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Chapter 8

International Human

Copyright 1998 Prentice-Hall Inc. 10-1

Ireka Construction Berhad
• The construction firm is located in Malaysia.
• It had started as a family proprietorship where key
management positions where staffed w/family
• As the firm grew, and took on more complex
projects, it transitioned to a public listed firm
• Family members still held controlling share of the
stock, but shared the management positions with
outside professionally trained managers
Managing in the decade of the 90’s
• Vision was to incorporate new ideas, but adopt
them to the culture of the firm & nation.
– Place emphasis on staffing with the most qualified
people whether from the family or outside
– Long term managers had a hands-on style, with
emphasis on close monitoring & family type cohesion
– Tensions developed between the new professional
employees and existing staff members as the policy of
promoting the most qualified was put in place
– Management sought to reassure the old employees
while moving to professionalize the firm
Change initiatives
• Clarify the organizational arrangements
• Improve communications
• Form a top management cross functional board
“Projects Operations Supervisory Board”
• Form a “head of divisions” forum to discuss
issues once a month
• Clarify the vision of the future for the firm
• Improve motivation through a stock option plan
• Coordinate human resource practices
Human resource department
• Shift the human resource functions to a human
resource staff group charged with developing
common approaches
– Recruitment & selection
– Training
– Performance evaluation
– Compensation
– Disciplinary procedures
• Retain management control through a HR
source committee that included directors &
department heads
Emerging problems
Company going in the right direction, however, a set of
– Still a family run business, conservative & tightly controlled
– Slow decision process w/overlapping responsibilities & authority
– Interference by top management that undermined sound practice
– Lack of transparency
– Confusion about goals & direction of the firm
– Lack of tie between performance & rewards
– Increasing workload
Managing the transition
• What are the obstacles for transforming
the firm to an flexible, efficient and/or an
innovative firm?
• What role does culture play in supporting
and inhibiting the change process?
• Can these changes be realized during a
down turn in the Malaysian economy?
International Human Resource Management (IHRM)

• The management of human

resources in global corporations
• The management of expatriate
• The comparison of human resource
management (HRM) practices in a
variety of different countries

Copyright 1998 Prentice-Hall Inc. 10-4

Employee selection practices
• Classifying employees
– Parent country national (PCNs)
– Host country national (HCNs)
– Third country national (TCNs)
• Implications of classification—compensation, benefits,
HRM staffing, managing & strategy approaches
• Ethnocentric—centralized in home country
• Polycentric
• Decentralized to regional or local units
• Few transfers or promotion of locals to headquarters
• Regiocentric
• Centralized on a regional basis
• Promotion within region, but seldom between region
& headquarters
• Geocentric
• Global integration
• Global staffing and promotion
• Integrated strategies based upon interaction with
regional units
Factors influencing HRM strategy
• Corporate International Strategy
• Level of Development in Foreign
• Diversity of product or service
• Organizational life cycle & experience

Copyright 1998 Prentice-Hall Inc. 10-6

Factors influencing HRM strategy
• Local political & legal constraints on staffing &
tax provisions
• Judgments on quality of local personnel
• Level of technology and quality issues
• Organizational life cycle & age/ history of the
• Culture parochialism of the organization & nation
• Costs of localized vs. common approach
HRM functions in a global setting
• Recruitment methods-headquarters vs. local practices
• Selection criteria:
– Ability, education, experience, . . . (achievement focus)
– Age, gender, religion, sex, . . . (ascriptive focus)
• Performance evaluation
– Centralized or decentralized policies & practices
• Compensation & benefits
– Local market conditions vs. common compensation
• Labor relation strategies
– Centralized or decentralized
Training and Development
• Training & development practices
– Delivery—centralized or decentralized
– Range of assignments—Limited or extensive global
• Planned
– Individual Learning,
– Organization Development, and
– Career Development
• Delivery of Programs Worldwide
• Developing Globally Minded Managers

Copyright 1998 Prentice-Hall Inc. 10-9

Managing expatriates
• The demands: Job competency (managerial
& technical), adjustment to the culture, &
adjustment of spouse /children
• Problem of “failures” & “brownouts”
• Failure rates vary among sponsoring
countries-US, 10 to 40%; European, 5-
15%;Japan, around 5%.
Managing expatriates
• Selection criteria
– Technical skills
– Ability to handle a new environment
• Organizational personnel adaptability
• Spouse & family members considerations
• Training
– Cross cultural training
– Job novelty orientation
Selection criteria
• Managerial & technical skill
– Success in home settings is problematical
• Ability to acclimate rapidly
– Previous international experience is problematical
– Nature & degree of cross cultural training
• Candidate training
• Family orientation
– Orientation to “live within the box” or expand it systematically
Cross-Cultural Training
Explain the major aspects of the host country
● Cultural Briefings culture, including customs, traditions, every day

Explain the history, geography, economy,

politics, and other general information about the
● Area Briefings host country and region.

Portray a real-life situation in business or

● Cases personal life to illustrate some aspect of living
or working in the host culture.

Copyright 1998 Prentice-Hall Inc. 10-12

Cross-Cultural Training Methods (cont.)
● Role Playing
Allows the trainee to act out a situation that he
or she might face in living or working in the
host country.

● Culture Provides a written set of situations that the

Assimilator trainee might encounter in living or working in
the host country. Trainee selects one from a set
of responses to the situation and is given
feedback as to whether it is appropriate and why.

Provide an opportunity for the trainee to go to

● Field Experiences the host country or another unfamiliar culture to
experience living and working for a short time.

Copyright 1998 Prentice-Hall Inc.
How Situational Factors Influence
the Selection
of a CCT Method
Degree of
Culture Novelty

High Simulations
Field Trips
Role Plays
Degree of s
hod Interactive Language Training
Training t
Rigor M
Degree of in g
in Sensitivity Training
Job Novelty a
Tr Culture Assimilators
Case Studies
Classroom Language Training
Low Area Briefings
Low High
Degree of Interaction with HCNs
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Cultural shock
Moving to the foreign country--Culture shock and
assimilation process—
• Degree of novelty & strangeness of the new setting
• Degree of acceptance by expatriate & family & its
reciprocal--acceptance by locals
• Movement into ethnic “enclaves”
• Home & country cultural values of integration vs.
sustaining separation e.g. French vs. British
• Infrastructural support—housing arrangements,
assistance in dealing with governmental
requirements, local sponsors,. . .
Culture Shock Cycle


1 2 3 4 5 6

Months in a New Culture

Copyright 1998 Prentice-Hall Inc. 10-15

Cultural shock
Moving back to the home country
• Shifting status, authority & power
• Shifting roles for spouses, & extended
family & social structures
• Different infrastructures-education, health,
standard of living, language, bureaucracy
• Problem of children & peer groups
Other IHRM Functions
• Performance Evaluation
– Problematic practices in recognizing
the special conditions
• Compensation and Benefits
– Home, host, or regional based policy
• Labor Relations

Copyright 1998 Prentice-Hall Inc. 10-10

Typical Expatriate Benefits

• Overseas Premium
• Housing Allowance
• Cost of Living Allowance (COLA)
• Moving Expenses
• Tuition for Dependent Education
• Home Leave
• Tax Reimbursement Plans
Copyright 1998 Prentice-Hall Inc. 10-16
Best International Practices Study
• Identified three types of practices
– Context free—can be applied everywhere
• E.g. Compensation should be related to performance except
benefits should be an important part of the package
• Criteria for selection—Getting along w/others & fit
w/organizational culture
– Content specific—applicable to similar countries &
• E.g. seniority & group pay valued in Asian & Latin countries
• Hire for the job—experience, technical skill-- in Anglo
– Context dependent—practices limited to specific
country settings, or companies
• Hire for their potential in Japan
Implications for HRM
Western training programs are unlikely to have a
positive impact when:
– Appraisal systems violate cultural norms
– Performance standards give way to interpersonal
– If high power conditions exist, delegation &
participation are likely to be rejected
– If job designs that emphasize higher level needs
don’t fit with the culture
– The efficiency focus of HRM programs is
inconsistent with social purposes of
Management development: Africa
The Malawi culture that carries over to organizations
– Collectivist values—maintaining personal
relationships, ritualized behavior and avoidance of
critical evaluation
– Emphasis on power distance & status differences
– Stability and security values leads to rigidity
– Instrumental view of organizations to satisfy their
& family needs (rather that production goals)
– Centralization with concentration of power
– Arbitrary decision processes with low predictability
Convergence or Divergence?
• Large corporations’ • Need to follow local
preference for HRM laws
consistent worldwide
systems • Development of
• Smaller companies’ unique techniques
desire for more and practices to suit
professional systems local cultural and
legal requirements

Copyright 1998 Prentice-Hall Inc. 10-17

Implications for Managers

• Every international manager has

responsibility for effectively
managing human resources,
therefore must understand IHRM
• Helpful to understand IHRM because
of potential impact on your career

Copyright 1998 Prentice-Hall Inc. 10-18