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International Management

McGraw-Hill/Irwin International Management

Phatak, Bhagat, and Kashlak

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

Chapter 16

International Human Resources Management

McGraw-Hill/Irwin International Management

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


Learning Objectives
Understand the various approaches that multinational and global organizations undertake for managing and staffing subsidiaries in various parts of the world. Distinguish between various functions of international human resources management. Identify the various strategies for selecting staff for foreign assignments. Explain how training programs prepare managers for overseas assignments. Understand the various schemes for compensation and benefits used by multinational and global organizations.


Learning Objectives (contd.)

Identify the issues inherent in repatriation, and why multinational and global companies need to address issues concerning managers returning from overseas assignments. Understand that labor relations practices differ in each country, and how these differences affect multinational and global companies.


Chapter Topics
What is International Human Resources Management? Managing and Staffing Subsidiaries Major IHRM functions Selecting Expatriates Managing Expatriates International Human Resource Management and Competitive Advantage


Functions of International Human Resources Management

1. Management of human resources in global corporations, including issues of expatriation and repatriation 2. Implementing corporate global strategy by adapting appropriate human resources management practices in different national, economic, and cultural environments 3. Adopting labor relation practices in each subsidiary that matches local requirements


Major Approaches to Managing and Staffing Subsidiaries

The company uses the approach developed in the home country, and the values, attitudes, practices, and priorities of headquarters determine the human resources policies and practices

The company considers the needs of the local subsidiary when formulating human resources policies and practices

The company considers needs of an entire region when developing human resources policies and practices

Global or Geocentric
The companys priority is the optimal use of all resources, including human resources, and local or regional considerations are not considered important for the success of the corporate strategy


Factors to be Considered in the Ultimate Selection of a IHRM Approach

1. National concerns 2. Economic concerns 3. Technological concerns 4. Organizational concerns 5. Cultural concerns


Ex. 16-1: Strategic Approach, Organizational Concerns, and IHRM Approach

Orientation Aspects of the Enterprise
Primary strategic orientation/stage Perpetuation (recruiting, staffing, development) Complexity of organization Authority; decision-making Evaluation and control Rewards Communication; information flow Geographic identification

International People of home country developed for key positions everywhere in the world Complex in home country, simple in subsidiaries High in headquarters Home standards applied to people and performance High in headquarters; low in subsidiaries High volume of orders, commands, advice to subsidiaries Nationality of owner

Multidomestic People of local nationality developed for key positions in their own country Varied and independent Relatively low in headquarters Determined locally Wide variation; can be high or low rewards for subsidiary performance Little to and from headquarters; little among subsidiaries Nationality of host country


Ex. 16-1(contd.)

Orientation Regiocentric
Regional Regional people developed for key positions anywhere in the region Highly interdependent on a regional basis High regional headquarters and/or high collaboration among subsidiaries Determined regionally Rewards for contribution to regional objectives

Aspects of the Enterprise

Primary strategic orientation/stage Perpetuation (recruiting, staffing, development) Complexity of organization

Transnational Best people everywhere in the world developed for key positions everywhere in the world Global Web: complex, independent, worldwide alliances/network Collaboration of headquarters and subsidiaries around the world Globally integrated Rewards to international and local executives for reaching local and worldwide objectives based on global company goals

Authority; decision-making

Evaluation and control Rewards

Communication; information flow

Little to and from corporate HQ, but may be high to and from regional HQ and among countries
Regional company

Horizontal; network relations

Geographic identification

Truly global co., but glocal


Major IHRM Functions

1. Recruitment and selection 2. Performance evaluation 3. Compensation and benefits 4. Training and development 5. Labor relations Also, management of expatriate workers


Terms Used in IHRM

Recruitment is the process of attracting a pool of qualified applicants for available positions Selection is the process of choosing qualified applicants from the available candidates and ensuring that the skills, knowledge, and abilities of the selected employees match the requirements of the positions Performance Evaluation is the process of appraising employees job performance The Compensation and Benefit function of HRM is designed to develop uniform salary systems and other forms of remuneration, such as health insurance, pension funds, vacation, and sick pay


Terms Used in IHRM (contd.)

The Training and Development function involves planning for effective learning processes, organizational development, and career development The Labor Relations function is designed to assist managers and workers determine their relationships within the workplace


Classifying Employees
1. Parent country national (PCN): the nationality of the employee is the same as that of the headquarters of the global organization 2. Host country national (HCN): the employees nationality is the same as that of the subsidiary 3. Third country national (TCN): The employees nationality is neither that of the headquarters or of the local subsidiary


Ex. 16-2: Impact of Culture on Training and Development Practices

United States/Canada
HRD Roles Trainer and trainee are equals; trainees can and do challenge trainer, trainer can be informal and casual Trainer determines objectives with input from trainees and their managers, trainees openly state needs and want to achieve success through learning Programs should be practical and relevant, using a variety of methodologies with lecturing time limited Hold training in comfortable, economical location, trainee selection based on perceived needs of organization and individual

East Asia
Trainees have great respect for trainer who should behave, dress, and relate in a highly professional, formal manner Trainer should know what trainees need, admitting needs might represent loss of face to trainees Materials should be orderly, well organized and unambiguous, trainees most accustomed to lecture, note taking, and limited questioning Quality of program may be judged on the basis of quality of location and training materials, ceremonies with dignitaries, certificates, plaques, and speeches taken as signs of value of program

Analysis and Design

Development and Delivery

Administration and Environment


Ex. 16-2 (contd.)

Middle East/North Africa
HRD Roles Trainer highly respected, trainees want respect and friendly relation ship, formality is important Difficult to identify needs because it is improper to speak of others faults, design must include time for socializing, relationship building, and prayers Need adequate opportunity for trainer and trainees to interact, rely on verbal rather than written demonstrations of knowledge acquired, avoid paper exercises and role playing The learning process should be permeated with flourishes and ceremonies, program should not be scheduled during Ramadan, the month of fasting

Latin America
Preference for a decisive, clear, charismatic leader as trainer, trainees like to be identified with and loyal to a successful leader Difficult to get trainees to expose weaknesses and faults, design should include time for socializing

Analysis and Design

Development and Delivery

Educational system relies on lecture and has more theoretical emphasis, training should be delivered in the local language

Administration and Environment

Value/importance judged by location, which dignitaries invited for the ceremonies, and academic affiliation of trainer, time is flexible: beginning or ending at a certain time not important


Ex. 16-3: Union Membership in Selected Countries

Argentina Brazil Canada Chile China Costa Rica Egypt France Germany Greece Italy Japan Malaysia Mexico New Zealand Spain United States Zimbabwe

Percentage of Union Membership

28% 13-30% (estimated) 29.5% 12.3% 92% 15% 50% 8-10% 39.5% 30% 15% 24.2% 9.1% 25-30% 34.3% 11% 15.8% 17%

1993 1993 1993 1993 1993 1993 1992 1993 1992 1993 1992 1993 1992 1991 1993 1992 1992 1993


Ex. 16-4: Effects of Culture Shock on Adjustment

7 6 5.5 Degree of Adjustment





Culture Shock





10-12 13-24 Time in Months


46-48 49+


Types of Compensation Systems

Headquarters Salary System
Headquarters pay scale plus differentials. The salary for the same job at headquarters determines the base salary of the home country national. The differential can be a positive addition to an expatriates salary, or it can be a negative allowance to account for the extra benefits that might be associated with the particular overseas placement

Citizenship Salary System

The managers salary is based on the standard for the country of his or her citizenship or native residence. An appropriate differential is then added, based on comparative factors between the two countries


Suggestions for Policies for Managing DualCareer Expatriates

Frequent visitation trips of the family or the expatriate to prevent the pain of separation from becoming too intense Generous allowance for long distance telephone calls and other costs of communication Seek employment opportunities for the spouse within the company or in the local area, if the spouse is willing to quit his or her job in the home country to be with the married partner Making connections with other global companies for employment of spouses


Repatriation is the term given to the return of the home country manager. Reasons for repatriation: The time of the overseas assignment is up Childrens education Unhappy with the assignment Family unhappiness Failure


Key Terms and Concepts

International human resources management Ethnocentric staffing approach Polycentric staffing approach Regiocentric staffing approach Geocentric staffing approach Performance evaluation Expatriate Repatriation Culture shock