Introduction to IHRM

Lecture 1
Dr Subhash Gupta

What is IHRM?
The second approach to IHRM is the study of industrial relations and labour
management practices and policies in different countries. Study of industrial
relations in a country is reflective of its state of society, historical evolution, power
relationships between groups, class struggle, political framework, prevailing labour
laws and national approach to labour management. This is a very wide field and
encompasses different approaches.

Differences between International and Domestic HRM

• Being responsible for a greater number of functions and activities, such as
the selection, training and management of international assignees.
• Having to expand one’s area of expertise to include a much broader
knowledge of foreign country employment laws and global organization designs.
• Being involved with a greatly expanded and constantly changing mix of
employees (from the host country and foreign locales), adding considerable diversity
and complexity to the HR tasks.
• Management of differential compensation due to variety of allowances and
adjustments.

Differences between International and Domestic HRM

• Diversity management, like managing people from different cultural and

political backgrounds and gender differences.
• More coordination and travel to assess performance of expatriates and solve
problems.
• More public relations work to enhance the multinationals image and deal
with human rights and other NGOs and interest groups operating in different
countries.

Differences between domestic and international HRM

• More HR activities
• The need for a broader perspective
• More involvement in employees’ personal lives
• Changes in emphasis as the workforce mix of expatriates and locals varies
• Risk exposure
• Broader external influences
Developing International HR Strategies
• Increasing the extent and scope of managerial talent in the organization.
• Identifying the depth of managerial talent in the organization.
• Developing global and local approaches to training and development.
• Ensuring management succession.
• Sustaining and improving performance at all levels in all areas of the
company.
• Establishing a total quality culture, and changing people’s attitudes to
quality.
• Linking HRM to strategic objectives.

Forces for change

• Global competition
• Growth in mergers, acquisitions and alliances
• Organization restructuring
• Advances in technology and telecommunication
Impacts on multinational management
• Need for flexibility
• Local responsiveness
• Knowledge sharing
• Transfer of competence

Managerial responses
• Developing a global ‘mindset’
• More weighting on informal control mechanisms
• Fostering horizontal communication
• Using cross-border and virtual teams
• Using international assignments

Thank You !!!

Organizational Context of IHRM

Deciding How to Enter the Market

Patterns of Internationalization
Strategies for International Organizations
• balance international strategy with local conditions and needs
• balance between differentiation and integration
The level of strategic control needed in an international operation is depicted
along three axes: the type of subsidiary operating in each country; the type of
international business strategy employed; and the type of ownership.

Management and organizations in Europe

• There is no national identity across the European Community as there is in Japan
and the USA; for example there is no equivalent of the ‘American Dream’.
• There is no common language or culture.
• Change is more complex than in American or Japan, particularly with the further
integration of Eastern and Central European countries

Management and organizations in Europe

• There is increasing cross-border activity through mergers and acquisitions,
joint ventures and direct investment situations requiring approaches to
management such as project management and networking.
• There is increasing emphasis on the use of technology as a means of
competing (such as e-commerce or extensive use of Intranet systems.
• There is continuing demand for linguistic skills, in addition to more
traditional management skills.

Thank you
IHRM: Sustaining International Business Operations
Objectives
Approaches to Staffing
 Factors affecting approaches to staffing
 General staffing policy on key positions at headquarters and subsidiaries
 Constraints placed by host government
 Staff availability
 Ethnocentric
 Polycentric
 Geocentric
 Regiocentric
Types of Staffing Policy
Ethnocentric
 Strategic decisions are made at headquarters;
 Limited subsidiary autonomy;
 Key positions in domestic and foreign operations are held by headquarters’
personnel;
 PCNs manage subsidiaries.
Polycentric
 Each subsidiary is a distinct national entity with some decision-making autonomy;
 HCNs manage subsidiaries who are seldom promoted to HQ positions;
 PCNs rarely transferred to subsidiary positions.
Geocentric
 A global approach - worldwide integration;
 View that each part of the organization makes a unique contribution;
 Nationality is ignored in favor of ability:
 Best person for the job;
 Color of passport does not matter when it comes to rewards, promotion and
development.

Regiocentric
 Reflects a regional strategy and structure;
 Regional autonomy in decision making;
 Staff move within the designated region, rather than globally;
 Staff transfers between regions are rare.
Ethnocentric Approach
Advantages:
 To ensure new subsidiary complies with overall corporate objectives and policies
 Has the required level of competence
 Assignments as control
Disadvantages:
 Limits the promotion opportunities of HCNs, leading to reduced productivity and
increased turnover among the HCNs
 Longer time for PCNs to adapt to host countries, leading to errors and poor
decisions being made
 High cost
 Considerable income gap, high authority, and increased standard of living may
relate to lack of sensitivity
Polycentric Approach
Advantages:
 Employment of HCNs eliminates language barriers, avoids adaptation of PCNs,
reduces the need for cultural awareness training programs
 Employment of HCNs allows a multinational company to take a lower profile in
sensitive political situations
 Employment of HCNs is less expensive
 Employment of HCNs gives continuity to the management of foreign subsidiaries
(lower turnover of key managers)
Polycentric Approach
Disadvantages:
 Difficult to bridge the gap between HCN subsidiary managers and PCN managers
at headquarters ( language barriers, conflicting national loyalties, cultural differences)
 HCN managers have limited opportunities to gain experience outside their own
country
 PCN managers have limited opportunities to gain international experience
 Resource allocation and strategic decision making will be constrained when
headquarter is filled only by PCNs who have limited exposure to international assignment
Geocentric Approach
Advantages:
 Ability of the firm to develop an international executive team
 Overcomes the federation drawback of the polycentric approach
 Support cooperation and resource sharing across units
Disadvantage:
 Host government may use immigration controls in order to increase HCNs
employment
 Expensive to implement due to increased training and relocation costs
 Large numbers of PCNs, HCNs, and TCNs need to be sent across borders
 Reduced independence of subsidiary management
Regiocentric Approach
 Advantages:
 Allow interaction between executives transferred to regional headquarters from
subsidiaries in the region and PCNs posted to the regional headquarters
 Provide some sensitivity to local conditions
 Help the firm to move from a purely ethnocentric or polycentric approach to a
geocentric approach
 Disadvantages:
 Produce federalism at a regional rather than a country basis and constrain the firm
from taking a global stance
 Staff’s career advancement still limited to regional headquarters, not the parent
country headquarters
Parent-Country Nationals
Advantages
 Organizational control and coordination is maintained.
 Rising stars are given international experience.
 PCNs may be the best people for the specific job due to special skills and
experience.
 An assurance that the subsidiary will comply with company objectives & policies.
Disadvantages
 Promotional opportunities of HCNs are limited.
 Time and performance costs associated with adaptation to the host country.
 PCNs may impose an inappropriate HQ style.
 Compensation for PCNs and HCNs may differ.
Host-Country Nationals
Advantages
 Language and other barrier eliminated
 Reduced hiring costs
 Continuity of management
 Government policy may require hiring HCNs
 Possible increased morale because of increased career potential
Disadvantages
 Hiring of HCNs may encourage a federation of national rather than global units
 HCNs have limited career opportunity outside the subsidiary
 Control and coordination of HQ may be impeded
 Hiring HCNs limits opportunities for PCNs to gain foreign experience
Third-Country Nationals
Advantages
 Salary and benefit requirements may be lower than for PCNs.
 TCNs may be better informed than PCNs about host-country environment.
Disadvantages
 Transfers must consider national animosities.
 Host government may resent hiring TCNs.
 TCNs may not want to return to their own countries after assignment.

Reasons for International Assignments

 Position filling, e.g.
 Skills gap, launch of new endeavor, technology transfer
 Management development
 Training and development purposes, assisting in developing common corporate
values
 Organizational development
 Need for control, transfer of knowledge, competence, procedures and practices
Types of International Assignments
 Short term: up to 3 months
 Troubleshooting
 Project supervision
 A stopgap until a permanent arrangement is found
 Extended: up to 1 year
 May involve similar activities as short-term assignments
 Long term
 Varies from 1 to 5 years
 The traditional expatriate assignment
Non-standard Assignments
 Commuter assignments
 Rotational assignments
 Contractual assignments
 Virtual assignments

Roles of an Expatriate
 Agent of direct control
 Agent of socialization
 Network builder
 Boundary spanner
 Language node
 Transfer of competence and knowledge
Expatriate Selection
 Self-orientation:
 Strengthen self-esteem, self-confidence and mental well-being.
 Others-orientation:
 Enhance ability to interact with host-country nationals.
 Perceptual ability:
 The ability to empathize - understand why people in host-country behave the way
they do.
 Cultural toughness:
 How well an expatriate adjusts to a particular posting tends to be related to the
country of assignment.
The Role of Non-expatriates
 People who travel internationally yet are not considered expatriates as they do not
relocate to another country
 Road warriors, globetrotters, frequent fliers
 Much of international business involves visits to foreign locations, e.g.
 Sales staff attending trade fairs
 Periodic visits to foreign operations
A Glamorous Life
 International business travelers cite the positives as:
 Excitement and thrills of conducting business deals in foreign locations
 Life style (top hotels, duty-free shopping, business class travel)
 General exotic nature
But a High Level of Stress!
 Home and family issues
 Frequent absences
 Work arrangements
 Domestic side of position still has to be attended to
 Travel logistics
 waiting in airports, etc.
 Health concerns
 Poor diet, lack of sleep, etc.
 Host culture issues
 Limited cultural training
The Expatriate Problem
 Citizens of one country working in another.
 Inpatriates: expatriates who are citizens of a foreign country working in the home
country of their multinational employer.
 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).

Various Roles of Corporate HR

The Role of the Corporate HR Function
 Can we manage our people like a global product, e.g., the feasibility of:
 The concept of a global internal labor market
 Standardization of work practices and HR activities
 What HR matters require central control and what can be decentralized?
Conclusion
Conclusion(cont.)
Conclusion(cont.)

Recruiting and Selecting Staff for International Assignments

Objectives
 We will address the following issues:
 The myth of the global manager
 The debate surrounding expatriate failure
 Factors moderating intent to stay or leave the international assignment
 Selection criteria for international assignments
 Dual-career couples
 Gender issues
Why international staffing?
Motives behind international staffing are of two types:
 Company motives
 Fill- positions
 Management development
 Organizational development

 Individual motives
 To gain new job experience.
 Better compensation.
 Sense of obligation to company.
 Possibility of advancement upon return.
 Improved life style abroad.
 Exposure to new culture.
 To shoulder greater professional responsibility.
 Desire to escape from personal problems at home.
 Restricted career possibilities within parent company
International recruitment: Some issues
 Stereotypes, ignorance, assumptions and general lack of cross-cultural
competencies can mean that the right people may not always be given the
opportunities they deserve. Equipping staff with the skills to be able to identify and
manage cross- cultural differences in interviews is vital. Cross cultural differences in
areas such as body language, communication, self-presentation, gender, eye contact,
questioning and privacy can influence an intercultural interview

International recruitment: Some issues

 Cross-cultural factors play a significant role while recruiting abroad. Hiring
the right people is a tough task, particularly when they are located thousands of miles
away. Selectors need to be trained in and sensitized to the candidates’ culture. The
cultural differences must be taken into account while recruiting an individual.
Otherwise, good candidates may be rejected only because of an unaware interviewer
and hiring managers, and lack of effective communication between the interviewer
and interviewee

Recruitment & Selection

 US favors open form of recruitments and selection based on open and public
advertisements, hiring is generally based on competence and qualifications
 More traditional societies rely on social status, family background and ties,
wealth, education, race, religion, or connections to military or ruling elite
– Need to understand these factors
 Collectivist societies also place emphasis on background factors such as family,
school attended etc.
– The major rationale is to find someone who will be loyal and fit the
organization

Some Country Examples

 Korea – backdoor recruitment – role of high school and university

 Japan – graduates from the two major public and private universities dominate
business and public leadership
 Malaysia – favor Malays over Chinese and Indian population – bumiputra policy
– sons of the soil

Research Evidence for Recruitment

 More socialist countries (France, Norway, Spain, Slovenia etc.) – when looking
for jobs, people prefer to use methods such as: registering with public agencies, asking
friends or relatives
 More capitalist/individualist societies (US, Australia, Japan) – people prefer open
advertisements and applying directly for jobs

Selection criteria and techniques

Tung (1981) has identified the following criteria that contribute to success or failure
of an expatriate and thus, need to be considered while selecting them:
 Technical competency
 Personal attributes
 Ability to cope with environmental variables
 Family situation

Apart from the above-mentioned criteria, certain other criteria also need to be
considered in selection of expatriates:
 Country- specific requirements
 Company-specific requirement
 Language

Mendenhall and Oddou’s Model

 Self-oriented dimension
 Perceptual dimension
 Others-oriented dimension
 Cultural-toughness dimension

Using Traits and Personality Tests to Predict Expatriate Success

 Although some tests may be useful in suggesting potential problems, there may be
little correlation between test scores and performance
 Most of the tests have been devised in the United States, thus culture-bound
 In some countries, there is controversy about the use of psychological tests
( different pattern of usage across countries)
 Use of personality traits to predict intercultural competence is complicated by the
fact that personality traits are not defined and evaluated in similar way in different
cultures
The global manager
Myth 1: There is a universal approach to management.
Myth 2: People can acquire multicultural adaptability and behaviors.
Myth 3: There are common characteristics shared by successful international
managers.
Myth 4: There are no impediments to mobility.
The Employment Relationship
 The nature of the employment relationship
 Relational: broad, open-ended and long-term obligations
 Transactional: specific short-term monetized obligations
 The condition of the relationship
 Intact: when employee considers there has been fair treatment, reciprocal trust
 Violated: provoked by belief organization has not fulfilled its obligations

Organizational Commitment
 Affective component
 Employee’s attachment to, identification with and involvement in, the
organization
 Continuance component
 Based on assessed costs associated with exiting the organization
 Normative component
 Employee’s feelings of obligation to remain

Why consider the psychological contract?

 Nature, location and duration of an international assignment may provoke intense,
individual reactions to perceived violations
 Expatriates tend to have broad, elaborate, employment relationships with greater
emphasis on relational nature
 Expectations and promises underpin this relationship
Current Expatriate Profile
Expatriate Failure
 Definition: Premature return of an expatriate
 Under-performance during an international assignment
 Retention upon completion

Costs of Expatriate Failure

 Direct costs:
 Airfares
 Associated relocation expenses
 Salary and benefits
 Training and development
 Averaged $250,000 per early return
 Costs vary according to:
 Level of position
 Country of destination
 Exchange rates
 Whether ‘failed’ manager is replaced by another expatriate
Indirect Cost of Expatriate Failure
 Damaged relationships with key stakeholders in the foreign location
 Negative effects on local staff
 Poor labor relations
 Negative effects on expatriate concerned
 Family relationships may be affected
 Loss of market share

Expatriate failure:

 Expatriates’ families and spouses face isolation, loneliness and boredom in the
new country and suffer from emotional and physical problems.
 Reward package is not sufficient to survive and maintain life style.
 In host countries, expatriates have to face uncertainties, relate with people with
different culture, values and beliefs.
 Conflicting goals between the parent company, subsidiary or the joint venture
company result in to role conflict.
 Culture shock
 Inadequate career support and repatriation plan.
 Lack of support from headquarters.

The Phases of Adjustment

 The U-Curve is not normative
 The time period involved varies between individuals
 The U-Curve does not explain how and why people move through the various
phases
 It may be more cyclical than a U-Curve
 Needs to consider repatriation
Factors Moderating Expatriate Performance
 Inability to adjust to the foreign culture
 Length of assignment
 Willingness to move
 Work-related factors
 Psychological contract/employment relationship

Transfer archetypes

 Free agents:
 41% expatriates fall in this type
 Allegiance to host country firm is low
 Allegiance to parent firm is low
 Flexible, innovative and adventurous

This type of expatriates can be further divided into two sub-categories

 Hired gun free agent
 Plateaued-career free agent

Heart at home
 12% expatriates fall in this type
 Allegiance to host country firm is low
 Allegiance to parent firm is high
 Committed towards the company
 Determined to achieve the target

Going native
 15% expatriates fall in this type
 Allegiance to host country firm is high
 Allegiance to parent firm is low
 Empathetic towards host country culture
 Willing to communicate and mix with local people

Dual citizens
 32% expatriates fall in this type
 Allegiance to host country firm is high
 Allegiance to parent firm is high
 Open-minded and goal-oriented

The above-mentioned typology clearly indicates the following:

 Dual citizens are most effective and committed. They are most effective in
balancing the job demands with role clarity.
 An expatriate, over-committed to home organization (heart at home), will have
difficulty to adopt the host country practices and will not be able to manage host country
managers, effectively.
 If an expatriate is over-committed to the host country organization (going native),
overall integration, coordination and control becomes difficult within the MNC.
 The largest group of expatriates falls into the category of free agents, who have
low commitment for both the host and home country organizations.
Solutions to the Dual-career Challenge
 Alternative assignment arrangements
 Short-term
 Commuter
 Other (e.g. unaccompanied, business travel, virtual assignments)
 Family-friendly policies
 Inter-company networking
 Job-hunting assistance
 Intra-company employment
 On-assignment career support

Summary
Summary (cont.)
Summary (cont.)
Summary
 It is also apparent that staff selection remains critical. Finding the right people to
fill positions, particularly key managers – whether PCN, TCN or HCN – can determine
international expansion.
 However, effective recruitment and selection are only the first step.
 We will explore in the next chapter that maintaining and retaining productive staff
are equally important.

Summary (cont.)

Training and Development

Dr Subhash Gupta
Objectives
 Training aims to improve employees’ current work skills and behavior, whereas
development aims to increase abilities in relation to some future position or job.
 In this lecture, we examine how the international assignment is a vehicle for both
training and development, as reflected in the reasons why international assignments
continue to play a strategic role in international business operations.
 The role of training in preparing and supporting personnel on international
assignments is also considered. We examine the following issues:
 (cont.)
Objectives (cont.)
 The role of training in supporting expatriate adjustment and on-assignment
performance.
 Components of effective pre-departure training programs such as cultural
awareness, preliminary visits and language skills. Relocation assistance and training for
trainers are also addressed.
 The effectiveness of pre-departure training.
 The developmental aspect of international assignments and its relation to
international career paths.
 Training and developing international management teams.
 (cont.)
BACKDROP OF INTERNATIONAL TRAINING
The key people who need to be trained are:
 Expatriates
 Spouses
 Children
Requirements and goals of expatriate training:
 To maximize the cultural sensitivity of relocating employees, in preparing them to
conduct business with colleagues from other cultures.
 To learn how to avoid misunderstandings based on cultural differences.
 To learn how to communicate verbally and non-verbally with colleagues in other
cultures.
 To understand the role of learning and communication styles in work, everyday
living, and telling situations, and how to work effectively with people with differing
styles.
 To understand the historical, political, educational, and economic background of
the host country well enough to interpret current news events and economic policies and
social problems.
 To learn to anticipate the factors leading to culture shock and how to manage it,
for oneself and one's family.
 Role-based training inputs for ensuring due performance of the jobs and
achievement of business goals in line with the company’s expectations.

CURRENT SCENARIO OF TRAINING & DEVELOPMENT OF

INTERNATIONAL STAFF
 International expertise can be learned only by personal experience abroad.
Cultural factors are not so important in gaining success in the international assignments.
 The pre-placement time period for the expatriates is very short and in-depth
training cannot be provided.
 The HR personnel of the parent country may analyze the international
assignment’s requirements incorrectly.
 The assignments are short term in nature and many organizations, therefore, feel
spending money on training is an undue expenditure.

Some problem which may arise due to lack of effective preparation before taking up of a
foreign assignment are:
 The manager may be incompetent to shoulder the responsibilities of the
assignment.
 The unwillingness to work abroad.
 The personality and the emotional maturity of the manager may
prove inadequate.
 The manager may find it very difficult to adapt to the new environment
(as the cultural differences can be very high)
 There can be family-related issues (as the spouse would find it very
inconvenient to adapt to the new culture)
International Assignments as a Training and Development Tool
 Expatriates are trainers
 Expatriates show how systems and procedures work, ensure adoption, and
monitor performance of HCNs
 International assignments are a form of job rotation to gain a broader perspective
– management development, and to assist in developing a pool of capable global
operators.
Components of Effective Pre-departure Training
 Cultural awareness programs
 Preliminary visits
 Language training
 Practical assistance
 Training for the training role
 TCN and HCN expatriate training
 Non-traditional assignments and training

TRAINING RIGOR
The extent of effort by trainees and trainers required to prepare the trainees for
expatriate positions
LOW RIGOR TRAINING
 Short time period
 Lectures
 Videos on local culture
 Briefings on company operations company operations
HIGH RIGOR TRAINING
 Lasts over a month
 Experiential learning
 Extensive language training
 Often includes interactions with host country nationals

Levels of training:
 First Level: Learning about the host country – Their culture, language, politics,
business, geography, religious values and history. (Through seminars, videos, meeting
with citizens of the country before assignment begins.)
 Second Level: Understanding the requirements of the assignment – technical
skills, managerial knowledge.
 Third Level: Preparation for the new job: preparing for the new job at the new
location.
 Fourth Level: Providing assistance –to adjust and adapt to the new environment.
 Fifth Level: Re-entry – contact with family, visit to home during vacations.

Language Training
 The role of English as the language of world business
 Host country-language skills and adjustment
 Knowledge of the corporate language
Practical Assistance
 Information that assists relocation
 Assistance in finding suitable accommodation and schooling
 Further language training
 Makes an important contribution to adaptation of expatriate and accompanying
family members to the host location
Effectiveness of Pre-departure Training
 Limited data on how effective such training is and what components are
considered most essential:
 Use of mixture of methods makes evaluation of which method is most effective
difficult to isolate
 Large diversity of cultures involved
 What works for one may not work for another
 Complex jobs in multiple cultural contexts
 Integrated cross-cultural training exhibited cultural proficiency earlier and
appeared to have greater job satisfaction than those with lesser training.
Developing Staff through International Assignments
 Management Development
 Individuals gain international experience which assists career progression
 Multinational gains through having a pool of experienced operators on which to
draw for future international assignments
Developing Staff through International Assignments
 Organizational Development
 Accumulating a stock of knowledge, skills and abilities
 Developing a global mindset
 Expatriates as agents of direct control and socialization in the transfer of
knowledge and competence.

How international teams benefit the multinational

 Fosters innovation, organizational learning and transfer of knowledge
 Assists breaking down of functional and national boundaries
 Encourages diverse inputs
 Assists in developing broader perspectives
 Develops shared values

Summary
Summary (cont.)
Summary (cont.)
GLOBAL EXPATRIATE WEBSITES
 Expat Communities, www.expatcommunities.com, is a worldwide directory
with listings of useful resources, online forums, organizations, etc. for the expatriate.
 Expat Exchange, www.expatexchange.com, is one of the most extensive
expatriate sites online, providing a wealth of resources and articles for expatriates
worldwide.
 Expat Expert, www.expatexpert.com, provides useful articles and information
for the expatriate, resources about going and living abroad, as well as information for
returning home.
 Expat Focus, www.expatfocus.com, provides news, information, and advice for
the expatriate; also maintains an online community through forums and blogs. Maintains
the Yahoo discussion group “Expat Focus,” groups.yahoo.com/group/ExpatFocus.