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Yang 1
Chapter 3
IHRM: Sustaining International
Business Operations
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Chapter Objectives
Issues related to various approaches to staffing
foreign operations;
Reasons for using international assignments:
position filling, management development and
organizational development;
(cont.)
The previous two chapters have concentrated on the global
environment and organizational contexts. We now focus on
the managing people aspect. The aim is to establish the
role of HRM in sustaining international business operations
and growth. We will cover the following:
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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
The role of the corporate HR functions
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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.
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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.
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Geocentric Staffing Requirements
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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.
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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
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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
Resource allocation and strategic decision
making will be constrained when headquarter
is filled only by PCNs who have limited
exposure to international assignment
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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
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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
Staffs career
advancement still limited
to regional headquarters,
not the parent country
headquarters
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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.
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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
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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.
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Determinants of IHRM Approaches
and Activities
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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
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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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Factors Influencing Virtual Assignments
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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

A Simple Management Network
G
B
C
D
A F
E
Informal contacts between
managers within a MNE
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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
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
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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 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.
Host culture issues
Limited cultural training
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Centralized HR
Companies
Decentralized HR
Companies
Transition HR
Companies
Large well-resourced
HR departments
Small HR
departments
Medium-sized HR
departments
Key role: Managing all
high-grade management
positions worldwide
Key role: Managing
elite corporate
managers
Key role: Management
and development of senior
managers and expatriates
Key activities:
Planning international
assignments and
performance
management globally,
identifying high-potential
staff
Key activities:
Influencing operating
units to support
international
assignments,
supporting
decentralized HR
Key activities:
Persuading divisional
managers to release key
staff using informal and
subtle methods, strategic
staffing.
Source: Based on H. Scullion and K. Starkey, in Search of the Changing Role of the Corporate Human Resource Function in the
International Firms, International Journal of Human Resource Management, V 11, N 6 (2000) pp. 1061-1081.
Various Roles of Corporate HR
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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?
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Chapter Summary
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.)
This chapter has expanded on the role of IHRM in
sustaining international business operations. We have:
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Chapter Summary (cont.)
Discussed the various types of international assignments:
short, extended and long-term (traditional); and non-
standard 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.
Looked at the role of the corporate HR function as
the firm grows internationally, building on sections
from Chapters 1 and 2.