Chapter 3

IHRM: Sustaining International Business Operations

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Chapter Objectives
The aim of this chapter is to establish the role of HRM in sustaining international business operations and growth. We will cover the following:
Issues related to various approaches to

staffing foreign operations; Reasons for using international assignments: position filling, management development and organizational development;

(cont.)

Chapter Objectives (cont.)

Various types of international assignments:
Standard assignments: Short-term, extended, and longer-term; Non-standard arrangements: Commuter, rotator, contractual, and virtual.

The role of expatriates and non-expatriates (international business travellers) in supporting international business activities
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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
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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.
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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 & hiring.

Geocentric Staffing Requirements

Regiocentric
Reflects a regional strategy and structure; Regional autonomy in decision making; Staff may move outside their countries but

only within the designated region, rather than globally; Staff transfers between regions are rare (Asia to Europe)

Ethnocentric Approach
Advantages:
To ensure new subsidiary complies with overall corporate objectives and policies Lack of qualified host country nationals Assignments as control

Disadvantages:
Limits the promotion opportunities of HCNs, leading to reduced productivity and increased turnover among the HCNs Takes Longer time for PCNs to adapt to host countries, leading to errors and poor decisions being made High cost Considerable income gap, high authority, is viewed unjustified by HCNs.
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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)

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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 Host government may dictate that key managerial positions are filled by its nationals.
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Geocentric Approach
Advantages:
Increases the ability of

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
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the firm to develop an international executive team globally Overcomes the federation drawback of the polycentric approach Support cooperation and resource sharing across units

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, since local subsidiaries are staffed almost totally by HCNs. 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
Staffs career advancement still limited to regional headquarters, not the parent country headquarters

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Parent-Country Nationals
Advantages
Organizational control and

Disadvantages
Promotional opportunities of

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.

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.

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Host-Country Nationals
Advantages
Language and other barrier

Disadvantages
Hiring of HCNs may

eliminated Reduced hiring costs Continuity of management Government policy may require hiring HCNs Possible increased morale because of increased career potential

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
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Third-Country Nationals
Advantages
Salary and benefit

Disadvantages
Transfers must consider

requirements may be lower than for PCNs. TCNs may be better informed than PCNs about host-country environment.

national animosities. Host government may resent hiring TCNs. TCNs may not want to return to their own countries after assignment.

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Reasons for International Assignments

Position filling, e.g.

Skills gap, launch of new endeavor, technology transfer Training and development purposes, assisting in developing common corporate values

Management development

Organizational development

Here strategic objectives of the operation come

into play:

Need for control, transfer of knowledge, competence, procedures and practices

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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

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Non-standard Assignments
Commuter assignments Rotational assignments Contractual assignments Virtual assignments
Some of these arrangements assist in overcoming the high cost of international assignments but are not always effective substitutes for the traditional expatriate assignment.

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Non-standard Assignments (Contd)

Commuter Assignment

International Commuter assignments are defined as ones where the employee commutes from home country to a place of work in another country, usually on a weekly or biweekly basis, while the family remains at home.
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Concerns about using Commuters

As (PricewaterhouseCoopers, 2000) reports

pointed out:
There are real concerns about the viability of

commuter arrangements over an extended period of time due to the build up of stress resulting from intensive travel commitments and the impact on personal relationship

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Rotational Assignment
Employee commutes from the home

country to a place of work in another country for a short, set period followed by a break in the home country.
For instance, Oil companies rigs
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Contractual Assignments
CA are used in the situations where employees

with specific skills vital to an international project are assigned for a limited duration of 612 months.
Research & Development (R&D) is one area

that is using multinational project teams and lends itself to short term contractual assignments.
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Virtual Assignments
Within VA employees are not

relocate to a host location but manages from home base, international responsibilities for part of the organization in another country.

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Factors Influencing Virtual Assignments

Role conflict, dual allegiance (loyalty) and identification issues Between the person in the home location and the virtual group in the foreign location. i.e. how much time should be devoted to the virtual work responsibilities versus the real work Interpersonal relations Much of the work is done through electronic media, cultural misunderstanding can increase, and needs high skills of using electronic equipments, so face to face meeting could still be required

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Roles of an Expatriate
Agent of direct control Agent of socialization Network builder Boundary spanner Language node

Transfer of competence and

knowledge
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Roles of an Expatriate
Agent of direct control
The use of staff transfers can be regarded as a

bureaucratic control mechanism, where the primary role is that of ensuring compliance through direct supervision.

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Roles of an Expatriate (contd)

The expatriate as an agent of socialization This role is related to the use of corporate culture as an informal control mechanism. There is an implicit expectation that expatriates assist in the transfer of shared values and beliefs. However there has been little empirical investigation as to how effective expatriate have been as agent of socialization
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Roles of an Expatriate (contd)

As a Network Builders International assignments are viewed as a way of fostering interpersonal linkages that can be used for control and communication purposes.

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Roles of an Expatriate (contd)

Expatriate as boundary spanners
BS refers to activities, such as gathering information, that bridge internal and external organizational contexts. Expatriate act as a boundary spanners because they can collect host-country information, act as representatives of their firms in the host country and can influence agents. For instance attending social gathering at a foreign embassy..
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Roles of an Expatriate (contd)

Transfer of competence and knowledge

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The Role of Non-expatriates

People who travel internationally yet are not considered expatriates

as they do not relocate to another country. That is, non- expatriate are international business travelers, persons for whom a large proportion of their role involves constant international visits to foreign markets, subsidiary units Also known as 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 Visits to deal with host country government officials, suppliers
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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 (foreign) nature
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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.

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Chapter Summary
This chapter has expanded on the role of IHRM in sustaining international business operations. We have:
Looked at the various approaches to staffing

international operations ethnocentric, polycentric, geocentric and regiocentric examining their advantages and disadvantages and factors that may determine the choice of these options. Considered the reasons for using international assignments: position filling, management development and organization development.
(cont.)
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Chapter Summary (cont.)

Discussed the various types of international assignments:

short, extended and long-term (traditional); and nonstandard forms such as commuter, rotational, contractual and virtual assignments. Examined the various roles of the expatriate: as an agent for direct control, as an agent for socialization, as network builders, as boundary spanners and as language nodes. These various roles of the expatriate help to explain why expatriates are utilized and illustrates why international assignments continue to be an important aspect of international business from the organizations perspective.
(cont.)
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Chapter Summary (cont.)

Recognized that non-expatriates are also critical to

international business operations. International business travellers present their own challenges, such as the effect of frequent absences on family and home life, the possible negative health effects and other stress factors. The management of such individuals, however, does not appear to fall within the domain of the HR department.

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