Chapter 3

IHRM: Sustaining International

Business Operations

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Chapter Objectives
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:
Issues
Issuesrelated
relatedto
tovarious
variousapproaches
approachesto
tostaffing
staffing
foreign
foreignoperations;
operations;
Reasons
Reasonsfor forusing
usinginternational
internationalassignments:
assignments:
position
positionfilling,
filling, management
managementdevelopment
developmentand
and
organizational
organizationaldevelopment;
development;
(cont.)
(cont.)
IBUS 618 Dr. Yang 2
Chapter Objectives (cont.)

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

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

The
The role
role of
of the
the corporate
corporate HR
HR functions
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: Disadvantages:
To ensure new subsidiary Limits the promotion opportunities
complies with overall of HCNs, leading to reduced
corporate objectives and productivity and increased
policies turnover among the HCNs
Has the required level of Longer time for PCNs to adapt to
competence host countries, leading to errors
Assignments as control 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
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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
13
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
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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
14
Parent-Country Nationals
Advantages
Advantages Disadvantages
Disadvantages
Organizational
Organizationalcontrol
controland
and Promotional
Promotionalopportunities
opportunities
coordination
coordinationisismaintained.
maintained. of
ofHCNs
HCNsare
arelimited.
limited.
Rising
Risingstars
starsare
aregiven
given Time
Timeand
andperformance
performance
international
internationalexperience.
experience. costs
costsassociated
associatedwith
with
PCNs adaptation to the host
PCNsmaymaybe bethe
thebest
best adaptation to the host
people country.
peoplefor
forthe
thespecific
specificjob
job country.
due
duetotospecial
specialskills
skillsand
and PCNs
PCNsmay
mayimpose
imposean an
experience.
experience. inappropriate
inappropriateHQHQstyle.
style.
An
Anassurance
assurancethat
thatthe
the Compensation
Compensationfor forPCNs
PCNs
subsidiary
subsidiarywill
willcomply
complywith
with and
andHCNs
HCNsmaymaydiffer.
differ.
company
companyobjectives
objectives&&
policies.
policies.

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Host-Country Nationals
Advantages
Advantages Disadvantages
Disadvantages
Language
Languageand
andother
otherbarrier
barrier Hiring
Hiringof
ofHCNs
HCNsmay
may
eliminated
eliminated encourage
encourageaafederation
federationofof
Reduced national
nationalrather
ratherthan
thanglobal
Reducedhiring
hiringcosts
costs global
units
units
Continuity
Continuityofofmanagement
management
Government
HCNs
HCNshavehavelimited
limitedcareer
career
Governmentpolicy
policymay
may opportunity
require opportunityoutside
outsidethe
the
requirehiring
hiringHCNs
HCNs subsidiary
Possible subsidiary
Possibleincreased
increasedmorale
morale Control
because
Controland
andcoordination
coordinationof of
becauseof ofincreased
increased HQ
career
careerpotential
potential HQmay
maybe beimpeded
impeded
Hiring
HiringHCNs
HCNslimits
limits
opportunities
opportunitiesfor forPCNs
PCNstoto
gain
gainforeign
foreignexperience
experience
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Third-Country Nationals

Advantages
Advantages Disadvantages
Disadvantages
Salary
Salaryand
andbenefit
benefit Transfers
Transfersmust
mustconsider
consider
requirements
requirementsmay
maybebe national
nationalanimosities.
animosities.
lower
lowerthan
thanfor
forPCNs.
PCNs. Host
Hostgovernment
government may may
TCNs
TCNsmaymaybe
bebetter
better resent
resent hiring
hiringTCNs.
TCNs.
informed
informedthan
thanPCNs
PCNs TCNs
TCNsmay maynotnotwant
wantto
to
about
abouthost-country return
host-country return to
totheir
theirown
own
environment.
environment. countries
countriesafter
after
assignment.
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
Some ofof these
these arrangements
arrangements assist
assist in
in overcoming
overcoming
the
the high
high cost
cost of
of international
international assignments
assignments but but are
are
not
not always
always effective
effective substitutes
substitutes for
for the
the traditional
traditional
expatriate
expatriate assignment.
assignment.
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Factors Influencing Virtual Assignments

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Roles of an Expatriate
A Simple Management Network
Agent of direct control
Agent of socialization
G E
Network builder B
Boundary spanner C D
Language node
Transfer of competence
A F
and knowledge
Informal
Informalcontacts
contactsbetween
between
managers
managerswithin
withinaaMNE
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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 Various Roles of Corporate HR
Centralized HR Decentralized HR Transition HR
Companies Companies Companies
Large well-resourced Small HR Medium-sized HR
HR departments departments departments
Key role: Managing all Key role: Managing Key role: Management
high-grade management elite corporate and development of senior
positions worldwide managers managers and expatriates
Key activities: Key activities:
Key activities:
Planning international Influencing operating
Persuading divisional
assignments and units to support
managers to release key
performance international
staff using informal and
management globally, assignments,
subtle methods, strategic
identifying high-potential supporting
staffing.
staff decentralized HR
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.

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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
This chapter has expanded on the role of IHRM in
sustaining international business operations. We have:
Looked
Lookedat
atthe
the various
variousapproaches
approachesto
tostaffing
staffing
international
internationaloperations
operations ethnocentric,
ethnocentric, polycentric,
polycentric,
geocentric
geocentricand
andregiocentric
regiocentricexamining
examiningtheir
their
advantages
advantagesandanddisadvantages
disadvantagesand and factors
factorsthat
thatmay
may
determine
determinethe
thechoice
choiceofofthese
theseoptions.
options.
Considered
Consideredthethe reasons
reasonsfor forusing
using international
international
assignments:
assignments:position
positionfilling,
filling,management
management
development
development andandorganization
organizationdevelopment.
development.
(cont.)
(cont.)
IBUS 618 Dr. Yang 29
Chapter Summary (cont.)
Discussed
Discussedthe
thevarious
varioustypes
typesof
ofinternational
internationalassignments:
assignments:
short,
short,extended
extendedand andlong-term
long-term(traditional);
(traditional);and
andnon-
non-
standard
standardforms
formssuch
suchas ascommuter,
commuter,rotational,
rotational,contractual
contractual
and
andvirtual
virtualassignments.
assignments.
Examined
Examinedthe thevarious
variousroles
rolesofofthe
theexpatriate:
expatriate:as asan
anagent
agent
for
fordirect
directcontrol,
control,as
asananagent
agentforforsocialization,
socialization,asasnetwork
network
builders,
builders,as
asboundary
boundaryspanners
spannersand andasaslanguage
languagenodes.
nodes.
These
Thesevarious
variousroles
rolesofofthe
theexpatriate
expatriatehelp helpto
toexplain
explainwhy
why
expatriates
expatriatesareareutilized
utilizedand
andillustrates
illustrateswhy whyinternational
international
assignments
assignmentscontinue
continueto tobebean
animportant
importantaspect
aspectof of
international
internationalbusiness
businessfrom
fromthe
theorganizations
organizationsperspective.
perspective.
(cont.)
(cont.)

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Chapter Summary (cont.)
Recognized
Recognizedthat
that non-expatriates
non-expatriates are
arealso
alsocritical
criticalto
to
international
internationalbusiness
business operations.
operations. International
International
business
businesstravellers
travellerspresent
present their
their own
ownchallenges,
challenges,
such
suchas asthe
theeffect
effectof of frequent
frequent absences
absenceson on family
familyand
and
home
homelife,
life,the
thepossible
possiblenegative
negativehealth
healtheffects
effectsand
and
other
otherstress
stressfactors.
factors.TheThemanagement
management of of such
such
individuals,
individuals,however,
however, does doesnot
notappear
appear to
tofall
fallwithin
within
the
thedomain
domainof of the
theHRHRdepartment.
department.
Looked
Lookedat atthe
the role
roleof
ofthethecorporate
corporateHRHRfunction
function asas
the
thefirm
firm grows
growsinternationally,
internationally,building
buildingon
onsections
sections
from
fromChapters
Chapters11and and2. 2.
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