allocation capabilities,
reducing their market share and customer base and their position in the
foreign country, vis-à-vis their competitors.
Large numbers of PCNS, TCNS and HCNS need to be sent abroad in order to
build and maintain the international team required to support a geocentric
staffing policy. To implement a geocentric staffing policy successfully
requires a longer lead time and more centralized control of the staffing
process. This necessarily reduces the independence of subsidiary this loss
of management in these issues, and customarily may be resisted by the
subsidiary.
Based on top management attitudes, a multinational can pursue one of
several approaches to international staffing. It may even proceed on an ad-
hoc basis, rather than systematically selecting one of the above four
approaches. The dangers with the approaches are: "The firm will opt for a
policy of using parent- country nationals in foreign management positions
by default, that is, simply as an automatic extension of domestic policy,
rather than deliberately seeking optimum utilization of management skills.
LIMITATIONS TO IHRM:

There are various issues or challenges in IHRM. This nationality mainly

because there are people of more than one and culture. Some of the
issues/limitation are:
1) Employee and family Adjustment: Peoples adjustment t expatriate
assignments can be extremely challengine regardless of the country. The
success of expatriata performance may depend upon how well his spouse
and children are taken care of by the organization. Moreover expatriates
must be personally adaptable and their families capable of adjusting to new
and unusual challenges.
2) Selecting the Right Person for the Foreign Assignment: Selecting
one/few people among many for foreign assignment is another challenge for
the HR managers. There are many factors to be considered before selecting
a particular person like technical ability, cross-cultural suitability, family
requirements etc.
3) Managing International Assignments: The management and
development of expatriates- selection, training compensation and
repatriation of expatriate failures is a while completing cause of
international concern assignments.
4) Management Practices: The management practices are basically the
principle based on local cultures, traditions, practices and needs of the
organizational growth. It is not universal for everywhere, especially in the
field of human resources management. Also the HRM methods and systems
developed by one society cannot always be transferred and applied to
another.
5) Cultural Issues: There is a need to internationalize the whole
organization by creating a new corporate culture reflecting the need for
greater international experiences. Many a times there may be issues
regarding the cross cultural interactions.
6) Difference in Industrial Relation Practices: HRM and industrial
relations practices differ across countries as these have their historic origin
in countries. Personnel management and industrial relations are embedded
in societal rules, norms, values, ideologies and no MNC can ignore the
influence of these.
7) Language and Communication: Expatriate manager must learn the
foreign language or rely on local interpreters to communicate with the local
workforce. Parent company officials may struggle to communicate with local
managers in foreign subsidiaries. Because HR professionals are often
expected to foster international communication, they must understand that
effective communication involves more than just speaking the same
language. To communicate effectively, individuals must share the deeper
meanings that are often embedded with cultural norms and traditions.
8) Resistance to Change: Different locations have their own way of doing
things and resisting change. If an HR initiative as being imposed by the
corporate that is viewed management on the local HR staff, then it is
difficult to gain acceptance.
QUALITIES OF GLOBAL MANAGERS: A global manager is someone who
knows how to conduct an manage business across borders. The global
dimensions of business and management, though pervasive, pose many
complications for a national or local organization to overcome Even high
performers with proven technical skills at home may find that their styles
and attitudes just do not work well overseas. The Global managers possess
certain qualities and acquire a set of skills that help them to work across
regional, national and subnational boundaries to propel the business
forward. Those qualities include the following:
(1) Self-Awareness: Understanding one’s beliefs and knowing where they
might differ from others' is critical to global executive success. Without this
key characteristic, the global manager will not be able to adapt to and
tolerate the pre-set beliefs of others and lose the business opportunities.
(2) Vision: The global manager must have the ability to set the path that
others will follow. He has to be focused and determined and a strong vision
to lead people.
(3) Sensitivity to Cultural Diversity: The global managers have to deal
with people of different nationalities and cultures. He must have an intense
interest in the lives and cultures of others, recognizing that his culture and
background are not inherently superior, to master the global business
arena.
(4) Global Strategic Thinking: The global managers must have a global
perspective; think strategically about managing business using the best
people from around the world. The ability to do this comes from a lifetime of
networking at the highest levels in global boardrooms and the managers'
aptitude for seeing how various global industries operate internationally. To
make strategic decisions for his company, the global manager needs to
understand how the business world works on a global scale.
(5) Flexibility: HR is burdened with a lot of processes and guidelines.
Companies strive for standardization across their entire enterprise. The
global manager must understand that flexibility is a key to success. Every
country is different and the standard approach/standard HR policies
designed might not work perfectly in every country. So he has to be flexible
about the application of global standards and processes.
(6) Adaptability: Global managers have to work in areas which require
adaptability to the situation prevalent in a particular country. It may be
often different from the head quarter. For instance, the roles of labour
unions in India, Europe or Latin America, create requirements that are very
different from the US. If one starts applying US-style labour relations in
India or Europe, it would not work. Hence the global manager must be
adaptable. He should learn the rules and adapt his style as needed.
(7) Good Negotiator: Doing business across ethnic, national and regional
boundaries requires strong negotiating skills. The global manager needs to
possess the quality of negotiating.
(8) High Emotional Intelligence: The global manager must be able to
accurately identify and manage his own emotions, as well as those of
others. He should have the ability to utilize emotions and apply them to
tasks, like thinking and problem-solving. He should be self-motivated and
empathetic.
(9) Effective Management Skills: Multicultural workforces are also a part
of the global business. Thus, a global manager should know the best way to
deal with a multicultural workforce since the styles of leadership,
motivation, decision making, planning, organizing, leading, and controlling
vary from country to country. International businesses have operations,
partners, alliances and senior managers representing virtually every global
region. Many have more than one "headquarters," hence there is diversity in
their thinking and perspective.
ORGANIZATIONAL DYNAMICS AND IHRM:

Organizational dynamics refers to the patterns of movement over time in the

interactions between the people in the organization. Organizational
dynamics is defined as the process of continuously strengthening resources
and enhancing employee performances. It can also be described as how an
organization manages and promotes organizational learning. better business
practices and strategic management.
The Essential Elements of Organizational Dynamics: There are four
fundamental business activities that contribute to an organization's
dynamics:
(i) Planning: Planning requires management to structurally define
departments and divisions. Managers set measurable goals that will define
future actions and decisions. Organizational planning may involve inventory
control, production scheduling, revenue forecasts and expense
management. Managers use these plans as the actionable foundation for all
their regular duties.
(ii) Implementation: Goal execution involves implementing, evaluating and
following up with expected deliverables. In order to accomplish this,
managers must allocate resources and responsibilities to employees based
on skills and schedules.
(iii) Leadership: Leadership involves hands-on, exemplary oversight that
drives innovation, knowledge and performance.
(iv) Control: Resource control refers to how executives and management
establish systems that gather data which is used to determine if goals are
met.
The Human Resources and Organizational Dynamics area specializes in
how people operate within organizations. Effective management of
employment relationships requires responding to the needs of a diverse
work force, developing flexible organizational structures, improving work
performance, facilitating improved relationships with unions, and reducing
conflict within the workplace. A variety of skills including interpersonal
communications, motivation, negotiation, problem-solving, decision-making,
conflict resolution, and leadership are essential to working effectively with
others. Human Resource professionals also participate in organizational
development initiatives such as wellness initiatives, spirituality, care stress
reduction, development and training. the Organizational dynamics is IOUI
important in IHRM because of the diverse workforce, divers cultures
prevalent in organizations, diverse working styles etc Hence the
international HR managers have to understand the Understanding
dynamics to ensure that there are right quantity and quality of workers, the
right strategy , and the right environment. They should conduct
organizational audits, implement, measure, and evaluate change initiatives,
work effectively in teams, perform employment and labour relations
functions including collective bargaining, dispute resolution, labour and
employment law negotiation, and arbitration.

COMPONENTS OF INTERNATIONAL HRM

The components of IHRM can be studies under three headings:

(1) Cross-Cultural Management.

(2) Comparative HRM.
(3) IHRM.

(1) CROSS CULTURAL MANAGEMENT (CCM):

Cross cultural management is the discipline that primarily deals with the
comparison of various cultures. It involves managing work teams in ways
that considers the differences in cultures, practices and preferences of
consumers in a global or international business context. Many businesses
have to learn to modify or adapt their approaches in order to compete on a
level in fields no longer bound by physical geographical boundaries as
online interactions are more common today in business and The feature of
cross-cultural other situations. common management is that there are
differences between management practices in various countries and that the
respective environment is of particular significance in explaining these
differences. The first contribution to cross-cultural management research
were made in the early 1960s. Thereafter there have been many researchers
conducted in the area of CCM mainly due to the increasing international
complexity of the global economy and the resulting problems experienced by
managers when dealing with employees and with customers and suppliers
in various host countries. The goals of cross-cultural management studies
include: Description of organizational behaviour within countries and
cultures. Comparison of organizational behaviour between countries and
cultures. Explanation and improvement of interaction between employees,
customers, suppliers or business partners from different countries and
cultures. The common feature of cross-cultural management research is the
basic assumption that there are differences between management practices
in various countries and that the respective environment is of particular
significance in explaining these differences.

Features of Cross-Cultural Management:

Cross-cultural management describes and compares the working behaviour

in various cultures and provides suggestion on improving interaction
between members of various cultures The features of CCM are:

CCM describes organizational behaviour within countries and cultures and

improves the interaction of co -workers. managers, executives, clients,
partners, suppliers etc.
An adequate understanding of the cultural context, as it impacts the
behaviour of organization's employees, is very important.
CCM helps managers to cope with employees of foreign cultures. It forms
the basis for the development of intercultural training measures.
It assists a structured analysis about the transferability of specific elements
of the parent firm's existing HR policy to foreign subsidiaries.
It helps to decide the incentive system and compare to find out whether
incentive systems for groups or for individuals would be effective in a
specific culture.
It helps a manager be proactive and anticipate the environmental
differences which could lead to problems when MNES attempt to introduce
worldwide standardized HRM practices.
Convergence of Cultures: Cultural convergence occurs when multiple
cultures become more like one another through exposure to traditions,
ideals and languages. An example of cultural convergence is the use of
technology, participation in global sports like, at international sports events
fans and athletes alike learn the different expectations and practices of
spectators and competitors and the English language, like the diffusion of
English language led to the exchange of cultural practices, causing a
convergence. Technology is a key example of cultural convergence. Youth
from a variety of cultures interact with social media and information sites
on the Internet. Global companies use the Internet for research, marketing
and adapting to their customers' needs. Cultural convergence occurs when
multiple cultures become more like one another through exposure to
traditions, ideals and languages. It proposes to facilitate and stimulate
dialogue between cultures, to fight against discrimination and violence. Its
main objective is to promote relationships between different cultures as well
as disseminate its ideas and activities.

A number of factors have encouraged the convergence of certain aspects of

culture among nations:
 Improvements in transport and communication and a huge increase in
the number of people, who visit foreign countries.

 Globalization of media, with similar or even same television programmes

and newspaper and magazine article appearing in all nations.

 Similarities in the tastes and consumption patterns of human young

people.

 The operation of MNCS across the world, supplying standardized

products and frequently using undifferentiated marketing strategies.
 A seemingly worldwide increase in consumers intern willingness to
accept fresh ideas and try new products. Adoption of similar technologies
in several countries, creating common work experiences and working
manag methods.

Role of IHRM in Cross Cultural Management:

IHRM plays a very significant role in cross cultural management.

(1) Competition: The market globalization is bringing the multinational
enterprises much more opportunities and mana manag profit, but also
bringing them much fierce competition. In the fierce competition
environment, the international with I emplor companies that do everything
they can do to survive in the battle have to promote and strengthen
themselves internally as the first step.
(2) Cost: For the vast majority of organizations, the cost of the people who
do the work is the largest single item of operating costs that can be
controlled and adapted to circumstances. Increasingly, in the modern world
the capabilities and the knowledge incorporated in to rum cultura some
should an organizations human resource management are the key to
success. On both the cost and benefits sides of the equation, human
management is crucial to survival, resource performance and success of an
enterprise.
(3) Work Relationships: The International HR manager has to know how to
manage the harmonious working relationship between expatriates
(candidates who have been sent on international assignments to other
countries) and local employees of that particular country by analysing
problems; this is the basic concept of cross-cultural human resource
management. There may be problems existing between expatriates and local
employees but the International HR manager has to draft strategies for
cross-cultural management.
(4) Organizational Structure: One of the key resources in an organization
is undoubtedly human resources. It is the management structure that
makes decisions concerning the management of people within the
organization, beginning with recruitment, job rotation, job description,
training, employee remuneration etc.
(5) Communication: For all organizational growth, cross- cultural
communication has become essential both for local and international
operations. In international organisations, effective cross-cultural
communication enables businesses to run more effectively and successfully.
Understanding cultural differences and overcoming language barriers are
some of the considerations employees of the organisation should have while
dealing with individuals of various cultures.
The importance of communication in an International organisation could be
beneficial to: Promote motivation Help in decision-making Alter individual's
attitude Help in socialising Assist in controlling the nrocess of one's
behaviour Thus, the primary responsibility of international manager is to
develop and maintain an effective communication system in the
organisation by discovering various barriers analysing the reason for their
occurrence and to take preventive measures.
(6) Work Culture: Work culture plays an important role in bringing out the
best out of employees and making them remain loyal to the organisation for
a longer period. These days the workplace is increasingly globalised and has
become highly competitive. Interaction and communication across
international borders have turned out to be necessary for many workers
around the world. Consequently HR is under strong pressure to find
employees who are not only technically proficient but also culturally
perceptive with the ability to be successful in a global work-environment.
Furthermore, Knowledge of foreign languages benefit the organisations
through their ability to bring in new clients, work within diverse teams and
also support for the growth of the organisation.
(7) Conflict Management: The primary prerequisite is for the workforce to
work together to eliminate conflicts for the interests of the organization.
Conflicts arise mainly because of dualities like personal goal versus
organisational goal; personal ethics versus organisational ethics, rights
versus duties and so on. Providing periodic training, seminar and
conferences to professionals by HR not only helps increase the productivity
or meets the objective of the organisation but it also eliminates conflicts.
(8) Technology: Today the business environment has become multifaceted
and competitive, products have become knowledge-based and the workforce
has become culturally diverse. Rapid developments in technology,
communication network and computing capabilities have changed the
communication within and among the organizational settings, consequently
to employ human resources with different ethnic and cultural backgrounds
and education.
As the workforce is becoming more and more multicultural and diverse it is
not only necessary for human resources to gain knowledge of
communication but also cross-cultural factors to achieve the objectives of
the organization successfully. Thus International human resource
management plays a very important role in a cross cultural management.
Problems of Cross Cultural Issues in Organizations:
International business management is inseparable from the sphere of
patterned cultural behaviours because culture represented in terms of the
pervasive and shared beliefs, norms values, and symbols that guide the
everyday life of difference groups of people. International managers have to
decide choose and adjust their strategies aligned with each countrys
culture. The traditional strategies used by management to manage
culturally diverse workforce are proving inadequate and may not be able to
solve the problem of cross cultural diversity in the era of globalization.
There are various problems of cross cultural issues in organizations such
as:
1) Understanding why people behave differently than expected:
When the managers are handling people from a different culture they have
to follow certain norms and values in order to understand the behaviour of
the employees. Developing that understanding is the most challenging task
managers of cultural diverse teams have to face.
2) Teamwork: Cooperating to achieve common organizational goals is
critical to business success. HR managers have to see to it that the foreign
and domestic nationals get along with each other. For this, they have to
sensitize each group to differences and develop an appreciation for them.
3) Lifetime Employment: Workers in some Asian countries enjoy a
paternalistic relationship with their employers and work for the same firm
all their lives. The expectations that arise from such devoted relationships
can complicate dealings with outside firms. Western managers struggle with
motivating employees who expect they will always have the same job
regardless of the quality of their work.
4) Pay-for-Performance System: In some countries, merit is often not the
primary basis for promoting employees. For instance, in China and Japan, a
person's age is the most important determinant in promoting workers. But
the dilemma is how do such workers perform when Western firms evaluate
them using performance-based measures?
5) Organizational Structure: Some companies prefer to delegate authority
to country managers, creating a decentralized organizational structure.
Others are characterized by autocratic structures with power concentrated
at regional or corporate headquarters. Firms may be entrepreneurial or
bureaucratic. This can become a major cross cultural issue in
organizations.
6) Frustration and Hostility: Whenever the manager compares other
people's behaviour with his own norms and values and if the behaviour does
not make sense, it is rejected. Sometimes that rejection leads to frustration
and hostility. As a manager such situations should be avoided that show
frustration or hostility towards employee behaviour.
7) Motivating: Motivating a diverse team is a challenge because every
person is unique and so can be his needs and wants. What motivate an
employee of a particular country may not motivate the one from the other
country. Very often companies have a uniform pattern motivation and
reward systems based on the norms and values from where the company
was originated. However when they expand to other cultures they have to
adopt motivation strategies that lead to efficiency and employee satisfaction.
8) Achieve the Desired Level of Efficiency: It may be difficult to reach the
desired level of efficiency in the multicultural team because too much time
is spent on sorting out misunderstandings, setting expectations and make
everyone on the team pursue the same goals.
9) Training and Managing a Culturally Diverse Team: The cross-cultural
managers feel that they need the right tools to manage and lead a culturally
diverse team. Managing diversity is an important add-on to the
management skills they already have.
Importance of Cultural Sensitivity to International Managers:
Crossing the geographical boundaries by the companies gives rise to
multicultural organization where employees from more than one country are
working together. It may be true that companies are finding these
expansions as attractive and lucrative but operating and managing a global
business is normally a lot tougher than managing a local company. The
main reason for the expansion of companies is to create global
competitiveness by reducing production costs and exploiting market
opportunities offered by trade liberalization and economic integration.
Cultural sensitivity involves being respectful of other cultures.
Understanding and knowing about different cultures and accepting the
differences and similarities helps people to communicate effectively and
build meaningful more relationships.
Companies often employ foreign workers and take advantage of new
markets in other countries. Another situation involves contract labour, with
specialists from another cultural background coming in, sometimes on a
temporary basis, to support an existing workforce. This makes cultural
sensitivity in business more important than ever.
Effective knowledge and use of cross cultural diversity can provide a source
of experience and innovative thinking to enhance the competitive position of
organizations. However, cultural differences can interfere with the
successful completion of organizational goals in today's multicultural global
business community. To avoid cultural misunderstandings, managers
should be culturally sensitive and promote creativity and motivation
through flexible leadership. Effective handling of the cross-cultural interface
is a critical source of a firm's competitive advantage. Managers need to
develop not only empathy and tolerance toward cultural differences, but
also acquire a sufficient degree of factual knowledge about the beliefs and
values of foreign counterparts.
Cross-cultural sensitivity helps managers connect with their foreign
counterparts. They give importance to a deep knowledge of culture and
language in international business. Managers C- achieve effective cross-
cultural interaction by keeping an open mind, being inquisitive, and not
rushing to conclusions abo others' behaviours. Experienced managers
acquire relevant facts skills, and knowledge to avoid offensive or
unacceptable behaviour when interacting with foreign cultures. They under
cultural training that emphasizes observational skills and huma relations
techniques that help managers meet cross-culture challenges.
To sum up, interacting with people from different culture happens regularly
at most workplaces. Some businesses ha employees from across the globe.
Others have customers different countries. Some businesses have multiple
offices different geographic locations. Regardless of where t employees,
customers and partners are from, it's vital to focus cultural sensitivity in the
workplace in order to create a sensed unity and ease tension.

(2) COMPARATIVE HRM:

As an increasing number of organizations seek to operate foreign markets, it

is vital that management practitioners develop a better understanding of,
and sensitivity to, the impact different national settings on the management
task. Comparative HRM is the systematic investigation of HRM practices in
two more countries to increase knowledge and understanding t has analytic
rather than descriptive implications It is concern with questions about why
and to what extent there a differences in the HR practices across countries.

Importance of Comparative HRM:

Comparative HRM is the systematic investigation of HRM practices in two or

more countries to increase knowledge and understanding that has analytic
rather than descriptive implications. It seeks to understand individual
national context and the way in which HRM is organized in each particular
country It does not aim to discover general laws in HRM but in gaining
sensitivity for the locally contingent circumstances surrounding the
particular forms of labour management. Difference between IHRM and
Comparative HRM: The growth in international trade and globalization has
encouraged firms to expand their operations worldwide, which has resulted
in the emergence of new markets such as China, India, South East Asia and
Latin America. This trend has also been accompanied by an increased level
of competition amongst firms at both national and international level. The
challenge of managing a workforce worldwide with different cross-cultural
skills, competencies and demographic characteristics means that managers
can no longer rely on traditional HRM models.
International HRM has been defined as HRM issues, functions, policies and
practices that result from the strategic activities of MNES (Scullion, 1995).
IHRM deals principally with issues and problems associated with the
globalization of capitalism. It involves the same elements as domestic HRM
but is more complex to manage, in terms of the diversity of national
contexts and types of workers. The emphasis is on the MNCS' ability to
attract, develop and deploy talented employees in a multinational setting
and to get them to work effectively despite
differences in culture, language and locations. International an HRM tends
to mitigate the impact of national culture and national employment practice
against corporate culture practices. Comparative HRM, on the other hand,
is a systematic method of investigation that seeks to explain the patterns
and variation encountered in cross-national HRM rather than simply
describe HRM institutions and practices in different societies, According to
comparative HRM literature, different national business systems arise from
differences in specific historical, cultural and institutional heritage in
certain countries. Comparative differences occur due to decisive historical
events such as the process of industrialization or due to the legacy of pre-
modem forms of social organization.

MANAGING DIVERSITY IN WORKFORCE:

Today's workforce has become increasingly diverse. Employees from

different generations, gender, nationalities and cultures often work together
in the same organization. With such workforce diversity, it becomes
important for organizations to put in place policies and practices to build an
inclusive and harmonious workplace. An inclusive and harmonious
workplace is one that appreciates differences amongst workers and works
towards maximizing their potential. Diversity is the variety of experiences
and perspective which arise from differences in variables/characteristics
such as the race, culture, religion, mental or physical abilities, heritage, age
gender, sexual orientation, gender identity etc. Managing
Diversity means acknowledging people's differences and diversity
recognizing these differences as valuable; it enhances good management
practices by preventing discrimination and promoting inclusiveness. Some
of the ways to manage diversity at workplace are:
(1) Understand Discrimination: The HR manager has to supervise the
employees, he must, therefore, understand both the discrimination laws
and the penalties for violating them. Knowledge of this legislation, and also
sharing that knowledge among the workgroup, effectively reduces the
numbers of conflicts and behavioural issues. That same knowledge can
prevent employers from making decisions, be they harsh or favourable,
based on colour, religion, age, gender, and race.
(2) Equitable Treatment: The HR manager must confirm that all of the
personnel policies from hiring to promotions and raises are based on
employee performance. He should avoid allowing tenure, ethnic background
or any other kind of category affect the framing of human resources policies.
Managing a diverse workplace begins with strong policies of equality from
the company. Once these policies are in place, the company can begin
implementing diversity measures throughout the entire organization.
(3) Create an Empowered Atmosphere: HR managers must infuse the
work environment with an atmosphere that welcomes the diverse skill set
and empowers them to work as a team. Leaders can be very effective in
helping to establish morale and encourage employees to perform best.
(4) Provide Orientation: Orientation helps new employees to become
familiar with the company, its operations, and present workforce. Company
policies are defined, issues or concerns are addressed, queries are
answered, short and long-term goals are discussed. Orientation is a way to
welcome the newcomers and make them feel comfortable.
(5) Fairness in Hiring: HR manager should rate the qualifications of the
candidate based on the quality of his experience, not age or any other
category, when hiring. When an organization hires a diverse but qualified
workforce, it is on the right track towards being able to manage the
diversity.
(6) Create Diverse Work Groups: Managers must encourage diversity when
creating teams and special work groups within the organization. If a
manager creates a work group that does not utilize the skills of the most
qualified employees, then he must insist on the group being changed to
include all qualified staff members.
(7) Handle Complaints Effectively: All the complaints of favouritism or
discrimination should be treated seriously. Employees should be
encouraged to report all instances of discriminatory behaviour, and have a
definitive process in place for investigating and dealing with these issues.
(8) Invest in Diversity Training: HR managers should hold periodic
sessions of training for the entire staff on the benefits of diversity in the
workplace. They must encourage discussions at these meetings on how the
company can better manage workplace diversity. In order to survive, a
company needs to be able to manage and utilize its diverse workplace
effectively. Managing diversity in the workplace should be a part of the
culture of the entire organization. Organizations that manage a diverse
workforce benefit most and bring out the best of an individual's unique.
skills, creativity, experience and knowledge. Successful management
reflects positively on a company and encourages customers and prospective
customers to establish long-term relationships.

DEALING WITH CULTURAL SHOCK

Culture shock is an experience a person may have when one moves to a

cultural environment which is different from one's own. It is also the
personal disorientation-n a person may feel when experiencing an
unfamiliar way of life due to immigration or a visit to a new country, a move
between social environments, or simply transition to another type of life.
Culture shock happens when a person suddenly finds himself in a new
place. It is the term used to describe the feelings of confusion and
uncertainty that are experienced when one comes into contact with a
culture that is vastly different from his/her own. Some of the common
problems include: information overload, language barrier, generation gap,
technology gap, skill interdependence, formulation dependency,
homesickness (cultural), infinite regress (homesickness), boredom (iel
dependency), response ability (cultural skill set) etc. There is no true way to
entirely prevent culture shock, a. individuals in any society are personally
affected by cultural contrasts differently. It is common for people to suffer
from anxiety, confusion and apathy when they are pushed into an
unfamiliar environment. The emotional stress of the situation can easily
lead to emotional and intellectual withdrawal. This has significant impact
on business performance. Many people think the experience of culture
shock is usually "a 'short and sharp', disorientating experience in a foreign
place"; however, if it is not properly addressed, the effects can be deeper and
last a considerable amount of time, disrupting both the personal and
professional life of the employee.

Getting Over the Culture Shock:

Normally it takes about three to six months to get over the culture shock
and start living a normal life abroad. Slowly but steadily, expat managers
start learning and understanding the nuances of the foreign culture. They
learn what the foreign culture considers important and meaningful. They
learn what to focus on and what to ignore. Over a period of time, they learn
to appreciate the foreign culture, learn how to deliver in a foreign
environment and stop blaming others. Successful global managers develop
creative solutions to existing problems - by creating a fusion of their
national culture and the new foreign culture.
Role of Organization: Companies or organizations can help a great deal in
reducing culture shock and the associated stress the employee goes
through.
(1) Organize a Training Program: In the first stage, companies must
organize a training program aimed at educating the expat manager about
the culture of the foreign country. Training programs should contain: Work
culture in the [foreign] country Working effectively in the [foreign] country
Living (costs, lifestyle) in the [foreign] country Social life (norms, mores etc.)
in the [foreign] country Work- life balance in the [foreign] country Spouse
and family members must also be invited to these training sessions. This
will help the entire family cope with the culture shock.
(2) Appoint a Mentor: Organizations can appoint a mentor - who is a
local national in the foreign country to assist the expat manager in dealing
with cultural issues. This mentor - protégé mechanism is very important for
the expat manager new to become productive and successful in the
environment.
(3) Disseminate Information: The local office in the foreign country should
disseminate all the important information like: details of local medicare,
policies of local banks, names/address/phone numbers of estate agents,
Information on how to get local phone/electricity /utilities connectior,
Information on local rules and regulations etc.
(4) Orientation program: Once an expat comes to the new office, he/she
must be formally introduced to the local employees and have a local
orientation program to explain the local work culture to the expat manager.
Culture shock creates a new set of challenges for the expat managers and it
is the leading cause for the manager's failure abroad. Culture shock is
inevitable while working in a foreign country for the first time. Therefore
expat managers must be prepared to face the culture shock and the
associated stress. The better the preparation, the faster the expat gets out of
the culture shock. Organizations must take an active role in preparing the
expat manager to work abroad conduct training programs, have a mentor
program etc. Reverse Culture Shock (also known as "re-entry shock" or "own
culture shock"): The advent of globalization has resulted in more and more
employees being sent on lengthy assignments to other countries. With the
number of expatriates who live and work in countries other than their own
having increased in recent years, reverse culture shock is a phenomenon
that is on the rise. "Reverse Culture Shock" means returning to one's home
culture after growing accustomed to a new one. These are results from the
psychosomatic and psychological consequences of the readjustment process
to the primary culture. The affected person often finds this more surprising
and difficult to deal with than the original culture shock.

UNIT 2

GLOBAL HRM FUNCTIONS

INTERNATIONAL RECRUITMENT AND SELECTION

MEANING:

The goal of most organizations, whether domestic Or international, is hiring

and deploying people to positions where they can perform effectively.
Recruitment involves searching for and obtaining potential job candidates in
sufficient numbers and quality so that the organization can select the most
appropriate people to fill its job needs. Here, employer branding may play a
crucial role, especially in emerging countries such as China or India where
it may be difficult to find enough qualified personnel for foreign companies.
This is due to the strong growth rates of these economies and the fierce
competition for talent in the local labour markets. Selection is the process of
gathering information for the purposes of evaluating and deciding who
should be employed in particular jobs. It is important to note that
recruitment and selection are discrete processes and both processes need to
operate effectively if the firm is to effectively manage its staffing process. For
example, a firm may have an excellent selection system for evaluating
candidates but if there are insufficient candidates to evaluate, then this
selection system may not be of any use. Both processes must operate
effectively for optimal staffing decisions to be made.
Some of the major differences between domestic and international staffing
are:
(i) Many firms have predispositions with regard to who should hold key
positions in headquarters and subsidiaries (i.e. ethnocentric,
polycentric, regiocentric and geocentric staffing orientations) The
constraints imposed by host governments (e.g. immigration rules
with regard to work visas and the common requirement in most
countries to provide evidence as to why local nationals should not
be employed rather than hiring foreigners) which can severely limit
the MNC's ability to hire the right candidate.
(ii) Most expatriates are recruited internally rather than externally.
Internal hires for expatriate assignments are preferred because this
reduces the risk of a poor selection decision.

SOURCES OF INTERNATIONAL LABOUR MARKET:

With continued globalization and the removal of barriers between countries,
multinational corporations (MNCS) are operating in a growing number of
different markets. To staff their various international operations, these
companies not only make use of local talent in each respective local market
but also deploy talent on a global basis.
Over recent years, the group of employees performing their work outside of
their home countries has become increasingly fragmented in terms of
assignment direction (parent country nationals, host country nationals,
third country nationals), assignment length (traditional long-term assignees,
short- term commuter assignees, international business travellers,
assignees), assignment scope (technical, developmental, strategic,
functional) or locus of assignment initiative (company- initiated vs. self-
initiated assignees).
The three basic sources that the MNCS mainly use for overseas assignments
are:
(1) Home/Parent Country Nationals (PCNS).
(2) Host Country Nationals (HCNS).
(3) Third Country Nationals (TCNS). (The above three topics are
covered in detail in next chapter.).
GLOBAL STAFFING:

Human resource management professionals working for global

organizations have unique staffing choices. No doubt, global staffing
involves hiring individuals with requisite skills to do a particular job; the
challenge here is developing tools to promote a corporate culture that is
almost the same everywhere except that the local sensitivities are taken care
of. Whether to choose a local from the host country for a key position or
deploy one from the headquarters assumes importance; and finally whether
or not to have a uniform hiring policy globally remains a big challenge.
An organization can choose to hire according to any of the staffing policies
mentioned below:
 Ethnocentric: Key management positions are filled by the parent
country individuals.
 Polycentric: Host country nationals manage subsidiaries whereas the
headquarter positions are held by the parent company nationals.
 Geocentric: The best and the most competent individuals hold key
positions irrespective of the nationalities.
Geocentric staffing policy is the best when it comes to Global HRM. The
human resources are deployed productively and it also helps build a strong
cultural and informal management network. The drawback is that human
resources become a bit expensive when hired on a geocentric basis. Besides
the national immigration policies may limit the implementation.
SELECTION CRITERIA:

Selection is a two-way process, between the individual and the organization.

A prospective candidate may reject the expatriate assignment, either for
individual reasons, such as family considerations, or for situational factors,
such as the perceived toughness of a particular culture. It is a challenge for
those responsible for selecting staff for international assignments to
determine appropriate selection criteria.
FACTORS IN EXPATRIATE SELECTION:

(Note : 1,2,3 are Individual Factors and 4,5,6 are Situational Factors)

The factors involved in expatriate selection/selection criteria, both in terms

of the individual and the specifics of the situation concerned are interrelated
and shown in the figure below:
(1) Technical Ability: The employee's ability to perform the required tasks
of a particular job is an important selection factor. Technical and
managerial skills are therefore an essential criterion. Most of the
multinationals place heavy reliance on relevant technical skills during the
expatriate selection process. Since expatriates are predominantly internal
recruits, personnel evaluation records can be examined and checked with
the candidate's past and present superiors. The dilemma is that past
performance may have little or no bearing on one's ability to achieve a task
in a foreign cultural environment.

(2) Cross-Cultural Suitability: The cultural environment in which

expatriates operate is an important factor for determining successful
performance. Here, intercultural competence and related concepts as well
as the ability to adjust to a foreign culture play important role. However, a
precondition for cross-cultural suitability is soft skills that are also
important in other national positions.
Soft skills are a criterion which is underestimated by many MNES. They are
a precondition for intercultural competence and are important success
factors of international managers and need to be considered in addition to
technical knowledge and skills. They include psychological as well as
personal features, international experience and language knowledge. Apart
from the obvious technical ability and managerial skills, expatriates require
cross-cultural abilities that enable the person to operate in a new
environment and to guarantee the functioning of culturally diverse teams.
This is often expressed by using the term intercultural competence, which is
defined as 'the ability to function effectively in another culture'. The
desirable attributes should include dimensions such as cultural empathy,
adaptability, diplomacy, language ability, positive attitude, emotional
stability, maturity, etc.
(3) Family Requirements: The family is a very important influence factor
on the success of international assignment, particularly the spouse. Despite
the importance of the accompanying spouse/partner, the focus has been on
the expatriate. From the multinational's perspective, expatriate performance
in the host location is the important factor. It should be pointed out that the
spouse (or accompanying partner) often carries a heavy burden. Upon
arrival in the country of assignment, the responsibility for settling the family
into its new home falls on the spouse. It is often not possible for the
spouse/partner to work in the country of assignment due to immigration
regulations and the well-being and education of the children may be an the
ongoing concern for the spouse. Apart from accompanying partner's career,
there are other family considerations that can cause a potential expatriate
to decline the international assignment. Disruption to children's education
is an important consideration, and the selected candidate may reject the
offered assignment on the grounds that a move at this particular stage in
his or her child's life is inappropriate. The care of aging or invalid parents is
another consideration.

(4) Country/Cultural Requirements: International firms are usually

required to demonstrate that a HCN is not available before the host
government will issue the necessary work permit and entry visa for the
desired PCN or TCN. In some cases, the multinational may wish to use an
expatriate and has selected a candidate for the international assignment,
only to find the transfer blocked by the host government. Many developed
countries are changing their legislation to facilitate employment-related
immigration which will make international transfers somewhat easier.

(5) Language: Language skills may be regarded as of critical importance for

some expatriate positions. Knowledge of the host country's language is an
important aspect of expatriate performance, regardless of the level of
position. The ability to speak the local language is an aspect often linked
with cross-cultural ability. Nevertheless, mastering the local language is not
the most important qualification with respect to languages. Some
multinationals adopt a common corporate language as a way of
standardizing reporting systems and procedures.

(6) Multi National Enterprise (MNE) Requirements: Selection decisions

are influenced by the specific situation of the MNE. For example, the MNE
may consider the proportion of expatriates to local staff when making
selection decisions, mainly as an outcome of its staffing philosophy.
However, operations in particular countries may require the use of more
PCNS and TCNS. Selecting staff to work in an international joint venture
may involve major input from the local partner, and could be heavily
constrained by the negotiated agreement on selection processes.

MANAGING GLOBAL DIVERSE WORKFORCE:

A new era of diversity management is posing challenge especially because

globalization has transformed society, economics and politics is greatly
influencing demographics within the workplace. Workplace diversity refers
to the variety of differences between people in an organization. Diversity
encompasses race, gender, ethnic group, age, personality, cognitive style,
tenure, organizational function, education, background and more. Diversity
not only involves how people perceive themselves, but how they perceive
others. Those perceptions affect their interactions. For a wide assortment of
employees to function effectivelv. as an organization, human resource
professionals need to deal and effectively with issues such as
communication, adaptability. change. Successful organizations recognize
the need for immediate action and are ready and willing to spend resources
on managing diversity in the workplace.
Benefits of Workplace Diversity:
An organization's success and competitiveness depends upon its ability to
embrace diversity and realize the benefits. There are many benefits when
the organizations actively assess the workplace diversity issues, develop and
implement diversity plans. Some of them are:
Increased Adaptability: Organizations employing a diverse workforce can
supply numerous solutions to problems in service, sourcing, and allocation
of resources. Employees from diverse backgrounds bring individual talents
and experiences in suggesting ideas that are flexible in adapting to
fluctuating markets and customer demands.
Broader Service Range: A diverse collection of skills and experiences (e.g.
languages, cultural understanding) allows a company to provide service to
customers on a global basis.
Variety of Viewpoints: A diverse workforce that feels comfortable
communicating varying points of view provides a larger pool of ideas and
experiences. The organization can draw from that pool to meet business
strategy needs and the needs of customers more effectively.
More Effective Execution: Companies that encourage diversity in the
workplace inspire all of their employees to perform to their highest ability.
Company-wide strategies can be executed; resulting in higher productivity,
profit, and return on investment. Managers have to face several challenges
due to the diversity in the workplace like:
Communication: Cultural and language barriers need to be overcome for
diversity programs to succeed.
Resistance to Change: Employees may resist social and cultural changes.
Implementation of Diversity in the Workplace Policies: Managers must
build and implement a customized strategy to maximize the effects of
diversity in the workplace.
Successful Management of Diversity in the Workplace: Creating and
implementing strategies to create a culture of diversity that permeates every
department and functions of the organization.
Some of the Ways to Manage Global Diverse Workforce are:
(1)Understand Discrimination: The HR manager has to supervise the
employees, he must, therefore, understand both the discrimination
laws and the penalties for violating them. Knowledge of this legislation,
and also sharing that knowledge among the workgroup, effectively
reduces the numbers of conflicts and behavioural issues. That same
knowledge can prevent employers from making decisions, be they
harsh or favourable, based on colour, religion, age, gender, and race.
(2)Equitable Treatment: The HR manager must confirm that all of the
personnel policies from hiring to promotions raises are based on
employee performance. He should avoid allowing tenure, ethnic
background or any other kind category affect the framing of human
resources policies Managing a diverse workplace begins with strong
policies equality from the company. Once these policies are in place
the company can begin implementing diversity measure throughout
the entire organization.
(3)Create an Empowered Atmosphere: HR managers mu. infuse the
work environment with an atmosphere the welcomes the diverse skill
set and empowers them to work as a team. Leaders can be very
effective helping t establish morale and encourage employees to
perform best.
(4) Provide Orientation: Orientation helps new employees to become
familiar with the company, its operations, an- present workforce.
Company policies are defined, issues a concerns are addressed, queries
are answered, short and long-term goals are discussed. Orientation is a
way to welcome the newcomers and make them feel comfortable.
(5) Fairness in Hiring: HR manager should rate the qualifications of the
candidate based on the quality of his experience, not age or any other
category, when hiring When an organization hires a diverse but qualified
workforce, it is on the right track towards being able to manage the
diversity.
(6) Create Diverse Work Groups: Managers must encourage diversity
when creating teams and special work groups
within the organization. If a manager creates a work that does not utilize
the skills of the most qualified group employees, then he must insist on
the group being changed to include all qualified staff members.
(7) Handle Complaints Effectively: All the complaints of favouritism or
discrimination should be treated seriously. Employees should be
encouraged to report all instances of discriminatory behaviour, and have
a definitive process in place for investigating and dealing with these
issues.
(8) Invest in Diversity Training: HR managers should hold periodic
sessions of training for the entire staff on the benefits of diversity in the
workplace. They must encourage discussions at these meetings on how
the company can better manage workplace diversity.
In order to survive, a company needs to be able to manage and utilize its
diverse workplace effectively. Managing diversity in the workplace should
be a part of the culture of the entire organization. Organizations that
manage a diverse workforce benefit most and bring out the best of an
individual's unique skills, creativity, experience and knowledge.
Successful management reflects positively on a company and encourages
customers and prospective customers to establish long-term
relationships.
INTERNATIONAL COMPENSATION

MEANING:

Compensation may be defined as the financial remuneration that the

employees receive in exchange for their Labour. The compensation system is
designed to reward employees in an inducement for the equitable manner
and to serve as attraction and retention of a good workforce.

Compensation decisions should achieve some critical objectives like:

 Be legal.
 Be adequate.
 Be motivating.
 Be equitable.
 Provide security.
 Be cost-benefit effective.
Global compensation practices have increasingly being seen as a
mechanism to develop and reinforce a global corporate culture, a primary
source of corporate control, linking performance outcomes with associated
costs.

OBJECTIVES OF INTERNATIONAL COMPENSATION:

(1) When developing international compensation policies, a firm seeks to

satisfy several objectives like:
a) The policy should be consistent with the overall strategy, structure and
business needs of the MNC
b) The policy must work to attract and retain staff in the areas where the
MNC has the greatest needs and opportunities.
c) The policy should facilitate the transfer of international employees in
the most cost - effective manner for the firm.
d) The policy must give due consideration to equity and ease of
consideration.
(2) The international employee will also have a number of objectives that
need to be achieved from the firms compensation policy:
a) The employee will expect that the policy offers financial protection in
terms of benefits, social security, and living costs in the foreign
location.
b) The employee will expect that a foreign assignment will offer
opportunities for financial advancement through income and/or
savings.
c) The employee will expect that issues such as housing, education of
children, and recreation will be addressed in the policy.
Increased complexities in global pay include the growing use of
outsourced activities and subsequent labour pricing needs, balancing
centralization and decentralization of incentives, benefits and pensions
and so on. The complexities, challenges and choices facing managers
involved in global compensation decisions do not change the primary
areas of focus.
For MNES to successfully manage compensation and benefits. requires
knowledge of employment and taxation law, customer environment and
employment countries; familiarity with currency fluctuations and the
effect of practices of many foreign inflation on compensation, Moreover, it
 also requires an understanding of why and when special allowances must
be supplied and which allowances are necessary in what countries - all
within the context of shifting political, economic and social conditions.

COMPONENTS OF INTERNATIONAL COMPENSATION

PROGRAM:

The area of international compensation is complex primarily because

multinationals must cater to three categories of employees: PCNS, TCNS
and HCNS. The key components of international compensation as
follows:
(1) Base Salary: The term base salary acquires a different meaning when
employees go abroad. In a domestic context, base salary denotes the
amount of cash compensation serving as a benchmark for other
compensation elements (such as bonuses and benefits).

For expatriates, it is the primary component of a package of

allowances, many of which are directly related to base salary (e.g.
foreign service premium, cost-of-living allowance, housing allowance)
as well as the basis for in-service benefits and pension contributions.
It may be paid in home or local country currency or a combination of
both.

The base salary is the foundation block for international

compensation whether the employee is a PCN or TCN. Major
differences can occur in the employee's package depending on
whether the base salary is linked to the home country of the PCN or
TCN, or whether an international rate is paid.

(2) Foreign Service Inducement and Hardship Premium: Parent-

country nationals often receive a salary premium as an inducement to
accept a foreign assignment, as well as a hardship premium to
compensate for challenging locations. Under such circumstances, the
definition of hardship, eligibility for the premium, and amount and
timing of payment must be addressed. For example, where a host
country's work week may be longer than that of the home country, a
differential payment may be made for overtime, which is not normally
paid to PCNS or TCNS.
 It is important to note that these payments are more commonly paid
to PCNS than TCNS. Foreign service inducements, if used, are usually
made in the form of a percentage of salary, usually 5 to 40 per cent of
base pay, but are also sometimes offered as a lump-sum incentive (i.e.
as a one-off payment made at some point during an assignment).
Such payments vary, depending upon the assignment location, tax
consequences, and length of assignment.

(3) Allowances: Issues concerning allowances can be very challenging to

a firm establishing an overall compensation policy, partly because of
the various forms of allowances that exist. Some of the most common
allowances include:

(a) Cost-of-living Allowance: The cost-of-living allowance (COLA),

which receives the most attention, involves a payment to
compensate for differences in expenditures between the home
country and the foreign country, for example, the costs of
transportation, furniture and appliances, medical, automobile
maintenance and domestic help etc.

(b) Housing Allowance: The provision of a housing allowance implies

that employees should be entitled to maintain their home-country
living standards (or, in some cases, receive accommodation that is
equivalent to that provided for similar foreign employees and
peers). The amount of housing allowance is determined
predominantly by family size, and to some extent job level. Other
alternatives include company-provided housing (either mandatory
or optional); a fixed housing allowance across a particular job level,
with the expatriate 'topping up' according personal preferences; or
assessment of a portion of income, out of to which actual housing
costs are paid.

(c) Home Leave Allowances: Many MNES also have a provision for
home leave allowances where employers Cover the expense of one
or more trips back to the home country each year. The primary
purpose paying for such trips is to give expatriates the opportunity
to renew family and business ties, thereby helping them to
minimize adjustment problems when they are repatriated.

(d) Education Allowances: The provision of education allowances for

the children of expatriates is frequently an integral part of an
 international compensation policy. Allowances for education can
cover items such as tuition (including language classes),
application and enrolment fees, books and supplies, meals,
transportation, excursions and extra-curricular activities, parent
association fees, school uniforms and, if applicable, room and
board.

(e) Relocation Allowances: Items covered by relocation allowances

include moving, shipping and storage charges; temporary living
expenses; subsidies regarding appliance or car purchases (or
sales); and down payments or lease-related charges. Allowances
regarding perquisites (cars, drivers, club memberships, servants
and so on) may also need to be considered (usually for more senior
positions, but this varies according to location).

(f) Spouse Assistance: Many MNES are offering spouse assistance to

help guard against or offset income lost by an expatriate's spouse
as a result of relocating abroad. Payments, on average, are capped
at US$ 7000 per family but vary according to region. Although
some firms pay a one-time allowance to make up for a spouse's lost
income, US firms are beginning to focus on providing spouses with
employment opportunities abroad, either by offering job search
assistance or employment in the firms foreign unit.

APPROACHES:

The main options in the area of international compensation are the Going
Rate Approach (also referred to as the Market Rate Approach), Balance
Sheet Approach (sometimes known as the Build-up Approach) and Local
Plus Approach.

Going Rate Approach:

With this approach, the base salary for the international transfer is linked
to the salary structure in the host country. The multinational usually
obtains information from local compensation surveys and must decide
whether local nationals (HCNS), expatriates of the same nationality or
expatriates of all nationalities will be the reference point in terms of
benchmarking. For example, a Japanese bank operating in New York would
need to decide whether its reference point would be local US salaries, other
Japanese competitors in New York, or all foreign banks operating in New
York. With the Going Rate Approach, if the location is in a low-pay country,
the multinational usually supplements base pay with additional benefits
and payments.

Characteristics of the Going Rate Approach:

(a) Based on local market rates:
(i) Relies on survey comparisons among:
(a) Local nationals (HCNS)
(ii) Expatriates of same nationality
(iii) Expatriates of all nationalities

(b) Compensation based on the selected survey comparison:

(i) Base pay and benefits may be supplemented by additional
payments for low-pay countries.

Advantages of Going Rate Approach:

(a) There is equality with local nationals (very effective in attracting PCNS or
TCNS to a location that pays higher salaries than those received in the
home country).
(b) The approach is simple and easy for expatriates to understand.
(c) Expatriates are able to identify with the host country.
(d) There is often equity among expatriates of different nationalities.
Limitations of Going Rate Approach:

(a) Variation between assignments for same employee: There can be

variation between assignments for the same employee. This is most obvious
when we compare an assignment in an advanced economy with one in a
developing country, but also between assignments in various advanced
economies where differences in managerial salaries and the effect of local
taxation can significantly influence an employee's compensation level using
the Going Rate Approach.
(b) Variation between expatriates of same nationality in different
countries: There can be variation between expatriates of the same
nationality in different locations. A strict interpretation of the Going Rate
Approach can lead to rivalry for assignments to locations that are financially
attractive and little interest in locations considered financially unattractive.
(c) Potential re-entry problems: The Going Rate Approach can pose
problems upon repatriation when the employee's salary reverts to a home
country level that is below that of the host-country. This is not only a
problem for firms in developing countries, but also for MNES from many
countries where local managerial salaries are well below that of the USA,
which has long been the world market leader in managerial salaries,
although the gap between US and some European salaries has been
narrowing.

The Balance Sheet Approach:

The basic characteristic of this approach is to ‘keep the expatriate whole'

(that is, maintaining relativity to PCN colleagues and compensating for the
costs of an international assignment) through maintenance of home-country
living standard plus a financial inducement to make the package attractive.
This approach links the base salary for expatriates to the salary structure of
the relevant home country.
For example, a US executive taking up an international position would have
his or her compensation package built upon the US base salary level rather
than that applicable to the host country. The key assumption of this
approach 19 that foreign assignees should not suffer a material loss due to
their transfer, and this is accomplished through the utilization of what is
generally referred to as the Balance Sheet Approach.
According to Reynolds, The balance sheet approach to international
compensation is a system designed to equalize the purchasing power of
employees at comparable position levels living overseas and in the home-
country and to provide incentives to offset qualitative differences between
assignment locations. There are four major categories of outlays incurred by
expatriates that are incorporated in the Balance Sheet Approach:
(a) Goods and Services: Home-country outlays for items such as food,
personal care, clothing, household furnishings, recreation, transportation
and medical care .
(b) Housing: The major costs associated with housing in the host country.
(c) Income Taxes: Parent-country and host-country income taxes.
(d) Reserve: Contributions to savings, payments for benefits, pension
contributions, investments, education expenses, social security taxes, etc.
Where costs associated with the host-country assignment exceed equivalent
costs in the parent country, these costs are met by both the MNE and the
expatriate to ensure that parent-country equivalent purchasing power is
achieved.
Advantages of Balance Sheet Approach:
(a) The Balance Sheet Approach provides equity between all foreign
assignments and between expatriates of the same nationality.
(b) Repatriation of expatriates is facilitated by emphasis on equity with
the parent country as expatriate compensation remains anchored to
compensation system in the parent country.
(c) This approach is easy to communicate.

Limitations of Balance Sheet Approach:

(a) This approach can result in considerable disparities- both between
expatriates of different nationalities and between PCNS and HCNS.
Problems arise when international staff is paid different amounts for
performing the same (or very similar) job in the same host location,
according to their different home base salary. For example, in the
Singapore regional headquarters of a US bank, a US PCN and a New
Zealand TCN may perform the same (or similar) banking duties but
the American will receive a higher salary than the New Zealander
because of the differences in US and New Zealand base-salary levels.
(b) The differences in base-salary levels can also cause difficulties
between expatriates Traditionally, this has referred to the problem of
highly paid PCNS being resented by local HCN employees and HCNS.
because these 'foreigners' are perceived as being excessively
compensated (and because they are blocking career opportunities for
locals). For instance, as indicated above, the USA has the highest
level of managerial compensation in the world. Thus, a multinational
that establishes a subsidiary in the USA (or acquires a US business)
may find that if it uses a Balance Sheet Approach, its expatriates may
be substantially underpaid compared to local American employees.
 (c) While the logic of the balance sheet states that being tied to the home
country assists in repatriation because the expatriate identifies with
the home country, research in equity theory suggests that employees
do not always assess compensation issues in a detached way. The
issue of base salary differences is also a concern for US employees
working for foreign firms operating in the USA. Many non-US
multinationals are reluctant to pay high US salaries to US employees
who are offered international assignments (as HCNS into the firm's
home country operations, or as TCNS in a regional subsidiary). US
employees are equally reluctant to accept the lower salaries paid in
the firm's home country. Thus, the Balance Sheet Approach can
produce disparities and may also act as a barrier to staff acceptance
of international assignments.

(d) While this approach is both elegant and simple as a concept, it can
become quite complex to administer. Complexities particularly arise
in the areas of tightly integrated private and government fund
transfers (e.g. taxes and pensions).

Local Plus Approach:

This is a third emerging approach to international compensation: Over the

past decade, a approach to international compensation called Local pl. has
begun to emerge, particularly in the Asia Pacific regios Local Plus approach
is one in which expatriate employees are paid according to the prevailing
salary levels, structure and administration guidelines of the host location,
plus provided 'expatriate type' benefits such as assistance with
transportation , housing, and dependents' education in recognition of the
employee's 'foreign' status. Benefits may be paid in-kind (directly by the
MNE) or as add-ons to local salary levels at a grossed-up rate to account for
host taxes.
Local Plus compensation does not typically include tax equalization, COLA,
mobility premiums, hardship allowances, familiarization visits, home leave,
cross-cultural training and other pre-departure programs, or spouse
assistance. Pension benefits are optional depending on the nature of the
assignment and whether the transfer is temporary or permanent.
The driving force behind a Local Plus approach for many MNES is to reduce
their international assignment costs. Developing low-cost alternative salary
packages, such as Local Plus, is one way to achieve this. With many
companies also seeing an increase in the number of developmental
assignees, many expatriates (especially junior and middle management
staff) are often willing to accept a reduced package such as Local Plus in
return for the international experience that will enhance their future
careers.
Local Plus is used for long-term assignments, permanent transfers, intra-
regional transfers (e.g. such as in Asia Pacific), and for assignments from
low to high wage locations. In many respects, Local Plus compensation is a
hybrid version of both the Balance Sheet (home based) and Going Rate (host
based) Approaches, often containing the optimum benefits of both. As such,
it is a compensation approach that can frequently solve some of the
problems encountered in more traditional compensation approaches and
therefore has some unique benefits. For example, because the expatriate
benefits of a Local Plus package are not fixed' as in the Balance Sheet
Approach, there is considerable flexibility to tailor each "plus' component
(i.e. add or a remove a benefit) according to a variety of individual and
corporate objectives.
This is advantageous for a number of reasons:
(a) If we take the Balance Sheet Approach, this is based on the notion
that expatriate employees can identify a home' country, but with more
expatriates undertaking multiple assignments, often back to back,
and frequently over a decade or more (some with no intention to
return or retire there), identifying 'home' is becoming increasingly
difficult. Using a Balance Sheet approach under these circumstances
does not make sense, but a Local Plus approach does.
(b) Companies that recruit employees from locations who facilities will
find it very difficult to administer either home or host based
approached. Again, a Local Plus approach will solve this problem by
offering 'plus benefits based on what is appropriate given the
employee's experience and skills rather than where there come from or
where they are going to. Advantages / Benefits of the Local Plus
 Approach: The benefits of this approach can be seen in the increasing
use of this type of compensation in Asia Pacific. Companies
headquartered in Asia are more likely to have a formal Local Plus
policy in place, and have more assignees on a Local Plus policy, than
in any other region in the world. This may be due in large part to
Asia's economic growth over the past decade that is fuelling the
demand for a more globalized workforce.

Advantages of Local Plus Approach:

(a) MNES can attract thousands of expatriates while also facilitating the
transfer of international employees in the most cost-effective manner.
(b) It helps to develop low cost alternative salary packages.
(c) It can be used for assignments from low to high wage locations
(d) It overcomes the drawbacks of Balance Sheet and Going Rate approach.
Disadvantages of Local Plus Approach:
Although the benefits of Local Plus compensation are numerous, there are
also some limitations for firms that use the approach:
(a) Local Plus compensation tends to shift the balance in the
employment relationship in expatriates' favour. This is because
Local Plus compensation has a power more normalizing effect on
how expatriates live in a host-country in comparison to expatriates'
on more generous salary packages. It means that the lifestyle of
expatriates on Local Plus compensation is generally more closely
aligned with the lifestyle and socio- economic habits of locals in the
host-country, i.e., the disparity in purchasing power between
themselves and HCNS is marginal given that the choices they make
about their standard of living (where to live, which schools to
attend) are determined less by the MNE.

(b) As a result of their greater sacrifice and being forced to rely less on
the organization to support some of their fundamental employment
needs, which is often not compensated for in other non-financial
ways (e.g. through improved career management support), Local
Plus compensation can impact on expatriates' job embeddedness in
terms of commitment and loyalty.
 (c) Local Plus compensation tends to decrease the ties that bind
expatriates to their firm. The shift in power in the employment
relationship in favour of expatriates can have significant
implications for MNES. The most significant problem is expatriate
retention. For instance expatriates' willing to accept a reduced
salary package to if Local Plus compensation is ideally suited in
exchange for the opportunity to acquire valuable. international
skills, it is necessary to also consider that once these skills have
been acquired, employees marketability on the international
Labour market will likely increase.

As Local Plus expatriates are less reliant on firms for fund their expatriate
lifestyle, and because they are living a largely 'local' lifestyle to begin with,
their willingness to consider other job offers that may afford them even an
incremental increase in their current salary is higher. This may be because
they feel 'pushed to find better employment opportunities, or because they
have (or are developing) a self-initiated career orientation that prompted
them to initially accept a local-plus package.
Either way, there is an increased risk of losing expatriates to competitors,
particularly during an international assignment, which can have a
devastating effort on MNES broader global staffing objectives.

HRM PERSPECTIVES IN TRAINING AND

DEVELOPMENT

MEANING:
Training aims to improve employees' current work skills and behaviour,
whereas development aims to increase abilities in relation to some future
position or job. International assignment is a vehicle for both training and
development and continues to play a strategic role in international business
operations. Training and development activities are part of the way in which
the MNE builds its stock of human resources its human capital.

EXPATRIATE TRAINING: The way in which an MNE anticipates

and provides suitable training for international assignments is an important
step. This is reflected in the growth of interest in, and provision of, pre-
departure training to prepare expatriates and accompanying family
members for their international assignment. The following figure is a
representation of the international training and development process. It
shows the link between international recruitment and selection, and
training and development activities. Most expatriates, whether PCNS or
TCNS are internal hires, selected from within the MNE's existing operations.
However some expatriates may be hired externally for an international
assignment.
Role /Advantages of Expatriate Training: International relocations are
personally demanding because they require the assignee not only to perform
new job requirements but also adjust to a new cultural and linguistic
environment, learn to effectively interact with cultural deal with conflict and
competing interests between differ To others units of the MNC, or cope with
changes to family life. that the assignment can be executed smoothly,
expatriate ensure training is required.

The advantages of expatriate training is explained as follows:

Clear Understanding of Role: Employees who are sent abroad for the right
reasons are likely to be most successful. Expatriate training that clearly lays
out the primary goals of their assignment is likely to help employees meet
expectations with greater ease.

Better Integration: The inability to settle into a new country is one of the
most common reasons for expatriate failures and them to return home.
Therefore, detailed sensitivity training is required to: Provide a detailed
overview of the cultural differences between home and host countries.
Develop emotional flexibility to accept unfamiliar behaviour and values are
effective ways of doing things. Help the expatriate to evoke a sense of
respect towards the culture and norms of their host country and to enact
change in a culturally sensitive way.

Improved Language Skills: Training offers the basics of the host country's
language to those moving abroad. Good host language skills improve an
expatriate's access to information once they move abroad and helps them to
build connections, an essential element of expat success.

Develop Cultural Awareness: Although the primary selection criterion for

most MNES is technical ability of existing employees, most of the expatriate
training is devoted to expatriate pre-departure training activities that are
mainly concerned with developing cultural awareness.

Ensure Expatriate Effectiveness: Once an employee has been selected for

an expatriate position, pre-departure training is considered to be the next
critical step in attempting to ensure the expatriate's effectiveness and
success abroad, particularly where the destination country is considered
culturally tough .

Rapid Adjustment: Effective cultural training assists individuals to adjust

more rapidly to the new culture. A major objective of intercultural training
is to help people cope with unexpected events in a new culture.

Adjustment of the Family: Expatriate training programs expedite the

transition process by cultivating employees' cultural sensitivity and
equipping them and their families with the tools, skills and knowledge
required to effectively interact with people from other cultures.

Avoids Unnecessary Repatriation Cost: It should be noted that failure to

provide an expat and their family with the knowledge and skills needed to
quickly fit in the new milieu invariably results in failure of the international
assignment and the premature repatriation of the employee. This can be
unnecessarily costly to the business.

International Training and Development

In the above figure(Page91), pre-departure training is indicated as a subset

of general training. However in some organizations the top management did
not believe pre-departure training was necessary or effective. So, while the
potential benefits of cultural awareness training are widely acknowledged,
such training was downgraded or not offered by a large number of US
multinationals. Previously, multinational firms placed less priority on
providing pre-departure training for the spouse and family. However, due to
the increasing recognition of the interaction between expatriate performance
and family adjustment, more multinationals are now extending their pre-
departure training programs to include the spouse/partner and children.
Expatriate training enable employees to:

1. Understand how their new culture factors into both their social and
business relationships.

2. Acquire essential information about the host country.

3. Nurture the skills needed to adjust to their new living and working
environment.

CROSS CULTURAL TRAINING:

Today's world is characterized by globalization, ever- improving information

and transportation systems, multicultural communities and workplaces, as
well as changing political systems. The process of globalization facilitates
operations across borders and cultures. However, it also creates new
obstacles that international companies have to deal with to be successful.
The amount of cross-cultural interaction, loaded as it is with potential
difficulties rooted in cultural differences, grows steadily in frequency and
intensity, bringing about the need for organizations to prepare their staff (at
all levels) with cross- cultural training and international competency
coaching.

Cross culture refers to a company's initiatives to increase understanding of

different develop "sdno8 effective communication or marketing efforts to
reach out to customers and clients outside its traditional market. Methods
of cross culture are intended to strengthen the interaction of people from
different backgrounds in the business world and is a vital issue in
international business.

Cross-cultural training in general can be defined as "Any intervention aimed

at increasing an individual's capability to cope with and work in foreign
environment" (Tung, 1981, in Zakaria, 2000). Hence cross-cultural training
involves all the methods like lectures, simulation etc. used to make the
person familiar with a different culture. The term cross-cultural training
hence is broad enough to include differences in areas like language abilities,
business etiquettes, beliefs and values, social system, negotiating style. etc.
of any culture. Cross-cultural Training has also been defined as "Formal
methods to prepare people for more effective interpersonal relations and job
success when they interact extensively with individuals from cultures other
than their own" (Brislin and Yoshida, 1994). The term job success here is
ambiguous, as the factors defining success on an expatriate assignment can
include organizational values, earning respect from subordinates, technical
skills, interpersonal and relationship peers and management skills etc.

Advantages of Cross Cultural Training:

It is accepted that to be effective the expatriate employee must adapt to and

not feel isolated from the host country. A well-designed cultural awareness
training programme can be extremely beneficial, as it seeks to foster an
appreciation of the host-country's culture so that the expatriates can
behave accordingly, or at least develop appropriate coping patterns.

The advantages from cross-cultural training have been listed as following

(Zakaria, 2000):

i. A means for constant switching from an automatic, home culture

international management mode to a culturally adaptable and
acceptable one
ii. An aid to improve coping with unexpected events and cultural shock in
a new culture

iii. A means to reduce uncertainty of interactions with foreign nationals

iv. A means for enhancing expatriates coping abilities

Hence cross-cultural training can be seen as a tool for improving the

corporate culture and practices by constantly learning through induction of
foreign nationals in the organizations. Further the cross-cultural training
will help to reduce the psychological stress and cultural shock which often
lead to failure of expatriates.

The components of cross cultural training programmes vary according to

country to country assignment, duration, purpose of the transfer, and the
provider of such programmes.

Following are the major types of cross-cultural training programmes:

(i) Environmental briefing is used to provide information about such

things as geography, climate, housing and schools.
(ii) Cultural orientation is designed to familiarize the individual with
cultural institutions and value systems of the host country.

(iii) Cultural assimilators using programmed learning approaches are

designed to provide the participants with inter-cultural encounters.

(iv) Language training is aimed at increasing communication

effectiveness.

(v) Sensitivity training is designed to develop attitudinal flexibility.

(vi) Field experience is arranged to make the expatriate familiarize with

the challenge of assignment.

Some organizations have now extended this idea to includ. cross-cultural

training to family members, especially, children they will be accompanying
their parents. Issues in Cross Cultural Training: Doing business in a cross-
cultural environment requires an in-depth understanding of and clear
communication with people from a variety of cultural backgrounds and
nationalities and makes cross-cultural training essential in order to
maximize positive outcomes of intercultural interactions and to reduce
potential cultural faux-pas.

Some of the issues in cross cultural training are:

(i) Pass Relevant Information: Necessary cross-cultural information

should be shared with all employees involved in international ventures,
rather than being limited to those who have already had experience with
them. Cross-cultural training organizations are experts in the area of
cross- cultural relationships and can provide training on many topics.

(ii) Different Aspects of Time like Punctuality: The time factor here
involve two dimensions that are punctuality and relationship
dimension. While in some cultures like USA starting and ending on time
are very important in others like South American countries that may be
considered exceptional. Some cultures prefer to take time for
relationship building, which may not be acceptable at all in others.
Hence cross-cultural barriers related to time need to be taken care of.

(iii) Linguistic Barriers: English is being used for most transactions but
then usage of English tends to change with the country contexts. For
example the pronunciation in India is significantly different from the
American way. Secondly certain terms may have different meaning in
different languages; hence context also plays an important role. In case
of countries with different language the expatriates must be trained in
opening dialogues and discussions with the help of translators.

(iv) Cultural Stress (ambiguity and difference of perceptions): The

training should involve methods to counter stress and to interpret
situations. The expatriates will have to understand the situations on
their own and then form perceptions. The training should avoid any
kind of stereotyping where trainees may be lead to believe certain things
about any culture. The culture may broadly explain value system of a
community or country but every individual is different. Hence any
individual with a pre- formed notion about the culture will be shocked
to see people different from his beliefs leading to lot of confusion and
stress.
(v) Body Language and Greetings: The way emotions are expressed in the
various cultures may differ, for example the face expressions and hand
gestures may convey different meanings in different culture.

(vi) Clear Communication: with the expatriates as well as repatriates is

necessary. Any misunderstandings at any stage should be avoided and
cleared.

(vii) Pre-Departure Briefing: Managing expectations conducting pre-

departure briefing on what can be expected during the assignment and
after returning. Moreoves Reorientation programmes should be
organized to provide the repatriate with a briefing on changes in
strategies and policies of the organization

(viii)Written Record: Written repatriate agreements when upon feasible to

clarify the types of assignments available return.

(ix) Career Planning Sessions: Career planning sessions and mentoring

programmes focusing on career objectives and performance indicators,
carried out by the HR managers

(x) Adjustment Period: Handling issues such readjustment, counselling

regarding the education of the child, life style changes etc . and providing as
social school and adjustment period or a short vacation to the repatriate.

A well-structured cross-cultural training will help the employees to prepare

for coping with the changes in the working styles, beliefs and values they
are expected to face. A large degree of uncertainty which an employee might
face while moving to a foreign land and culture can be reduced through
organizational support in terms of training. The huge costs that an
organization might face due to expatriate failure is of high concern.
Preparing the employees for a foreign assignment is mutually beneficial to
the organization and the employee. For the employees, a well delivered
training can help in managing with the new situations, while for the
organization this helps in getting the best of the employee in terms of work
output through maintaining the employee morale and motivation. With the
growing influence of foreign markets and increasing growth prospects for
multinational business models, it is of high importance that companies
prepare their employees to be fit for global assignments.
INTERNATIONAL PERFORMANCE MANAGEMENT
MEANING:

International performance management is a process that enables the MNE

to evaluate and continuously improve individual, subsidiary unit and
corporate performance, against clearly defined, pre-set goals and targets.
Organizations exist to achieve goals, the degree of success that individual
employees have in reaching their individual goals is important in
determining organizational effectiveness. The assessment of how successful
employees have been at meeting their individual goals is a critical part of
HRM. The evaluation of performance of expatriates is linked with the
performance of subsidiaries, which they are sent to manage. The
International HR manager has to consider the complex interaction between
local and global contexts for performance and the tasks of the expatriates,
performance criteria, purposes for, and timing of performance management
as these elements relate to individual and firm outcomes.
International assignments vary in terms of the duration scope of physical
relocation required. That is, from traditional expatriate assignments when
expatriates and, usually, the is family members relocate; to virtual
assignments, where physical relocation by employees or their families is
required When attempting to determine expatriate performance, it is
important to consider the impact of the following variables and their
interrelationship: The compensation package. The task - the assignment
task variables and role of the expatriate. Headquarters' support. The
environment in which performance occurs the subsidiary or foreign facility.
Cultural adjustment - of the individual and the accompanying family
members.
Variables Affecting Expatriate Performance Management:
1. Compensation Package: It is essential that we recognize the
importance of remuneration and reward in the performance equation.
Perceived financial benefits, along with the progression potential
assignment, are often important motives for accepting the associated
with an overseas posting. If these expectations are not realized during
 the assignment, the level of motivation and commitment is likely to
decrease, thus affecting performance

2. Task: Expatriates are assigned to foreign operations in order to fulfil

specific tasks like:

(a) The chief executive officer, or subsidiary manager, who oversees

and directs the entire foreign operation,

(b) The structure reproducer carries the assignment of building or

reproducing in a foreign subsidiary, a structure similar to that
which he or she knows from another part of the company. He or she
could be d building a marketing framework, implementing an
financial reporting system, or accounting and establishing a
production plant, for example.

(c) The trouble-shooter is the individual who is sent to a foreign

subsidiary to analyse and solve a particular operational problem.

(d) The operative is the individual whose assignment is to perform

functional job tasks in an existing operational structure, in
generally lower level, supervisory positions.

In a recent review of cross-cultural performance management systems,

Caligiuri identifies four bast types of international assignments:

i. Technical Assignments: Short-term knowledge make up 5 to 10

per transference activities, said cent of expatriate assignments.

ii. Developmental Assignments: focusing on country performance

and the acquisition of local or regional understanding by the
assignee, said to in- make up 5 to 10 per cent of assignments

iii. Strategic Assignments: high-profile activities that focus on

developing a balanced global perspective, said to make up 10 to 15
per cent of assignments.

iv. Functional Assignments: described as more enduring assignments

with local employees that involve the two-way transfer of existing
 processes and practices, said to make up between 55 and 80 per
cent of assignments. Accurately assessing performance in the tasks
inherent in technical and functional assignments may well involve a
limited number of sources and focus on more concrete output
criteria (projects completed, contracts signed, etc.). Assessing
progress in developmental and strategic assignments, given their
more complex, subjective tasks, are likely to involve a wider variety
of local and global participants and perspectives.

3. Headquarters' Support: The expatriate assignment differs from a

domestic relocation as it involves the transfer of the individual (and
possibly accompanying family members) into a foreign environment,
outside their normal cultural comfort zones. The individual's primary
motivation for accepting the assignment may be career or financially
orientated, but this is often mixed with a genuine feeling of loyalty and
commitment to the sending organization. The process of adjustment to
the foreign location typically produces, to varying degrees, a range of
emotional and psychological reactions unfamiliar situations
encountered over the period of the stay in the host country. The level
of headquarters' support provided to the individual and the family is
an important performance variable.

4. Host Environment: The environment has an impact on any job, but it

becomes of primary importance with regard to expatriate management.
According to Gregersen et al., the with its differing societal, legal,
international context economic, technical and physical demands - can
be a major determinant of expatriate performance. Consequently,
expatriate performance should be placed within its international as
well as its organizational context.

5. Cultural Adjustment: The process of cultural adjustment may be a

critical determinant of expatriate job performance. Indeed, much of the
literature reviewed in our discussion of the cause of expatriate 'failure'
covers the process of adjustment. It is likely that expatriates and their
families will have some difficulty adjusting to a new environment, and
this will impact on the manager's work performance.

The dilemma is that adjustment to a foreign culture is multifaceted,

and individuals vary in terms of their reaction and coping behaviours.
 Determining the relevance of adjustment to the new environment when
assessing expatriate work performance may be problematical.

The five variables compensation package, task, headquarters' support, host

environment and cultural adjustment - reviewed above are not mutually
exclusive, but interact in a way that has significant implications for the
appraisal of international employees' performance. Designers and users of
performance management systems need to be conscious of, and responsive
to, the impact of these variables.

FACTORS INFLUENCING PERFORMANCE:

An effective employee is a combination of a good skill set and a productive

work environment. Performance of employees is affected by numerous
factors at work place. It is defined as the way to perform the job tasks
according to the prescribed job description. Performance is the art to
complete the task within the defined boundaries. Employee performance is
the extent to which a person carrying out the responsibilities and work
tasks (Singh et al., 1996).

Many factors affect employee performance that managers need to be aware

of and should work to improve at all times. To get the maximum
performance from employees, managers need to provide them with the tools
they need to succeed.

The factors influencing performance of employees at workplace are:

1. Managerial Standards: Managerial standards should be in line with
the job duties outlined in the job description outlined by human
resources. The background of the employee, including their
educational history, is also outlined in a job description. Managers
should keep their expectations in line with the duties assigned to the
employee. By expecting more from an employee than they were hired
for, or than their background has prepared them for, can lower the
employee performance.

2. Motivation: To get the best performance from employees, there needs

to be some sort of motivation. Motivation can come in the form of
financial incentives, the opportunity to get involved in company
projects, a career path that leads to management and direct
involvement from management into the daily tasks. Effective
motivation can create a productive work force, but a lack of motivating
factors can leave employees searching for reasons to give their
maximum effort.

3. Commitment: Commitment means offering a competitive rate of pay

and benefits package, offering assistance in paying for employee's
higher education costs, developing a regular training schedule that
keeps employees updated on company changes and gives pertinent
information for employees to do their jobs and upgrading equipment to
make sure that employees have the most efficient technology available
to do their work. Commitment shown by the company is returned in
the form of commitment from employees.

4. Employee Evaluation: An effective employee evaluation is an

interactive process where the manager gives his input on the
employee's performance, and the employee gets the chance to point
out what she has learned throughout the year. Managers create a plan
along with the employee for the coming year on how the employee can
develop and improve their performance. Comprehensive employee
evaluations are important to the ongoing performance of employees.

5. Job Security: The fear of getting fired can also reduce the productivity
of workers. So, job security is an important factor that can affect
employee performance. Job stress is another common problem that
can affect employee performance. The above factors affecting employee
performance in organization have to be controlled organization on the
right track. to put business
 6. Skills and Knowledge: If employees do not have the necessary
capability, skill or knowledge to do the job, their performance suffers.

7. Role Clarity: Employees need to know their responsibilities and have

a clear understanding about what they need to accomplish at the end
of the day. Ambiguity about roles could be another reason for a poor

8. Work Environment and Culture: Unhealthy work environment affects

performance of employees. A positive workplace culture boosts
employee morale, creates a work environment that is enjoyable and
contributes to increased productivity.

CRITERION USED FOR PERFORMANCE APPRAISAL OF

INTERNATIONAL EMPLOYEES:

The global firm's ability to measure an employee's individual contribution to

performance and to assess the aggregate contribution of human capital to
strategic progress is a complex process. Goals tend to be translated into
performance appraisal criteria so specificity and measurability issues are
important aspects, and we need to recognize that hard, soft and contextual
goals are often used as the basis for performance criteria.
 Hard goals are objective, quantifiable and can be directly measured -
such as return-on-investment (ROI), market share, etc.

 Soft goals tend to be relationship or trait-based, such as leadership

style or interpersonal skills.

 Contextual goals attempt to take into consideration factors that result

from the situation in which performance occurs.
Performance appraisal of subsidiary managers against hard criteria is often
supplemented by frequent visits by headquarters staff and meetings with
senior managers from the parent company. Soft criteria can be used to
complement hard goals, and take into account areas that are difficult to
quantify such as leadership skills, but their appraisal is somewhat
subjective and, in the context of both expatriate and non-expatriate
assignments, more complicated due to cultural exchanges and clashes.
However, relying on hard criteria such as financial data t evaluate how well
a manager operates a foreign subsidiary does not consider the way results
are obtained.
Who Conducts the Performance Appraisal?
Employees are appraised by their immediate superiors. This can pose
problems for subsidiary chief executive officers (or senior managers). They
work in countries geographically distant, yet are evaluated by superiors
back at headquarters who are not in a position to see on a day-to-day basis
how the expatriate performs in the particular situation.
Consequently, subsidiary managers tend to be assessed according to
subsidiary performance, with a reliance on hard criteria similar to that
applied to heads of domestic units or divisions. There is always a danger
that a subsidiary manager will take decisions and implement local strategies
that favour short-term performance to the detriment of longer-term
organizational goals.
Appraisal of other employees is likely to be conducted by the subsidiary's
CEO, or the immediate host-country supervisor, depending upon the nature
and level of the position concerned. With regard to expatriate performance
appraisal, host-country anagers may have a clearer picture of expatriate
performance d can take into consideration contextual criteria.
However, they may have culturally bound biases (e.g. about role behaviour)
and lack an appreciation of the impact of the expatriate's performance in
the broader organizational context. Some expatriates may prefer to have
parent-company evaluators, given that their future career progression may
depend on how the appraisal data is utilized back at headquarters. This
may be especially so in cases where foreign operations are relatively less
mnortant than the domestic operations. Others may prefer a host-country
appraisal if they perceive it as a more accurate reflection of their
performance.
Multiple raters are sometimes used in the domestic context - e.g. the 360-
degree feedback process. It has been argued that, given the cross-cultural
complexity of the foreign assignment, a team of evaluators should be used
for performance appraisal.
Standardized or Customized Performance Appraisal Forms:
Domestic firms commonly design performance appraisal forms for each job
category, particularly those using a traditional performance appraisal
approach rather than performance management. Such standardization
assists in the collection of accurate performance data on which the HR
decisions can be made, and allows for cross-employee comparisons.
Frequency of Appraisal:
In practice, formal appraisal is commonly on a yearly basis, and this
appears to extend to international performance systems, even though the
domestic-oriented literature on this topic recommends an ongoing
combination of formal and informal performance appraisal and feedback.
For example, the majority of the US companies in the Gregersen et al. study
referred to above reported annual appraisal practices. It is interesting to
note that the US companies using annual appraisal systems were more
likely to use standard appraisal forms and hard criteria.
Performance Feedback:
An important aspect of an effective performance management system is the
provision of timely feedback of the appraisal process. One of the problems
with annual appraisal is thet employees do not receive the consistent
frequent feedback considered critical in order to maintain or improve their
performance. Regular feedback is an important aspect in terms of meeting
targets and revising goals, as well as assisting in motivation of work effort.
The difficulty for the expatriate who is being evaluated by a geographically
distant manager is that timely, appropriate feedback is only viable against
hard criteria. For virtual assignees, this is further complicated when
geographic dispersion dictates reliance on email communication.
Interpersonal relations and an effective choice of communication medium
are two factors influencing virtual workgroup relations.

Appraisal of HCN Employees:

Performance appraisal in different nations can be interpreted as a signal of
distrust or even an insult. In Japan, for instance, it is important to avoid
direct confrontation to 'save face', and this custom affects the way in which
performance appraisal 15 conducted. A Japanese manager cannot directly
point out a work-related problem or error committed by a subordinate. One
way overcome the dilemma of cultural adaptation is to use host-country
nationals to assist in devising a suitable system for appraising subsidiary
employees and to advice on the conduct of the appraisal. At times, the need
for local responsiveness may affect the multinational's ability to effectively
implement a standardized approach to performance management at all
levels within the global operation. In terms of task performance and
potential role conflict, as can be seen in the following figure, it can be seen
that the HCN managers face particular role concerns that are different from
those of PCN and TCN managers. The HCN manager is expected to perform
a role that is conceptualized by a psychologically and physically distant
parent company, but enacted in an environment with other role senders
who are both psychologically and physically close.

HCN Role Conception:

Parent-company role conception is communicated to the HCN, but it crosses
the cultural boundary, as does feedback expressed as the HCN's role
behaviour (the straight arrows in the above figure). Input from 'host-
country' role senders, though, does not cross a cultural boundary. The HCN
receives role expectations and enacts role behaviours in his or her own
cultural environment. For subsidiary staff below the top management level,
one would expect that the performance management system be localized to
take into consideration local behavioural norms of work behaviour,
Conflict may arise in cases where HCNS report to a PCN expatriate manager
who also conducts their performance appraisal. In a way, this is the reverse
of the discussion surrounding local managers appraising the performance of
expatriates in terms of cultural bias. The difference is the impact that
parent-company standards have on the performance management system
and the degree to which localization is permitted in a standardized
approach. It may not be culturally sensitive to use appraisal techniques
such as 360-degree feedback, for instance.
PROBLEMS FACED IN INTERNATIONAL
PERFORMANCE MANAGEMENT:

Managing employee performance based on the organizational needs,

strategic requirements and customer preferences is crucial aspect of IHRM.
MNCS incur high cost on human resources due to employment of different
kinds of foreigners. Therefore, they expect the foreigners to perform
distinctly and create, contribute and add significant value to the
organizational activities. Foreign employees are also aware of their cost to
MNC concerned contribute phenomenally to the to and are organization
goals and strategies. MNCS encounter critical challenges in the process of
international performance management. The problems/challenges faced in
International performance management are:
1. Use of Different Techniques: MNC consists of headquarters (HQs),
subsidiaries and its various alliance companies. HR manager needs to
use different type of appraisal techniques for each part, as decision
affects various organs of the MNC differently. Even the implementation
process of the decision results in contrasting outcomes. The best
practice from the point of view of a subsidiary may not be the best for
HQ or other subsidiaries. Hence decisions that benefit most of the
parts and on long rather than short term basis are to be preferred and
considered appropriate.

2. Use of Different Criteria: Generally the parameters like profits, return

on investment, cash flows, productivity, sales per employee,
punctuality, rate of customer complaints etc. are applied to employees
in a group for measuring their performance. Some MNCS additionally
apply qualitative leadership, motivation parameters like innovation,
judgement, adaptability etc. for performance appraisal Should the HỌ
and subsidiaries adapt the same and standard criteria/performance
factors or a different criteria is a challenge.

3. Environmental Factors: Organizational performance in terms of

sales, profits etc. is influenced by the regulations or the host country's
Government like issuing license O cancelling the issued license,
exchange rate controls, immigration and migration controls, tariffs,
subsidies and employment of nationals. Therefore, increase/decrease
in profits cannot be always attributed to the performance of the
employee alone. In fact MNCS cannot follow a standard format of
 performance rating as the influences of environmental factors vary
from country to country and hence from subsidiary to subsidiary.

4. Different Business Firms: MNCS and their subsidiaries not only work
in different environment but also carry-out different kinds of business
including manufacturing, trading, dealing in services, construction
projects and the like. Therefore providing uniform data for appraisal is
not feasible.

5. Different Influences in Different Countries: Cultural and social

environment, economic system and institutional set up, political
ideologies and structure that influence the business as well as the
performance of the managers vary from the parent country to the host
country. Therefore the performance criteria valid in the parent
company may not be valid in the host country.

6. Difference in Use of Information Technology: Measurement of

performance of employees working in MNCS is challenging compared
to those working in the domestic companies can meet the colleagues
face to face, while the employees of the MNCS have a limited choice to
do so. compared to those working in domestic However, the
information technology devices like video conferencing, emails, fax and
telephone, though, have reduced the complexities.

7. Difference in Levels of Maturity: People of different countries are

generally strong in different skills, have different levels of maturity and
are strong in different disciplines. For instance, Indians are strong in
Mathematics and logic, while Americans in systematic analysis. MNCS
should not adopt the same performance appraisal format and scale to
measure the performance of employees of home country nationals and
different host country nationals as well as third country nationals.

8. Inexperienced Raters: The raters may have no experience of working

in other countries and may not know the social, business and work
challenges that the foreign employees face. As such, they may not even
possess required competence to appraise the performance of
expatriates. Also be there may rater bias while appraising.

9. Difference in Facilities Available: External environment like social

and cultural issues, political and economic issues affect the employee
performance. In addition, availability of school and other educational
facilities, medical and hospital facilities, recreational facilities, security
situation and transportation facilities have their bearing on foreign
employee performance. Apart from the above mentioned problems,
adjustment of the employee to the organizational culture and country's
culture ana adjustment of employee's family members to the country's
culture significantly influence the employee's performance. It would be
difficult to measure performance of host country parent country
national working in the HQ, as they also encounter cultural issues
while dealing with foreigners.
MOTIVATION AND REWARD SYSTEM INTRODUCTION:

International organizations have realized the fact that simply receiving a

paycheck is not enough of an incentive to keep employees dedicated and
focused. Managers must think of new ways to hold an employee's attention
and interest on a project, or the company as a whole. Many companies
employ motivational tactics and rewards systems, both of which have
advantages and limitations.
MOTIVATION:
Companies use both positive reinforcement and negative reinforcement to
motivate employees. Many managers believe that using positive motivation
techniques encourages employees to produce more and better quality work.
For example, some companies select an employee as "Employee of the
Week." This technique praises the winning employee, while positively
encouraging other employees to keep trying to do well. Other managers
believe negative reinforcement motivates employees to stop bad behaviour.
For example, a company may issue a written-warning system, or threaten
employees with termination to get them to perform a certain way.
REWARDS:
Reward may be defined as material and psychological returns for performing
activities in any organization. It is the benefit that attracts an employee and
encourages him to work efficiently. When employees are rewarded on the
basis of their performance, it is an outcome of performance. Reward may
not include only financial return but also involve non-financial benefits like
achievements, recognition, status, prestige, value, accomplishment, etc.
Companies reward their employees with both tangible goods, as well as
praise. For example, a sales department may offer a monthly bonus to the
highest earner. Some companies host free lunches, or give away company
gear to good workers. Many managers choose to reward their best
employees by simply praising them for a job well done, or by recognizing the
hard work they put in to a project. Employee's performance can be improved
by the use of properly designed reward system.
Essentials of Effective Reward System:
An effective employee reward system for an organization should contain
items that are acceptable by both the employer and employees. Reward
systems are made for both the employee and employer because happy
employees make a productive work environment which makes the employer
happy. The employees are almost guaranteed to work more effectively with
the ria incentives. Since reward is an important tool of motivation, it should
fulfil the following essential conditions:
1. Satisfy Needs: Rewards system of an organization should fulfil
material as well as the social needs of the employees. Financial reward
plays an important role to fulfil material needs whereas non-financial
reward fulfils social and psychological needs of the employees.

2. Effort-Reward Relation: There must be a link between effort and

reward. An employee should be paid in direct proportion to his
performance or output. Time rate system of wage payment must be
avoided and emphasis should be given to piece rate system.

3. Equitable Reward: The distribution of reward within the organization

must be equitable. When employees are underpaid as compared with
colleagues in the organization, the probable results will be low morale
and poor performance.

4. Cost Effective: Reward system of an organization should be cost

effective. It should be determined on the basis of employees
performance and organizational benefits and resources. The cost of
reward should be minimum.

5. Variety of Rewards and Methods: Different people have different

needs and choose different paths to satisfy those needs. Therefore, a
variety of rewards and variety of methods for satisfying them should be
developed.

6. Performance Based: Reward must be based on the performance.

Better performer must receive better reward than the average and poor
performer. Performance based reward system will motivate the
employees to perform better.
 7. Motivating: Rewards should be such that it should motivate the
employees and encourage them to put in their best: Employees should
see rewards as a tool for which they would strive hard to work for.

8. Transparent and Predictive: Reward system must be transparent.

Employees must be familiar with the reward system and the reward
must be predictive. Employees should be able to calculate and predict
their reward in advance. Employees become enthusiastic and
motivated if they are aware about the type, size and quality of reward.
Transparent reward system also fulfils the self-esteem and recognition
need of the employees.

9. Cost Effective: Reward must have the quality of balancing the cost
benefit ratio. The reward received by the employee should not exceed
the benefit received by the organization. Over costing reward causes
the organization in loss position and the existence of the organization
may be challenging. The concept of making employees happy through
the expensive reward is wrong.

10. Competitive: Reward system must be competitive to other

organization's provision. Reward must be revised timely. In the
absence of competitiveness, employees may leave the organization and
join the other organization. Good reward system will attract and retain
the competent employees. Advantages of Reward System: Cordial
Relationship: By using positive reinforcement to motivate employees, a
manager may build good a relationship with his employee that fosters
a sense of trust. Employees feel Respected: In a good manager-
subordinate relationship, employees may feel respected and
comfortable in their working environment. Satisfied Employees:
Providing rewards, both tangible and in the form of praise, can make
employees happier. Happier employees often perform better at work.
Enhanced Productivity: Satisfied employees work with full dedication
and thus the productivity of the organization is enhanced.
Limitations of Reward System:

1. Resentment: Employees who do their best and still do not qualify for
incentives may become resentful of the star performers.

2. May be Disincentive: Some workers find the rewards a disincentive.

When they see they can't compete, they give up, and their performance
suffers.

3. Imposed Pay Cut: If the organization substitutes an incentive scheme

for part of their pay, the action can alienate staff. From the perspective
of workers who don't qualífy for the bonuses, it is an imposed pay cut.

4. May Lead to Dissatisfaction: Using negative enforcement as a form of

motivation could cause employees to become dissatisfied with their
jobs. May have Negative Effect: Unhappy workers produce low quality
work or fail to meet deadlines. Applying too much motivation or
offering too many rewards can also have a negative effect. Undue
Advantage: Employees can become over-confident and take undue
advantage of being the bosses favourite.

BENCHMARKING GLOBAL PRACTICES:

Best practices are "those practices that have been shown to produce
superior results; selected by a systematic process; and judged as exemplary,
good, or successfully demonstrated", these practices are then adapted to fit
a particular organization. Benchmarking is a systematic process used for
identifying and implementing best or better practices. Organizations that
performance, financial or otherwise, continually search for better are
serious about improving their business practices. The fastest and easiest
way to improve is to compare and learn from other successful organizations
(for example, through using a benchmarking approach).
Benchmarking global practices is very much essential as employees in
IHRM are from varies cultures and nationalities. Where pay is not
collectively bargained, as is the case for managerial grades in some Western
European and Japan for white collar and junior managerial grades, pay is
in all cases should be benchmarked against a defined Labour market OF
industry peer group. Firms should benchmark specific measures of pay e.g.
base pay and bonus opportunity, or benchmark the employee's package
overall on the basis of total cash compensation (all cash elements of the
package combined) or total remuneration (cash and the private market
value of equivalent benefit purchase).
INTERNATIONAL INDUSTRIAL RELATIONS

MEANING:
Industrial Relations (IR), alternatively known as Labour Relations, occupies
a place of importance in International Human Resource Management
(IHRM). Hence, this chapter is devoted to a detailed discussion of all facets
of labour relations. IR is a system by which workplace activities are
regulated; the arrangement by which the owners, the managers and the
staff of organizations come together to engage in productive activity. It
provides for setting standards and promoting consensus. The key players in
IR are:
1. Employees: Employees are represented by unions, popularly called
trade union, Union seek to protect the interests of workers at work
place.

2. Employers, that includes MNCS and their associations: The

function of the employer in IR is:
 To set standards of employee management, attitudes behaviour and
performance
 To set terms and conditions of employment
 To act in a fair and reasonable way towards all

3. Government: acts as an employer and as a regulator. As a dominant

employer, the Government sets standards of employment and IR
practices that others are expected to follow. As a regulator, the
government enacts legislations, sets up tribunals and enforces them
for the sake of improving Labour welfare. Before we examine the key
issues in Industrial Relations (IR) as they relate to MNES, we need to
consider some general points about the field of international industrial
relations:

i. It is important to realize that it is difficult to compare industrial

relations systems and behaviour across national boundaries; as
industrial relations concept may change considerably when translated
from one industrial relations context to another.

The concept of collective bargaining, for example, in the USA is

understood to mean negotiations between a local trade union and
 management; in Sweden and Germany the term refers to negotiations
between an employers' organization which represents the major firms
in a particular industry and the trade union covering employees in
that industry,

ii. It is very important to recognize in the international industrial

relations field that no industrial relations system can be understood
without an appreciation of its historical origin.
A comparative study of industrial relations shows that industrial relations
phenomena are a very faithful expression of the society in which they
operate, of its characteristic features and of the power relationships between
different interest groups.
Industrial relations cannot be understood without an understanding of the
way in which rules are established and implemented and decisions are
made in the society concerned.
An interesting example of the effect of historical differences may be seen in
the structure of trade unions in various countries. Poole (1986) has
identified several factors that may underlie these historical differences:
 The mode of technology and industrial organization at critical stages of
union development.
 Methods of union regulation by government. Ideological divisions
within the trade union movement.
 The influence of religious organizations on trade union development.
 Managerial strategies for Labour relations in large corporations.
The lack of familiarity of multinational managers with local industrial and
political conditions has sometimes worsened a conflict that a local firm
would have been likely to resolve. Increasingly, MNES are recognizing this
shortcoming and admitting that industrial relations policies must be flexible
enough to adapt to local requirements. This is evidently an enduring
approach, even in firms that follow a non-union Labour relations strategy
where possible.
KEY ISSUES IN INTERNATIONAL INDUSTRIAL
RELATIONS:
The key issues in international industrial relations are:
(1) Who should handle Labour Relations - Head Quarter (HQ) or
Subsidiaries in the concerned countries.

Because national differences in economic, political and legal systems

produce different industrial relations systems across countries, MNES
generally delegate the management of industrial relations to their
foreign subsidiaries. However, a policy of decentralization does not
keep corporate headquarters from exercising some coordination over
industrial relations strategy.

Generally, corporate headquarters will become involved in or oversee

labour agreements made by foreign subsidiaries because these
agreements may affect the international plans of the firm and/or
create precedents for negotiations in other countries.

Comparison of performance data across national units of the firm

creates the potential for decisions on issues such as unit location,
capital investment and rationalization of production capacity. The use
of comparisons would be expected to be greatest where units in
different countries undertake similar the propensity of multinational
headquarters to intervene in, or to centralize operations. There are
differences in control over industrial relations in host locations.

However, the involvement of the MNC headquarters in host- country

labour relations is influenced by four important factors:

1. The labour relations function is centralised and coordinated by

HQs when there is a high degree of inter subsidiary production
integration.

2. The nationality of ownership of the subsidiary has impact on who

should handle employee relations.
 3. Subsidiary characters also influences on who should handle
employee relations.

4. Finally, where a subsidiary depends more on its parent company

for resources, there will be an increased corporate involvement in
labour relations.

(2) What should be the Union Tactics?

Unions use several tactics to deal with international business:

(1) The most common one is 'strike'. A strike is a temporary

suspension of function, designed to exert pressure upon others in
the same unit. Unions should be cautions before restoring to a
strike in international scenario because the bargaining power of an
union may be threatened or weakened by the financial resources of
a multinational. This is particularly evident where an MNC has
adopted a practice of transnational sourcing and cross
subsidisation of its products or components across different
countries.

(2) Forms International Trade Secretariats (ITSS) - There are 15 ITSS

to facilitate the exchange of information. Primary goal of ITSS is to
achieve transactional bargaining with each of the MNCS in its
industry.

(3) Lobbing for restrictive national legislations On a political level,

trade unions have for many years lobbied for restrictive national
legislation in United States and Europe. The motivation for trade
unions to pursue restrictive national legislation is based on a desire
to prevent jobs via multinational investment policies.

(4) Finally, Labour unions seek intervention from global body like ILO,
UNCTAD, EU, OECD (organization for economic operation and
development) etc. who has a clear agenda for safeguarding the
interests of workers all over the world.
TRADE UNION AND INTERNATIONAL IR:

Trade unions may limit the strategic choices of multinationals in three

ways:
i. by influencing wage levels to the extent that cost structures may
become uncompetitive;
ii. by constraining the ability of multinationals to vary employment levels
at will; and
iii. by hindering or preventing global integration of the operations of
multinationals.

Influencing Wage Levels:

Although the importance of Labour costs relative to other costs is
decreasing, Labour costs still play an important part in determining cost
competitiveness in most industries. The influence of unions on wage levels
is therefore, important. Multinationals that fail to successfully manage their
wage levels will suffer Labour cost disadvantages that may narrow their
strategic options.
Constraining the ability of Multinationals to vary employment
levels at will:
For many multinationals operating in Western Europe, Japan and
Australia, the inability to vary employment levels 'at will may be a more
serious problem than wage levels. Many countries now have legislation that
limits considerably the ability of firms to carry out plant closure,
redundancy or layoff programs unless it can be shown that structural
conditions make these employment losses unavoidable. Frequently, the
process of showing the need for these programs is long and drawn-out.

Plant closure or redundancy legislation in many countries also frequently

specifies that firms must compensate redundant employees through
specified formulae such as two week's pay for each year of service. In many
countries, payments for involuntary terminations are quite substantial,
especially in comparison to those in the USA. Trade unions may influence
this process in two ways: by lobbying their own national governments to
introduce redundancy legislation; and by encouraging regulation of
multinationals by international organizations such as the Organization for
Economic Cooperation and Development (OECD).

Multinational managers who do not take these restrictions into account in

their strategic planning may well find their options to be considerably
limited.
Hindering or preventing Global Integration of the Operations
of MNES:
In recognition of these constraints (which can vary by industry), some
multinationals make a conscious decision not to integrate and rationalize
their operations to the most efficient degree, because to do so could cause
industrial and political problems. Prahalad and Doz cite General Motors as
an example of this 'sub-optimization of integration'. GM was alleged in the
early 1980s to have undertaken substantial investments in Germany
(matching its new investments in Austria and Spain) at the demand of the
German metalworkers' union (one of the largest industrial unions in the
Western world) in order to foster good industrial relations in Germany.

Union influence thus not only delays the rationalization and integration of
MNES' manufacturing networks and increases the cost of such adjustments
(not so much in the visible severance payments and 'golden handshake'
provisions as through the economic losses incurred in the meantime), but
also , at least in such industries as automobiles, permanently reduces the
efficiency of the integrated MNC network. Therefore, treating Labour
relations as incidental and relegating them to the specialists in the various
countries are inappropriate. In the same way as government policies need to
be integrated into strategic choices, so do Labour relations.
 UNIT 3

MANAGING EXPATRIATION AND REPATRIATION

The scarcity of qualified managers has become a major constraint on the

speed with which multinational companies can vnand their international
sales. The growth of the knowledge- based society, along with the pressures
of opening up emerging markets, has led the global companies to recognize
that human resources are as significant as financial assets in building
sustainable competitive advantage. Good HR management in a
multinational company comes down to getting the right people in the right
jobs in the right places at the right times and at the right cost. There are
three nationality groups available to a multinational company while hiring
people:
(1) Parent-Country Nationals (PCNS).
(2) Third-Country Nationals (TCNS).
(3) Host-Country Nationals (HCNS).
(1) CONCEPT OF PARENT-COUNTRY NATIONALS
(PCNS):
Parent-Country Nationals are managers who are citizens of the country
where the MNC is headquartered. In fact, sometimes the term 'headquarters
nationals' is also used. In other words, PCN is a person whose nationality is
the same as that of the firm, but different from the country in which they
are working. For example, an Indian manager working for a US based
subsidiary of an Indian company or e.g, a German employee working at the
Chinese subsidiary of Volkswagen.
These managers are commonly called expatriates who live and work away
from their parent country on the request of employers. The primary reasons
for using PCNS are: To start up operations. MNCS prefer to have their own
people to launch a new venture. The parent country people have the
necessary managerial and technical expertise. The role and function of a
PCN depends on the organizations approach to International HRM and the
needs of the overseas subsidiary where the PCN is assigned. PCNS use
different adaptation strategies to cope with their overseas assignments.
There are both advantages and limitations in using PCNS to staff
international subsidiaries.
Advantages of PCNS:
(a) Organizational control and coordination is maintained and facilitated.
(b) Promising managers with technical and managerial competence are given
international experience.
(c) Familiarity with the home office's goals, objectives, policies and practices.
(d) PCNS may be the best people for the job because of special skills and
experiences.
(e) There is assurance that the subsidiary will comply with Multi National
Enterprise (MNE) objectives, policies, etc.
(f) It is easier exercise of control the subsidiary’s over operations.
Limitations of PCNS:
(a) Adaptation to host-country may take a long time.
(b) Difficulties in adapting to the foreign language and the socioeconomic,
political, cultural and legal environment.
(c) Excessive cost of selecting, training and maintaining expatriate managers
and their families abroad.
(d) Host countries' may insist on localizing operations and on promoting
local nationals in top positions at foreign subsidiaries.
(e) Family adjustment problems, especially concerning the unemployed
partners of managers. Compensation for PCNS and HCNS may differ.

(2) CONCEPT OF THIRD-COUNTRY NATIONALS

(TCNS):

Third-country nationals are managers who are citizens of countries other

than the one in which the MNC is headquartered or the one in which it is
assigned to work by the MNC. In short, the nationality of employee is
neither that of the headquarters nor the local subsidiary. For example, an
Indian employee working at the Chinese subsidiary of Volkswagen. The two
most important reasons that American MNCS use third country nationals
[Tung (1991)] are:
(i) These people have the necessary expertise.
(ii) They may be judged to be the best ones for the job.
It is found that the Japanese companies usually do not hire TCNS whereas
US companies usually prefer TCNS from Europe.

Advantages of TCNS: There are a number of advantages for using TCNS:

(a) It facilitates getting the necessary technical and managerial expertise
and adapting to a foreign socioeconomic and cultural environment.
(b) The salary package and benefit requirements of TCNS be lower. TCN are
usually less expensive to maintain than may PCN.
(c) TCNS may be better informed than PCNS about the host. country
environment. For example, the knowledge of local language, like English is
one of the reason for choosing British managers by US companies in former
British colonies like India, Jamaica, West Indies and Kenya. Today, a new
breed of multi-lingual, multi- experienced 'global-managers' has emerged.
These new managers are part of a growing group of international executives
who can manage across borders and do not fit the traditional third country
mould. With a unified Europe, and North America and Asia becoming
business hubs, such global managers are in great demand.
Limitations of TCNS:
(a) Transfers must consider possible national enmity (e.g. India and
Pakistan).
(b) The host government may resent hiring of TCNS.
(c) TCNS may not want to return to their home country after the
assignment.
(d) Local nationals are obstructed in their efforts to upgrade their own ranks
and assume responsible positions in the multinational subsidiaries.

(3) CONCEPT OF HOST-COUNTRY NATIONALS

(HCNS):

Host-Country Nationals are local managers who are hired by the MNC. An
HCN is a person whose nationality is the same as that of the country in
which the company is operating. For example, an Indian employee working
at the Chinese office of the German company.. A host-country national
(HCN) is an employee who is citizen of a country in which an who is an
organization's branch or plant is located, but the organization is
headquartered in another country.

Reasons for Hiring HCNS:

There are many reasons for hiring HCNS at the lower or middle-level ranks.
Many countries require the MNC to hire local talent as part of opening their
markets to MNCS.
For example, in Brazil, two-thirds of employees in any foreign subsidiary
have to be Brazilian nationals. In India too, before approving joint venture
agreements, the government restricts the number of expatriates to be
employed, primarily to limit the foreign exchange outflow and to prepare
Indian nationals to undertake the responsibility at a future time.
PCNS fill usually top positions, but this is not always the case. For example,
companies following the philosophy or polycentric approach would select
most positions, multi-domestic including top ones, from the host country,
but usually after starting the operations. Like Hindustan Lever Ltd., a
subsidiary Unilever group in India is currently headed by an Indian.
Tung (1981) identified four reasons for use of host country managers:
(i) These individuals are familiar with the culture.
(ii) They know the language.
(iii) It is less expensive to hire them and know the way things are done,
the rules of and how to get things done or who can influence.
(iv) Hiring them is good public relations.

Advantages of HCNS:
(a) Familiarity with the socioeconomic, political and legal environment and
with business practices in the host country.
(b) Provides opportunities for advancement and promotion to local nationals
and, consequently, increases their commitment and motivation.
(c) Language and other barriers are eliminated.
(d) Hiring costs are reduced and no work permit is required.
(e) Continuity of management improves, since HCNS stay longer in their
positions. Morale among HCNS may improve as they see future career
potential.
(g) Responds effectively to the host country's demands for localization of the
subsidiary's operation.
Limitations of HCNS:
(a) Difficulties in exercising effective control subsidiary's operation. over the
(b) Communication difficulties in dealing with home office personnel.
(c) Lack of opportunities for the home country's nationals to gain
international and cross-cultural experience.
(d) HCNS have limited career opportunity outside the subsidiary.
(e) Hiring HCNS limits opportunities for PCNS to gain foreign experience.

REASONS FOR INTERNATIONAL ASSIGNMENTS:

There basic reasons for the use of various forms of international

assignments are:
(1) Globalization: Globalization has been gaining momentum and as firms
continue expanding their business on a global scale, they need a method of
capturing information from remote parts of the world. They then use the
information to build a competitive edge against competitors. One successful
method of capturing information is to send an employee on international
assignment. Once the an employee has been deployed on the assignment,
he/she can look for new markets and growth areas for the business.
(2) Expansion into both new and existing markets: Most organizations
transfer employees overseas for expansion into existing markets. Sending
employees abroad helps grow a small office into a strong international firm.
By building out a talented workforce abroad, one can increase the
company's global influence and revenue. strengthening opportunities in In
today's fast-paced world, industries are their global presence, and
identifying new cities that are rapidly rising as centres of commerce, By
sending employees abroad to areas that are seeing their dynamic growth,
the company can make sure it does no miss out on establishing a strong
presence there.
(3) Position Filling: The organization has a need and depending on the type
of position and the level involved will either employ someone locally or
transfer a suitable candidate. At times, there is unavailability of qualified
employees and also the personnel costs are more important when deciding
about international assignments. Short-term position filling continues and a
lack of available skills is the major reason for international assignments.
(4) Transfer Knowledge: Organizations utilize an international assignee to
help transfer knowledge from the parent company to the local entity.
Transferring knowledge is not meant to benefit only the organization.
Instead, it is meant to help the local population understand a certain skill
set in more detail, while also allowing the organization more insight into the
local customs and needs of the market in which they are trying to conduct
business. This happens when expatriates, acting as transferor, not only
disseminate knowledge from headquarters to the subsidiary, but also when
information is disseminated from the subsidiary back to headquarters.
(5) Streamlined operations: If an organization wishes to make moves
quickly, sending an existing employee abroad can help streamline
operations. A domestic employee sent overseas has the company knowledge
and experience to quickly embed themselves in business activities in the
market abroad, avoiding the time-consuming on-boarding and training that
is necessary when hiring a new employee for overseas work.
(6) Management Development: Staff is often moved into other parts of the
organization for training and development purposes and to assist in the
development of common corporate values. Headquarters staff may be
transferred to subsidiary operations, or subsidiary staff transferring into the
parent operations, or to other subsidiary operations. Assignments may be
for varying lengths of time and may involve project work as well as a trainee
position.
(7) Organization Development: Here the more strategic objectives of the
operation come into play, like the need for control; the transfer of
knowledge, competence, procedures and practices into various locations;
and to exploit global market opportunities. As a result, organizational
capabilities enabling a firm to compete in global markets might be
developed.
Most of the reasons for international assignment eventually lead to
organization development. In fact, international assignments are often
undertaken to reach several goals simultaneously. However, the importance
of the international assignment objectives differ by country-of-origin. For
example the development of management skills was one of the most
important reasons for international assignments in German MNES whereas
MNES from the US mainly sent managers abroad to fill local skill gaps.
Japanese as well as British MNES indicated that the development of new
operations abroad was their major reason to send expatriates abroad.
EXPATRIATION

MEANING:

International HRM facilitates the movement of staff across national

boundaries into various roles within the international firm's foreign
operations these employees have traditionally been called 'expatriates'. The
word comes from the Latin terms ex (out of) and patria (country, fatherland).
An expatriate is an employee who is working and temporarily residing in a
foreign country. Some firms may call such employees 'international
assignees'. Basically, an expatriate (expat) is a person temporarily or
permanently residing, as an immigrant, in a country other than that of their
citizenship. This process known as Expatriation.
Basically, the most traditional model of expatriate is a person who is sent
abroad for a specific time period to complete some kind of business
assignment. There are also "self-made expatriates" who are people who have
decided they need a change of scenery and leave to another country. Despite
the different reasons for expatriation, expats usually have a higher
academic degree, some specialty or international job that is well- paid.
Expat needs to have the right mind set for expatriation. Self- made
expatriates have the benefit of choosing their destination and might be more
enthusiastic than the expats that are sent abroad by their companies.

REASONS FOR EXPATRIATION:

Expatriates are employees/managers who move from the home country to

an overseas location. There are numerous opportunities and challenges in
modern global business environment that creates the need for expatriates.
An example is the "China-phenomenon" where in order to overcome the
lack of competent workforce, companies in China rely on skilled workers
from other countries and organizations frequently provide international
experience for their talented managers for career developmental purposes.
The strategic reasons for expatriation are:

 Transmitting organizational culture to foreign subsidiary

 Transferring knowledge.
 Improving coordination and functional needs of control
 Developing global skills. (Other than this, advantages of expatriates
can be written here.)

FACTORS IN SELECTION OF EXPATRIATES:

Selection of expatriates is a challenging task. It includes analysing the

current global assignment needs, defining the current pool of managers with
the potential for advancement and the need or desire for an international
assignment, establishing future global assignment needs, and developing
future global candidate pools for strategic success. A prospective candidate
may reject the expatriate assignment, either for individual reasons such as
family commitments or for situational factors, such as perceived toughness
in adjusting to new culture etc. There are certain factors that are to be
considered in the selection of expatriates:
(1) Technical Ability.
(2) Cross-Cultural Suitability.
(3) Family Requirements.
(4) MNE Requirements.
(5) Language.
(6) Country Requirements.

Other Issues in Expatriate Selection:

(1) Dual Career Couples: Accepting the international assignment will
impact upon the career of the potential candidates spouse.Employees
generally may not be willing to relocate, either domestically or
internationally because of dual-career issues. To overcome this problem,
some of the MNCS are coming up with the following strategies:

(a) Intercompany Networking: where the MNC attempts to place the

accompanying spouse or partner in a suitable job with another MNC.

(b) Job-hunting Assistance: MNC may provide the spouse or partner

assistance with the employment search in the host country.

(c) Intra-Company Employment: MNC may send the couple to the

same foreign country.

(e) On-assignment Career Support: MNC may provide a lump-sum

payment for education expenses, professional association fees,
seminar attendance, language training to upgrade work-related
skills, and employment agency fees.
(2) Female International Managers: Some of the MNCS are concerned with
the various social norms prevailing in certain countries with regard to
women. They may be reluctant to issue a work visa to women/female
expatriate. Men in some cultures may not like reporting to female managers,
especially if they are foreigners., Some MNCS may feel that women are
incapable, ineffective and uninterested in foreign assignments. Some others
may be relueant to send women employees abroad as they may be
concerned of the potential danger inherent in some overseas postings.
Sometimes there may be reluctance on part of women candidates to accept
international assignments. The reasons may be: • The traditional beliefs
that women are second class citizens whose place is at home. They may not
be interested in managerial careers. They have family commitments and
may give priority to their children at home.
(3) Work Permit Refused: A work permit is generally granted to the
expatriate only. The accompanying spouse/partner may not be permitted to
work in the host country. MNCS are finding that the inability of the spouse
to work in the host country may cause the selected candidate to reject the
offer of an international assignment.
ADVANTAGES OF USING EXPATRIATE
EMPLOYEES:

When an MNC opens its subsidiary in the new country, it might not find the
local person who has the specific skills that are required by the company,
so, it sends an employee (expatriate) from the host country to that new
subsidiary. As this employee is aware of the working, business culture and
all other process of the company, he may help the employees of new
subsidiary to follow and understand them.
The expatriate goes abroad in order to fill the needs of the parent
organization to introduce methods of working, new tachnology or marketing
methods and sometimes to propagate corporate culture. There are several
advantages of using expatriate employees to staff international company
subsidiaries. Some of them are:
(1) Fulfilling the Strategic Needs of the Organization: Companies
appoint an expatriate as he is likely to have tacit knowledge of global
operations and help the local employees to identify and meet the company's
objectives.
(2) Management Style: Expatriate helps the subsidiary to follow the same
management style with that of home company. They will make the local
employee follow the same culture.
(3) Control and Coordinate: Posting an expatriate in the subsidiary helps
the MNCS and gives them the opportunity to control and coordinate the new
subsidiary. More so if the has people with different attitudes and host
company behaviour with that to home company.
(4) Improve Performance: Expatriate helps in improving the business
performance in the host country. They help in breaking down the barriers
between the parent company and subsidiaries. They are helpful in reducing
risks as well as technical problems. Moreover, they are very helpful in
developing good relation with the suppliers. Expatriates are not only used
for coordination but also for the knowledge transfer, improving business
relation to dominate the international market.
(5) Better Supervision and Expertise: Employers want to exercise greater
corporate control upon the management and daily functions of subsidiary
employees. Expatriates provide the extra supervision for this purpose.
Furthermore, expatriates may provide better expertise in other foreign
markets of existing subsidiaries. Expatriates have increased understanding
of the company's global operations and can help the local employees identify
and meet company objectives. Expatriates also play a critical role in the
training and development of new management.
(6) Operations Must Conform to the Standards of Home Market: Many
manufacturing companies choose bright individuals to represent their
international operation and train local employees. These expatriates may act
as GM, oversee operations and ensure that all business efforts are
compliant with the regulations of the domestic office.
(7) Target Country may have a Limited Local Talent Pool: There may be
a limited local talent pool in the industry. In this scenario, the costs of
hiring knowledgeable local employees can be relatively high. Moreover the
ability to work with certain software or computerized technologies specific to
one's industry is a vital skillset possessed by very few individuals.
Appointing expatriates can solve this problem.
(8) Other Advantages:
 Sometimes, moving out of the country can provide some expatriates
with much-needed space for their emotional well-being.
 Utilize full potential of employees.
 Career growth and advancement of employees.

LIMITATIONS OF EMPLOYEES: OF USING

EXPATRIATE:

Expatriates, no doubt play an important role in international assignments,

there are many limitations of hiring them. Some of the most common ones
are:
(1) Create Misunderstanding: Expatriates can misunderstand the political
situation and this can give rise to the political risk and heavily cost the
company. Misunderstanding of the political situation in the host country
can even lead to the ban of the company in the host country.
(2) May not have Command over Local Language: Expatriate has to look
for the local market to build up the relation and increase the business for
the company. If he does not have command over the local language or
experience to manage and work with the local staff, he may not succeed.
(3) High Cost Involved: Deputing expatriate along with his family involves
heavy costs. There are expenses to be borne by the organization like the
travelling expenses, visa, host or home-country tax differentials and
relocation allowances. In addition to increased salary, the cost of living and
education for the expatriates' children are also covered. Further, the
training and rewarding of an expatriate is expensive.
(4) De-motivation of Local Employees: The extraordinary awards for an
expatriate can lead to ill- feeling in the local employees and can work as a
de-motivational factor for them.
(5) High Burnout Rate: It is proven in researches that the Expatriates
performing extremely demanding jobs, have a high burnout rate. They are
stressed out because of several factors including language barriers, being
away from friends and family, having to deal with an entirely new culture,
and the feeling of isolation.
(6) Legal Risks: Some companies have been fined or barre from operating in
a certain country because they did not respect its immigration requirements
and permit obligations. For an expatriate the situation can become even
more severe. For example, continuing to work in a country after the
expiration date of permit may lead to imprisonment.
(7) Expatriate Failure: One of the greatest limitations of using expatriates
is the possibility of expatriate failure. Expatriate failure occurs when an
expatriate returns to their home country prior to finishing their
international assignment, or if the expatriate resigns from their job before
completing the assignment. Despite adjustment training, there is no
guarantee how well an expatriate will adapt and socialize in the new
country.

ROLE OF FAMILY:

The increase of economic globalization has driven a demand for

multinational corporations (MNCS) to cultivate global leaders with the
abilities to effectively perform their assignments overseas. In order to
compete in the global market, many MNCS use some methods to attract and
source international managers and deploy some strategies, such as
selection system and training programs, to equip their expatriate managers
with cross- cultural competencies. However, an expatriate assignment may
fail because of family-related factors or family situations. According to Tung,
Family situation refers to "the ability of the expatriate's family to adjust to
living in a foreign environment". Some of the family related factors found to
be the majorly affecting expatriate assignments are:
(1) Spouse Adjustment: Loneliness, boredom, and helplessness are some of
the difficulties of cross-cultural adjustment of their accompanied spouses.
Language barrier is another factor leading to spouse's maladjustment in a
different cultural setting. Spouse's cross-cultural adjustment is an issue
frustrating some expatriates, impacting the expatriate's decisions to accept
another overseas assignment.
(2) Spouse Support: Generally the expatriates with accompanying spouses
credit and appreciate their spouses' devotion and support on taking care of
their life and facilitating their adjustments. Spouse support is an important
source that can give the expatriate "more accurate objectives" in life and he
can focus on international assignments.
(3) Lack of Spouse's Career Opportunities: Sometimes the spouse may not
be able to get employment as per his/her choice and qualifications. This
may be the reason for expatriate to reject international assignment.
(4) Children's Education and Adjustment: The impact of different
educational system on the development and well-being of children is
another major concern of the expatriates. Language barrier and cultural
differences are the challenges faced by expatriate's children when moving to
a culturally different country with their parents. Thus, there can be
disruption to the children's education and the selected candidate may reject
the assignment on the grounds that a move at this particular stage in his
child's life may be inappropriate.
(5) Parental Demand: The care of aged parents, especially parents' health
conditions, is another family issue many expatriates face. They may be
concerned that their parents are getting old and he needs to be with them in
the home country itself.
(6) Other Cultural Differences: Most of the family related factors to
international assignments are dynamic and often culturally bound.
These critical family-related factors have an impact on expatriates'
adjustment or decisions to accept or reject an international assignment.
None the less, family plays a very important role in successful performance
as well as adjustment of the expatriate. It is a proven fact that family
support; spouse support and family adaptation have a positive impact on
expatriate adjustments.

ROLE OF EXPATRIATE:
The role of expatriate is very vital. There are various expectations from him
as he is transferred from one location to another country. The roles are as
follows:
(i) Direct Agent.
(ii) Agent of Socializing.
(iii) Network Builder.
(iv) Transfer of Competence and Knowledge.
(v) Boundary Spanner.
(vi) Language Node.

(1)Expatriates as an Agent of Direct Control: The use of staff transfers

can be regarded as a bureaucratic control mechanism, where the
primary role is that of ensuring compliance through direct supervision.
To a certain extent, using expatriates for control reflects an
ethnocentric, predisposition, but this can be important in ensuring
subsidiary compliance, enabling strategic objectives for local
operations to be achieved.

(2)Expatriates as an Agent of Socialization: This role is related to the

use of corporate culture as an informal control mechanism. There is
an implicit expectation that expatriates assist in the transfer of shared
values and beliefs. Attempts to instil corporate values and norms
ritualized in the form of certain expected behaviours often have
negative results at the subsidiary level.

(3)Expatriates as Transfer of Competence and Knowledge:

International assignments assist in knowledge sharing and
competence transfer, and encourage adoption of common work
practices, aspects of which may comprise elements of corporate
culture. Staff in the various organizational units may be exposed to
 different viewpoints and perspectives that will shape their behaviour
and may reinforce their feeling of belonging.

(4)Expatriates as Network Builders: International assignments are

viewed as a way of developing social capital by fostering interpersonal
linkages that can be used for informal control and communication
purposes. People tend to nurture and protect their networks. They
tend to evaluate the potential damage to key individuals in their
networks if the connection was to be inappropriately utilized. Short-
term assignments may not allow the expatriate to develop wide range
of contacts in one location. Duration of the assignment thus has an
impact on the person's ability to develop networks.

(5)Expatriates as Boundary Spanners: Boundary spanning refers to

activities, such as gathering information, that bridge internal and
external organizational contexts. Expatriates are considered boundary
spanners because they can collect host country information, act as
representatives of their firms in the host country, and can influence
agents.For example, attending a social function at a foreign embassy
can provide the expatriate with an opportunity to network, gather
market intelligence and promote the firm's profile at a high level.

(6)Expatriates as Language Nodes: Many multinational firms operate

through language standardization - or a Common corporate
language, , usually English.

NON-EXPATRIATE:

A considerable amount of international business involves what can be called

'non-expatriates'. These are people who travel internationally but are not
considered expatriates, as they do not relocate to another country. These
non-expatriates have been called international business travellers -
employees who spend a large proportion of their time visiting foreign
markets, subsidiary units and international projects. Some of the popular
terms for these employees include 'road warriors', 'globetrotters', 'frequent
fliers' and 'flexpatriates'
International travel is an essential component of their work, such as
international sales staff whose job is almost totally comprised of
international travel; and managers whose job operations. involves numerous
visits to international International sales representatives attend trade fairs,
visit foreign agents and distributors, demonstrate new products to potential
clients, and negotiate sales contracts. Various staff will visit foreign
locations to deal with host-country government officials, alliance partners,
subcontracting firms, and foreign suppliers.

ROLE OF NON- EXPATRIATE:

Non-expatriate business travellers also perform many of the roles of
expatriates - in terms of being agents for socialization network-builders,
boundary spanners and language nodes. The management of staff using
these forms of arrangements falls to the functional or line managers
involved rather than the HR department as such.

Much of international business involves visits to foreign locations, e.g.:

Sales staff attending trade fairs.

Periodic visits to foreign operations.

The selection criteria of flexpatriates should go beyond technical knowledge

and cross-cultural skills and include, for example, health issues such as
physical fitness. The issue of working and traveling time must also be
addressed with respect to recognizing the need for the employee to recover
from international travel (adjustment to jetlag, changes in diet, etc.). If these
concerns are taken into consideration, flexpatriates can be an even more
valuable alternative solution to international mobility.

REASONS FOR EXPATRIATE FAILURE:

The term expatriate failure has been defined as the premature return of an
expatriate (that is, a return home before the period of assignment is
completed). In such a case, an expatriate failure represents a selection error
and reflects ineffective expatriate management policies. For example, an
expatriate may be ineffective and poorly adjusted, but if not recalled, the
person will not be considered a failure. Inabilities to either effectively handle
new responsibilities or to adjust to the country of assignment is very likely
to contribute to diminished performance levels. These results may not be
immediately apparent but can have long-term negative consequences in
terms of subsidiary performance. However, if the expatriate remains for the
duration of the assignment, to all intents and purposes, the assignment is
considered a success. Another significant issue is that of expatriates leaving
the MNC within the first or second year after repatriation because they feel
that their newly acquired knowledge is not valued. Again, in this case the
international assignment would be regarded as a success although it leads
to the loss of a valuable employee. On the other hand, a project abroad can
be completed early, which could lead to a premature return of an expatriate.
P Some of the common reasons for expatriate failure are:

(1) Transfer Anxieties: Foreign appointments tend to be poorly planned,

creating a sense of disorder with the numerous tasks associated with taking
a foreign posting without proper planning. This may lead to anxiety about
the future with respect to both the foreign assignment and eventual return
to home country.

(2) Career Problems: A foreign posting creates, for the expatriate, a number
of career threats such as: Being "out of sight", "out of mind" and being
passed over for promotion.
The danger of coming home a 'stranger' with few familiar faces among the
greeters. The possibility of adapting the foreign lifestyle and losing the desire
to return.

(3) Income Gaps: Income gaps can occur when compensation does not
match the position or the high cost of living overseas.

(4) Lifestyle Adjustment: Expatriates and their families experience major

adjustment problems such as:

 Uncomfortable living conditions.

 Inability to purchase housing.
 Being "far from home".
 Concern for children's education and health.
 Medical problems.
 Cultural and social problems.
(5) Short-Term Perspective: Other expatriate problems are experienced
because the foreign posting is too often perceived as a short-term obligation.

(6) Inappropriate Leadership: Short-term expatriate assignment results in

the lack of continuity, there is a constant change in policies and procedures
and inappropriate leadership.

(7) Performance Appraisal: There may be confusing, conflicting and short-

term criteria used to evaluate the performance of the expatriate.

(8) Business Environmental Issues: Expatriates experience a number of

problems in the business environment, including:

 Diverse business customs and practices;

 unfavourable, unfamiliar, and/or unpredictable political climate;
unfamiliar and/ or undeveloped legal systems;
 unfamiliar contractual practices; complex, and perhaps, intangible
trade barriers;
 unfamiliar labour relations problems;
 rigid status differences in levels of employees, varying and inadequate
education and skills;
 inadequate and unpredictable transportation and communication
systems;
 lack of facilities;
 fluctuations in the local economy;
 money exchange and money management difficulties;
 language barriers;
 conflict of cultural attitudes, values, and beliefs etc.

Expatriate failure can be a serious problem and cost dearly to the MNC. The
costs of expatriate failure can be both direct and indirect. Direct costs
include airfares and associated relocation expenses, and salary and
training. The precise amount varies according to the level of the position
concerned, country of destination, exchange rates, and whether the 'failed'
manager is replaced by another expatriate.

The 'invisible' or indirect costs are harder to quantify in money terms but
can prove to be more expensive for firms. Many expatriate positions involve
contact with host government officials and key clients. Failure at this level
may result in loss of market share, difficulties with host-government
officials, and demands that expatriates be replaced with HCNS (thus
affecting the multinational's general staffing approach). The possible. effect
on local staff is also an indirect cost factor, since morale and productivity
could suffer.

Failure also has an effect on the expatriate concerned, who may lose self-
esteem, self-confidence, and prestige among peers. Future performance may
be marked by decreased motivation, lack of promotional opportunities and
perhaps increased productivity to compensate for the failure. Finally, the
expatriate's family relationships may be threatened. These an additional
costs to organizations that are often overlooked.

WOMEN AND EXPATRIATION:

A viable solution to the increased need for leaders is tapping into female
talent. There is a trend towards increasing numbers of female expatriates in
the banking, electronics, petroleum and publishing industries. Women are
available, educated and possess many global leadership competencies in
abundance. Although vastly improving, there are still many obstacles which
female executives must overcome in order to ultimately reach a position
which would enable her to go on international assignment The factors that
influence the low representation of women in expatriate assignments are:
(1) Work-Family Conflict: It is very difficult for married female employees
to find the time to fulfil their commitment to home, spouse, children,
parents and friends. They are increasingly recognizing that work is
infringing on their personal lives. Organizations that do not help their
female employees achieve work-life balance will find it increasingly difficult
to attract and retain the most capable and motivated women employees.
(2) Gender Stereotyping: There is a common preconception that men in
some cultures, such as certain Asian countries, do not like reporting to
female managers, particularly foreign women, and therefore women should
not be posted overseas.
(3) Perceived Strategic Function of Expatriation: The other factor may
be the perceived strategic function of expatriation in the transfer of
socialized knowledge and organizational cultures as subsidiaries. This
requires access a form of control on to the informal organizational network,
often denied to women.
(4) Host Country Barrier: Host countries may be seen as being prejudiced
against female managers. The concern of companies to send women abroad
because they will not be accepted in the local culture often arise from the
male managers in the home country blaming other cultures for their own
prejudice.
(5) Dual Career Issues: According to Alder (1993), women often have more
visibility as foreign clients are more curious and anxious to meet them, they
have better inter- personal skills and often find it easier to talk to local men
than male expatriates do; and they have novelty value, with foreign clients
assuming they must be the best, to have been sent by their companies in
the first place.
Based on the barriers, challenges and competencies among women in
senior-level expatriate roles, initial steps should include:
 Building awareness among management regarding the benefits of
women in expat positions and barriers to women being selected for
such roles.
 Building awareness among high potential women around the rewards
associated with expat roles.
 Developing women to overcome self-imposed barriers, developing the
four competencies (self-awareness, conscious imbalance, operating
outside the comfort zone, and active career management) for expat
success, and providing a support network to encourage women to take
on international assignments.
In light of the expected boom in the number of expats around the world, and
the associated benefits expats bring, organizations cannot afford to overlook
women in their global leadership development programs. It may not seem
simple to target future female expat leaders, but organizations can take
immediate action to begin down the path of including women in the new
global workforce in order to remain competitive.

REQUIREMENTS / CHARACTERISTICS OF
EFFECTIVE EXPATRIATE MANAGERS:

Expatriate is an executive who is able to assume a leadership position

fulfilling international assignments across countries and cultures. There are
certain characteristics that are to bo possessed by effective expatriate
managers like:
(1) Cultural Sensitivity: Cultural sensitivity is defined as the expat's ability
to understand the culture in which they are living and working, and to
integrate/fit into it. This characteristic encompasses many elements like:
Interest in the new culture. Curiosity and passion to learn new things
culturally. Ability to fit into the new location/society. Having a sense of
humour and understanding that other cultures or countries might have a
better idea or approach about something than what was perceived as the
best in one's home country. Acceptance of host country culture.
Willingness, time, and ability to learn a new language.
(2) Curiosity: Curiosity is the expat's interest in learning about their new
culture, environment, and job. Being inquisitive and curious is a factor
contributing to success.
(3) Flexibility: Flexibility is the expat's willingness to try new In ways of
doing things. Adaptability and flexibility are important characteristics of an
expatriate. They have to be flexible on the methodology, while remain
focused on delivering results within the allotted time. Flexibility is also
important as each country and job has a different way of doing things.
(4) Open mindedness: Open mindedness is the expat's ability to look at
their new environment with a desire to learn about and understand it and
an interest in seeing things differently. Willingness to try new methods and
accepting failure as a means to learn and improve is another characteristic.
Expats have to be open to new and different practices.
(5) Be Comfortable with Uncertainty: International HR staff is often faced
with situations they have not encountered before and for which there is no
precedent. They need to analyse the situation and create a solution, even if
there are no clear cut answers. They have to find a solution that works for
the client group, and satisfies corporate at the same time.
(6) Extroversion: The expatriates should have an outgoing and extrovert
personality. They should possess the capability of entering into conversation
with strangers.
(7) Agreeableness: Expats must possess relational skills, display of respect
and kindness. He should have the ability to establish interpersonal
relationship, have empathy and understand the feelings of others.
(8) Intelligence: The expat should have social as well as mental
intelligence. He should have a non-judgmental approach in evaluating the
host nationals. He should have social problem solving skills and social
judgement capacity.
(9) Emotional Stability: The expat must have emotional stability and the
ability to deal with frustration, stress and anxiety. He should have a
tolerant personality and patience.

REPATRIATION

MEANING:

Repatriation is the final stage of an international assignment. In repatriation

the expatriate is brought back to the parent country. Repatriated expatriate
is a repatriate. In fact, the expatriation process includes an activity
repatriation bringing the expatriate back to the home country.

Repatriation needs careful planning and managing. Re-entry in the home

country presents new challenges as the repatriate copes with what has been
termed re-entry shock, or reverse culture shock. While people frequently
expect life in a new country to be different, they may be less prepared and
face problems of adjustments.
Recruitment and Selection performed by the HR Manager

Pre-departure Training

Repatriation or Re-Assignment

On Assignment
(Expatriation include Repatriation Source: Based on Dowling, Welch &
Schuler, 1999, p. 204.)
 From the MNCS perspective, repatriation is frequently often considered as
the final stage in the expatriation process, but the MNCS ability to attract
future expatriates is affected by the manner in which it handles
repatriation.

REPATRIATION PROCESS:

On completion of the foreign assignment, the multinational brings the

expatriate back to the home country. Not all international assignments end
with a transfer home rather, the expatriate is re-assigned to another
international post. The key factors associated with re-entry, include how the
repatriation process is handled by the individual and the receiving work
unit and family adjustment.

Repatriation affects the successful 'closure' of the foreign assignment, its

impact on future career paths within the multinational and the effect on
staff mobility. Some expatriates may agree to become part of the
multinationals international team of managers, and thus have consecutive
international assignments. The repatriation is divided into four related
phases:
(1) Preparation: Preparation involves developing plans for the future and
gathering information about the new position. The firm may provide a
checklist of items to be considered before the return home (e.g. Closure of
bank accounts and settling bills) or a thorough preparation of employee and
family for the transfer home.
(2) Physical Relocation: Physical relocation refers to removing personal
effects, breaking ties with colleagues and friends, and travelling to the next
posting, usually the home country. Most multinationals use removal firms
or relocation consultants to handle the physical relocation, both for the
movement out and the return home of the employee and family, and this
may be formalized in their HR policies. According to Foster (1994)
comprehensive and personalized relocations assistance reduces the amount
of uncertainty, stress, and disruption experienced by the repatriate and
family
(3) Transition: Transition means settling into temporary accommodation
where necessary, making arrangements for housing and schooling, and
carrying out other administrative tasks (e.g., renewing driver's license,
applying for medical insurance, opening bank account). Some companies
hire relocation consultants to assist in this phase.
(4) Readjustment: Readjustment involves coping with reverse culture shock
and career demands. Of the four phases, the readjustment phase is the one
that seems to be the least understood and most poorly handled. Given the
reason why international assignments are used and the various roles that
are assigned to expatriates, it seems important to understand why re-entry
is a problem yet of seemingly lesser importance to researchers and
practitioners than the other stages of the international perspective, and
then from the MNCS.

FACTORS AFFECTING REPATRIATION PROCESS:

The re-entry process is a complex interaction of several factors and grouped

the major factors under two headings: (i) Job-related Factors. (ii) Social
Factors.
(i) Job-related Factors.
Career Anxiety: The following are the causes that prompt career
anxiety(prime factor for re-entry):
(i) No post-assignment guarantee of employment: This is a concern
for majority of employees on international assignments. A large
majority of the firms do not guarantee a position at home upon
successful completion of the overseas assignment. Given this lack of
job security, it is not surprising anxiety prior to that career
commences a homecoming, and acts as a readjustment moderator
upon re-entry if career outcomes are not realized.

(ii) A fear that the period overseas has caused a loss of visibility
and isolation: There is a common phrase "out of sight is out of
mind'. This fear can commence at any stage during an assignment
and not just as the end of the posting draws near. There are several
factors may influence this process: the amount of contact that the
person has had with the home organization; the seniority of the
position; whether the expatriate knows in advance what re-entry
position they will take up when they return to their home country.
Lack of information may increase the level of anxiety giving the
person an impression that the firm has not planned adequately, or
 that a mediocre or makeshift job awaits him. If there is no post-
assignment job guarantee, the anxiety level may very high.

(iii) Change in the home workplace: Anxiety Can increase due to

informal communication from about colleagues organizational
home-based changes. It may be that the MNC is in the process of a
major restructuring, after a merger or acquisition. or sale of
divisions or business units. These changes are often accompanied
by downsizing. Knowledge of such changes and potential or real job
loss may add to the level of anxiety - particularly if the expatriate
does not have a guaranteed job upon repatriation.
(b) Work Adjustment: Work adjustment has an important impact on
person's intent to stay with the a organization. Career anxiety is one
critical factor, but other factors may also lead to readjustment problems
like:
(i) The employment relationship: An individual's career
expectations may be based on clear messages sent by top
management to the effect that an international assignment is a
condition for career progression. That is, verbal or written
statements made by the HR manager to the employees, like: "We are
an international company and we need internationally oriented
people who have worked in our overseas facilities'. These
pronouncements can be made in the context of the need for a global
orientation or mind-set where a definite link is made between
international experience and global managers.

Perceptions regarding expected career outcomes also are influenced

by comments made by HR or line managers during the recruitment
and selection stage. For example, the line manager may suggest to a
younger employee: 'You should volunteer for that international
assignment. It would be a smart career move at this stage in your
life'. If others have been promoted upon repatriation, it may be
perceived to be the 'norm', thus reinforcing the perception that
international assignments lead to promotion upon re-entry. For
these reasons, the person believes promotion should follow based on
successful performance while abroad and if the re-entry position
does not eventuate within a reasonable time frame, then career
anxiety is justified.
 (ii) Re-entry positions: Generally the promotions go to people who
have been in a position for extended periods; nothing done overseas
may count in the company. Fears surrounding future employment
and career development can materialize. Peers are promoted ahead
of the repatriated manager, and the repatriate sometimes is placed
in a position that is, in effect, a demotion. The situation may be
worsened if the repatriate had held a senior position in the foreign
location and now finds himself/herself at a less senior level.

As a consequence, the re-entry position i the frequently judged by

whether it matches repatriate's career expectation, particularly
when assignment the international has caused considerable family
disruption; such as a forced break in the career of the
accompanying partner, or difficulties experienced with the education
of the children involved. The repatriate wants the 'end to justify the
means', so that the family unit is fully compensated for the
sacrifices it has made in expectation of career advancement.

(iii) Devaluing the experience: Career overseas progression is

important but to be promoted upon re-entry signifies that
international experience is important and valued by the
organization. However, the re-entry position may be a less
challenging job with reduced responsibility and status than that
held either during the international assignment, or prior to the
period overseas, in 'holding' positions such as a task force or project
team, or in temporary positions engaged in duties that do not
appear to exploit their newly gained international expertise.
(d) Coping with New Role Demands: Along with career issues, a mismatch
of expectations can affect the repatriate's perception of the role associated
with a new position. A role is the organized set of behaviours that are
assigned to a particular position. Although an individual may affect how a
role is interpreted and performed, the role itself is predetermined, usually
defined in the job description.

(d) Loss of Status and Pay: The international assignment is a form of

promotion. It carries greater autonomy, a of responsibility and, at the top
broader area management level, a prominent role in the local community.
The results is higher status. Upon return, the repatriate is expected to
resume his position within the home company with the loss of status and
autonomy. The repatriate may be treated as a company executive.
Employees are brought home to resume life on a scale that may be
significantly less comfortable than what they had grown used to abroad. The
amount of support provided for the expatriate and family is critical to
adjustment and intend to stay, but may have a negative effect on re-entry.
(2) Social Factors: The familiar surrounds of the home environment may
ease the transition, or at least the cultural adjustment will not be as
demanding as that confronted in the foreign country. However, the
international experience can distance the repatriate, and his or her family,
socially and psychologically. If the expatriate position gave the person a
higher profile, involving interaction with the local national social and
economic elite, the return home may bring with it some measure of social
disappointment. The financial loss of the compensation premium, housing
subsidy and related benefits may also give rise to these feelings. The social
factors are as follows:
(a) Family adjustment: It must be stressed here that, where
spouses, partners and children are involved, each family member is
experiencing his or her own readjustment problems. For some
returnees, re-entry is a shock. It is as if they had pressed the 'pause'
button as they flew out of the country, and expected life at home to
remain in the 'freeze frame'. Re-entry reminds them that life is not
static. Others may have, as a coping behaviour in the foreign
location, glamorized life back home, and now have to come to terms
with reality; to accept the negative as well as the positive aspects of
home. For example, the foreign country may have appeared more
expensive in relative terms, but upon repatriation, the family is
confronted with a higher level of inflation in the home country than
was previously the case. Conversely, life at home may now seem dull
and unexciting in contrast, and the family unit may begin to
glamorize the life they left behind in the foreign location. These
reactions can be compounded if the family income has been reduced
upon repatriation.

(b) Social networks: In the past, impressions generated about

changes in the home country may have depended on how effectively
the family was able to keep up to date with events back home.

In the 21st century this is much less of a problem as the coverage

by satellite television news channels, wide- spread access to the
internet, email, social media, mobile phone technology. the low cost
of communication, make it significantly easier for expatriates to
follow events in their home country and stay in touch with their
extended family. This in turn assists with re-establishing social
networks which can be difficult, especially if the family has been
repatriated to a different state or town in the home country.
Children may also find re-entry difficult. Coming back to school,
attempting to regain acceptance into peer groups and being out-of-
touch with current sport and fashion can cause some difficulties.

(c) Effect on partner's Partners encounter career: difficulties in

re-entering the workforce, particularly if the partner has not been
able to work outside the home prior to, or during, the foreign
assignment, but now desires to find outside employment. Negative
experiences during the job search may affect the partner's self-
worth, compounding the readjustment process and even causing
tension in the relationship.

For those who held positions prior to the overseas assignment,

difficulties in re-entering the workforce may depend on occupation,
length of time abroad, unemployment levels in the home country
and personal characteristics such as age and gender.

Readjustment of the expatriate, whether male-led or female-led, may

be linked with concerns about theeffect that the foreign assignment
might have on the partner's career. Given that dual career couples
are on the increase, and that more females expect overseas
assignments, the issue of the partner's career is likely to become a
major factor determining staff availability for future overseas
assignments.

Various factors influence re-entry and readjustment at the

individual level. These moderating factors can combine in hard to
predict ways, creating a volatile situation that may lead to the
repatriate's unforeseen and exit from the multinational.

(d) Multinational Responses: Managing the process of repatriation

should be of concern to the multinationals that desire to maximize
the benefits of international assignment and create a large internal
labour market. A well-designed repatriation process is important in
achieving these objectives for the following reasons:
 (i) Staff Availability: The way in which MNC handles repatriation
has an impact on staff availability for future needs. Re-entry
positions signal the importance given to international experience. If
the repatriate is promoted or given a position that capitalizes on
international experience, other members of the MNC interpret
international as a positive career move. On the other hand, if the
MNC does not reward expatriate performance, tolerates a high
turnover among repatriates or is seen to terminate a repatriates
employment upon re-entry, then the workforce may interpret the
acceptance of an international assignment as a high risk decision in
terms of future career progression within the organization. The
MNCS ability to attract high-calibre staff for international
assignments is reduced, and this can have a negative effect on the
MNCS activities in the long run.
(ii) Return Investment (ROI):

Expatriates are expensive. Wherever possible, MNCS try to localize

positions by employing HCNS, but not all positions can be and
should be localized. MNCS can also give short-term or non-standard
assignment to replace FE the traditional expatriate form. Getting
return on the investment in expatriate is an important objective and
should be achieved. ROI the international assignment concentrates
period, and can be substituted by a cost-benefit analysis to justify a
decision to replace expatriates with HCNS rather than considering
gains that accrue to the organization through repatriated staff.

(iii) Knowledge Transfer: International assignments are a primary

method of achieving the objective of exchange of ideas to develop
and maintain competitive advantage. Organizations need to make
sure that their business strategies are supported by sound mobility
strategies regardless of national boundaries and this will be
increasingly vital to the success of the global organization. MNCS
should value international experience and ensure here is knowledge
transfer that contributes to the intellectual capital base of their
companies.

ROLE OF REPATRIATE:

The effects that an expat assignment and the consequent have on an

employee are frequently repatriation underestimated. Since repatriates
frequently return to their old position in their home country, they are
expected to know whatever changes take place in due course. However,
during the time they have spent abroad, they have acquired new skills.
Their old work might bore the average repatriate, and there may be cultural
differences in the workplace. It can happen that the can repatriate may get
the impression that his new skill set and experience gained abroad are not
appreciated.

Effective role behaviour is an interaction between the concept of the role,

the interpretation of expectations, the person's ambitions and the norms
inherent in the role. Readjustment problems may occur because, although
the repatriate is attempting to function back in the home country, his or her
role conception remains influenced by the experience of the foreign
assignment. While the repatriate may retain the role conception, and the
cultural norms regarding behaviour appropriate to that role, the foreign
subsidiary's influence may linger, and what is communicated to the home
company, in the form of role behaviour, may not fully conform to the home
firm's expectations. The repatriate may even struggle to return to his old
position, either because it has already been filled or because it feels like
taking a step back. Any repatriate who feels this way should volunteer for
special projects within their company or enquire about a possible alternative
position in which they can use their newly acquired skills. Professional
development or vocational education can also make the re-entry for a former
expat easier by qualifying them for a more challenging position.

CHALLENGES FACED BY REPATRIATES:

Repatriation is often the most difficult phase of an expatriate experience.

Many people face both work-related and personal repatriation challenges.

Learning how to successfully cope with the various challenges encountered

during the foreign assignment may give the person self-confidence, along
with a broader more perspective. These changes may be subtle for some
people, for others they can be profound - and may be influenced by factors
such as length of time spent abroad, country of assignment and individual
differences such as age and personality. As a result, the re-entry shock
experienced by the repatriate may be as much a function of the degree to
which the person has altered, as to the changes that have occurred in the
home country.

The repatriate can encounter the changes in the formal and informal
information channels in the home organization, particularly if there has
been wide spread restructuring and downsizing. Technological advances in
the MNC may render the repatriates functional skills and knowledge
outdated. When coupled with other job-related problems, these changes
make work adjustment a difficult process.

Some of the prominent challenges can be classified as under-

(a) Work-related: loss of visibility and isolation; changes in the home
workplace; adjusting to the re-entry position; others devaluing the
international experience.

(b) Personal: making assumptions of how easily one will fit back in;
unrealistic expectations of life at home and how it changed; social
readjustment as friend and family relationships change; difficulty
supporting family members experiencing reverse culture shock; Even more
distressing is the fact that most companies do not sponsor repatriation
programs to help assignees and their families adjust to their move back
home. However, repatriation, the final adjustment in the overseas relocation
process, does not have to be a negative experience - if it is well planned.
Successful repatriation strategies involve a three-step process:
(i) Keeping informed of home country changes while on assignment,
(ii) Rebuilding friendships and networking upon arrival "home",
(iii) Utilizing knowledge and skills attained throughout the overseas
assignment.

In some countries there are organizations that offer transition seminars to

help repatriate face the challenges.
 UNIT 4

TRENDS AND CHALLENGES

EMERGING TRENDS IN IHRM

MEANING:

Organizations today have become more global in markets and operations.

They experience higher levels of risk and uncertainty. There is increased
political and social pressure for ecological and societal responsibility. The
disruptive nature of globalization has increased the need for organizations
to be more flexible. Organizations face challenges by economic and
demographic imbalances. When business is conducted across borders, the
IHRM functions become more complex. It is especially problematic when
multinationals operate in host countries that have:
 Different standards of business practice.
 Economically impoverished.
 Inadequate legal infrastructure.
 Governments are corrupt.
  Human rights are habitually violated.
There are several emerging trends in IHRM mainly because of the
differences in practices and central operations and policies of
multinationals. International HRM places greater emphasis on a number of
responsibilities and functions such as relocation, orientation and
translation services to help employees adapt to a new and different
environment outside their own country.
Some of the emerging trends in IHRM are:
 Selection of employees/expatriates requires careful evaluation of the
personal characteristics of the candidate and his/her spouse.

 Training and development extends beyond information and orientation

training to include sensitivity training and field experiences that will
enable the manager to understand cultural differences better.
Managers need to be protected from career development risks, re-entry
problems and culture shock.

 To balance the pros and cons of home country and host country
evaluations, performance evaluations should combine the two sources
of appraisal information.

 Compensation systems should support the overall strategic intent of

the organization but should be customized for local conditions.

 Work has become more complex and interdependent. Moreover, there

is rapid increase in the use of technology that has to be adopted by
employees. Work and thus people have become more mobile and global
in orientation leading to increased workforce migration.

 Global managers have to strategically align Human Resources

Management with the changing environmental and organizational
contexts.

Today, there is a growing mismatch between skills needed and talent

available. There is an increased need for developing demographic and
cultural sensitivity. More work is done by diverse work teams often at a
distance from one another. There has been a declining loyalty between
organizations and employees. Hence a major challenge faced by the HR
manager is to select the right employees for the international assignment.
Employees need to develop a global mind-set that would enable them to
adapt to the changing needs if the global business.

OFF SHORING

MEANING:

Off shoring is an important trend for reaching competitive advantage in the

globalized economy. The trend of off shoring leads to a revolution in the
global division of labour, leading to new interfaces that emerge that need to
be managed. There is no or globally-accepted definition for the term 'off
common shoring'. Frequently, it is used as a subcategory of outsourcing,
which can be defined as the act of transferring some of a company's
recurring interval activities and decision rights to outside providers, as set
in a contract'.
Off shoring is the relocation of a business process from one country to
another typically an operational process, such as manufacturing, or
supporting processes, such as accounting. It majorly refers company
business, although state governments may also employ off shoring. Off
shoring has been associated primarily with the outsourcing of technical and
administrative services supporting domestic and global operations from
outside the home country ("offshore outsourcing"), by means of internal
(captive) or external (outsourcing) delivery models. Off shoring is defined as
the movement of a business process done at a company in one country to
the same or another company in another, different country. Almost always
work is moved because of a lower cost of operations in the new location
More recently, off shoring drivers also include access to qualified . personnel
abroad, in particular in technical professions, and increasing speed to
market.

IMPORTANCE OF OFFSHORING:

Off shoring is gaining importance as it has offers many advantages, like cost
savings and the opportunity to acquire skills or equipment not found in
one's home country. Off shoring is important because:

(1) Cost Savings: The main reason that companies choose to offshore is to
save money. Moving production to a country with a lower hourly wage and
few employee benefits, like health care save the money and other resources
of the If a company moves part or all of production to another country that's
got a large population of workers, company. then the company won't have
difficulty in finding employees.
(2) Accessibility to top-notch people across the globe: Off shoring
destinations have a pool of highly skilled and talented professionals. People
from the Philippines, China, and India are very hardworking and their work
is at par with international standards.
(3) Market growth potential: There is huge potential in having local
presence in other countries, as new territories can be sources of new clients
for one's business. Also, establishing tie-ups with local businesses can
mean expansion opportunities and enhancement of one's current business
practices.
(4) Opportunity to Acquire Specialized Skills or Equipment: In some
cases, the skills needed to perform a job are not readily available in a
particular country and a company needs to go to another country to find
employees who can do the job. In other situations, a specialized piece of
equipment might only be available in another country. Moving production to
a country easily available save training time.
(5) Close Collaboration: Offshoring gives the company g0reater control
through closer physical collaboration. Shared space collaboration has the
advantage of overseeing the conduct of work without the filters or delays
associated with technology. Nowadays, there are software programs that
allow clients to view the work of its outsourcing partner.:
(6) Government Policies: There some are Favourable governments that
grant special exemptions and incentives to companies that invest in their
economy. These include tax exemptions and access to cheap credit which
could improve the bottom- line of the business.
(7) Handling Monotonous Tasks: Sometimes delegation of routine and
monotonous task like staff management can be offshored just to reduce
costs on a labour intensive projects.
(8) Higher Value Work and Employee Retention: When all compliance
tasks that consume a lot of time are taken off the shoulders of onshore
employees, these people are able to focus on more revenue-generating tasks.

Off shoring has a long tradition, for example, in the automobile industry, it
has recently gained importance in the service industry and especially in the
information technology (IT) sector.

DRAWBACKS OF OFFSHORING:

There are certain drawbacks of offshoring such as:

(1) Increase Unemployment: The biggest criticism of offshoring is that it
increases the level of unemployment of the local economy.
(2) Cultural and Social Barriers: It is always difficult to get accustomed
with a new environment and a new culture. Also the way people behave may
be different. While some countries prefer talking in a straightforward
manner a few others might be reserved and rather take offence.
(3) Security Issues: Whenever one is sharing and transmitting data to
another party, there is always a risk of security breach and compromised
data integrity. There will always be transfer issues when it comes to data
even when there is shared space collaboration.
(4) Communication Issues: One major drawback of offshoring is the
language barrier. Most of the countries consider English language as a
common language but the understanding and depth of knowledge differs.
Accent issues also come to play which makes understanding very difficult.
(5) Zone Differences: Appropriate shift patterns need to be assigned to
match with the time differences between zones.
While offshoring comes with its advantages of reducing labour cost and
facilitating new market and opportunities, it has challenges too like social,
cultural and communication barriers. Hence offshoring pros and cons must
be considered before choosing to offshore the entire or even part of business
operations.

OFF SHORING AND HRM IN INDIA:

In India the development of off shoring was a result of strong support by the
government to help the country meet those requirements that have an
impact on the choice of the location for off shored activities. This choice
depends on:
 Costs (labour and trade costs);
 The quality of institutions (particularly legislation) and infrastructure
(particularly telecommunications);
 Tax and investment regime;
 Skills of the employees (particularly language and computer skills).
A prominent example for off shoring activities in India are
international call-centres. However, off shoring of services in India also
includes more sophisticated, high value-added activities, such as
accounting, billing, financial analysis, software development, architectural
design, testing, and research and development.

The technological infrastructure and the qualification as well as the

motivation of the employees in India are perceived as benefits by Western
investors and partners. Furthermore, each year 3.1 million graduates enter
the workforce and 20 per cent of the Indian population speaks English.
Indian graduates are prepared to work for salaries which are lower than
those of their Western counterparts. To capitalize on this cost advantage, Us
firms such as IBM, Hewlett-Packard and Electronic Data Systeme have
outsourced software development to Indian suppliers. Other multinationals,
such as General Electric, have used the availability of a highly educated yet
relatively cheap labour force to establish their call centres in various parts
of India. Local staff employed in these call centres are trained to speak
English complete with particular accent and use of appropriate idiom, so
that US, UK and Australian customers are often unaware that their local
call has been diverted to a call centre in India.
However, problems have also been reported from Indian companies and
many of them are associated with HRM issues. For example, according to a
survey, annual personnel turnover rates range from 20 to 80 per cent and a
shortage exists considering the high demand for a skilled workforce,
especially in middle management. As some HR managers have reported,
only half of the candidates even show up for a job interview. This shortage
and the high demand for skilled workers have led to an annual increase in
salaries of between 10 and 20 per cent.

Consequently, the significant cost advantages of off shoring to India are in

danger. Additional issues are the problems of worker dissatisfaction and
conflicts caused by stress as well as cases of reported sexual and racial
abuse. All of these factors can lead to a decrease in productivity and thus,
to further financial losses.

Moreover the Indian HRM policies and practices are still very much
influenced by the caste system, social relationships and politics. At times,
selection, promotion and transfer are based on ascribed status and social
and political connections, so there is a strong emphasis on collectivism-
family and group attainments take precedence over work outcomes.
Motivational tools are more likely to be social, interpersonal and even
spiritual. In such conditions, the employee's orientation emphasizes
personalized relationships rather than performance.
 INTERNATIONAL BUSINESS ETHICS AND
INTERNATIONAL HRM

INTRODUCTION:

The conduct of international business increasingly involves concerns about

the values and practices of multinational enterprises when they conduct
business outside their countries of origin. International governing bodies,
such as United Nations and the International Labour Organization (ILO),
non- governmental organizations, labour organization etc. raise several
questions about the ethical nature of the business practices about the
MNCS, especially their employment practices.
When business organizations look outside their country borders for
business opportunities, they claim many benefits derive from this global
business activity. At the same time, they may be charged with exploitation
and causing increasing inequities in the countries in which they do
business, particularly in the less developed countries. Because of this, the
possibility of confusion about business rules, ethics, and HR policies and
practices have intensified. Many of the issues that are seen as raising
concern about ethics fall within the managerial and administrative
responsibilities of human resources.

MEANING OF BUSINESS ETHICS:

Business ethics (also corporate ethics) is a form of applied ethics or

professional ethics that examines ethical principles and moral or ethical
problems that arise in a business environment. It applies to all aspects of
business conduct and is relevant to the conduct of individuals and entire
organizations. Business ethics refers to contemporary standards or sets of
values that govern the actions and behaviour of an individual in the
business organization. It has normative and descriptive dimensions. As a
corporate practice and a career specialization, the field is primarily
normative. Academics attempting to understand business behaviour employ
descriptive methods. The range and quantity of business ethical issues
reflects the interaction of profit-maximizing behaviour with non-economic
concerns.

GLOBAL VALUES:

Every society needs to be bound together by common values, so that its

members know what to expect of each other, and have some shared
principles by which to manage their differences without resorting to
violence. This is true of local communities and of national communities.
Today, as globalization brings us all closer together, and our lives are
affected almost instantly by things that people say and do on the other side
of the world, we also feel the need to live as a global community. We can do
so only if we have global values to bind us together.

A value is an enduring belief that a specific mode of conduct or end-state of

existence is personally or socially preferable to an opposite or converse
mode of conduct or end-state of existence. Global values are values that are
universally accepted over the world. All human beings were in a sense
united in a global community, and that this global community operated on
the basis of a shared global value system.
The list of global values is not static, in the sense that a particular list of
values has guided global affairs since the beginning of time, and will do so
until the end of time. Also, the global values of the international community
have evolved over time. Some of the global values are: peace and security,
social progress and sustainable development, human dignity, self-
determination of people etc.

Global values guide global decision making and must be globally shared to
actually guide global affairs. A global value system helps global policy
makers choose between alternative goals. A clear choice will in turn help to
resolve conflicts and facilitate global decision making. Global values "help
us to define the state of the world, to evaluate the meaning of the world so
defined, to explain the human condition, and to prescribe a correct line of
action."

As global values are based on ideas of what constitutes a better world from
the perspective of all the world's citizens, they are above all about the
humanization of global affairs. They are about the desire to actively build a
future based on human needs. It is a natural development that whenever
people interact frequently and as equals, a body of values to humanize this
interaction emerges.

INTERNATIONAL CORPORATE CODE OF

CONDUCT:

The first international ethics code for business was developed in 1994 by
Japanese, European and North American business leaders meeting in Caux,
Switzerland. It was aimed to set a global benchmark against which
individual firms could write their own codes and measure the behaviour of
their executives.
The Caux Principles are grounded in two basic ethical ideals:
(i) Kyosei, and
(ii) Human dignity.

The Japanese concept of kyosei means living and working together for the
common good-enabling cooperation and mutual prosperity to co-exist with
healthy and fair competition.
Human dignity relates to the sacredness or value of each person as an end,
not simply as the means to the fulfilment of others' purposes or even
majority prescription.
The attitudes of senior management play a crucial role in developing,
implementing and sustaining high ethical standards. HR professionals can
help multinationals to institutionalize adherence to ethics code through a
range of HR activities including training and the performance-reward
system.
The International corporate code of conduct can be viewed by grouping
them into three main categories:
 externally generated codes of conduct that are developed by
governments or international organizations.
 corporate codes of conduct that represent individual companies'
ethical standards.
 industry-specific codes.

These categories often overlap and some codes that initially were adopted
voluntarily by companies or industries have been incorporated into law by
governments.

CRIMINALIZATION OF BRIBERY:

Bribery involves the payment of agents to do things that are inconsistent

with the purpose of their position or office in order to gain an unfair
advantage. Bribery can be distinguished from so-called 'gifts' and
'facilitating' or 'grease' payments. The later are payments to motivate agents
to complete a task they would routinely do in the normal course of their
duties. It is now generally agreed that bribery undermines equity, efficiency
and integrity in the public service; undercuts public confidence in markets
and aid programs; add to the cost of products; and may affect the safety
and economic well-being of the general public. For these reasons, there has
been an international movement to criminalize the practice of bribery.
The criminalisation of the bribery of public officials-both domestic and
foreign - and the enforcement of these anti-bribery laws are a key
component of a comprehensive anti-corruption framework and complements
parallel efforts to prevent and detect corrupt behaviour.
In 1977 the United States enacted the Foreign Corrupt Practices Act (FCPA)
to prohibit US-based firms and US nationals from making bribery payments
to foreign government officials. In addition, payments to agents violate the
Act if it is known that the agent will use those payments to bribe a
government official. The Act was amended in 1988 to permit facilitating'
payments but mandates record-keeping provisions to help ensure that
illegal payments are not disguised as entertainment or business expenses.
In the absence of adequate international self-regulation to control bribery
and corruption, the US has lobbied other nation- states over many years to
enact uniform domestic government regulation to provide a level playing
field. These efforts met with some success in December 1996 when the
United Nations adopted the Declaration Against Corruption and Bribery in
International Commercial Transactions which committed UN members to
criminalize bribery and deny tax deductibility for bribes.

OPERATIONALIZING CORPORATE ETHICS OF HR IN

OVERALL CORPORATE ETHICS PROGRAMME:

HR has a special role to play in the formulation, communication,

monitoring, and enforcing an enterprise's ethics program, HR professionals
institute a strategic plan for legal compliance and developing corporate
codes for voluntary compliance. They can also provide training in
understanding the difference between corrupt bribery payments, gifts, and
allowable facilitation payments and the development of negotiation skills to
handle problem situations that may arise in sensitive geographical regions
and industries.
The US-based business ethics literature generally presents the view that the
HR function along with finance and law is the appropriate locus of
responsibility for an enterprise's ethics program.
HR is well positioned to make an important contribution to creating,
implementing and sustaining ethical organizational behaviour within a
strategic HR paradigm. The key factors for integrating responsibility for
ethics into all aspects of organizational life-expertise in the areas of
organizational culture, communication, training, performance management,
leadership, motivation, group dynamics, organizational structure and
change management. When recruiting and selecting expatriates HR
managers should exhibit the ability to manage with integrity the job-
relevant criterion. To operationalize corporate ethics of HR in overall
corporate ethics programme, it is the responsibility for ethical leadership
across all functions and managerial levels, including line and senior
managers. The need to operationalize is felt because:
 People involved in international business activities face many of the
same ethical issues as those in domestic business.

 The issues are more complex for IHRM because of the different social,
economic, political, cultural and legal environments in which
multinationals operate.

 Consequently, multinationals will need to develop self- regulatory

practices via codes of ethics and behavioural guidelines for expatriate,
TCN and local HCN staff.

 Firms which opt consciously or by default to leave ethical

considerations up to the individual not only contribute to the
pressures of operating in a foreign environment (e.g., poor performance
or early recall of the expatriate), but also allow internal inconsistencies
that affect total global performance.
The pre-departure training of expatriates and the orientation program
should include an ethics component. This might include formal studies in
ethical theory and decision making as well as interactive discussion and
role playing around dilemmas which expatriates are likely to encounter. In
an effort to sensitize managers to cultural diversity and to accept the point
that home practices are not necessarily the best or only practices, there has
been an emphasis in international business training on adapting to the way
in which other cultures do business.
In designing training programs to meet the challenges of multinational
business, HR professionals must raise not only the issue of cultural
relativities but also the extent to which moral imperatives transcend
national and cultural boundaries. Insufficient attention may result in
unacceptable ethical compromises.
It is also important for the HR department to monitor the social, ethical
performance of the expatriate managers to ensure that as managers become
familiar with the customs and practices of competition in the host country,
they do not backslide into the rationalization that 'everybody else does it'.
There is an emerging consensus about core human values which underlie
cultural and national differences and the content of guidelines and codes
which help to operationalize the ethical responsibilities of multinationals.

MANAGING INTERNATIONAL PROJECTS AND

TEAMS:

During the last decades, large projects tend to involve people from all
around the world, extending the breadth of skills that a Project Manager
should possess. Multi country project teams and virtual project team
composition seems to be the norm in today's globalized economy. Making
the transition from managing projects where the complete team is local, to
managing projects with teams covering various time zones and nationalities
becomes increasingly challenging. It should thus be one of the areas that
Project Managers managing such projects allocate additional planning time,
to avoid any problems that might create tensions and lead to overall
problems.
One of the most important factors in today's multinational teams seems to
be cultural management. Managing culture involves the conscious effort by
the Project Manager to encompass a whole philosophy of promoting equality
and positive team spirit, no matter the origins and the mix of the team.
There are a lot of different factors to be taken under consideration and a lot
of decisions can be directly affected by them. A successful Project Manager
should try to identify any such issues from the very beginning of the project
and be prepared, so that no such issues could cause delays or any other
problems.

HOW PROJECTS ARE MANAGED ACROSS THE

WORLD:
A project manager leading an international team needs an international
view of the different legal environments in order to successfully navigate
unforeseen and political difficulties or changes. The following steps are to be
followed in order to manage projects across the world are:
(1) Establish the Team: The first step is to establish the project
management team. The best project teams include stakeholders at all
levels, from executives to those individuals at the front line. These
individuals have the inside knowledge that will be critical to the success
of technical experts from external organisations. The most important
element about team composition is having a that is effective working
together. Collaboration and communication skills are two of the most
team critical personal skills demanded of all members. The ability and
willingness to recognise and value the different roles and contributions of
team members is essential. Every team needs problem solving, influence,
process and compliance behaviours and values if it is to be successful.
People possessing those different requirements for group success have
very different behaviours and conflict can be a product of their
interactions. Team development at the very start of the project should
include training in communication skills, and the recognition and valuing
of the different behaviours, values and personal skills needed for team
success.
(2) Facilitate Effective Communication: Accurate, useful, timely and
credible communication is crucial to maintaining a cohesive team
environment and achieving project success. All project information
should be communicated consistently throughout each stage of the
process so all team members are equally informed. Open sharing of
information should be encouraged and a no surprises attitude must be
adopted to create a trusting work environment.
A variety of communication mediums should also be used. Team
members will respond differently to written (email, text, memo etc.),
verbal (telephone, radio, face to face etc.) methods of communication.
Busy schedules and multiple projects can become obstacles to effective
communication. Recurrent face to face be scheduled to encourage
ongoing meetings must discussions and ensure that deliverables are
completed within project time frames.
(3) Encourage Collaboration: Groups that plan together are typically
more successful, therefore project leaders must realize the importance of
collaborative planning and goal setting. This collaborative goal setting
allows team members to achieve individual successes, while contributing
to the overall project goals.
Collaboration is the vehicle which:
• Generates the most creative solutions.
 • Gets the greatest membership support.
• Produces the greatest amount of personal growth.
By matching each team member's incentive to the overall goals, the entire
team is motivated further to achieve success. It is also the project
manager's responsibility to manage the team's development to ensure a
cohesive integrated team is founded.
(4) Accept and Manage Problems: It should be noted that bringing a
group of people together does not necessarily constitute a team,
especially not an effective working team. One of the biggest mistakes
made by project managers is not recognising this as a fact and then
expecting their project team to be successful running from day one.
Project leaders are challenged to facilitate relationships among people of
very different backgrounds. However, they all share the common goal of
the project. Conflict within projects can manifest itself in many different
ways but a good project manager will intercept and take action when
conflict occurs. Despite the variables that might contribute to project
challenges, by communicating team goals and expectations openly and
effectively, these barriers can be overcome.
(5) Recognition and Reward: A recognition and reward scheme will help
reinforce the importance of the key project deliverables and focus the
team on the important aspects of the project. Completion of a project and
the steps along the way can be very rewarding for team members.
Outwardly celebrating these successes can be very motivating for the
team. When project milestones are reached, they should be
communicated to the project team members and stakeholders. Rewards
can come in various forms. They should be established and
communicated at the start of the project, as they may impact on other
areas to the project, such as cost and time.
The project management team needs to clearly understand the
requirements and deliverables of the project as well as being aware of the
organisation's overall strategy, objectives and drivers. It is also essential
for the project management team to understand the organisations
professional and ethical requirements and subscribe to them and ensure
that the project complies with them.

CHALLENGES IN MANAGING INTERNATIONAL

PROJECTS ACROSS THE WORLD:
The world of business is continually shrinking. Project managers work in an
environment with real-time audio visual communication with colleagues on
the other side of the world and online translation tools. Even small
companies can operate internationally with outsourcing agreements and
partners overseas, which means that project managers in organisations of
any size face the challenges of managing international projects.
Some of the challenges of global projects are familiar like figuring out the
right role for top executives, for example, or finding a good balance between
formal and informal project management processes.
The other challenges are:
(1) Language: In case of international projects, it is unlikely that all
members of the project team will speak the same language. The problem of
a common language is far greater if one is working with colleagues who do
not routinely work in a common language. At the beginning of a project it is
worth specifying what will be the main working language of the project. In
projects led from an English speaking country it does not have to be English
for everything. However the project manager must be considerate to
members of the team who are not working in their native language, He must
minimize jargon, and make spoken and written language clear.
(2) Time: Different cultures have different interpretations of time. The
project manager may value punctuality, but other team members may not
have the same view of when a meeting is supposed to start. The only way to
manage this is to have open and frank conversations with everyone
involved, spelling out what the potential challenges might be and asking for
collaborative solutions to dealing with them. It is better to have these
conversations early than spend a lot of time hanging around on conference
calls waiting for the others to turn up.
(3) Roles and Responsibilities: The role of the project manager might be
very well respected in his own country, but the role may not be understood
elsewhere. Colleagues in countries where companies have very hierarchical
structures may not take direction from the project manager because they
may not see him (or his role) as very important.
(4) Tools: The project manager must make the most of the software
available. Some tools have instant messaging capabilities. He should use
technology that connects him with his team members even if he is not
working in the same room as them E.g. Skype. However, they work best
when the time difference is not more than a couple of hours. Working with
someone who is 10 or 12 hours behind can be far more challenging.
(5) Virtual Teams: Managing virtual teams is difficult and it takes a lot of
commitment from everyone involved. Project managers have to be better at
documentation, knowledge sharing and team building than the other team
members. Being alert to the challenges of virtual teams is the first step to
identifying methods to help keep the team on track.
(6) Communication: To be proficient in a language does not automatically
mean that the communication in that language is effective. There is
communication, such as non-verbal cues and cultural more to effective
differences. There are cultures and countries which are more direct in their
communication. While in other cultures such a direct approach would be
considered rude. Germans for example usually give direct feedback, while in
the US it common to give criticism more indirectly.
(7) Cultural Dimensions: Cultural differences do not just include different
eating habits or different ways of doing things. Cultural differences also
affect how teams work together. The project manager has a lot to learn from
other cultures and working with international teams can be one of the most
rewarding parts of project management.
(8) Geographical boundaries: In a local project, there are several meetings
held on a regular basis to get the status updates by the project team and to
ensure that everything is on right track. But, this is not easy with a global
project and managing the project team across the great geographical
distances is the biggest challenge because physical interaction with the
project team members daily with the people located in different time zones,
tracking the progress and providing the timely feedback is very difficult.

HR IN MNCS:

In order to survive and grow in international markets organizations adapt

their HRM practices for successful execution of strategies. International
human includes the human resource management issues and problems
resource management arising from internationalization of business, and the
human resource management strategies, policies and practices which firm
pursue in response to the internationalization of business. Multinational
Companies (MNC's) use three types of strategies for transfer of HR practices
across different nations:
Ethnocentric strategy uses same HR practices of parent company in host
nations.
Polycentric strategy employs local people as workforce and adapts the HR
practices of host nation.
Geocentric strategy only focuses on skills of the employee and adopts HR
practices which are most effective and efficient irrespective of the
nationality.
All strategies have their pros and cons, they are applied as per the type of
business, the strategy of the organization, the leadership, and the past
experiences of the organization regarding different strategies. The
international organizations can use culturally sensitive and adaptive HRM
practices for creating competitive advantage in overseas operations. In
attempt to explore new markets and opportunities multinational companies
are adapting to HRM practices across different borders.
Managing human resources in international organizations can be a complex
issue. MNC's continuously strive to improve their international HRM
strategies. Selection of the right incumbent for the foreign assignment must
be based on holistic selection criteria, especially the criteria of cultural
adaptability. Training before assigning the job is must to make the employee
aware of the challenges ahead, managing repatriation through a career
progression plan for expatriate and employee counselling is another focus
area of international HRM.
The correct compensation strategy keeps the employee morale high and
motivates others in the organization to accept foreign assignments. The
MNC's must strive to maintain harmonious labour relations to avoid
confrontations with labour and trade unions in host country. HRM, if given
due attention, can source of competitive undoubtedly be leveraged to be a
advantage for organizations expanding across countries.

INDUSTRIAL RELATIONS IN MNCS:

Industrial Relations is a multidisciplinary field that studies the employment

relationship. Industrial relations is increasingly being called employment
relations or employee relations because of the importance of non-industrial
employment relationships: this move is sometimes seen as further
broadening of the human resource management trend.
One of the key reasons why managers of multinational corporations should
be well aware of the industrial relation issues is due to their significance in
the determination of labour sustainable firms productivity, profits and
costs, even competitive advantage. In response to the challenges of the
multinational corporation in union-management relations, unions are
attempting to internationalize their activities and strength.
Some general points about the field of international industrial relations are:
First, it is important to realize that it is difficult to compare industrial
relations systems and behaviour across national boundaries; an industrial
relations concept may change considerably when translated from one
industrial relations context to another. The concept of collective bargaining,
for example, in the USA is understood to mean negotiations between a local
trade union and management; in Sweden and Germany the term refers to
negotiations between an employers organization which represents the major
firms in a particular industry and the trade union covering employees in
that industry. Cross-national differences also emerge as to the objectives of
the collective bargaining process and the enforceability of collective
agreements. Many European Unions continue to view the collective
bargaining process as an ongoing class struggle between labour and capital,
whereas in the USA union leaders take a very pragmatic economic view of
collective bargaining rather than an ideological view.
Second, it is very important to recognize in the international industrial
relations field that no industrial relations system can be understood without
an appreciation of its historical origin. As Schregle has observed:
Industrial relations phenomena are a very faithful expression of the society
in which they operate, of its characteristic features and of the power
relationships between different interest groups. Industrial relations cannot
be understood without an understanding of the way in which rules are
established and implemented and decisions are made in the society
concerned. Because national differences in economic, political and legal
systems produce markedly different industrial relations systems across
countries, MNES generally delegate the management of industrial relations
to their foreign subsidiaries. However, a policy of decentralization does not
keep corporate headquarters from exercising some coordination over
industrial relations strategy.

Generally, corporate headquarters will become involved in or oversee labour

agreements made by foreign subsidiaries because these agreements may
affect the international plans of the firm and/or create precedents for
negotiations in other countries.
ROLE OF TECHNOLOGY ON IHRM:

Industries across the globe have witnessed dramatic change. over the last
two decades. With the advent of development in information technology, the
nature of work that people are engaged in along with the requisite skills,
knowledge and abilities have underwent a shift. Technology has changed
the business world many times over. In the Information Age, the advent of
computers and the Internet has increased that impact significantly. Many
businesses cannot even function without the use of computer technology.
This impact is seen in nearly all areas of business, including human
resources, where technology continues to have a significant impact on HR
practices. Technology has enabled organizations to connect to the internet
to interact with other professionals in organizations in their industry. It has
helped many human resource professionals in gathering information that
they need to remain informed to demonstrate the desired characteristics
and ability. These facts also suggest that technology has not only enabled
human resource professionals to access and distribute information. Today,
all the operative functions of HRM can be managed with the help of
technology. Managers in one country Can interact with employees located in
another country through video conferencing, skype etc.
Before the Internet, HR recruiters had to rely on print publications, such as
newspapers, to post jobs and get prospects for open positions. Other
methods such as networking also were used, but HR recruiters did not have
the ability to post a job in one or more locations and have millions of people
see it all at once. Technology has made recruiting more efficient and, in the
hands of the right recruiter, more effective as well. Many companies now
Internet-based employee use applications or other technology in human
resource management for finding new employees. Information technology
makes it possible for human resources professionals to train new staff
members in a more efficient manner as well. The ability to access company
information and training programs from different locations is possible. HR
professionals are able to train a large number of employees quickly and to
assess their progress through computerized testing programs. Enhanced
performance management is another by product of technological
improvement. Human resources professionals can use computer technology
to assess employee performance and also to get employee feedback to be
used for the betterment of the organization. Because of wide use of
technology, communication is no longer constrained. Employees can
communicate instantly anytime, with anyone, anywhere. Virtual meetings
allow people in geographically dispersed locations to meet regularly.
However, there are certain drawbacks of using technology in IHRM like,
moving traditional activities from a manual to technological process can be
time-consuming and expensive.
Also, the potential for hardware or software to fail is also a problem that a
company may need to consider. Being prepared for all technological issues
is a must as failure to properly handle employee data at international level
can result in heavy fines or penalties.

IHRM AND VIRTUAL ORGANIZATION MEANING:

A virtual organization is an organization involving detached and

disseminated entities (from employees to entire enterprises) and requiring
information technology to support their work and communication. Virtual
organizations do not represent a firm's attribute but can be considered as a
different organizational form.

FEATURES OF VIRTUAL ORGANIZATION:

Virtual organizations save time, travel expenses and eliminates lack of

access to experts. Virtual teams can be organised whether or not members
are in reasonable proximity to each other. Virtual teams allow firms to
expand their potential labour markets enabling them to hire and retain the
best people regardless of their physical locations.
Some of the features of virtual organization are:
(1) Technology: Technology has transformed the traditional ways of
working. In particular, the worlds of computing and telephony are coming
together to open up a whole new range of responsibilities. The main
feature of the virtual organizations is that virtual organizations are
emerged as a result of information technology and they do not have
concrete structure.
(2) Adaptability: The virtual organization is an organization with high
adaptability. Structure and operation of the customer's needs as an
organization that can work in a manner to respond as soon as possible.
(3) Informal Communication: Informal communication is very intense.
Due to lack of clear reporting relationships, official rules and procedures,
informal relationship is needed extensively. Informal relationships are
personal, are concentrated in the same levels.
 (4) Reduced face-to-face Interactions: In virtual organizations, face to
face relations are decreased.
(5) Time: In a virtual organization performed by different units are
required to be made at the same time and at the same place.
(6) E-mail Integration: Integrating Short Message Service (SMS) into the
existing e-mail infrastructure allows the whole organisation to take
advantages of SMS products such as "Express Way'.
(7) Mobile Data: This enables a laptop to retrieve information anywhere
through the mobile phone network. Mobile data communications
revolutionize where and how work is done. In the past, corporate
information has been inaccessible from many places where it is needed.
One's ability to link laptop to mobile phone keeps one connected to his
/her virtual organisation from anywhere.

DIFFERENCE BETWEEN VIRTUAL ORGANIZATION

AND TRADITIONAL ORGANIZATION:

The traditional organization consists of individuals working in physical

proximity, the virtual organization refers to a group of individuals who are
separated by physical distance but are united by a shared goal. Generally,
the virtual organization consists of talent across geographies, cultures and
time zones. The interactions among the members of a virtual organization
Communication are mediated by the Information and Technology (ICT) tools.
Some of the key differences between traditional and virtual organization are
as following;
* Selection of Team Members: In case of traditional organization,
members are largely selected based on their functional skills. But
performing in a virtual team environment is not easy for everyone. Lack
of face-to-face interactions and social focus in a virtual setting might lead
to isolation and loneliness. It calls for managing ambiguity, proactive
networking, exceptional time management and work discipline, ability to
learn new technologies, and the ability to collaborate across functional
and cultural boundaries. So, in the selection of a virtual team member,
there is a need to look into these core competencies in addition to the
basic functional skills.
* Organization Structure: Compared to the traditional organization,
virtual organization support flatter organization structure with dim lines
of authorities and hierarchies. This is required to survive in
 hypercompetitive market, deliver results faster and encourage creativity
which is actually the primary objectives for forming a virtual
organization.
* Leadership Style: In virtual organization, managers cannot physically
control the day-to-day activities and monitor each team members'
activities, therefore they need to delegate little more as compared to
traditional organization. The command and control leadership style of
yester years is giving way to the more democratic and coaching style of
today.
* Knowledge Exchange and Decision-taking: Many a times in
traditional organization, information is being exchanged during informal
discussions. But in case of virtual organization, members have a very
limited or no informal access to the information. Hence there is a need for
more frequent updates on project status and building a shared database
to provide all the important information to the team. Considering the time
zone differences in global virtual teams, it becomes difficult to schedule
meetings.
Thus in case of virtual organization, many a times, delay occurs in fixing
a problem or reaching a consensus, whereas in traditional teams a
meeting can be called at any time of the day when all the members are
present together in the office, resulting quick decisions and problem
solving.
* Relationship Building: When traditional organization members meet in
the workplace every day they tend to develop close social ties with each
other, They strike rapport with each other when they interact face-to-
face. In the virtual organization the interactions are tend to be more task-
focused. Further, lack of verbal cues and gestures in virtual setting does
not allow any scope for personal touch in the communication.
* Psychological Contract: The foundation of psychological contract is
more fragile in the virtual environment. Smaller instances of
misunderstanding or gaps in communication result in violation of the
psychological contract which has negative effects on the organization's
effectiveness. Virtual organization also experience difficulties in building
trust, cohesion and commitment among its members. Considering the
challenges posed by the virtual organization, it is necessary to pay special
attention to the communication, collaboration and cultural issues.

MANAGING HR IN VIRTUAL ORGANIZATION:

Planning, recruitment, development, maintenance, retention, and
socialisation are the common HR issues that ensure right HR for right job.
Virtual organisations are staffed by highly proficient workers who are left to
do their own things and produce highly competitive products or services.
Jobs in virtual organisations being knowledge-based are assumed to require
greater skills, have greater variety and offer better quality of working life
(QWL). From HR point of view, virtual organisation has both sides of the
coin. The one (positive) side is greater job autonomy and more financial
stability, which are the most sought after things by the workers in any
organisation. This is so because of the reduced commuting, lunches and the
clothing costs. Added to these are increased working hours, a perceived
increase in performance, reduced job-stress and better social relationships
as barriers between the home and work interface are dissolved.
However, the other (negative) side includes aspects like longer work hours,
increased work demands, poor working (physical) conditions and fewer
career opportunities. In virtual organisations, jobs are variable and of short
term. People with multi-skill are valuable to the organisation. The employee
selection is a very crucial area in virtual organisation. There are certain
requirements that have to be met to work in virtual organisations like:
motivated, knowledgeable, effective communicator, adaptable, familiar with
the job, result- oriented etc. It is, therefore, essential to consider these
qualities while recruiting people to work in virtual organisations. There is a
need to select those employees whose values are in consonance with the
organisational requirements/culture. In a world of ever increasing
competition, it is impossible for any company to have all skills that are
needed to do the job. It is virtual organisation that imbibes these ideas and
makes the final leap. In fact, that is where the reality of virtual
organisations lies to-day and possibly will remain tomorrow as well.

GROWTH IN STRATEGIC ALLIANCES AND CROSS

BORDER MERGERS AND ACQUISITIONS

The strategic importance of alliances has increased in the course of

globalization. Cross-border alliances are cooperative agreements between
two or more firms from different national backgrounds, which are intended
to benefit all partners. They comprise equity as well as non-equity
arrangements.
Equity modes involve a 'foreign direct investor's purchase of shares of an
enterprise in a country other than its own. These include the establishment
of subsidiaries either through Greenfield investments or acquisitions, as
well as through joint ventures or mergers. The latter typically involve long-
term collaborative strategies, which require the support of appropriate HR
practices. They represent cross- border equity-based alliances.

A non-equity cross-border alliance 'is an investment vehicle in which

profits and other responsibilities are assigned to each party according to a
contract. Each party cooperates as a separate legal entity and bears its own
liabilities'. Examples include international technology alliances or strategic
research and development alliances as well as cooperative agreements in
different functional areas such as marketing or production.

Equity as well as non-equity cross-border alliances pose specific challenges

to international human resource management. Often, these are crucial to
the success of the international operation.

CROSS BORDER MERGERS AND ACQUISITIONS:

A merger is the result of an agreement between two companies to join their

operations together. An acquisition, on the other hand, occurs when one
company buys another company with the interest of controlling the
activities of the combined operations.

The above figure shows that a merger usually results in the formation of a
new company while an acquisition involves the acquiring firm keeping its
legal identity and integrating a new company into its own activities. The HR
challenge in both cases consists of creating new HR practices and strategies
that meet the requirements of the M&A. In cross-border mergers and
acquisitions (M&As), firms with headquarters located in two different
countries are concerned.
Many of the HRM challenges faced in mergers and in acquisitions are
similar. Cross-border M&As involve partial or full takeover or the merging of
capital, assets and liabilities of existing enterprises in a country by TNCS
[transnational corporations] from other countries. M&As generally involve
the purchase of existing assets and companies. Cross-border M&As have
seen tremendous growth over the last two decades in part because of the
phenomenon of globalization. One major reason to engage in mergers or
acquisitions is often to facilitate rapid entry into new markets. Thus,
'mergers and acquisitions are a predominant feature of the international
business system as companies attempt to strengthen their market positions
and exploit new market opportunities'. Some of the factors that a firm takes
into consideration when deciding on a target country include: the growth
aspiration of the technological advantages, a response to government
policies in a particular acquiring company, risk diversification, country,
exchange rate advantages, favourable political and economic conditions, or
an effort to follow clients.

CROSS BORDER MERGERS AND ACQUISITIONS

AND ITS IMPACT ON IHRM:

The quality of employee relations, ranging from employee support to

employee resistance, is influenced by variables such as the similarity
between the management styles of the two organizations, the type of cross-
border combinations, the combination potential in terms of efficiency gains,
or the extent of organizational integration. There is evidence that employee
resistance endangers M&A performance as it may hinder synergy
realization. For this reason, it is important that all M&As try and effectively
manage issues where employee resistance is encountered, in order that
employee support can evolve. This is a process in which the HRM function
can play a crucial role.

When a firm is acquired by another firm, it constitutes an existing

workforce. There are typical phases characterizing cross-border M&A
processes and outline which HR practices are important at each of the
different stages. The extent to which these HR practices are carried out very
much depends on the extent to which integration of the two companies is
actually aspired. In the case of low integration (e.g. if the M&A is carried out
mainly for portfolio reasons) both companies remain separate cultures.
However, in the case of high integration, it is crucial for the M&A to meet
the HR requirements of the different phases.
The M&A process usually consists of the following four steps:
 (1) A pre-M&A phase including a screening of alternative an analysis of
their strengths and partners based on weaknesses.

(2) A due diligence phase which focuses more in depth on analysing the
potential benefits of the merger. Here, product-market combinations,
tax regulations, and also compatibility with respect to HR and cultural
issues are of interest.

(3) In the integration planning phase, which is based on the results of the
due diligence phase planning for the new company is carried out.

(4) In the implementation phase plans are put into action. Firms should
match their M&A strategy with their HR strategy while relying on three
conceptual tools:

 Resources are defined as tangible assets such as money and

people, and intangible assets, such as brands and relationships.
In the context of HRM in M&As decisions about resources involve
staffing and retention issues, with termination decisions being
particularly important.
 Processes refer to activities that firms use to convert the
resources into valuable goods and services. For example, in our
case, these would be training and development programs as well
as appraisal and reward systems.
 Values are the way in which employees think about what they do
and why they do it. Values shape employee's priorities and
decision making.

These ideas deliver starting points for developing HR strategies for the newly
created entity. Hence, they give hints on how to meet the intra-merger or
intra-acquisition HR challenges Taking such a strategic approach and
aligning the HRM activities with the M&A strategy with respect to resources,
processes and values is also a challenging task for the HR manager to
perform: The HR manager must develop a set of integrated HR activities
which are not only in line with the business strategy but with the M&A
strategy as well.

KNOWLEDGE MANAGEMENT AND IHRM

Knowledge management is the deliberate and systematic coordination of an
organizations people, technology, processes, and organizational structure in
order to add value through reuse and innovation. This is achieved through
the promotion of creating, sharing, and applying knowledge as well as
through the feeding of valuable lessons learned and best practices into
corporate memory in order to foster continued organizational learning.
Knowledge management develops systems and processes to acquire and
share intellectual assets. It increases the generation of useful, actionable,
and meaningful information, and seeks to increase both individual and
team learning. In addition, it can maximize the value of an organizations
intellectual base across diverse functions and different locations. Knowledge
management maintains that successful businesses a are collection not of
products but of distinctive knowledge bases. This intellectual capital is the
key that will give the company a competitive advantage with its targeted
customers. Knowledge management seeks to accumulate intellectual capital
that will create unique core competencies and lead to superior results.
Knowledge management efforts have been largely concerned with capturing,
codifying, and sharing the knowledge held by people in organizations. The
basic aim of knowledge management is to leverage knowledge to the
organizations advantage. Some typical knowledge management objectives
would be to:
 Facilitate a smooth transition from those retiring to their successors
who are recruited to fill their positions.
 Minimize loss of corporate memory due to attrition and retirement.
 Identify critical resources and critical areas of knowledge so that the
corporation knows what it knows and does well and why.
International assignments are seen as an effective way of accomplishing
multiple objectives. One could argue that there are elements of knowledge
transfer in all the roles identified. However, clear empirical evidence as to
the effectiveness of expatriates in conducting their numerous roles is
limited. Factors that may influence effectiveness include:
 The creation of an environment of openness and support for cross-
fertilization of ideas and implementation of 'best practice'.

 The need for knowledge and information to travel, that is, between the
expatriate and the host location, and back to the expatriate's home
location, if the multinational is to benefit from international
assignments as a mechanism for knowledge transfer.
  Despite the recognition of the importance of personal networks in
knowledge and information transfer, staffing decisions are often made
without regard to their effect on network relationships. In many cases
there is no strategic approach applied to control for potentially
negative effects.

 There is a link between the duration of the assignment and the

effective transfer of knowledge. Some knowledge may be transferred
quickly while other skills and knowledge (particularly where a high
level of tacitness is present) may take longer.

 Much of what is transferred depends on the expatriate concerned in

terms of ability to teach others and motivation to act as an agent of
knowledge transfer.

Knowledge management is broader and includes leveraging the value of the

organizational knowledge and know-how that accumulates over time. This
approach is a much more holistic and user-centred approach that begins
not with an audit of existing documents but with a needs analysis to better
understand how improved knowledge sharing may benefit specific
individuals, groups, and the organization as a whole.