Approach to Staffing (i.e.

,
ethnocentric, polycentric,
geocentric, or regiocentric)

COUNTRY A
Contextual Variables
Legal system
Cultural distance

Situation Variables
 Staff availability
 Location of assignment
COUNTRY B
 Need for control
 Locus of decision)

IHRM Activities
COUNTRY C  Selection
 Training and development
 Compensation
Etc.  Repatriation
International HRM (IHRM) is the process of:
 Procuring
 Allocating
 Effectively utilizing human resources in a
multinational company.
 While balancing the integration and
differentiation of HR activities in foreign
locations.
 Coordinating market, product, and production plans
on a worldwide basis
 Creating organization structures capable of balancing
centralized home-office control with adequate local
autonomy.
 Extending its HR policies and systems to service its
staffing needs abroad.
 Deployment
› Easily getting the right skills to where we need them,
regardless of geographic location.
 Knowledge and innovation dissemination
› Spreading state-of-the-art knowledge and practices
throughout the organization regardless of where they
originate.
 Identifying and developing talent on a global basis
› Identifying can function effectively in a global
organization and developing his or her abilities.
 Selecting candidates for overseas assignment
 Assignment terms and documentation
 Relocation processing and vendor management
 Immigration processing
 Cultural and language orientation and training
 Compensation administration and payroll processing
 Tax administration
 career planning and development
 Handling of spouse and dependent matters
Strategy in Unit Staffing
life cycle impetus
Setting up the host Focused staffing challenges;
unit pace is slow and
micromanaged as the senior
team is put together.
Establishing the Unit staffing challenges are
technology team to stepped-up; hiring focuses
begin core on obtaining individuals
operational with high emphasis on
activities competency; common
vendor linkages with
placement consultants and
RPO’s (Recruitment
Process Outsourcing)
Hiring Staffing approach Role of parent
headcounts MNC
Normally 5-20 Usually an Closely and
ethnocentric or a carefully monitored
geocentric approach by the parent MNC;
as the ‘management literally handpicked
team’ is put
together
Hiring headcount Polycentric Role of the parent
normally 20-20 approach is unit is somewhat
preferred as the unit reduced as the
sets up its own responsibility of the
operational teams newly structured
unit takes shape
Strategy in Unit life Staffing Hiring Staffing approach Role of parent
cycle impetus headcounts MNC
Full-blown Increased staffing challenges Hiring headcount Distinctly polycentric Role of parent
operations of the as hiring targets are stepped varies between approach as achievement unit is minimal.
host unit with up, focus shifts to numbers, 200-1000 of unit objectives Focus on global
significant role in competencies receive reduced depending on becomes significantly framework for
establishing global focus as nature of business self-contained hiring, leaving
objectives and the rest to the
targets In-house skills development unit
initiatives are established; management.
newer linkages with third
party like colleges vocational
institutes and training
institutions.

Strong operational Move to volume hiring as Hiring headcounts Distinctly polycentric Role of parent
leadership at the unit’s global contributions are are steeper approach; could get to unit is at a
unit level while clear; focus on referral hiring; between 500-1000 geocentric approach as strategic level,
globally establishing long term depending on labor costs provide the taking decisions
consolidating with liaisons with educational and nature of business competitive advantage for to optimize
parent training institutions the achievement of global global operating
objectives costs
 Advantages
PCNs Familiarity with the home office goals,
objectives, policies and practices.
Easy organizational control and coordination
Promising managers are given international
exposure. PCNs are the best people for
international assignments because of special
skills and experiences.
HCNs Familiarity with the socio-economic, political
and legal environment, and with business
practices in the host country.
Lower cost incurred in hiring them as
compared to PCNs and TCNs
Promotional opportunities for locals and
consequently, their motivation and
commitment.
Disadvantages
Difficulty in adapting to the foreign language and the socio-
economic, political, cultural and legal environment.
Excessive cost of selecting, training and maintaining
expatriate managers and their families abroad.
Promotional opportunities for HCNs are limited
PCNs may impose an inappropriate HQ style Compensation
for PCNs and HCNs may differ family adjustment problems,
especially concerning unemployed spouses
Difficulty in exercising effective control over the subsidiary’s
operations.
Communication difficulties in dealing with home-office
personnel
Lack of opportunities for the home country’s nationals to gain
international and cross-cultural experience.
 Advantages
Responds effectively to the host country’s
demands for localization of the subsidiary’s
operations.
Languages and other barriers are eliminated.
Continuity of management improves since
HCNs stay longer in positions.
Salary and benefit requirements may be lower
than of PCNs
TCNs TCNs may be better informed than PCNs
about the countries of assignment
TCNs are truly international managers
Disadvantages
HCNs have limited career opportunity outside the subsidiary
Hiring HCNs may encourage a federation of nationals rather
than global units.
Host country government may recent hiring TCNs.
TCNs may not want to return to their own countries after
assignment
Host country’s sensitivity with respect to nationals of specific
countries is missing
HCNs are impeded in their efforts to upgrade their own ranks
and assume responsible positions in the multinational
subsidiaries.
 Cultural Factors
 Economic Systems
 Legal and Industrial Relations Factors
 The European Union
 Personnel Selection Procedure
 The Purpose of the Performance Appraisal
 Training and Development Practices
 The Use of Pay Incentives
 Making the global HR system more acceptable
› Remember that global systems are more accepted
in truly global organizations.
› Investigate pressures to differentiate and
determine their legitimacy.
› Try to work within the context of a strong
corporate culture.
 Developing a more effective global HR system
› Form global HR networks.
› Remember that it’s more important to standardize
ends and competencies than specific methods.
 Implementing the global HR system
› Remember, “You can’t communicate enough.”
› Dedicate adequate resources for the global HR effort.
 International staffing: Home or local?
› Expatriates (expats): Noncitizens of the countries in
which they are working.
› Home-country nationals: Citizens of the country in
which the multinational company has its headquarters.
› Third-country nationals: Citizens of a country other
than the parent or the host country.
 Off-shoring
› Having local employees abroad do jobs that the firm’s
domestic employees previously did in-house.
 Off-shoring
› Having local employees abroad do jobs that the
firm’s domestic employees previously did in-house.
 Issues in off-shoring
› Having an effective supervisory and management
structure in place to manage the workers.
› Screening and required training for the employees
receive the that they require.
› Ensuring that compensation policies and working
conditions are satisfactory.
 Ethnocentric
› The notion that home-country attitudes, management style,
knowledge, evaluation criteria, and managers are superior to
anything the host country has to offer.
 Polycentric
› A conscious belief that only the host-country managers can
ever really understand the culture and behavior of the host-
country market.
 Geocentric
› The belief that the firm’s whole management staff must be
scoured on a global basis, on the assumption that the best
manager of a specific position anywhere may be in any of the
countries in which the firm operates.
 Personality
 Personal intentions
 Family pressures
 Inability of the spouse to adjust
 Inability to cope with larger overseas
responsibility.
 Lack of cultural skills
 Providing realistic previews of what to expect
 Careful screening
 Improved orientation
 Cultural and language training
 Improved benefits packages
I. Job Knowledge
and Motivation III. Flexibility/Adaptability V. Family Situation
Managerial ability Resourcefulness Adaptability of spouse
Organizational ability Ability to deal with stress and family
Imagination Flexibility Spouse’s positive opinion
Willingness of spouse to
Creativity Emotional stability
live abroad
Administrative skills Willingness to change Stable marriage
Alertness Tolerance for ambiguity
Responsibility Adaptability
Industriousness
Independence
Initiative and energy
Dependability
High motivation
Political sensitivity
Frankness
Belief in mission and job Positive self-image
Perseverance IV. Extra cultural Openness
II. Relational Skills Variety of outside interests
Respect Interest in foreign cultures
Courtesy and fact Openness
Display of respect Knowledge of local language[s]
Kindness Outgoingness and extroversion
Empathy Overseas experience
Non-judgmental-ness
Integrity
Confidence
Willingness and motivation
Performance (previous)
Technical abilities
Relational skills
Cross-cultural adaptability
Open-mindedness Individual
Stress adaptation skills Criteria
Administrative skills
Communication skills
Leadership traits
Marital status
Right person for
expatriation

Willingness and motivation

to become a trailing spouse
Spouse’s adjustability
Give up jobs and career
prospects Family
Marriage stability Support
Cross-cultural adaptability
Children’s education
 There is little or no systematic selection and training
for assignments overseas.
 Training is needed on:
› The impact of cultural differences on business
outcomes.
› How attitudes (both negative and positive) are
formed and how they influence behavior.
› Factual knowledge about the target country.
› Language and adjustment and adaptation skills.
 Rotating assignments that permit overseas managers to
grow professionally.
 Management development centers around the world
where executives hone their skills.
 Classroom programs provide overseas executives with
educational opportunities similar to stateside programs.
 Continuing, in-country cross-cultural training
 Use of returning managers as resources to cultivate the
“global mind-sets” of their home-office staff.
 Use of software and the Internet for cross-cultural
training.
 The “Balance Sheet Approach”
› Home-country groups of expenses—income taxes,
housing, goods and services, and discretionary
expenses—are the focus of attention.
› The employer estimates what each of these four
expenses is in the expatriate’s home country, and
what each will be in the host country.
› The employer then pays any differences such as
additional income taxes or housing expenses.
 Home-and
Host- Country
Income Taxes Income
Taxes Premiums and
Incentives

Income
Taxes Housing Housing Income
Housing Taxes
Goods and
Goods and services Goods and Housing
services services
Goods and
Reserve services
Reserve
Reserve
Home-Country Home-Country Reserve
Salary Costs Host-Country
Costs paid by Home-Country
Organisation and Equivalent
from salary Purchasing Power
 Salary

International Benefits
Compensation

Long-term
Benefits
 Foreign service premiums
› Financial payments over and above regular base
pay, and typically range between 10% and 30% of
base pay.
 Hardship allowances
› Payments to compensate expatriates for
exceptionally hard living and working conditions at
certain foreign locations.
 Mobility premiums
› Lump-sum payments to reward employees for
moving from one assignment to another.
 Percent of Companies
Other Retention Bonuses All By Company Size
Companies (# of Employees)
Up to 50 Over 50 Over 500 Over 5,000
to 500 to 5,000
Yes, currently have a programme 26% 24% 23% 28% 50%
Yes, but only discretionary 9% 0% 7% 21% 6%
No, and no plans to implement one 57% 67% 62% 44% 44%

No, but plan to implement one 8% 9% 8% 7% 0%

 Challenges in appraising oversea managers
› Determining who should appraise the manager.
› Deciding on which factors to base the appraisal.
 Improving the expatriate appraisal process
› Stipulate the assignment’s difficulty level, and adapt
the performance criteria to the situation.
› Weigh the evaluation more toward the on-site
manager’s appraisal than toward the home-site
manager’s.
› If the home-office manager does the actual written
appraisal, use a former expatriate from the same
overseas location for advice.
 Percent of Base
pay 30%

Others 8%

Build Long-term
Formula Based on Time Organisational
Worked 2% continuity 33%
 Retain
Employees
during
Difficult
Period 21% Build Long-term
Organisational
continuity 33%

Retain Employees
during Merger and
Acquisition 11%

Retain Employees
during Organisational
Restructure 18%
Other 17%
 Centralization  Content and scope of
bargaining
 Union structure
 Grievance handling
 Employer
organization  Strikes
 Union recognition  Worker
participation
 Union security
 Taking protective measures
› Crisis management teams
 Kidnapping and ransom (K&R) insurance
› Crisis situations
 Kidnapping: the employee is a hostage until the employer
pays a ransom.
 Extortion: threatening bodily harm.
 Detention: holding an employee without any ransom
demand.
 Threats to property or products unless the employer
makes a payment.
 Problem
› Making sure that the expatriate and his or her family
don’t feel that the company has left them adrift.
 Solutions
› Match the expat and his or her family with a
psychologist trained in repatriation issues.
› Make sure that the employee always feels that he or she
is still “in the loop” with what’s happening back at the
home office.
› Provide formal repatriation services.
 70 year old Chicago manufacturer of electronic components
 1967 International Division to coordinate exporting – 1970 Japanese plant –
1971 Irish plant
 2003 61% of business from international sales of $1.84 b – 50 plants in 21
countries – 16,000 people worldwide (1/3 in US)
 Strategy =
› Low cost & excellent customer service
› Plants are located where conditions are favorable & major customers are
close
› Truly global company - at home wherever in world they operate that
proactively shares valuable knowledge across operations in different
countries
› Committed to globally minded managers, multilingual competency &
creation of common company culture
 HR most localized of functions
› Regular expatriates – 3 to 5 years in another country (50)
› Inputs – come to US to work at HQ
› 3rd country nationals who move from one Molex entity to another
(Singapore to Taiwan)
› Short term project transfers – 6 to 9 months
› Medium term project transfers – 12 to 24 months
 Strong fit between HR practices & strategy is required for high
profitability
 Sustained source of high productivity & competitive advantage in the
global economy
 HR policies need to be congruent with strategy - 4 Strategies pursued
by international business
› Multi-domestic = create value by emphasizing local
responsiveness
› International = transferring core competencies overseas
› Global = realizing experience curve & location economies
› Transnational = doing all these thing simultaneously

 Molex – transnational strategy – building a strong corporate culture &

informal management network for transmitting information within
the organization.
 Selection of employees for particular jobs

 Tool for developing and promoting corporate culture (norms &

value system) to attain higher performance

 Types
› Ethnocentric
› Polycentric
› Geocentric
 Ethnocentric - all key management positions are filled by parent
company nationals
› May believe the host country lacks qualified individuals
› May see this as the best way to maintain a unified corporate
culture
› May believe it is the best way to transfer core competencies to a
foreign operation
 Disadvantages
› Limits advancement opportunities for host-country nationals
-> resentment, lower productivity & increased turnover
› Can lead to “cultural myopia” – failure to understand host
country cultural differences that require different approaches
to management & marketing

 Compatible with an international strategy

 Polycentric – Requires host country nationals to be recruited to manage
subsidiaries, while parent country nationals occupy key positions at corporate HQ
› Firm less likely to suffer from cultural myopia
› Less expensive to implement -> reducing the cost of value creation (expats are
$$$)

 Disadvantages
› Host country nationals have limited opportunities to gain experience outside
their own country & can’t progress to senior positions -> resentment
› Gap can form between host country managers & parent country – isolating HQ
staff from various foreign subsidiaries (Unilever’s little kingdoms &
transnational)
› Lack of management transfers can lead to lack of integration -> a federation of
largely independent national units with only nominal links to H
› Difficult to transfer core competencies or realize experience curve & location
economies

 Compatible with a multi-domestic strategy

 Geocentric – seeks the best people for the job throughout the company, regardless
of nationality
› Enables firm to make the best use of its human resources
› Enables the firm to build a cadre of international executives who are at home
working in a number of cultures
› Build a strong unifying corporate culture & informal management network –
required for global & transnational strategies
› Better able to create value from the pursuit of experience curve & location
economies and from the multidirectional transfer of core competencies
› Reduce cultural myopia & enhance local responsiveness

 Disadvantages
› Immigration laws can require the employment of host-country nationals
› Expensive to implement – training & relocation costs
› Need a compensation structure with a standardized international base pay
level higher than national levels in most countries

 Compatible with both global & transnational strategies

 Ethnocentric & geocentric staffing policies rely on extensive use
of expatriate managers

 Prominent feature is expatriate failure – pre-mature return of

an expatriate manager to his or her home country
› Failure of firm’s selection policies to identify individuals who
will not thrive abroad (^ 40% return early from developed &
^ 70% return early from developing)
› Cost of failure can be 3X the expat’s annual domestic salary +
cost of relocation = $250,000 - $1M
› Reasons (US) inability of spouse to adjust; manager’s
inability to adjust; other family problems; manager’s
personal or emotional maturity; inability to cope with larger
overseas responsibilities
 90% of time employees are selected on the basis of their technical
expertise, not their cross cultural fluency.

 Only 10% of 50 Fortune 500 firms tested for important traits such as
cultural sensitivity, interpersonal skills, adaptability & flexibility

 4 dimensions predict success in a foreign posting (Mendenhall & Oddou)

› Self-orientation – self-esteem, self-confidence, & mental well being
› Others-orientation – ability to interact effectively with host country
nationals (relationship development & willingness to communicate)
› Perceptual ability – ability to understand why people in other
countries behave the way they do
› Cultural toughness – relationship between country of assignment &
how well an expatriate adjusts to a particular posting
 Training the manager to do the specific job & management development
which can happen over the course of a career

 Job transfers are opportunities for broad international experience that will
enhance the management & leadership skills of executives

 Training expatriate manager & spouse – cultural, language & practical

training to reduce failure

 Repatriation of Expats – prepare them for reentry into the home country
(15% of returning expats leave w/i 1 year, 40% w/i 3 years)

 Management development as a strategic tool – especially transnational

› Strong unifying corporate culture & information management network
to assist in coordination & control
› Need to be able to detect pressures for local responsiveness & that
requires cultural understanding
 Two groups usually evaluate the performance of
expats – host nation & home office managers.
Both are subject to bias
› More weight should be given to on-site manager
appraisal than off-site (soft variables)
› Former expat who served in country could be involved
in the appraisal
› When on-site prepares, off-site should be consulted
before it is complete to balance
 How should compensation be adjusted to reflect national differences
– according to prevailing country standards or equalize pay on a
global basis

 How should expatriate managers be paid

› Ethnocentric – how much home country expats should be paid
› Polycentric – lack of managers’ mobility among national
operations -> pay can be kept country specific
› Geocentric – pay the international executives the same basic salary
regardless of country of origin or assignment

 Balance sheet approach to expat pay = equalizes purchasing power

across countries.
 Concern of domestic unions about MNEs
› company can counter its bargaining power with the power to move the
plant to another country
› International business will keep highly skilled tasks in the home country &
farm out low-skilled tasks to the foreign plants
› International business will attempt to import employment practices &
contractual agreements from its home country

 Organized labor has responded by

› Trying to establish international labor organizations
› Lobbying for national legislation to restrict MNEs
› Achieve international regulations on MNEs through UN

 Not very successful because

› Unions want to cooperate but compete with each other for jobs
› Wide variation in union structure
› Divergent ideologies about role of union in society & class conflict