International HRM

Module 4
International Human Resource
Management
• International human resource management is the process of
employing, training and developing and compensating the
employees in international and global organizations.
• An international company is one which has subsidiaries outside
the home-county which rely on the business expertise or
manufacturing capabilities of the parent company.
• Generally, an MNC is considered to have a number of
businesses in different countries but managed as a whole from
the headquarters, located in one country
International human resource management

• Strategic role: HRM policies should be congruent with

the firm’s strategy and it’s formal and informal
structure and controls
• Right People, Right Place, Right Time
• Task complicated by profound differences between
countries in labor markets, culture, legal and
economic systems
• IHRM is concerned with the management of all the
human resource activities in global organizations
without regard to geographic boundaries
Strategy, structure and control
systems
 International HRM
• More difficult for international companies than
domestic companies due to;
• E nvironment differences
• Organizational challenges
• Task complicated by profound differences between
countries in labor markets, culture, legal, and
economic systems
HRM Phases

Policy
Hiring

Developing
Ethnocentric Polycentric

Appraising
Geocentric
Rewarding

Policy
 Staffing Policy
 Staffing policy
 Selecting individuals with requisite skills to do a
particular job
 Tool for developing and promoting corporate
culture
 3 types of Staffing Policy
 Ethnocentric
 Polycentric
 Geocentric
Ethnocentric Policy
 Key management positions filled by home-
country nationals (headquarters)
 Reason – believed that home country are
superior than host countries
 Advantages:
 Overcomes lack of qualified managers in host nation
 Unified culture
 Helps transfer core competencies
 Disadvantages:
 Local managers unmotivated and demoralized
 Impractical
Polycentric Policy
 Host-country nationals manage subsidiaries
 Parent company nationals hold key
headquarter positions
 Best suited to multi-domestic businesses
 Advantages:
 Alleviates cultural myopia
 Helps transfer core competencies
 Increase employees moral
 Disadvantages:
 Limits opportunity to gain experience of host country
nationals outside their own country
 Can create gap between home and host country
operations – accountability problems
 Geocentric policy
 Seek best people, regardless of nationality
 not always possible
 Best suited to Global and trans-national
businesses
 Advantages:
 Enables the firm to make best use of its human
resources
 Equips executives to work in a number of cultures
 Helps build strong unifying culture and informal
management network
 Disadvantages:
 National immigration policies may limit implementation
 Expensive to implement due to training and relocation
 Compensation structure can be a problem.
Comparison of staffing approaches
STAFFING
expatriates (expats) - Nonnative employees who
work in a foreign country

parent (home) country nationals (PCNs) -

employees who come from the parent country of
the multinational enterprise (MNE) and work at its
local subsidiary

third country nationals (TCNs) - employees who

come from neither the parent country nor the host
country
 The expatriate problem

 Expatriate: citizens of one country working in

another
 Expatriate failure: premature return of the
expatriate manager to his/her home country
 Cost of failure is high: estimate = 3X the expatriate’s
annual salary plus the cost of relocation (impacted by
currency exchange rates and assignment location)
 Inpatriates: expatriates who are citizens of a
foreign country working in the home country of
their multinational employer
ROLES OF EXPATRIATES
strategists - representing interests of the MNE’s
headquarters
daily managers - run operations, to build local
capabilities and gain international management
experience
ambassadors - representing headquarter’s
interests in the subsidiaries and representing the
interests of the subsidiaries when interacting with
headquarters
trainers - for their replacements
Reasons for Expatriate
Failure
 US multinationals
 Inability of spouse to adjust
 Manager’s inability to adjust
 Other family problems
 Manager’s personal or
emotional immaturity
 Inability to cope with larger
overseas responsibilities
 European
multinationals
 Almost similar to the US
 Japanese Firms
 Inability to cope with larger
overseas responsibilities
 Difficulties with the new
environment
 Personal or emotional
problems
 Lack of technical
competence
 Inability of spouse to
adjust
 Expatriate selection

 Reduce expatriate failure rates by improving

selection procedures
 An executive’s domestic performance does not
(necessarily) equate his/her overseas
performance potential
 Employees need to be selected not solely on
technical expertise but also on cross-cultural
fluency
Sample selection for overseas assignment
 Because moving to a new place, especially a new country, is
stressful, it is important to train the employee on managing
stress, homesickness, culture shock, and likely a larger
workload than the employee may have had at home
 Some stress results from insecurity and homesickness. It is
important to note that much of this stress occurs on the family
as well
 The expatriate may be performing and adjusting well, but if
the family isn’t, this can cause greater stress on the
employee, resulting in a failed assignment. Four stages of
expatriate stress identified in the Selyes model, the
Fig: General
adaptation
syndrome
for expats
PREPARATION OF EXPATRIATES
Pre-departure training
1. General country understanding –
information about the host country
2. Culture sensitivity -
3. Practical skills – to be familiar with the
routine life in the host country
Training
Five main components of training someone for an overseas
assignment:
 1. Language
 2. Culture
 3. Goal setting
 4. Managing family and stress
 5. Repatriation
Training
 Cultural training : Seeks to foster an appreciation of the
host-country’s culture
 Language training : Can improve expatriate’s
effectiveness, aids in relating more easily to foreign
culture and fosters a better firm image
 Practical training: Ease into day-to-day life of the host
country
Repatriation
 Repatriation planning should happen before the employee
leaves on assignment and should be a continuous process
throughout the assignment and upon return.
The process can include the following:
• Training and counseling on overseas assignment before
leaving
• Clear understanding of goals before leaving, so the expatriate
can have a clear sense as to what new skills and knowledge he
or she will bring back home
Repatriation
 Job guarantee upon return (Deloitte and Touche, for example,
discusses which job each of the two hundred expats will take
after returning, before the person leaves, and offers a written
letter of commitment)
 Assigning the expatriate a mentor, ideally a former expatriate
 Free return trips home to stay in touch with friends and family
 Counseling (at Honeywell, employees and families go through
a repatriation program within six months of returning)
 Compensation

 Two issues:
 Pay executives in different countries according to the
standards in each country?
or
Equalize pay on a global basis?

 Method of payment
 Compensation

 One possible option is to pay a similar base salary

companywide or region wide and offer expatriates an
allowance based on specific market conditions in each
country.
 This is called the balance sheet approach. With this
compensation approach, the idea is that the expatriate should
have the same standard of living that he or she would have
had at home.
 Compensation

 Four groups of expenses are looked at in this approach:

 1. Income taxes
 2. Housing
 3. Goods and services
 4. Base salary
 5. Overseas premium
 Compensation

 The HR professional would estimate these expenses within

the home country and costs for the same items in the host
country.
 The employer then pays differences.
 An overseas premium is an additional bonus for agreeing to
take an overseas assignment.
 The balance sheet method

Fig 18.2

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

International Business, 5/e
 Compensation issues

Type of Company Payment

How much home-country

Ethnocentric
expatriates should be paid.

Pay can and should be

Polycentric country-specific.

May have to pay its

Geocentric/Transnational international cadre of
managers the same.

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

International Business, 5/e