Chapter 28

International Human
Resource Management

Human Resource Management, 5E 1

 Learning Objectives
 Understand the nature of IHRM.
 Understand the differences between
domestic HRM and IHRM.
 Understand the basics IN IHRM.
 Understand the Key issues involved
in international labour relations.

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 International Human Resource
Management
 The process of Procuring, Allocation
and Effectively Utilising the human
resources in an international
business is called IHRM.
 IHRM is the interplay among the
three dimensions- HR activities,
types of employees and countries of
operations.

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 Model of IHRM
Host Country Countries

Third Country
Nationals

Procure

Home Country

Home Country
Nationals
Third Country
HR activities

Allocate
Utilise IHRM
try
st C als
un
Ho ation
o

Types of
employees

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 Comparison between Domestic
HRM and IHRM
 More HR activities
 Need for a broader perspective
 Involvement in employee personal
lives
 Change of emphasis
 Risk exposure
 External influences

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Basic Functions in International
HRM
HRP

ORGANISATIONAL EFFECTIVENESS
Recruitment and Selection

Training and Development

Performance Management

Remuneration

Repatriation

Employee Relations

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 More HR Activities
 Human Resource Planning
 Difficulty in implementing HR procedure in host countries.
 Difficulty in aligning strategic business planning to HRP and vice-
versa.
 Providing developmental opportunities for international managers.
 Employee Hiring
 Ability to mix with organisation’s culture.
 Ethnocentric, polycentric or geocentric approach to staffing.
 Selection of expatriates.
 Coping with expatriate failures.
 Managing repatriation process.
 Training and Development
 Emphasis on cultural training
 Language training
 Training in manners and mannerisms.
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 More HR Activities
 Compensation
 Devising an appropriate strategy to compensate expatriates.
 Minimising discrepancies in pay between parent, host and third
country nationals.
 Issues relating to the re-entry of expatriates into the home
country.
 Performance Management
 Constraints while operating in host countries need to be
considered.
 Physical distance, time difference and cost of reporting system
add to the complexity.
 Identification of raters to evaluate subsidiary performances.
 Industrial Relations
 Who should handle industrial relations problem in a subsidiary?
 What should be the attitude of parent company towards unions in
a subsidiary?
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 What should be union tactics in subsidiaries?
The Expatriate Assignment Life
Cycle
Crisis and Reassignment
Determining Adjustment Abroad
the Need for
Expatriate
or
Post-arrival Repatriation
Departure Orientation and and
Training Adjustment
or

The
Pre-assignment Crisis and
Selection
Training failure
Process

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Factors in Expatriate Selection
Technical Cross-Cultural Family
Ability Suitability Requirements

Individual Selection Specific

Situation Decision Situation

Country-
MNC
Cultural Language
Requirements
Requirements

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Reasons for Expatriate Failure
US Firms Japanese Firms

 Inability to cope with larger

 Inability of spouse
international responsibilities

 Difficulties with the

 Manager’s inability to adjust
environment

 Other family reasons  Personal or emotional problems

 Manager’s personal or  Lack of technical competence

emotional maturity

 Inability to cope with larger  Inability to spouse to adjust

international responsibilities

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Culture Shock Cycle

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Expatriate Success Factors and
Selection Methods

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 Objectives of Expat
Compensation
 Attract employees who are qualified and
interested in international assignments
 Facilitate the movement of expatriates from
one subsidiary to another, from the home
country to subsidiaries, and from subsidiaries
back to the home country;
 Provide a consistent and reasonable
relationship between the pay levels of
employees at the headquarters, domestic
affiliates, and foreign subsidiaries; and
 Be cost-effective by reducing unnecessary
expenses. Human Resource Management, 5E 14
 Problems in Expat
Compensation
 Discrepancies in pay between parent, host
and third-country nationals.
 The need to vary expatriate compensation,
depending on the ‘stage of life cycle’ of the
expatriate’s family (e.g. young children,
children in college, etc).
 Remuneration issues related to re-entry into
the parent-country organisation.
 Remuneration issues to deal adequately with
new waves of change in the international
business environment.
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Factors Influencing International
Compensation
Internal and external MNC external
MNC Internal
relativities environment
Environment
• Parent nationality
• Goal orientation
• Labour market
• Capacity to pay
characteristics
• Competitive strategy
• Local culture
• Organisational culture
• Home and host
• International workforce
country governments’
composition
roles
• Labour relations
• Industry type
• Subsidiary role
Staffing orientation • Competitors’ strategies

International
compensation strategy

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 Steps in Expat Performance
Management
Identifying
Linkage to Setting individual
variables Appraising the
organisational performance
impacting performance
strategy goals
performance

Providing regular
Providing
feedback on Linking results
opportunities for
progress towards with rewards
improvement
goals

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Components of Expat
Compensation

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A Balance Sheet Approach to
Expatriate Compensation

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The Repatriation Process
Preparation

Physical
Relocation

Repatriation
Process

Transition

Re-adjustment

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 Key Issues in Employee
Relations
(A) Who should handle labour
relations?
 HO or subsidiary

(B) What should be the union tactics?

 strike
 form ITSs
 lobbying for protective legislation
 intervention by international agencies
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 Key Terms
 Balance Sheet  Culture Shock
Approach  Expatriate
 Ethnocentric Approach  Going-Rate Approach
 Geocentric Approach  IHRM
 Host Country  Parent Country
Nationals Nationals
 IHRP  Repatriation
 Polycentric Approach  Tax Equalisation
 Reverse Culture Shock  Third Country
 Tax Protection Nationals
 Union Tactics
Human Resource Management, 5E 22
 Reality Check
 It is said that being ethnocentric is
the basic propensity of human
beings. List the areas (managerial as
well as personal) where
ethnocentricism is being observed.

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 Reality Check
 Between PCNs and HCNs, which do
you prefer? Why? What industry and
subsidiary characteristics do
influence your choice?

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 Reality Check
 Your B-school has a tie-up with a
university in Cyprus. A few of the
professors of your school need to go
to that country to teach there for two
years. Draft expatriation and
repatriation policies.

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