Module One

International Human Resource Management

Compiled By
Josephine Pepra-Mensah, PhD
 Introduction
Over the last fifty to 100 years, the economies of the world have become increasingly
integrated. This has been driven by many forces and led by what is now referred to as the
Multinational Enterprise (MNE). As enterprises have increased their global activity, all of
their business functions have required adaptation, including human resource management.
HRM has become one of the most important business functions, today, particularly in terms of
a global enterprise’s ability to build sustainable competitive advantage in the global economy.

The pace of globalization is continuing to increase. Markets for most goods and services are
global, investment across borders continues to increase, the number and value of cross-border
mergers and acquisitions, international joint ventures, and alliances continues to increase, and
the amount of money and number of people (legal and illegal) that cross borders are on the rise.
Thousands of firms and millions of people work outside their countries of origin and millions
of people work at home for foreign-owned companies. Competition almost everywhere is
global in scope, meaning almost all enterprises face real or potential competition from foreign
products or services or from foreign-owned subsidiaries and domestic firms that are now
foreign-owned. In addition, inputs to business activity (including financial capital, materiel,
ideas, technology, parts, insurance, legal services, office equipment and, of course, employees)
are available everywhere at world-class quality, price, and speed, creating global standards and
competition in virtually every industry and sector.
What this means is that there is no way for anyone or any business to escape from constant
global pressure. It affects everyone and all aspects of every organization.
Hence, the conduct of business has become a truly global activity. And so has HRM. So, the
questions to be answered are:
ü How is this pervasive globalization affecting HRM?
ü How is today’s HRM carrying out its new obligations?
ü How is it changing to meet the demands of this newly interconnected world?
The course thus, is focused on/is about the nature of HRM in the multinational enterprise.

Internationalization of Business
Enterprises, large and small, from all countries (developed and developing) are already or are
in the process of going global. The names of the largest businesses from the wealthiest
countries are well known. However, large firms from developing countries and small to

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medium-sized enterprises (SMEs) from both developed and developing countries may not be
as well known, but their presence is also being felt ever more strongly throughout the world.
We have lots of ‘stories’ about organizations (large, medium, small) that have gone
‘international’; and there are classic examples of what has happened - and is continuing to
happen - to small and medium-sized firms everywhere.

Globalization
‘The process by which businesses or other organizations develop international influence or
start operating on an international scale’.
‘. . the inexorable integration of markets, nation-states, and technologies to a degree never
witnessed before—in a way that is enabling individuals, corporations, and nation-states to
reach around the world farther, faster, deeper, and cheaper than ever before’ (Thomas
Friedman, New York Times). In other words, globalization is the ever-increasing interaction,
interconnectedness, and integration of people, companies, and countries. Globalization is
creating the political, economic, and social structure of the new world. There are some people
who don’t like the consequences of globalization; but the reality is that the expanding
connections between people, companies, countries, and cultures are real, powerful, and
increasing in importance. International business continues to grow in terms of enterprises
conducting business across borders, foreign direct investment (FDI), and the value of trade
between countries.

Drivers Of Globalization
What is driving this interest in and need to globalize? There are many pressures, including the
following:

i. Increased travel. International travel has become much easier, quicker, and cheaper.
Hundreds of millions of people travel across national borders every year, for business
and pleasure. They see how people in other countries live and they experience goods
and services that are available in other countries. They then take back home either some
of those products or, at least, new expectations for what is possible. Many either decide
to trade in these products or recognize new opportunities to sell their own products or
services in the countries they visited.
ii. Rapid and extensive global communication. Global communication has also become
much easier, quicker, more varied, and cheaper. Global television, music, movies,

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 telecommunication, the internet, the worldwide web, and print media all spread
information about how people around the world live and their standards of living, about
what they think and want, which also helps to create expectations for an ever-increasing
quality of life.
iii. Rapid development and transfer of new technology. New technologies are developed
around the world and because of modern transportation, education, and communication,
are made available everywhere. In addition, new technologies make it possible to
manufacture products and deliver services with world-class quality and prices
everywhere in the world. And modern education and information technology make it
possible for just about every country to play a part in the global economy.
iv. Free trade. Trade between countries and within regions of the world is constantly
increasing, as trade agreements (on a global basis, through the World Trade
Organization, and regionally, through trade treaties, such as the EU, the North
American Free Trade Agreement, and the Association of South East Asian Nations)
decrease trade barriers and open markets. Often, local and national governments go
even further, supporting and encouraging growing trade and foreign investment with
tax incentives and free trade zones.
v. Education. Improving education around the world is enabling firms everywhere to
produce world-class products and services and raises expectations for those products
and services. This also makes it possible for firms to produce and offer their products
and services everywhere, using local talent. Global communications and travel also
facilitate the sharing of knowledge and information, so that no country or set of
countries any longer has advantages based on better educational systems.
vi. Migration of large numbers of people. Not only do millions of people move to other
countries to work (either because their employers ask them to relocate, usually for a
limited time, or they are recruited to fill jobs for which there are not enough local
workers), but many millions more emigrate, legally and illegally, to other countries
seeking work or are relocated because of natural disasters or political conflicts.
vii. Knowledge sharing. The impact of global enterprises, as they “export” their
management philosophies and techniques, as well as their technologies, products, and
services, around the world.
viii. Pressure on costs. Because of local and global competition, firms are always
seeking lower costs, in order to compete with local and global firms that have access to
lower-cost materials and lower-cost inputs such as land, utilities, and labor. In addition

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 to other reactions, this has led to outsourcing and offshoring of business activities and
processes.
ix. Search for new markets. The mature markets and limited opportunities for growth in
developed countries push many firms to seek markets in other countries in order to
grow revenue and market share.
x. Homogenization of cultures. The integration of cultures and values through the impact
of global communication and the internet and the spread of products and services such
as music, food, television, movies, and clothing, have led to common consumer
demands around the world.
xi. E-commerce. The worldwide web, credit cards, and global transportation and logistics
services, have made it possible for large and small firms to conduct business over the
internet. If a business has a web site, its business is global, such that anyone—from
anywhere in the world - who has access to the web can access that web site.

Together these pressures have created a new set of global realities for large and small
enterprises - publicly traded, privately held, family-owned, and government-owned. These new
global realities impact every aspect of enterprises, including - if not especially - their HRM
functions. When businesses internationalize, HRM responsibilities, such as talent management,
executive and leadership development, performance management (PM), compensation, and
labor relations, take on global characteristics, requiring globally savvy HRM professionals to
facilitate international business (IB) success.

In summary, the point being made here is that the globalization of business is proceeding at an
unexpected and unprecedented rate. The opening of markets and the appearance of competitive
foreign firms places pressure on virtually every major industry in virtually every country. These
developments impact human resource management on a number of fronts. The increased
intensity of competition places great pressure on firms to develop the capacity to operate at
lower costs and with greater speed, quality, customer service, and innovation, both at home
and abroad. It is in the light of these that the HR ‘function’ is called upon to recruit, select,
develop, and retain the work force talent that can achieve this global competitiveness, often
in dozens of countries.

When management begins to develop and implement global strategic plans, they also begin to
concern themselves with global HR issues. Indeed, the HR issues are among the most critical

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issues for successfully competing in the global marketplace. Because of that, HR—in this ideal
world—will be involved in the international strategic decision making at every step. The new,
global, complex, and often chaotic world of the MNE requires a new strategic focus and new
capabilities from HR just as it does from other management functions.

International Orientation/Approaches to IHRM

One aspect of international strategy that has been relatively well studied involves the
international orientation of senior executives, usually referred to in terms proposed by
Perlmutter, such as ethnocentric, regiocentric, polycentric, and geocentric. The central
strategic issue in a firm’s orientation is the degree of domination of the MNE headquarters
over subsidiary management and HR practices. Thus, this headquarters orientation goes a
long way toward determining the level of autonomy that subsidiaries enjoy in their
management and HR practices.

Ethnocentrism
The initial orientation of most managers in MNE headquarters, especially those from a
relatively homogeneous national population and culture (or from a country with a strong
nationalist or patriotic culture), is one of ethnocentrism. In this orientation, managers are most
likely to use a home country standard as a reference in managing international activities. The
outlook is one of centralized decision making and high control over international operations
that are centered in the headquarters. Managers with such a mind-set are likely to follow an
international strategy of replicating home country systems, procedures, and structure abroad.
This mind-set is likely to make extensive use of expatriates from headquarters to establish and
manage the subsidiary operations.

Polycentrism or Regiocentrism
Over time and as a result of increased experience, managerial orientation tends to evolve or
develop into polycentrism or regiocentrism. Here, as international investment and involvement
increase, the host country culture and traditions assume increased salience. This may be
extended to include a number of similar countries in a region, with host country standards and
practices increasingly used as a reference point for managing company operations. The
strategies typically followed are likely to be multinational (or multidomestic) strategies that
emphasize decentralized and autonomous operations within wholly owned subsidiaries. Under

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this mind-set, HR managers in the foreign subsidiaries tend to be local and relatively
autonomous from headquarters influence and oversight.

Geocentrism
When a firm reaches the level of a global orientation, a geocentric mind-set will develop and
be adopted. Here the managerial outlook is one of creating a global network and a preference
for following a transnational strategy that is integrative and interdependent among various
elements of the global organization. Under the geocentric mind-set HR practices will include
extensive use of expatriates and inpatriates with a broad global sharing of HR practices and
adoption of the best practices, no matter their origins. It would be expected that HR policies
and practices would be as centralized or decentralized as the overall strategic mind-set of the
enterprise.

The Relationship between International Orientation and IHR Practices

Indeed, in one study relating these concepts to IHR practices, it was found that IHR practices
do indeed correlate with these mind-sets. That is,
Ð In firms with an ethnocentric orientation, HR practices for international operations tend
to copy parent company practices and are very centralized.
Ð In firms with a polycentric mind-set, HR practices tend to be decentralized and local
subsidiaries tend to be much more likely to be left alone, managed by a local HR
manager who will follow local HR practices.
Ð In firms with a geocentric orientation, HR practices tend to be more eclectic (deriving
ideas, style, or taste from a broad and diverse range of sources), borrowing best
practices from around the world, rather than giving preference necessarily to either
headquarters or local practices.

Definining the General Field of HRM

The success of any organization depends on the human resources and how they are treated in
the organization. Many companies have proved that their success is achieved through the
employees the organization possesses. Today people in an organization are considered as an
asset than a liability. This demands proper understanding of people in an organization which is
an important aspect of human resource management. By having the right mix of people in the
organization, some organizations achieve the desired goals and success in spite of many
obstacles. Human resource management refers to the process of evaluating human resource

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needs, finding people to fill those needs and getting the best from each employee by providing
the right incentives and job environment, all with the goal of meeting the objectives of the
organisation’. In other words, HRM is about getting the BEST out of the investment made
in the human being.
It is managing people within the employer – employee relationship. It involves the productive
use of people in achieving the organisation’s strategic business objectives and the satisfaction
of individual needs. HR Managers plan, administer and review activities concerned with staff
selection, training and development, conditions of employment and other human resource
issues within organisations.

Typically, HRM refers to those activities undertaken by an organization to effectively utilize

its human resources. These activities would include at least 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.
The question is of course which activities change when HRM goes international? A model
developed by Morgan is helpful in terms of answering this question. He presents IHRM on
three dimensions:
a) 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.)
b) The national or country categories involved in international HRM activities:
i. the host-country where a s ubsidiary may be located;
ii. the parent-country where the firm is headquartered; and
iii. ‘other’ countries that may be the source of labor, finance and other inputs.
c) The three categories of employees of an international firm:
i. Parent-Country nationals (PCNs) - Employees from the parent headquarters
assigned to the subsidiary, usually in the upper management positions.
ii. Host-Country nationals (HCNs) - Employees directly recruited and employed
by the MNE and are nationals of the host country. Generally these employees
are employed at lower levels but gradually these employees are given
responsibilities at senior management levels.

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 iii. Third-Country nationals (TCNs) - Employees who are nationals of neither the
parent country nor the host country.
Thus, for example, the US multinational IBM employs British citizens in its British operations
(HCNs), often sends US citizens (PCNs) to Asia-Pacific countries on assignment, and may
send some of its Singaporean employees on an assignment to its Chinese operations (as TCNs).
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.

Morgan defines international HRM as the interplay among the three dimensions of human
resource activities, type of employees and countries of operation. It can be seen that in broad
terms IHRM involves the same activities as domestic HRM (e.g. procurement refers to HR
planning and staffing). International human resource management is concerned with the human
resource problems of multi-national firms in foreign subsidiaries with the unfolding of HR
issues that are associated with the various stages of the internationalization process (Boxall,
1995). However, domestic HRM is involved with employees within only one national
boundary. Increasingly, domestic HRM is taking on some of the flavor of IHRM as it deals
more and more with a multicultural workforce. Thus, some of the current focus of domestic
HRM on issues of managing workforce diversity may prove to be beneficial to the practice of
IHRM. However, it must be remembered that the way in which diversity is managed within a
single national, legal and cultural context may not necessarily transfer to a multinational
context without some modification.

Broadly defined, the field of IHRM is the study and application of all human resource
management activities as they impact the process of managing human resources in enterprises
in the global environment. HRM in the MNE is playing an increasingly significant role in
providing solutions to business problems at the global level. Consequently there is a need to
re-examine how HR policies can best support the rapid advance of globalization. The
challenges facing HRM in the MNE, as the function strives to become the crusader of
globalization, include the following:
i. Developing a global mind-set inside the HR function, particularly awareness and
understanding of the new global competitive environment and the impact it has on the
management of people worldwide. The global HR challenge consists of how to
effectively attract, engage, and retain the thousands of MNE employees in many

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 different countries to achieve strategic objectives. This not only includes engaging
employees in different countries of the MNE but also the role and importance of
globally mobile employees such as expatriates, inpatriates, and short-term international
assignees.
ii. Aligning core HR processes and activities with the new requirements of competing
globally, while simultaneously responding to local issues and requirements.
iii. Enhancing global competencies and capabilities within the HR function.

Features of IHRM
ü IHRM involves employment of right people at right job at right time, irrespective of
geographic locations.
ü It requires the development of long-term HR plan to make sure of effective alignment
of HR strategies with corporate objectives.
ü It requires the development of a diversified range of skills for employees, especially for
those who need to work beyond national boundaries.
ü It necessitates the determination of compensation for parent, host & third country
nationals on the basis of country specific factors.
ü It creates the centralized reporting relationships around the world for faster information
system.

Issues in GHRM
ü The variety international models that exists.
ü The extent to which HR policies & practices should vary in different countries [Issues
of Convergence (union) and Divergence (departure)]
ü Managing people in different countries and environments.
ü The approaches used to select, deploy, development and reward expatriate who could
be nationals of parent country or third country.
ü Repatriation and its process
ü Varieties of Government policies + active politics in Host and Third countries.

Challenges in IHRM
There are a number of unique problems that global companies face while trying to implement
consistent practices across their global HR networks. These problems act as barriers to effective
International Human Resource Management. They include:

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 i. Variation in-country environment. PESTEL (Political, Economic, Social,
Technological, Environmental and Legal) factors of countries varies. An HR practice
which works in one country might not work in the same manner in another country.
Fluctuations in currency, government policies and regulations, compensation
expectations etc are just a few examples of the local variations global HR professional
faces.
ii. Perception of HR. The perceived value of HR is another global challenge in HRM. In
one country, HR in a company might be viewed as a true business partner, working
with high-level managers on critical assignments. In another country within the same
company, the same HR might just be viewed as a transactional personnel department
that handles administrative work.
iii. Attitudes and actions of headquarters towards HR. The perception sent from the
headquarters towards HR also helps determine how HR is viewed locally. The position
of the corporate chief HR officer also sends a strong signal to local units on the
importance of the HR function.
iv. Resistance to change. The rate of change is enormous in multinational companies.
Hence, a major challenge facing global HR practitioners is that different locations have
their own way of doing things and resisting change.
v. Balance. International companies must strive to achieve the appropriate balance
between global and local HR systems and practices. It is such firms that put into
application the best practices and create a benchmark for others to follow.

Some of the best practices are:

i. Establishing common systems in all locations, including accounting, distribution,
marketing and management information systems.
ii. Creating an organizational mission based on inputs from individuals or teams in all
locations.
iii. Providing management education in all location about how the company wants to
conduct business.
iv. Creating a written manual about how parent organizations will institute and manage
unique corporate identity.
v. Communicating to all locations that the parent organization is attempting to create
common corporate culture with a shared mission, values, goals and more.

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Forms Of International Human Resource Management
Internationalization of HRM can take many forms. For practical purposes, HR managers in
most types of firms will confront at least some aspects of internationalization. That is to say,
the globalization and technology factors that have led to there being “no place to hide” for
business, in general, have also led to there being no place to hide for the HR professional. HR
practitioners can find themselves involved in - and therefore must understand and become
skilled at dealing with - IHRM issues in almost every job situation. The following provides a
short summary of the most significant of these situations.

Headquarters of Multinationals
This situation involves working as an HR professional in the central or regional headquarters
of the traditional MNE. This is the situation that receives almost all of the attention in literature
about the internationalization of business and is, by far, the best-known for HR managers. The
focus is from the center out to the subsidiaries and alliances, dictating and overseeing HR
practice in all foreign operations and administering the movement of employees between
locations. In the past, this primarily involved the relocation of expatriates from headquarters
to foreign subsidiaries and back. But now it also involves the movement of international
assignees across all borders and the development of HR policy and practices throughout the
firm’s global operations. Increasingly, this can also mean for HR professionals, themselves,
working as expatriate HR managers in foreign subsidiaries or alliances.

This situation involves, for example, an HR manager working in her or his home country in the
MNE headquarters for a firm like Nokia (Finland), Nestlé (Switzerland), Samsung (South
Korea), or Citibank (US), all firms that have extensive foreign business operations. Typical
headquarters IHRM responsibilities might include helping to select and prepare employees for
international assignments, determining and administering compensation packages for these
international assignees, developing safety programs for business travellers and international
assignees, and establishing HRM policies and practices for the firm’s foreign subsidiaries.
Typically, the headquarters either applies its parent country HRM practices directly to its
foreign subsidiaries, or it tries to merge its personnel practices with those that are common in
the host countries.

In terms of HR management in the foreign subsidiaries of MNEs, as a matter of practice and

probably necessity, local HR managers are almost always host country nationals (HCNs). That

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is, these positions do not tend to be filled with HR managers from the parent firm. The use of
local HR managers as part of the subsidiary management team makes sense because the host
country work force is normally hired locally and work rules and practices must fit local laws
and customs. Host country nationals are more likely than expatriate HR managers to be
effective in the subsidiary HR position, even though HR policy is often “dictated” from the
parent company headquarters. This centralization of HR policy can create problems with
interface for host country (subsidiary) managers - including local HR managers - who will
differ in their orientations from the parent country (headquarters) HR managers. As a matter of
management development, however, in large firms, even HR managers may be rotated through
foreign assignments.

Home Country Subsidiaries Of Foreign-Owned Enterprises

The second possibility for IHR involves the HR manager who works in his or her home country
but works in a subsidiary of a foreign MNE. This often involves working for a home country
firm that has been acquired by a foreign firm, although it may also involve working in a
subsidiary established by a foreign firm. Now the HR manager may be on the receiving end of
policy and practice as sent out from the (now) foreign headquarters (particularly when the
foreign firm practices a centralized approach to its HR and management practices, applying its
parent country policies and practices). This will involve working with the foreign headquarters
(and, often, expatriate managers sent from the foreign enterprise) and typically will involve
having to integrate a foreign philosophy and organizational culture into the local operations.

This particular perspective has received little research attention, but is by no means uncommon.
This situation would involve, for example, host country HR managers working in the local
subsidiaries of MNEs that have set up operations in places like Central Europe (pharmaceutical
companies, tobacco companies, telecommunications firms), India (software developers, call
centers), China (manufacturing facilities, services), Africa (energy companies), and Latin
America (commodity and natural resource firms), or even, maybe especially, HR managers
working in the local subsidiaries of the large multinationals in Asia, the US, and Europe, such
as Siemens, Toyota, and IBM. The different communication styles, worker motivation
philosophies, and organizational structures and frequent lack of understanding of the host
country cultures, markets, employment laws and practices, even language itself, by the parent
company can cause major problems for the local HR manager, and thus force that host country
HR manager to confront aspects of internationalization that are just as difficult as those

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confronted by the home country HR manager working at headquarters and dealing with the
“export” of policy and practice.

Domestic Firms
The situation of firm such as a hospital, farm, dry cleaner, ski resort, road or building
construction contractor, or restaurant (or the purely domestic operations of an MNE, such as a
local fast food franchise or a local petrol station). In many countries (particularly true in many
locales in the US and Europe), these types of firms also confront many of the complexities of
international business, particularly as they relate to IHRM. These complexities include: (1) the
hiring of employees who come from another country, culture, and language (recent
immigrants) or their families (who may have been born in the new country, and may be,
therefore, now citizens, but who may still be more familiar with the language and culture with
which they grow up at home than with that of their new country); as well as (2) having to deal
with competition from foreign firms for customers and suppliers, or for capital which may well
come from foreign-owned firms, or competition from these firms for resources, including
employees.

The hiring or recruiting of immigrants (or, even, the first generation since immigration) in local,
domestic firms can lead to many of the same internationalization concerns as those faced by
MNEs, such as how to merge the cultures, languages, and general work expectations of
employees from different countries, and how to respond to employees who bring to their new
work situations sometimes very different languages and very different attitudes toward
supervision and have very different expectations related to the practice of management. Even
in the domestic firm, HR managers must develop all the knowledge and experience necessary
to succeed in an internationalized environment.

Government Agencies and Non-Governmental Organizations

Even though most of the discussions here centres on IHRM in a business context, many other
types of organizations are also global in scope and are concerned about many of the same
international issues. For example, government agencies such as the Foreign Ministries of
countries and their embassies and the hundreds of non-governmental organizations (NGOs)
that send representatives to other countries such as many organized religions, humanitarian
organizations (international relief agencies, World Vision, Red Cross, Habitat for Humanity

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etc) all send hundreds of people from their parent headquarters to their overseas operations and
often also employ many local and third country people to staff their activities around the globe.

In addition, there are an increasing number of agencies that are global by purpose and function,
such as the United Nations and all of its agencies, the World Bank, the World Trade
Organization (WTO), the Organization for Economic Cooperation and Development (OECD),
the Association of South East Asian Nations (ASEAN), and the EU with its large concentration
of employees in Brussels, Strasbourg, and Luxembourg). Many IHR activities for these
organizations are similar to those faced by their commercial counterparts. Indeed, many of
them have experience with international operations over a longer period of time than is true for
most firms and have accumulated much significant expertise on how to best handle global HR
problems. Problems associated with recruiting, compensating, and managing employees in
multiple countries are not much different for the International Red Cross or the World Health
Organization than they are for IBM. HR managers in these types of organizations must also be
globally savvy in order to effectively carry out their responsibilities and they often have much
that they can teach their private sector counterparts.

The Development Of International Human Resource Management

HR managers, no matter the type of organization for which they work, can and do confront
aspects of IHR. The extent of this involvement will vary according to a number of factors, such
as the degree of development of the global strategy of the enterprise, and will invariably
increase with time. But as the general internationalization of business increases in extent and
intensity, HR managers are being called upon to contribute increasing expertise to that
internationalization. Some of the HR-related questions that need to be answered within the
MNE as it establishes its international strategy include:
i. Country selection. Which countries make the most sense for locating international
operations, and where will the firm be most likely able to recruit and hire the kinds of
employees it will need at a competitive wage?
ii. Global staffing. How many employees will need to be relocated to foreign locations to
start up the new operations and how many will be needed to run them (and does the
firm have those people or know how to find or train them—or will the necessary people
be found locally in the host countries)?
iii. Recruitment and selection. What will be required to find and recruit the necessary talent
to make the new international operations successful?

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 iv. Compensation. How will the firm compensate its new global work force, both the
international assignees from the home office as well as the new local employees?
v. Standardization or adaptation. Will the firm want its HRM policies to be uniform across
all of its locations (standardization or global integration) or will they be tailored to each
location (adaptation or localization)?
Whether the local HR manager is from headquarters, from the host country, or from a third
country, he or she will be sandwiched between his or her own culture and legal traditions and
those of the firm, whether headquarters or local affiliate. HR managers at the local, regional,
and headquarters levels must integrate and coordinate activities taking place in diverse
environments with people of diverse backgrounds as well as with their own diverse
backgrounds. Plus they are frequently also looked to for expertise in helping other managers
be successful in their international endeavours, as well.

Differences Between International And Domestic Human Resource Management

It should be clear to the reader by now that international HRM differs from purely domestic
HRM in a number of ways. To operate in an international environment, a human resources
department must engage in a number of activities that would not be necessary in a domestic
environment. Examples of required international activities are (activities IHR are responsible
for):
i. More HR functions and activities. For example, the management of international
assignees which includes such things as foreign taxes (international taxation),
administrative services for expatriates (work visas, language translation services),
assistance with international relocations and host-government relations.
o Expatriates are subject to international taxation, and often have both domestic
(i.e. their home country) and host-country tax liabilities. Therefore, tax
equalization policies must be designed to ensure that there is no tax incentive or
disincentive associated with any particular international assignment. The
administration of tax equalization policies is complicated by the wide variations
in tax laws across host countries and by the possible time lag between the
completion of an expatriate assignment and the settlement of domestic and
international tax liabilities. In recognition of these difficulties, many MNEs
retain the services of a major accounting firm for international taxation advice.
o International relocation and orientation involves the following activities:
ü arranging for pre-departure training;

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 ü providing immigration and travel details;
ü providing housing, shopping, medical care, recreation and schooling
information;
ü finalizing compensation details such as delivery of salary overseas,
determination of various overseas allowances and taxation treatment.
Many of these factors may be a source of anxiety for the expatriate and require
considerable time and attention to successfully resolve potential problems –
certainly much more time than would be involved in a domestic
transfer/relocation such as Accra to Kumasi/Tamale, London to Glasgow,
Frankfurt to Munich, New York to Dallas, Sydney to Melbourne, or Beijing to
Shanghai.
o Administrative Services. An MNE also needs to provide administrative services
for expatriates in the host countries in which it operates. Providing these
services can often be a time-consuming and complex activity because policies
and procedures are not always clear-cut and may conflict with local conditions.
Ethical questions can arise when a practice that is legal and accepted in the host
country may be at best unethical and at worst illegal in the home country. For
example, a situation may arise in which a host country requires an AIDS test for
a work permit for an employee whose parent firm is headquartered in the USA,
where employment-related AIDS testing remains a controversial issue. How
does the corporate HR manager deal with the potential expatriate employee who
refuses to meet this requirement for an AIDS test and the overseas affiliate
which needs the services of a specialist expatriate from headquarters? These
issues add to the complexity of providing administrative services to expatriates.
o Host-government relations represent an important activity for the HR
department in an MNE, particularly in developing countries where work permits
and other important certificates are often more easily obtained when a personal
relationship exists between the relevant government officials and multinational
managers. Maintaining such relationships helps resolve potential problems that
can be caused by ambiguous eligibility and/or compliance criteria for
documentation such as work permits. US-based multinationals, however, must
be careful in how they deal with relevant government officials, as payment or
payment-in-kind, such as dinners and gifts, may violate the US Foreign Corrupt
Practices Act (FCPA).

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 o Provision of language translation services for internal and external
correspondence is an additional international activity for the HR department.
Morgan notes that if the HR department is the major user of language translation
services, the role of this translation group is often expanded to provide
translation services to all foreign operation departments within the MNE.
ii. A broader expertise and perspective, including knowledge about foreign countries, their
employment laws and practices, and cultural differences. Human resource managers
working in a domestic environment generally administer programs for a single national
group of employees who are covered by a uniform compensation policy and taxed by
one national government. Because HR managers working in an international
environment face the problem of designing and administering programs for more than
one national group of employees (e.g. PCN, HCN and TCN employees who may work
together in Zurich at the European regional headquarters of a US-based multinational),
they need to take a broader view of issues. For example, a broader, more international
perspective on expatriate benefits would endorse the view that all expatriate employees,
regardless of nationality should receive a foreign service or expatriate premium when
working in a foreign location. Yet some MNEs that routinely pay such premiums to
their PCN employees on overseas assignment (even if the assignments are to desirable
locations) are reluctant to pay premiums to foreign nationals assigned to the home
country of the firm. Such a policy confirms the traditional perception of many HCN
and TCN employees that PCN employees (particularly US and European PCNs) are
given preferential treatment. Complex equity issues arise when employees of various
nationalities work together, and the resolution of these issues remains one of the major
challenges in the IHRM field.
iii. More involvement in people’s lives, as the firm relocates employees and their families
from country to country. A greater degree of involvement in employees’ personal lives
is necessary for the selection, training and effective management of both PCN and TCN
employees. The HR department or HR professional needs to ensure that the expatriate
employee understands housing arrangements, health care, and all aspects of the
compensation package provided for the assignment (cost-of-living allowances,
premiums, taxes and so on). Many MNEs have an ‘International HR Services’ section
that coordinates administration of the above programs and provides services for PCNs
and TCNs, such as handling their banking, investments, home rental while on
assignment, coordinating home visits and final repatriation. In the domestic setting, the

18
 HR department’s involvement with an employee’s family is relatively limited and may
not extend beyond providing employee benefits such as health insurance coverage for
eligible family members and some assistance in relocating the employee and family
members. In the international setting, however, the HR department must be much more
involved in order to provide the level of support required and will need to know more
about the employee’s personal life. For example, some national governments require
the presentation of a marriage certificate before granting a visa for an accompanying
spouse. Thus, marital status could become an aspect of the selection process, regardless
of the best intentions of the MNE to avoid using a potentially discriminatory selection
criterion. In such a situation, the HR department should advise all candidates being
considered for the position of the host country’s visa requirements with regard to
marital status and allow candidates to decide whether they wish to remain in the
selection process. The HR department may also need to assist children placed at
boarding schools in the home country. In more remote or less hospitable assignment
locations, the HR department may be required to develop, and even run, recreational
programs. For a domestic assignment, most of these matters either would not arise or
would be seen as the responsibility of the employee rather than the HR department. In
a sense the ‘psychological contract’ is now between the MNE and the entire immediate
family of the international assignee.
iv. Dealing with and managing a much wider mix of employees, adding considerable
complexity to the IHR management task - with each of the various types of global
employees requiring different staffing, compensation, and benefits programs.
v. More external factors and influences, such as dealing with issues stemming from
multiple governments, cultures, currencies and languages. The major external factors
that influence IHRM are the type of government, the state of the economy and the
generally accepted practices of doing business in each of the various host countries in
which MNEs operate. A host government can, for example, dictate hiring procedures-
host-government may introduce a requirement that foreign firms comply with an
extensive set of affirmative action rules designed to provide additional employment
opportunities for an indigenous ‘group’. In developed countries, labour is more
expensive and better organized than in less-developed countries and governments
require compliance with guidelines on issues such as labour relations, taxation and
health and safety. These factors shape the activities of the subsidiary HR manager to a
considerable extent. In less-developed countries, labour tends to be cheaper, less

19
 organized and government regulation is less pervasive, so these factors take less time.
The subsidiary HR manager must spend more time, however, learning and interpreting
the local ways of doing business and the general code of conduct regarding activities
such as gift giving and employment of family members.
vi. Risk exposure. Frequently the human and financial consequences of failure in the
international arena are more severe than in domestic business. For example, expatriate
failure (the premature return of an expatriate from an international assignment) and
under-performance while on international assignment is a potentially high-cost problem
for MNEs. The direct costs of failure (salary, training costs, travel costs and relocation
expenses) to the parent firm may be as high as three times the domestic salary plus
relocation expenses, depending on currency exchange rates and location of
assignments. Indirect costs such as loss of foreign market share and damage to key host-
country relationships may be considerable. Another aspect of risk exposure that is
relevant to IHRM is terrorism, particularly since the World Trade Center attack in New
York in 2001. Most major MNEs must now consider political risk and terrorism when
planning international meetings and assignments and spending on protection against
terrorism is increasing. Terrorism has also clearly had an effect on the way in which
employees assess potential international assignment locations. The HR department may
also need to devise emergency evacuation procedures for highly volatile assignment
locations subject to political or terrorist violence, or major epidemic or pandemic crises
such as severe acute respiratory syndrome (SARS), avian influenza, and Covid-19.
In addition to these factors, the geographic dispersion, multiculturalism, different legal and
social system(s), and the cross-border movement of capital, goods, services and people that the
international firm faces adds a need for competency and sensitivity that is not found in the
domestic firm. The personal and professional attitudes and perspectives of the IHR manager
must be greatly expanded to handle the multiple countries and cultures confronted in the
international arena - both to manage their IHR responsibilities and to contribute to successful
international business strategies by their firms - beyond those which the domestic HR manager
must develop.

Model of Variables That Moderate Differences Between Domestic And International

HRM
As already argued, the complexity involved in operating in different countries and employing
different national categories of employees is a key variable that differentiates domestic and

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international HRM, rather than any major differences between the HRM activities performed.
Many firms from advanced economies with limited experience in international business
underestimate the complexities involved in successful international operations – particularly in
emerging economies. There is considerable evidence to suggest that business failures in the
international arena are often linked to poor management of human resources. In addition to
complexity, there are four other variables that moderate (that is, either diminish or accentuate)
differences between domestic and international HRM. These four additional moderators are:
a) The cultural environment.
b) The industry (or industries) with which the multinational is primarily involved.
c) The extent of reliance of the multinational on its home-country domestic market.
d) The attitudes of senior management.
e) ‘Together’ Complexity involved in operating in different countries and employing
different national categories of employees
These five variables constitute a model that explains the differences between domestic and
international HRM (Source: P. J. Dowling)

The Cultural Environment

The term, ‘Culture’, is usually used to describe a shaping process over time. This process
generates relative stability, reflecting a shared knowledge structure that attenuates (i.e. reduces)
variability in values, behavioural norms and patterns of behaviour. An important characteristic
of culture is that it is so subtle a process that one is not always conscious of its relationship to
values, attitudes and behaviours. One usually has to be confronted with a different culture in
order to fully appreciate this effect. Anyone traveling abroad, either as a tourist or on business,
experiences situations that demonstrate cultural differences in language, food, dress, hygiene
and attitude to time. While the traveller can perceive these differences as novel, even enjoyable,
for people required to live and work in a new country, such differences can prove difficult.
They may experience culture shock – a phenomenon experienced by people who move across
cultures. The new environment requires many adjustments in a relatively short period of time,
challenging people’s frames of reference to such an extent that their sense of self, especially in
terms of nationality, comes into question. People, in effect, experience a shock reaction to new
cultural experiences that cause psychological disorientation because they misunderstand or do
not recognize important cues. Culture shock can lead to negative feelings about the host country
and its people and a longing to return home. Because international business involves the

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interaction and movement of people across national boundaries, an appreciation of cultural
differences and when these differences are important is essential.

Cultural Awareness and the Role of the International HR Manager

It is generally recognized that culturally insensitive attitudes and behaviours stemming from
ignorance or from misguided beliefs (‘my way is best’, or ‘what works at home will work here’)
are not only inappropriate but can all-too-often contribute to international business failure.
Therefore, an awareness of cultural differences is essential for the HR manager at corporate
headquarters as well as in the host location. Activities such as hiring, promoting, rewarding
and dismissal will be determined by the legal context and practices of the host country and
usually are based on a value system relevant to that country’s culture. A firm may decide to
head up a new overseas operation with an expatriate general manager but appoint as the HR
department manager a local, a person who is familiar with the host country’s HR practices.
This particular policy approach can assist in avoiding problems but can still lead to dilemmas
for senior managers. For example, in a number of developing countries (Indonesia is one such
example) local managers are expected (i.e. there is a perceived obligation) to employ their
extended family if they are in a position to do so. This may lead to a situation where people are
hired who do not possess the required technical competence. While this could be seen as a
successful example of adapting to local expectations and customs, from a Western perspective
this practice would be seen as nepotism, a negative practice which is not in the best interests
of the enterprise because the best people have not been hired for the job.

Coping with cultural differences, and recognizing how and when these differences are relevant,
is a constant challenge for international firms. Helping to prepare assignees and their families
for working and living in a new cultural environment has become a key activity for HR
departments in those MNEs that appreciate (or have been forced, through experience, to
appreciate) the impact that the cultural environment can have on staff performance and well-
being.

Industry Type
Porter suggests that the industry (or industries if the firm is a conglomerate) in which a MNE
is involved is of considerable importance because patterns of international competition vary
widely from one industry to another. At one end of the continuum of international competition

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is the multidomestic industry, one in which competition in each country is essentially
independent of competition in other countries. Traditional examples include retailing,
distribution and insurance. At the other end of the continuum is the global industry, one in
which a firm’s competitive position in one country is significantly influenced by its position in
other countries. Examples include commercial aircraft, semiconductors and copiers. In a global
industry, a firm must in some way integrate its activities on a worldwide basis to capture the
linkages among countries. Thus, the role of the HRM function in multidomestic and global
industries will differ. Laurent noted that in order to build, maintain, and develop their corporate
identity, multinational organizations need to strive for consistency in their ways of managing
people on a worldwide basis. Yet, and in order to be effective locally, they also need to adapt
those ways to the specific cultural requirements of different societies. While the global nature
of the business may call for increased consistency, the variety of cultural environments may be
calling for differentiation. Laurent proposes that a truly international conception of human
resource management would require the following steps:
i. An explicit recognition by the parent organization that its own peculiar ways of
managing human resources reflect some assumptions and values of its home culture.
ii. An explicit recognition by the parent organization that its peculiar ways are neither
universally better nor worse than others but are different and likely to exhibit strengths
and weaknesses, particularly abroad.
iii. An explicit recognition by the parent organization that its foreign subsidiaries may have
other preferred ways of managing people that are neither intrinsically better nor worse,
but could possibly be more effective locally.
iv. A willingness from headquarters to not only acknowledge cultural differences, but also
to take active steps in order to make them discussable and therefore usable.
v. The building of a genuine belief by all parties involved that more creative and effective
ways of managing people could be developed as a result of cross-cultural learning.

Extent Of Reliance Of The Multinational On Its Home-Country Domestic Market

A pervasive but often ignored factor that influences the behaviour of MNEs and resultant HR
practices is the extent of reliance of the multinational on its home-country domestic market.
When for example, we look through lists of very large firms (such as those that appear in
Fortune and other business magazines), it is frequently assumed that a global market
perspective would be dominant in the firm’s culture and thinking. However, size is not the only
key variable when looking at a multinational – the extent of reliance of the multinational on its

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home-country domestic market is also very important. In fact, for many firms, a small home
market is one of the key drivers for seeking new international markets. A large domestic market
will also influence the attitudes of senior managers towards their international activities and
will generate a large number of managers with an experience base of predominantly or even
exclusively domestic market experience. Thus, multinationals from small advanced economies
like Switzerland (population 7.7 million), Ireland (6 million), Australia (22 million) and The
Netherlands (17 million) and medium-size advanced economies like Canada (33 million), the
United Kingdom (61 million) and France (65 million) are in a quite different position compared
to multinationals based in the USA which is the largest advanced economy in the world with a
population of 306 million.

Attitudes of Senior Management to International Operations

Laurent indicates that some of the changes required to truly internationalize the HR function
‘have more to do with states of mind and mindsets than with behaviours’. It is likely that if
senior management does not have a strong international orientation, the importance of
international operations may be underemphasized (or possibly even ignored) in terms of
corporate goals and objectives. In such situations, managers may tend to focus on domestic
issues and minimize differences between international and domestic environments. Not
surprisingly, senior managers with little international experience (and successful careers built
may assume that there is a great deal of transferability between domestic and international
HRM practices. This failure to recognize differences in managing human resources in foreign
environments – regardless of whether it is because of ethnocentrism, inadequate information,
or a lack of international perspective – frequently results in major difficulties in international
operations. The challenge for the corporate HR manager who wishes to contribute to the
internationalization of their firm is to work with top management in fostering the desired
‘global mindset’. This goal requires, of course, a HR manager who is able to think globally and
to formulate and implement HR policies that facilitate the development of globally oriented
staff.

International Human Resource Management and Culture/The Cultural Context of

IHRM
So far, it has been reasonably observed that international HRM differs from nationally oriented
HRM predominantly in the complexities that result from employees of various national origins

24
working in different countries. People who work in internationally operating companies and
customers, suppliers or representatives of government institutions in the host country often face
very different cultural and institutional environments due to various socialization experiences.
This section gives an overview of the nature of national and organization (and corporate)
culture and their impact on IHRM as well as provides guidance as to how IHRM can perform
the role within MNEs as the advisor and trainer on how to learn from cultural differences and
to use those differences in ways to help build global competitive advantage.

Introduction To Cross-Cultural Management Research

The first contributions to cross-cultural management research were made in the early 1960s.
Engagement in this subject area was prompted by 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. A central role in this
discussion is occupied by cross-cultural management studies by Hofstede and the Global
Leadership and Organizational behaviour (GLOBE) study. An overview of other studies will
also be provided.
The goals of cross-cultural management studies include:
a. Description of organizational behaviour within countries and cultures
b. Comparison of organizational behaviour between countries and cultures
c. 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. This perspective
rejects the approach of researchers who assume universal transferability of management
knowledge – i.e. a universalistic, culture-free approach to management. Cross-cultural studies
have often been the focus of substantial debate and criticism. Despite numerous critical
arguments, the knowledge gained from intercultural comparative research is a first step towards
understanding the complexity of international management and HRM.

Many of the most important and difficult challenges to the conduct of international human
resource management stem from the differences encountered in various countries’ and MNEs’
cultures. National and organizational cultures vary significantly from one country and firm to
another. Often these differences clash when firms conduct business in multiple countries and

25
with enterprises located in various countries. This can become a particularly salient challenge
when business people lack knowledge of or sensitivity to these differences, resulting in their
making mistakes in both their business and their personal interactions. Even when they know
the differences, they can mistakenly assume that their own country or company’s way of doing
things provides the best way to conduct business. Thus they can make decisions and behave in
ways that alienate their foreign counterparts, the people with whom they interact from other
countries or companies, such as foreign customers, suppliers, and employees, or they make
mistakes that lead to business and/or personal problems. Of course, a second—and maybe just
as important—consequence in today’s global economy is the likelihood that this attitude of
giving preference to one’s own country and company culture will result in the overlooking or
dismissing of better ways of doing things that can be found in other countries and their
enterprises. Knowledge about and competency in working with varying country and
organizational cultures is one of the most important issues impacting the success of
international business activity, in general, and of IHRM, in particular. The impact of
differences in national and organizational cultures lies at the center of every aspect of
international business and IHRM.

The Nature and Importance of Culture

Every country has at least some variances from all others, e.g., its history, government, and
laws. The more countries with which an MNE interacts (sells, sources, hires or transfers
employees, develops joint ventures and partnerships, etc.), the more complex and difficult
conducting business becomes. And, today, it is common for MNEs to interact with dozens of
other countries. So, one of the central causes of this complexity and high level of difficulty has
to do with the importance and critical nature of the differences between the national cultures
of all these various countries.
Variances in people’s values, beliefs, and behaviour patterns (for example, what they consider
to be right and wrong, normal and not-normal) are critically important to such international
business activities as cross-national negotiations, sales interactions between people from
different countries, management of the performance of employees from different countries, the
understanding and treatment of contracts between firms from different countries, and all HR
responsibilities, such as recruiting and hiring, compensation, training, labor relations, and
performance management.

26
Often, people - particularly those with limited international experience—operate with the
expectation that the business methods and models to which they are accustomed will work just
as well in other countries as they do at home. Yet, people and companies with long experience
in the global arena suggest that such positive overlap is rarely the case. A few years ago, the
World Economic Forum asked over 3,000 executives from around the globe to rate countries
on how well developed “intercultural understanding” was in those countries’ business
communities. As would be expected, some countries were perceived to have more highly
developed “cross-cultural competencies” than other countries. Presumably, therefore, people
from the countries with the highest degrees of intercultural understanding have an
advantage in their conduct of international business, while those with lower scores on their
intercultural understanding have much ground to make up to gain these advantages for
themselves.

A Definition And Description Of Culture

There have been many definitions of “culture’ offered over the years. For the purposes of this
text the following definition is used: Culture is the characteristic way of behaving and believing
that a group of people have developed over time and share. Culture is a shared system of
symbols, beliefs, attitudes, values, expectations, and norms for behaviour. In this discussion,
the ‘groups’ whose cultures will be discussed are the people from a particular country or region
and the members of a particular company. With this definition, then, a group’s culture:
ü Gives them a sense of who they are, of belonging, of how they should behave.
ü Provides them the capacity to adapt to circumstances (because the culture defines what
is the appropriate behaviour in that circumstance) and to transmit this knowledge to
succeeding generations (in the case of countries) or to new employees (in the case of
organizations).
ü Affects every aspect of the management process—how people think, solve problems,
and make decisions (for a country or firm).
As Schell and Solomon phrase it:
Learned and absorbed during the earliest stages of childhood, reinforced by literature, history,
and religion, embodied by . . . heroes, and expressed in . . . instinctive values and views, culture
is a powerful force that shapes our thoughts and perceptions. It affects the way we perceive
and judge events [and other people], how we respond to and interpret them, and how we
communicate to one another in both spoken and unspoken language. Culture, with all of its
implications [and forms], differs in every society. These differences might be profound or

27
subtle; they might be obvious or invisible. Ever present yet constantly changing, culture
permeates the world we know and molds the way we construct or define reality.

One’s cultural background influences the way we prioritize what is important in life, helps
define our attitude toward what is appropriate in a situation, and establishes rules of behavior.
Members of a given culture tend to have similar assumptions about how people should think,
behave, and communicate, and they all tend to act on those assumptions in much the same
way. Cultures can differ widely and vary in their rate of change, degree of complexity, and
tolerance toward outsiders. These differences affect the level of trust and openness that can be
achieved when communicating with people of other cultures. People learn culture directly and
indirectly from other members of their group. As you grow up in a culture, you are taught by
the group’s members who you are and how best to function in that culture. Sometimes you are
explicitly told which behaviors are acceptable; at other times you learn by observing which
values work best in a particular group. In these ways, culture is passed on from person to
person and from generation to generation. These issues can complicate communication with
other cultures.

Thus, When a firm enters a new country and performs activities such as hiring, using only its
home country practices can cause significant alienation and lack of trust, which can have
further ramifications, for example, in making it difficult to attain a quality work force.

Understanding Culture As Layers Of Meaning

One of the complexities that makes “culture” so difficult to deal with is its multiple layers of
meaning. There are many readily observable things about the culture of a country, a region, or
a firm that differ quite obviously from those of other countries, regions, and firms. These
characteristics, including such things as food, art, clothing, greetings, and historical landmarks,
are clearly visible. Sometimes these are referred to as artifacts, or manifestations, of
underlying values and assumptions. The underlying values and assumptions are much less
obvious. One way to understand this concept is using the ‘Onion’ model - which represents
culture as a series of concentric circles, or multiple layers. The layers of culture, or ‘onion’,
model provides a way to understand culture as a series of layers, with each layer, moving from
the outside to the inside, representing less and less visible, or less explicit, values and
assumptions, but correspondingly more and more important values and beliefs for determining
attitudes and behaviours. These layers include:

28
 ü Surface or explicit culture (the outside layer): things that are readily observable, such
as dress, food, architecture, customs, body language, gestures, etiquette, greetings, gift
giving.
ü Hidden culture (the middle layer): values, religions, and philosophies about things like
child rearing, views of what is right and wrong.
ü Invisible or implicit culture (the core): the culture’s universal truths.

As people develop an ability to work successfully with differing cultures, they typically go
through a process that helps in the development of cross-cultural competence - Awareness,
Respect, Reconciliation. This approach to building knowledge about another person or group’s
behaviour and values and eventually adapting to or being able to integrate with that other
person’s or group’s behaviours and attitudes assumes that a person must first understand her
or his own cultural values and beliefs before she or he can develop an appreciation and respect
for cultural differences, which precedes the eventual movement toward reconciliation and
integration with differing national and organizational cultures.

All three stages are challenging. All three stages require progressing from basic education and
training about one’s own and others’ cultures through gaining experience with other cultures
to reflecting on and then developing an openness about and finally a willingness to seek
feedback about one’s own values and behaviours in relation to the foreign culture(s).
Ultimately, as was found in an extensive study of the development of global executives, people
learn best to deal with the complexities of culture by living in a different culture.

Development of Cross cultural competence

a. Awareness. Increased awareness of one’s own cultural perspective
b. Respect. Appreciate cultural differences
c. Reconciliation. Resolve differences; Integration; Adaptation

Increasing transcultural competence

a. Education
b. Experience
c. Reflection
d. Openness
e. Feedback

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Development of cross-cultural competence. Source Briscoe, D. R., developed for this book

National And Regional Cultures

An increasing number of researchers are assessing whether or not the wide variety of cultures
around the world can be reduced to a more limited set of cultures with similar characteristics.
If so, it would greatly reduce the number of problems associated with determining management
and HR practices in various countries.

Schein’s Concept Of Culture

Schein’s concept of culture was developed in the course of organizational and not national
culture research. However, it can be applied to the analysis of national cultures, given
awareness that these two constructs are not exact equivalents. The important contribution of
this concept is that Schein considers various levels of culture: artefacts or creations, values
and underlying assumptions.
Ð Artefacts are described as visible organization structures and processes. They can be
analyzed using conventional methods of empirical social research, but their meaning is
often hard to decipher.
Ð values of a company or society. They are found in the intermediate level of
consciousness; in other words, they are partly conscious and partly unconscious. The
Ð third level is described as underlying assumptions, which are often presumed to be self-
evident. They include convictions, perceptions, thoughts and feelings, which are
usually invisible and unconscious. Nevertheless, they are the sources of values and the
actions based on them. Schein emphasizes that relationships that lead from artefacts
through values to underlying assumptions are much weaker than those leading in the
contrary direction, because the influence of underlying assumptions on values and
artefacts is stronger than vice versa.

Cross-Cultural Management Studies

Cross-cultural management studies aim to describe and compare the working behaviour in
various cultures. Suggestions on improving interaction between members of various cultures
can be drawn from these analyses. This section will describe important results of cross-cultural
management studies. The overview starts with the historically significant study by Hofstede.
The GLOBE study and results of the studies by Trompenaars and Hampden-Turner as well as
work by Hall and Hall are also presented and discussed.

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The Research Of Geert Hofstede
The research of Dr. Geert Hofstede occupies a special place in the field of cross-cultural
comparative research because it was the first major study in this field. In his original study,
Hofstede identified four cultural dimensions based on preliminary theoretical considerations
and statistical analyses, which can be used to describe cultural differences between countries.
Four underlying dimensions of country cultures were identified from the values obtained within
the scope of the study. In particular, this study focused on identifying country differences and
regional similarities on the basis of a series of work-related factors. Hofstede named them
power distance, uncertainty avoidance, femininity vs. masculinity, and individualism vs.
collectivism. A later study involving participants from the Asian Pacific region included a fifth
dimension, Confucianism or long-term orientation.
The following provides a short summary of the factors identified in this research:
i. Degree of acceptance of power distance between bosses and subordinates. The
power distance dimension represents the scale on which the members of a culture
accept that power is not distributed equally in institutions. It expresses the emotional
distance between employees and superiors. Power inequality exists in many
cultures, but may be more or less pronounced from culture to culture. Societies
marked by high power distance, and high power inequality, accept hierarchical
organization structure, in which every individual can occupy their place without
any need for justification. Cultures with low power distance aspire to equal power
distribution and demand explanations for any instance of formalized power
inequality. The important difference between societies that differ with respect to the
Power Distance Index is in how power inequality is dealt with. Naturally, this
implies consequences for the structure of organizations.
ii. Degree of individualism or collectivism. The cultural dimension of individualism
vs. collectivism describes the extent to which individual initiative and caring for
oneself and the nearest relatives is preferred by a society as opposed to, for example,
public assistance or the concept of extended family. In more individualist cultures,
there is merely a casual network of relationships between people. Each person is
primarily responsible for himself. More collective cultures, on the contrary, have
closer, more clearly defined systems of relationships. This applies both to extended
families as well as companies. A clear line is drawn between one’s own group and
other groups. In exchange for the care offered by one’s own group, the group
member provides very intense sense of loyalty. The distinguishing aspect of this

31
 dimension is the predominant self-sufficiency among individuals in a society. This
applies to private life just as professional life. Thus, this dimension is marked by
consequences for the structure of organizations. With regard to professional life,
collectivist companies differ from individualist companies in that the relationship
between the superior and the employee in collectivist structures can be described as
more informal. Furthermore, recruitment and career progression is often within the
so-called ingroup. Management means management of groups and the reward
systems are frequently group-oriented. On the contrary, individualist companies
focus on individual aspects when structuring reward systems. The relationship
between the superior and the employee is usually based on a relatively neutral,
impersonal contractual foundation. Although the four presented dimensions were
derived from data collected from employees of a multinational company, according
to Hofstede, they were confirmed in later studies by other researchers, who worked
with different methods and studied different target groups.
iii. Degree of masculinity or femininity in social values. The cultural dimension of
femininity vs. masculinity identified by Hofstede is based on the assumption that
values can be distinguished as more masculine or more feminine. The masculine
orientation comprises the pursuit of financial success, heroism and strong
performance approach; the feminine orientation contains preferences for life
quality, modesty and interpersonal relationships. Furthermore, role flexibility in the
feminine oriented cultures is more clear-cut than in more masculine cultures, in
other words, roles of the sexes overlap, which means that both women and men
could be modest and value a certain quality of life. The fundamental difference
between the two approaches is the form of social roles attributed to gender by the
relevant society.
iv. Degree of uncertainty avoidance or tolerance for ambiguity. The cultural dimension
of uncertainty avoidance represents the extent to which the members of a culture
feel threatened by uncertain, ambiguous and/or unstructured situations and try to
avoid them. Cultures with strong uncertainty avoidance are characterized by strict
beliefs and behavioural codes and do not tolerate people and ideas that deviate from
these. In cultures with weak uncertainty avoidance, the significance of practice
exceeds the significance of principles and there is high tolerance for deviations. The
major difference between countries with differing Uncertainty Avoidance Index is
the reaction of individuals to time pressure or uncertainties in the future. People try

32
 to influence and control the future to a varying extent. Just like the power distance
dimension the uncertainty avoidance dimension implies consequences for the
structure of organizations. Hofstede even goes as far as to claim that countries with
weaker uncertainty avoidance are more likely to bring about fundamental
innovations, because they have greater tolerance for deviate thinking. However, he
sees a decisive drawback for these nations in the implementation of such
innovations, because detailed work and punctuality are required for
implementation. An outstanding implementation of complex processes is associated
with cultures with higher uncertainty avoidance. In summary, he ascertains that
more Nobel Prize winners have come from Great Britain than Japan, but Japan was
able to introduce more new products into the world market.
v. Long-term versus Short-term orientation (later added by Hofstede). This dimension
essentially reflects a basic orientation in the life of people, which can be either more
long-term or short-term in nature. It contains values that Western researchers can
recognize, but they were not taken into account in the previous questionnaire.
Cultures that are classified as long-term in this dimension are characterized by:
o great endurance and/or persistence in pursuing goals.
o position of ranking based on status.
o adaptation of traditions to modern conditions.
o respect of social and status obligations within certain limits.
o high savings rates and high investment activity.
o readiness to subordinate oneself to a purpose.
o the feeling of shame.
Short-term classified cultures, on the contrary, are characterized by:
o personal candor and stability
o avoiding loss of face respect of social and status obligations without the
consideration of costs
o low savings rates and low investment activity
o expectations of quick profit;
o respect for traditions
o greetings, presents and courtesies based on reciprocity.
The first set of values is viewed as more future-oriented and dynamic (in particular, persistence
and frugality); the second set of values is viewed as more present-oriented or past-oriented and

33
is relatively static. The name of this dimension comes from the fact that nearly all values of the
short-term and long-term dimension could be drawn directly from the study of Confucianism.

Hofstede found not only that certain countries consistently show similarities based on the
presence of these characteristics but also that there are clearly differences between the various
groupings of countries on these value dimensions. The significant conclusion for MNEs was
that the idea was wrong that managerial and organizational systems as developed and practiced
in the parent country and parent company of an MNE should be - or could be - imposed upon
the MNE’s foreign subsidiaries.

Country-specific results of the Hofstede study.

According to results of the Hofstede study, the US culture is characterized more by
individualist behaviour. The same applies to the other Anglo Saxon countries such as Australia
or the United Kingdom. The extent of power distance is classified as rather low for all these
countries. In terms of the characteristics for both of these cultural dimensions, many South
Asian countries can be described as the opposite. For example, Singapore, Hong Kong and
Taiwan (and also many South American countries) are characterized by collectivist values and
a high power distance. These clusters are culturally distant from each other according to results
of the study. The countries are assigned to one cluster due to statistically established similarities
among them. Some Asian cultures tend to score high on uncertainty avoidance and high on
power distance. Among them are Singapore and Hong Kong. On the contrary, the German
speaking countries such as Germany, Austria and Switzerland build with others a cluster that
can be described by a comparably strong tendency of uncertainty avoidance and a relatively
low power distance. As a result of combining the masculinity index with the uncertainty
avoidance dimension, we can identify a cluster that includes predominantly German-speaking
countries Germany, Austria and Switzerland. All three countries are attributed more masculine
values with relatively high uncertainty avoidance tendency. The group of predominantly
German-speaking countries is the second most masculine-oriented after Japan. Opposite to this
is the Scandinavian cluster, including Denmark, Sweden, Norway and Finland. In terms of the
fifth dimension, long-term vs. short-term orientation of cultures, the USA, for example, is
characterized by a rather low value. Therefore, it is classified more as a short-term oriented
culture. This result is the opposite of the Asian countries, which demonstrate higher value for
long-term orientation. Thus, the robust economic growth of the Four Asian Tigers in the 1980s

34
– Hong Kong, Singapore, South Korea and Taiwan – is partly traced back to a strong orientation
on Confucianism values.

Table 1 presents examples of how cultural context may effect selected HRM practices.
Examples of the impact of the cultural context on HRM practices
HRM practices Impact of the cultural context
Recruitment and selection In societies low on ‘in-group collectivism’
individual achievements represent important
selection criteria.
• In societies high on ‘in-group collectivism’
the emphasis in the recruiting process is more
on team-related skills than on individual
competencies.
Training and development In societies high on gender egalitarianism
women have the same chances for vertical
career advancement as men.
In societies low on gender egalitarianism
female managers are rare.
Compensation • In societies high on uncertainty avoidance
employees tend to be rather risk averse and
prefer fixed compensation packages or
seniority-based pay.
• In societies low on uncertainty avoidance
employees tend to be rather risk-taking and
accept high income variability through
performance-based pay.
Task Distribution Societies high on collectivism tend to
emphasize group work.
• Societies high on individualism rather
attribute individual responsibilities in the
work system.

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The GLOBE Study
The GLOBE study was a transnational project, initiated by Robert J. House in 1991. The
research team currently consists of 170 researchers from 62 countries. GLOBE is an acronym
for Global Leadership and Organizational behaviour Effectiveness, in other words, this
project concerns the effectiveness of leadership and behaviour in organizations at a global level
with special consideration given to cultural influence factors. The goal of the GLOBE study
can be illustrated with the following questions:
i. Are there leadership behaviours, attributes and organizational practices that are
generally accepted and effective across cultures?
ii. Are there leadership behaviours, attributes and organizational practices that are
accepted and effective in some cultures only?
iii. How much do leadership attributes that are traced back to social and organizational
contexts affect the effectiveness of specific leadership behaviour and its acceptance by
subordinates?
iv. How much do behaviours and attributes in specific cultures influence the economic,
physical and psychological wellbeing of the members of societies researched in the
study?
v. What is the relationship between these socio-cultural variables and an international
competitive capacity of the various sample societies?
The GLOBE research tries to study the complex relationships between culture, leadership
behaviour, organizational effectiveness, social co-habitation conditions and the economic
success of societies.
Culture Dimensions Of The GLOBE Study.
The study is to some extent based on Hofstede’s dimensions: uncertainty avoidance and power
distance. However, the dimensions are modified and expanded, leading to some confusion
when Hofstede and GLOBE results are assessed and compared. Authors of the GLOBE study
are purposefully trying to overcome the earlier critiques of the Hofstede study, namely that the
borders between values and practices are blurred in his study and cannot be distinguished. The
different dimensions are explained briefly below.
i. ‘Institutional Collectivism describes the degree to which organizational and societal
institutional practices encourage and reward collective distribution of resources and
collective action’.
ii. In-Group Collectivism is ‘The degree to which individuals express pride, loyalty, and
cohesiveness in their organizations or families’.

36
 iii. Uncertainty Avoidance includes ‘the extent to which a society, organization, or group
relies on social norms, rules, and procedures to alleviate unpredictability of future
events’.
iv. Power Distance is defined as ‘the degree to which members of a collective expect power
to be distributed equally’.
v. Gender Egalitarianism: is ‘the degree to which a collective minimizes gender
inequality’.
vi. Assertiveness is ‘The degree to which individuals are assertive, confrontational, and
aggressive in their relationship with others’.
vii. Performance Orientation is defined as ‘the degree to which a collective encourages and
rewards group members for performance improvement and excellence’.
viii. Humane Orientation includes ‘the degree to which a collective encourages and
rewards individuals for being fair, altruistic, generous, caring, and kind to others’.
ix. Future orientation

Results of the GLOBE Study.

Quantitative collection of data was conducted in 62 countries by the GLOBE study; 17 370
people from middle management, 951 organizations and 3 industries (finance, food and
telecommunication services) were surveyed. Based on a literature analysis by the GLOBE
study authors, the analyzed countries and cultures were separated into ten land clusters and
tested empirically. This resulted in the following cultural regions: South Asia, Latin America,
North America, the Anglo cluster, Germanic and Latin Europe, Sub-Saharan Africa, Eastern
Europe, the Middle East and Confucian Asia. These cultural regions have different
characteristics within the respective cultural dimensions. Unique profiles emerge when
combining cultural dimension characteristics for different cultures.

The Trompenaars and Hampden-Turner Study.

Trompenaars and Hampden–Turner conducted a survey with employees of various hierarchical
levels and various businesses starting in the 1980s and continuing for several decades.
Trompenaars and Hampden-Turner differentiated between seven dimensions, the
characteristics of which mark the differences between cultures. They grouped these seven
dimensions by three aspects: relationships between people, concept of time and concept of
nature. Relationships between people:

37
 i. Universalism vs. Particularism: Universalist thought is characterized according to the
authors by the following logic: ‘What is good and right can be defined and always
applies’. Particularist cultures, on the contrary, pay more attention to individual cases,
deciding what is good and correct depending on relationship and special friendship
arrangements.
ii. Individualism vs. Communitarianism: The underlying question here is: ‘Do people
regard themselves primarily as individuals or primarily as parts of a group?’ The other
question is whether it is desirable that individuals primarily serve group aims or
individual aims. Individualist cultures, similar to Hofstede’s explanation, emphasize
the individual, who predominantly takes care of himself.
iii. Emotional vs. Neutral: This dimension describes how emotions are treated and whether
they are expressed or not. Neutral cultures tend to express little emotion; business is
transacted as objectively and functionally as possible. In affective cultures, an
emotional cultural basis is accepted as a part of business life and emotions are freely
expressed across many social contexts.
iv. Specific vs. diffuse: In diffuse cultures a person is involved in the business relationship,
whereas specific cultures focus more on contractually regulated aspects. Specific
cultures demand precision, an objective analysis of circumstances and presentation of
results, whereas diffuse cultures take other context variables into consideration.
v. Ascription vs. Achievement: In cultures focused on status achievement, people are
judged based on what they have achieved, in other words the goals they have fulfilled
recently. In ascriptive cultures, the status is ascribed from birth by characteristics such
as origin, seniority, and gender.
Concept of time:
i. Sequential vs. Synchronic concept of time: Cultures are differentiated by the concept
of time where they may be more past, future or present oriented. The different concept
of time is also demonstrated by the organization of work processes. Sequential
behaviour is behaviour that occurs successively and synchronous behaviour is the
possibility to ‘multitask’ and do a number of things at the same time.
Concept of nature:
i. Internal vs. external control: This dimension describes the concept of nature and
refers to the extent to which societies try to control nature. Trompenaars and
Hampden-Turner refer to the example of the Sony executive Morita, who explained
the invention of the Walkman: from the love of classical music and the desire not

38
 to burden the world with his own music taste. This is an example of external control,
of how people adapt heavily to the environment. In Western societies, the mindset
is different; music is heard in the headphones not to be bothered by the environment.
Another example is wearing a facemask during the cold/flu season. According to
Trompenaars, in external control cultures masks are used because one does not want
to infect others, whereas in internal control cultures masks are used to protect one’s
self from outside sources of infection.
To date, Trompenaars and Hampden-Turner have not demonstrated the validity or reliability
of their dimensions, or justified their classification schema. An empirical basis for their
characterization of differences in national characteristics is also not presented. However, this
model is quite often used in executive education programs as a practical template to monitor
behaviour and to draw conclusions for interaction with foreign business partners.

The Cultural Dimensions By Hall And Hall.

Based on their own experiences as government and corporate advisors and various qualitative
studies, anthropologist Edward Hall and his wife Mildred Hall have presented four dimensions
that differentiate cultures. They do not claim that their model covers all possibilities pointing
out that other dimensions may also exist. The relationship between culture and
communication is emphasized in particular, as one would not be possible without the other.
The dimensions mainly involve cultural differences in communication forms and time and
space concepts.
i. High vs. Low Context Communication: Cultures differ in the way their members
communicate with each other. In High Context cultures, a more indirect form of
expression is common, where the receiver must decipher the content of the message
from its context, whereas in so-called Low Context cultures the players tend to
communicate more to the point and verbalize all-important information. Contextual
differences are apparent in the way businesspeople approach situations such as decision
making, problem solving, negotiating, interaction among levels in the organizational
hierarchy, and socializing outside the workplace. For instance, in low-context cultures,
businesspeople tend to focus on the results of the decisions they face, a reflection of the
cultural emphasis on logic and progress (for example, “Will this be good for our
company? For my career?). In comparison, higher-context cultures emphasize the
means or the method by which a decision will be made. Building or protecting
relationships can be as important as the facts and information used in making the

39
 decisions. Consequently, negotiators working on business deals in such cultures may
spend most of their time together building relationships rather than hammering out
contractual details. The distinctions between high and low context are generalizations,
of course, but they are important to keep in mind as guidelines. Communication tactics
that work well in a high-context culture may backfire in a low-context culture and
vice versa. Examples of High Context cultures are Japan as well as France. Germany is
more of a Low Context culture.
ii. Spatial orientation: The focus of this dimension is on the distance between people of
various cultures when communicating. Distance that is adequate for members of one
culture, may feel intrusive for members of another culture.
iii. Monochrome vs. polychrome concept of time: A monochrome concept of time is
dominated by processes, where one thing is done after the other, whereas in the
polychrome concept these actions occur at the same time.
iv. Information speed: This dimension focuses on whether information flow in groups is
high or low during communication. Thus, in the USA people tend to exchange personal
information relatively quickly, while in Europe such a rate of information exchange
would require a more extended acquaintance.
As already mentioned, the classification of cultural dimensions by Hall and Hall came about in
an inductive way and does not claim to be complete. In addition, the dimensions are closely
related and overlapping and cultural regions are represented in a macro sense such as the USA
and Europe. Intracultural differences are not touched upon, but personal differences are
referred to. The works by Hall and Hall, similar to that of Trompenaars and Hampden-Turner,
focus on offering a practical template, allowing individuals to perceive and handle cultural
differences.

National Cultural Clusters

Because the number of different national and ethnic cultures is so great, the efforts by Hofstede,
Trompenaars, and others, to cluster countries with similar cultural profiles and to identify a
limited set of variables with which one can understand cultural differences have of course been
welcomed by firms working in the international arena. The hope and expectation for these
efforts is that they can simplify the problems encountered in adjusting to varying national
cultures by limiting the number of significantly different countries or regions for the purpose
of facilitating international management. The results of several studies suggest cultural
groupings of the following countries:

40
 o Anglo. Australia, Canada, Ireland, New Zealand, South Africa, United Kingdom,
United States.
o Arab. Abu-Dhabi, Bahrain, Kuwait, Oman, Saudi Arabia, United Arab Emirates.
o Far Eastern. Hong Kong, China, Indonesia, Malaysia, Philippines, Singapore, Vietnam,
Taiwan, Thailand.
o Germanic. Austria, Germany, Switzerland.
o Latin American. Argentina, Chile, Colombia, Mexico, Peru, Venezuela.
o Latin European. Belgium, France, Italy, Portugal, Spain.
o Near Eastern. Greece, Iran, Turkey.
o Nordic. Denmark, Finland, Norway, Sweden.
o Independent. Brazil, India, Israel, Japan, South Korea.
People with extensive international experience will probably suggest that some of these
groupings hide significant within-group (between countries that are in the same group)
differences (such as would be experienced among the different countries in the Far Eastern
cluster). Nevertheless, the various research efforts to identify countries with similar cultural
characteristics do suggest that the countries in each group do indeed exhibit significant
similarities in their cultural profiles.

These kinds of studies - even if they only confirm managers’ assumptions about certain country
characteristics - can provide some guidance to general managers and HR managers as they
structure policies and practices in foreign operations and activities. At a minimum, these studies
provide support for decentralizing many aspects of organizational structure and management
and offer a suggestion for creating regional divisions for managing at least some aspects of the
highly complex global firm.

Country Culture Versus Company Culture

Just as countries develop unique patterns of values, norms, beliefs, and acceptable behaviour,
so also do companies. Most MNEs take great pride in their ‘organizational cultures,’ which
reflect, at least initially, the values of their founders and evolve to create corporate personalities
that give employees a template for how to behave, including in areas like the making of
decisions, the acceptance of continual improvement, and the treatment of fellow employees
and customers. For many firms, these organizational values take precedence over country
cultures, particularly when there is a conflict between the two. For example, many large
MNEs that originate in the US or UK may feel very strongly about the assignment of women

41
to senior management positions and will do this even in cultures where it is rare (and not
supported by cultural norms) for women to have these types of appointments. Or MNEs from
Western countries may feel strongly in favour of egalitarian and participative management
styles and compensation practices and may decide that these values are so important that they
will pursue strategies to implement these practices in their foreign operations, even though
local culture supports a very different set of values (and often even in the face of resistance
from the local culture - even legal - norms). Asian MNEs might emphasize strong group loyalty
and discussion, with deference to senior employees, in the ways they operate, even in their
foreign subsidiaries, and even when this is not an accepted or understood way to operate by
local employees and managers.

Further, the conflict between centralization/standardization and localization/customization

may never be fully resolved, and it will come up again and again, as it affects various aspects
of IHRM policy and practice. This is one of the consequences of the major cultural differences
as already discussed. this issue will normally come as many international organizations may
continually insist on aspects of standardization while adopting numerous local ideas and
adaptations in their international operations..

Cultural Convergence and/or Divergence

One of the continuing controversies that surrounds any discussion of the role of culture in
international business is whether or not, due to increasing globalization, there is a growing
convergence of national cultural values and characteristics. There is some evidence to support
both the point of view that modern technology and the modernizing of industries around the
world are influencing firms to adopt similar ‘best practices’ (convergence) as well as support
for the view that countries’ cultural values and practices continue to exert quite strong
influences on their business and HR practices (divergence). It is likely that reality is somewhere
in between: Convergence and divergence perspectives may represent polar extremes. As most
firms struggle to find the optimal trade-off between globalization and localization, that is,
“glocalization,” perhaps the reality is closer to a more balanced or middle-ground view called
“cross-vergence,” or the intermixing of cultural systems between different countries. As the
global economy continues to grow, it is likely that cultural differences will influence
international business practices in multiple and complex ways. Management and HR practices
are likely to be both influenced by the practices of large MNEs from the developed economies

42
as well as by the values and practices from the largest, and from smaller, yet successful
economies, creating potentially many different, yet successful, hybrid management systems.

Impact Of Culture On International Human Resource Management

The discussion so far has illustrated just how important culture is in the conduct of international
business and international HRM. Indeed, every aspect of international business and IHRM is
impacted by national and organizational culture. It will be observed that every major HR
activity/function that needs to be addressed on the global front; and will be discussed is
influenced by the realities of varying country and company cultures. This is true for the HR
management of international assignees as well as for the HR management of local work forces
in subsidiaries and joint ventures.

The Challenges of Intercultural Communication

Today’s increasingly diverse workforce encompasses a wide range of skills, traditions,
backgrounds, experiences, outlooks, and attitudes toward work—all of which can affect
communication in the workplace.
ü Supervisors face the challenge of connecting with these diverse employees, motivating
them, and fostering cooperation and harmony among them.

ü Teams face the challenge of working together closely, and

ü Companies are challenged to coexist peacefully with business partners and with the
community as a whole.

The interaction of culture and communication is so pervasive that separating the two is
virtually impossible. The way you communicate is deeply influenced by the culture in which
you were raised. The meaning of words, the significance of gestures, the importance of time
and space, the rules of human relationships - these and many other aspects of communication
are defined by culture. To a large degree, your culture influences the way you think, which
naturally affects the way you communicate as both a sender and a receiver. Intercultural
communication is much more complicated than simply matching language between sender
and receiver - it goes beyond mere words to beliefs, values, and emotions. Elements of human
diversity can affect communication at every stage of the communication process from the ideas
a person deems important enough to share to the habits and expectations of giving feedback.
In particular, your instinct is to encode your message using the assumptions of your culture.

43
However, members of your audience decode your message according to the assumptions of
their culture. The greater the difference between cultures, the greater the chance for
misunderstanding.

Developing Cultural Competency

Cultural competency is an appreciation for cultural differences that affect communication and
the ability to adjust one’s communication style to ensure that efforts to send and receive
messages across cultural boundaries are successful. It requires a combination of attitude,
knowledge, and skills. The good news is that you’re already an expert in culture, at least in the
culture in which you grew up. You understand how your society works, how people are
expected to communicate, what common gestures and facial expressions mean, and so on. The
bad news is that because you’re such an expert in your own culture, your communication is
largely automatic; that is, you rarely stop to think about the communication rules you’re
following. An important step toward successful intercultural communication is becoming more
aware of these rules and of the way they influence your communication.

Understanding How Culture Affects Communication

Comprehending the verbal and nonverbal meanings of a message is difficult even when
communicators are from the same culture. When they come from different cultures, special
sensitivity and skills are necessary. Every country has a unique culture or common heritage,
joint experience, and shared learning that produce its culture. Their common experience give
members of that culture a complex system of shared values and customs. It teaches them how
to behave; it conditions their reactions. Global business, new communication technologies, the
Internet, and even Hollywood are spreading Western values throughout the world. However,
cultural differences can still cause significant misunderstandings. The more you know about
culture in general and your own culture in particular, the better able you will be to adopt an
intercultural perspective. To better understand one’s culture and how it contrasts with other
cultures, five key dimensions of culture will be described from various points of view: context,
individualism, formality, communication style, and time orientation.
i. Context. Context is one of the most important cultural dimensions, yet it is among the
most difficult to define. Every attempt at communication occurs within a cultural
context, the pattern of physical cues, environmental stimuli, and implicit understanding
that convey meaning between two members of the same culture. However, cultures
around the world vary widely in the role that context plays in communication. In a

44
model developed by cultural anthropologist Edward T. Hall, context refers to the
stimuli, environment, or ambience surrounding an event. Hall arranged cultures on a
continuum, from low to high in relation to context. In a high-context culture, people
rely less on verbal communication and more on the context of nonverbal actions and
environmental setting to convey meaning. For instance, a Chinese speaker expects the
receiver to discover the essence of a message and uses indirectness and metaphor to
provide a web of meaning. The indirect style can be a source of confusion during
discussions with people from low-context cultures, who are more accustomed to
receiving direct answers. Also, in high-context cultures, the rules of everyday life are
rarely explicit; instead, as individuals grow up, they learn how to recognize situational
cues (such as gestures and tone of voice) and how to respond as expected. The primary
role of communication in high-context cultures is building relationships, not
exchanging information. In a low-context culture such as the United States, people
rely more on verbal communication and less on circumstances and cues to convey
meaning. In such cultures, rules and expectations are usually spelled out through
explicit statements such as “Please wait until I’m finished” or “You’re welcome to
browse.” The primary task of communication in low-context cultures is exchanging
information.

Contextual differences are apparent in the way businesspeople approach situations such
as decision making, problem solving, negotiating, interaction among levels in the
organizational hierarchy, and socializing outside the workplace. For instance, in low-
context cultures, businesspeople tend to focus on the results of the decisions they face,
a reflection of the cultural emphasis on logic and progress (for example, “Will this be
good for our company? For my career?). In comparison, higher-context cultures
emphasize the means or the method by which a decision will be made. Building or
protecting relationships can be as important as the facts and information used in
making the decisions. Consequently, negotiators working on business deals in such
cultures may spend most of their time together building relationships rather than
hammering out contractual details. The distinctions between high and low context are
generalizations, of course, but they are important to keep in mind as guidelines.
Communication tactics that work well in a high-context culture may backfire in a low-
context culture and vice versa.

45
 ii. Individualism. An attitude of independence and freedom from control characterizes
individualism. Members of low-context cultures, particularly Americans, tend to value
individualism. They believe that initiative, self-assertion, and competence result in
personal achievement. They believe in individual action and personal responsibility,
and they desire a large degree of freedom in their personal lives. Members of high-
context cultures are more collectivist. They emphasize membership in organizations,
groups, and teams; they encourage acceptance of group values, duties, and decisions.
They typically resist independence because it fosters competition and confrontation
instead of consensus. In group-oriented cultures such as those in many Asian societies,
for example, self-assertion and individual decision making are discouraged. “The nail
that sticks up gets pounded down” is a common Japanese saying. Business decisions
are often made by all who have competence in the matter under discussion. Similarly,
in China managers also focus on the group rather than on the individual, preferring a
consultative management style over an autocratic style. Many cultures, of course, are
quite complex and cannot be characterized as totally individualistic or group oriented.
For example, European Americans are generally quite individualistic, whereas African
Americans are less so, and Latin Americans are closer to the group-centered dimension.
iii. Formality. People in some cultures place less emphasis on tradition, ceremony, and
social rules than do members of other cultures. Americans, for example, dress casually
and are soon on a first-name basis with others. Their lack of formality is often
characterized by directness. In business dealings Americans come to the point
immediately; indirectness, they feel, wastes time, a valuable commodity in American
culture. This informality and directness may be confusing elsewhere. In Mexico, for
instance, a typical business meeting begins with handshakes, coffee, and an expansive
conversation about the weather, sports, and other light topics. An invitation to “get
down to business” might offend a Mexican executive. In Japan signing documents and
exchanging business cards are important rituals. In Europe first names are used only
after long acquaintance and by invitation. In Arab, South American, and Asian cultures,
a feeling of friendship and kinship must be established before business can proceed. In
Western cultures people are more relaxed about social status and the appearance of
power. Deference (respect, reverence) is not generally paid to individuals merely
because of their wealth, position, seniority, or age. In many Asian cultures, however,
these characteristics are important and must be respected. Deference and respect are
paid to authority and power. Recognizing this cultural pattern, Marriott Hotel managers

46
 learned to avoid placing a lower-level Japanese employee on a floor above a higher-
level executive from the same company.
iv. Communication Style. People in low- and high-context cultures tend to communicate
differently with words. To Americans and Germans, words are very important,
especially in contracts and negotiations. People in high-context cultures, on the other
hand, place more emphasis on the surrounding context than on the words describing a
negotiation. A Greek may see a contract as a formal statement announcing the intention
to build a business for the future. The Japanese may treat contracts as statements of
intention, and they assume changes will be made as a project develops. Mexicans may
treat contracts as artistic exercises of what might be accomplished in an ideal world.
They do not necessarily expect contracts to apply consistently in the real world. An
Arab may be insulted by merely mentioning a contract; a person’s word is more
binding. In communication style North Americans value straightforwardness, are
suspicious of evasiveness, and distrust people who might have a “hidden agenda” or
who “play their cards too close to the chest.” North Americans also tend to be
uncomfortable with silence and impatient with delays.
v. Time Orientation. North Americans consider time a precious commodity. They
correlate time with productivity, efficiency, and money. Keeping people waiting for
business appointments wastes time and is also rude. In other cultures, time may be
perceived as an unlimited and never-ending resource to be enjoyed. A North American
businessperson, for example, was kept waiting two hours past a scheduled appointment
time in South America. She wasn’t offended, though, because she was familiar with
Hispanics’ more relaxed concept of time. The perception of time and how it is used are
culturally learned. In some cultures time is perceived analytically. People account for
every minute of the day. In other cultures, time is holistic and viewed in larger chunks.
Western cultures tend to be more analytical, scheduling appointments at 15 to 30-
minute intervals. Eastern cultures tend to be more holistic, planning fewer but longer
meetings. People in one culture may look at time as formal and task oriented. In another
culture, time is seen as an opportunity to develop an interpersonal relationship. In the
announcements of some international meetings, a qualifier may be inserted after the
meeting time. For example, “The meeting starts at 10 a.m. Malaysian time.” This tells
participants whether to expect fixed or fluid scheduling.

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Guidelines for Communicating with Diverse Audiences/Improving Intercultural
Communication Skills
Harmony and acceptance do not happen automatically when people who are dissimilar work
together. The following suggestions can help you and your organization find ways to improve
communication and interaction, adapt to any business culture as well as help all business
communicators improve their cultural competency.
Ð Tolerance. Working with people from other cultures demands tolerance and flexible
attitudes. As global markets expand and as our society becomes increasingly
multiethnic, tolerance becomes critical. Tolerance, here, does not mean “putting up
with” or “enduring,” which is one part of its definition. Instead, tolerance is used in in
a broader sense. It means learning about beliefs and practices different from our own
and appreciating them. One of the best ways to develop tolerance is to practice empathy.
This means trying to see the world through another’s eyes. It means being
nonjudgmental, recognizing things as they are rather than as they “should be.”
Ð Cultural Pluralism. Those who want to show respect for other people and to
communicate effectively in business need to adopt a more positive viewpoint, in the
form of cultural pluralism - the practice of accepting multiple cultures on their own
terms. When crossing cultural boundaries, you’ll be even more effective if you move
beyond simple acceptance and adapt your communication style to that of the new
cultures you encounter—even integrating aspects of those cultures into your own.
You can improve your intercultural skills throughout your career by studying other cultures
and languages, respecting preferences for communication styles, learning to write and speak
clearly, listening carefully, knowing when to use interpreters and translators, and helping others
adapt to your culture.
a) Studying Other Cultures. Effectively adapting your communication efforts to another
culture requires not only knowledge about the culture but also the ability and motivation
to change your personal habits as needed. Fortunately, you don’t need to learn about
the whole world all at once. Many companies appoint specialists for specific countries
or regions, giving employees a chance to focus on just one culture at a time. Some firms
also provide resources to help employees prepare for interaction with other cultures.
Even a small amount of research and practice will help you get through many business
situations. In addition, most people respond positively to honest effort and good
intentions, and many business associates will help you along if you show an interest in
learning more about their cultures. Don’t be afraid to ask questions, either. People will

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 respect your concern and curiosity. You will gradually accumulate considerable
knowledge, which will help you feel comfortable and be effective in a wide range of
business situations. Numerous websites and books offer advice on traveling to and
working in specific countries. Also try to sample newspapers, magazines, and even the
music and movies of another country. For instance, a movie can demonstrate nonverbal
customs even if you don’t grasp the language. (However, be careful not to rely solely
on entertainment products.
b) Studying Other Languages. As commerce continues to become more globalized and
many countries become more linguistically diverse, the demand for multilingual
communicators continues to grow as well. The ability to communicate in more than one
language can make you a more competitive job candidate and open up a wider variety
of career opportunities. Even if your colleagues or customers in another country speak
your language, it’s worth the time and energy to learn common phrases in theirs.
Learning the basics not only helps you get through everyday business and social
situations but also demonstrates your commitment to the business relationship. After
all, the other person probably spent years learning your language. Finally, don’t
assume that people from two countries who speak the same language speak it the
same way. The French spoken in Quebec and other parts of Canada is often noticeably
different from the French spoken in France. Similarly, it’s often said that the United
States and the United Kingdom are two countries divided by a common language. For
instance, period (punctuation), elevator, and gasoline in the United States are full stop,
lift, and petrol in the United Kingdom.
c) Respecting Preferences for Communication Style. Communication style—including the
level of directness, the degree of formality, media preferences, and other factors—
varies widely from culture to culture. Knowing what your communication partners
expect can help you adapt to their particular style. Once again, watching and learning
are the best ways to improve your skills. However, you can infer some generalities by
learning more about the culture. For instance, U.S. workers typically prefer an open and
direct communication style; they find other styles frustrating or suspect. Directness is
also valued in Sweden as a sign of efficiency; but, unlike with discussions in the United
States, heated debates and confrontations are unusual. Italian, German, and French
executives don’t put colleagues at ease with praise before they criticize—doing so
seems manipulative to them. However, professionals from high-context cultures, such

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 as Japan or China, tend to be less direct. Finally, in general, business correspondence
in other countries is often more formal than the style used by U.S. businesspeople
d) Writing Clearly Writing clearly is always important, of course, but it is essential when
you are writing to people whose first language is not English. Follow these
recommendations to make sure your message can be understood:
Ø Choose words carefully.
Ø Use precise words that don’t have the potential to confuse with multiple meanings. For
instance, the word right has several dozen different meanings and usages, so look for a
synonym that conveys the specific meaning you intend, such as correct, appropriate,
desirable, moral , authentic , or privilege .
Ø Be brief. Use simple sentences and short paragraphs, breaking information into smaller
chunks that are easier for readers to process.
Ø Use plenty of transitions. Help readers follow your train of thought by using transitional
words and phrases. For example, tie related points together with expressions such as in
addition and first, second, and third.
Ø Cite numbers and dates carefully. In the United States, 12-05-11 means December 5,
2011, but in many other countries, it means May 12, 2011. Dates in Japan and China
are usually expressed with the year first, followed by the month and then the day;
therefore, to write December 5, 2011, in Japan, write it as 2011-12-05. Similarly, in the
United States and Great Britain 1.000 means one with three decimal places, but it means
one thousand in many European countries.
Ø Avoid slang, idiomatic phrases, and business jargon. Everyday speech and writing are
full of slang and idiomatic phrases —phrases that mean more than the sum of their
literal parts. Examples from U.S. English include “Off the top of my head” and “More
bang for the buck.” Your audience may have no idea what you’re talking about when
you use such phrases.
Ø Avoid humor and references to popular culture. Jokes and references to popular
entertainment usually rely on culture-specific information that might be completely
unknown to your audience. Although some of these differences may seem trivial,
meeting the expectations of an international audience illustrates both knowledge of and
respect for the other cultures.
e) Speaking and Listening Carefully Languages vary considerably in the significance of
tone, pitch, speed, and volume, which can create challenges for people trying to
interpret the explicit meaning of words themselves as well as the overall nuance of a

50
 message. The English word progress can be a noun or a verb, depending on which
syllable you accent. In Chinese, the meaning of the word mà changes depending on the
speaker’s tone; it can mean mother, pileup, horse, or scold. And routine Arabic speech
can sound excited or angry to an English-speaking U.S. listener. When talking with
people whose native language is different from yours, remember that the processing of
even everyday conversations can be difficult. Without a lot of listening practice, new
French speakers have a hard time telling when one word ends and the next one begin.
To be more effective in intercultural conversations, remember these tips: (1) Speak
slowly and clearly; (2) don’t rephrase until it’s obviously necessary; (3) look for and
ask for feedback to make sure your message is getting through; (4) don’t talk down to
the other person by over enunciating words or oversimplifying sentences; and (5) at the
end of the conversation, double-check to make sure you and the listener agree on what
has been said and decided.
f) Using Interpreters, Translators, and Translation Software. You may encounter
business situations that require using an interpreter (for spoken communication) or a
translator (for written communication). Interpreters and translators can be expensive,
but skilled professionals provide invaluable assistance for communicating in other
cultural contexts. Some companies use back-translation to ensure accuracy. Once a
translator encodes a message into another language, a different translator retranslates
the same message into the original language. This back-translation is then compared
with the original message to discover any errors or discrepancies. A variety of soft ware
products and websites offer translation capabilities, from individual words and phrases
to documents and entire web pages. Although none of these tools can translate as well
as human experts, they can often give you the overall gist of a message.
g) Helping Others Adapt to Your Culture. Everyone can contribute to successful
intercultural communication. Whether a younger person is unaccustomed to the
formalities of a large corporation or a colleague from another country is working on a
team with you, look for opportunities to help people fit in and adapt their
communication style. For example, if a nonnative English speaker is making mistakes
that could hurt his or her credibility; you can offer advice on the appropriate words and
phrases to use. Most language learners truly appreciate this sort of assistance, as long
as it is offered in a respectful manner. Moreover, chances are that while you’re helping,
you’ll learn something about the other person’s culture and language, too. You can also
take steps to simplify the communication process. For instance, oral communication in

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 a second language is usually more difficult than written forms of communication, so
instead of asking a foreign colleague to provide information in a conference call, you
could ask for a written response instead of or in addition to the live conversation.

Reference List
Briscoe, D.R. & Schuler, R.S. (2004). International human resource management: Policy and
practice for the global enterprise. Psychology Press.

Dowling, P.J., Festing, M. & Engle, A.D. (2013). International human resource management.
Cengage Learning

Harzing, A-W. & Pinnington., A. (2014). International human resource management. SAGE.

Thill, J.V and Bovee, C.L.(2008). Excellence in business communication. New Jersey: Pearson

Thomas, D.C. & Lazarova, M.B. (2013). Essentials of international human resource
management: Managing people globally. SAGE Publications.

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