INTERNATIONAL HUMAN RESOURCES

MANAGEMENT
Yonatan Reshef
Strategic Management and Organization
Faculty of Business
University of Alberta

Based on

Peter J. Dowling, Denice E. Welch, and Randall S. Schuler. 1999 (3rd

ed.). International Human Resource Management. South-Western
College Publishing.
 Acronyms

 HCNs – HOST-COUNTRY NATIONALS

 PCNs – PARENT-COUNTRY NATIONALS
 TCNs – THIRD-COUNTRY NATIONALS
 INTERNATIONAL VERSUS DOMESTIC HRM

 More functions to perform (taxation, culture orientation,

relocation, admin services for expats)

 Broader perspective (cater to needs of Parent-Country Nationals,

Host-Country Nationals, Third-Country Nationals)

 Greater involvement in the personal lives of employees

 Greater risk exposure (expat failure, family problems, terrorism)

 More external influences (government regulations, local ways

of doing business, code of conduct)
 APPROACHES TO INTERNATIONAL
HUMAN RESOURCE MANAGEMENT
ETHNOCENTRIC: Highly centralized, HQ control,
PCNs dominate.

POLYCENTRIC: Decentralized. Each subsidiary has

some degree of decision making
autonomy, HCNs manage subsidiaries.
GEOCENTRIC: Ignores nationality in favor of ability.
The color of one’s passport does not
matter when it comes to rewards,
promotion, and development.

REGIOCENTRIC: Personnel may move outside their

countries but only within a particular
geographic region.
 EXPAT MANAGERS
• Why send expatriates?

• Why host country nationals (HCNs) or

third country nationals (TCNs) are not good
enough?

• Advantages and limitations of PCN, HCN and

TCN expats.
 PARENT-COUNTRY NATIONALS
Advantages Disadvantages
• Control and co- • HCNs’ promotion
ordination by HQ is opportunities are limited.
maintained. • Adaptation to host
• Promising managers get country may take a long
international time.
experience. • PCNs may impose an
• PCNs are the best inappropriate HQ style.
people for the job. • Compensation differences
• Assurance that the between PCNs and HCNs
subsidiary will comply may cause problems.
with company
objectives, policies, etc.
 HOST-COUNTRY NATIONALS
Advantages Disadvantages
• No problems with language • HQ may have less control
and culture. over operations.
• Reduced hiring costs. • HCNs may still have limited
• No work permits required. career opportunities outside
• Continuity of management the subsidiary and their
country.
improves, since HCNs stay
longer in positions. • Hiring HCNs limits
• Govt. policy may force opportunities for PCNs to
gain overseas experience.
hiring of HCNs.
• Promotional opportunities • Hiring HCNs may encourage
a federation of disintegrated
not limited - so higher
national units rather than one
morale among HCNs.
integrated global unit.
 THIRD-COUNTRY NATIONALS
Advantages Disadvantages
• Salary and • Transfers must consider
compensation may be national animosities.
lower than for PCNs. • Host government may
• May be more familiar resent TCNs as much as
with host country than PCNs.
the PCNs. • TCNs may not comply
with HQ style of
management.
• TCNs may not want to
return after assignment.
 REASONS FOR EXPAT FAILURE
(In descending order of importance)
AMERICAN MNCs JAPANESE MNCs
1. spousal adjustment 1. unable to cope with
problems larger overseas
2. manager’s inability to responsibility
adjust 2. new environment
3. other family reasons problems
4. manager’s emotional 3. personal or emotional
or personal maturity problems
5. unable to cope with 4. lack of technical
larger overseas competence
responsibility 5. spousal adjustment
problems.
 Costs of Expatriate Failure
• DIRECT
– Airfare and associated relocation expenses
• INDIRECT
– Damage to employee moral
– Loss of market share
• DIRECT EFFECT ON THE EXPATRIATE
– Self-esteem; self-confidence; prestige among
peers
– Promotion opportunities; Motivation
– Family
 COMPENSATION

• If compensation is raised, then problems may be

encountered on return to head office.

• If compensation is not adequately raised, then there

may be no incentive to go for the international
assignment, given the hardships that are usually
involved in doing so.
 Going Rate Approach

• Based on local market rates – the base salary is linked to

the salary structure in the host country.
• Relies on local survey comparisons of:
• Local nationals (HCNs)
• Expats of same nationality (all Canadians working in
Japan)
• Expats of all nationalities
• Base pay and benefits may be supplemented by
additional payments for low-pay countries
 Advantages and Disadvantages of the
Going Rate Approach

Advantages Disadvantages
• Equality with local • Variation between
nationals assignments for same
employees
• Simplicity
• Variation between expats
• Identification with the host of same nationality in
country different countries
• Equity among different • Potential re-entry
problems
nationalities
 The Balance Sheet Approach

• Basic objective is maintenance of home-country living

standard, plus financial inducement
• Home-country pay and benefits are the foundations
of this approach
• Adjustments to home package to balance additional
expenditure in host country
• Financial incentives (expat/hardship premium) added
to make the package attractive
• Most common system in usage by multinationals
firms
 THE BALANCE SHEET
APPROACH
(II)
FOUR MAJOR CATEGORIES TO CONSIDER:
• GOODS AND SERVICES – FOOD, PERSONAL CARE,
CLOTHING, HOUSEHOLD FURNISHING, RECREATION
• HOUSING
• INCOME TAXES
• RESERVE – CONTRIBUTIONS TO SAVINGS, PAYMENTS
FOR BENEFITS, PENSION CONTRIBUTIONS,
INVESTMENTS, EDUCATION EXPENSES, SOCIAL
SECURITY TAXES…
 Advantages and Disadvantages of the Balance
Sheet Approach

Advantages Disadvantages
• Equity • Can result in great
• between assignments disparities
• between expats of the same • between expats of
nationality
different nationalities
• Facilitates expat re-entry
• between expats and local
• Easy to communicate to nationals
employees
• Can be quite complex to
administer
PREPARING THE MANAGER AND THE FAMILY

Some issues:

•Spouse training - how much control the company

can exert over the spouse

•Children’s education - frequent changes in schools or

distance from parents

•Selection criteria: Age a factor.

 MNCs AND THE ISSUE OF SPOUSES IN
THE SELECTION PROCESS

• Reluctance to intrude into personal matters, issues of

civil liberties may arise.

• Some MNCs resort to informal methods such as dinners with

the family or putting the family in contact with another who
once lived abroad.

• Work permit issues - granted to the employees only, not to

their spouses.
 REPATRIATION: REVERSE CULTURE-SHOCK

JOB RELATED FACTORS SOCIAL FACTORS

“Out of sight, out of mind” Expat assignment - different

type of social interaction
International experience (going from a very close expat
devalued community to where everyone is
very busy with their own lives)

Loss of status and pay, Problems of spouse

relatively speaking returning to the workforce

Lack of peer support for

Changes in the HQ
teenagers
 Topics Covered by a Repatriation Program

• Preparation, physical relocation, and transition information

(what the company will help with)
• Financial and tax assistance (including benefit and tax
changes, loss of overseas allowance)
• Re-entry position and career path assistance
• Reverse culture shock (including family disorientation)
• School systems and children’s education
• Workplace changes (corporate culture, structure)
• Stress management
• Help in finding new social contacts