International Human Resource Management

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IHRM

The management of human resources in global corporations

The management of expatriate employees The comparison of human resource management (HRM) practices in a variety of different countries
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Approaches to Managing and Staffing Subsidiaries

Ethnocentric
Home country approach

Polycentric
Local approach

Regiocentric
Regional approach

Geocentric/Global
Global approach

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:International Orientations

The Ethnocentric Firm

The Polycentric Firm

The Geocentric Firm

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Classifying Employees

Parent Country National (PCN)

Host Country National (HCN)

Third Country National (TCN)

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Definitions of International Assignments

Expatriates - Managers from headquarters sent
abroad

Inpatriates - Host country managers sent to headquarters Transpatriates - Managers from different countries
sent to any other country

International assignments do not come cheap: on average, expatriates cost a company two or three times what they would cost in equivalent positions back home.

Business Strategy & Nature of Global Assignments

Domestic Multi domestic Multinational Global

Global Assignment
Who sent

None
No One

Expatriates
Average performers

Expatriates & Inpatriates

Good performers

E, I, & T
High potential managers & top executives Project, career, organizational development Essential for executive suite Easy Extensive

Purpose

---

To get a job done Project & abroad career development Negative for domestic career Extremely difficult None Good for global career Somewhat difficult Limited

Career Impact Professional Reentry Global Organizational Learning

Adler (2002), p. 260

----None

The Influence of Managing and Staffing Approaches

Ethnocentric approach

PCNs usually staff important positions at headquarters and subsidiaries

HCNs generally work in foreign subsidiaries PCNs manage headquarters positions PCNs and managers from the region-either HCNs or TCNs-staff regional headquarters positions HCN's primarily staff local subsidiaries

Polycentric approach

Regiocentric approach

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Geocentric approach

Chooses the most suitable person for a position

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Staffing MNCs
Orientation
Ethnocentricism

Staffing orientatio n
Advantages
Transfer of parent company goals, objectives and know how /technology Ensures control and coordination with HQ

Approach
Parent company/ country nationals PCNs are employed at all senior and key positions. Local employees fill only lower level and supporting jobs

Disadvantages
Lack of localization of response to host country demands and needs Lack of knowledge of local culture and work methods

Polycentricism

Host country nationals HCNs are employed to staff all positions

Familiarity with business practices, socio-economic, political and legal environment Lower cost of staffing Effective localization of the subsidiary's operations

Communication challenges in dealing with parent country personnel Challenges in effective control and coordination over subs operations Lack of parent company nationals to gain international and cross cultural 9 exposure

Staffing MNCs
Orientation
Geocentricism

Staffing orientatio n Advantages

Globally competent personnel Exposure to global best practices

Approach
The multinationals TCNs runs the subsidiary as a independent entity. Focus building a center of excellence at a global level. Hiring the best person for the job.. could be a third country national

Disadvantages
Lack of sensitivity to all cultures Tendency to run the subsidiary as a independent unit

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Issues in staffing global businesses

Linkage between staffing and growth of MNC Staffing orientation

Staffing MNCs

Managing expatriates

Female expatriates

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Staffing MNCs
Stage in Host Units life cycle Setting up the host unit (0 to 912months) Extremely critical phase in the subsidiarys evolution time consuming, multiple interviewing round expensive as it might involve travel to parent country for final interview and discussions Staffing impetus Hiring headcount s Normally 520 Staffing Approach

Linkage between staffing and growth of MNC

Role of Parent MNC Closely and carefully monitored by the parent MNC, literally handpicked

Focused Staffing challenges Top and Senior management positions is the focus Pace is slow, and micromanaged closely by the parent company, Usually work with a retainership arrangement with a international staffing company Key positions could be out rightly assigned to parent company personnel

Usually an ethnocentric or a geocentric approach

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Staffing MNCs
Stage in Host Units life cycle Staffing impetus Hiring headco unts Staffing Approach

Linkage between staffing and growth of MNC

Role of Parent MNC

Establishing the technology team to begin core operations activities (6months 1.5 years)
Apply stringent hiring techniques, building a preferred employer brand, offering high-end compensation to attract the desired talent, careful screening to ensure top quality hires

Unit staffing challenges are stepped up. Selection criteria focus on very high quality technical competency levels
Common vendor linkages with Placement Consultants and RPOs.

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Poly centric approach is preferred as the unit sets up its own operational unit
Processes emulate from local market to get access to local talent

Role of Parent unit is somewhat reduced as the responsibility of the newly structured unit takes place.

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Staffing MNCs
Stage in Host Units life cycle Full blown operations of the host unit with significant role in establishing global objectives and targets (1.5 -3yrs) Using multiple sourcing vendors and methods, Moderated compensation, Staffing impetus Hiring headcounts Varies between 200- 1000 Depending upon nature of the business. Staffing Approach

Linkage between staffing and growth of MNC

Role of Parent MNC Role of parent country is minimal. Focus on Global Framework for hiring using global selection tests Leaving rest to the unit Mangers.

Increased staffing challenges as hiring targets get aggressive, Numbers become a critical success determinant for recruitment Competencies receive reduces focus as in house skill development initiatives are established. Newer linkages& with third party like Colleges, vocational Institutes and training Institutions and fresher hiring

Polycentric approach as achievement of unit objectives becomes significantly self contained.

Creating a branding on vocational campuses

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Staffing MNCs
Stage in Host Units life cycle Strong Operational leadership at the unit level while globally consolidating with Parent Staffing impetus Hiring headcounts Hiring head count are steeper between 2001000 depending upon nature of the business. Staffing Approach Distinctly polycentric approach,

Linkage between staffing and growth of MNC

Role of Parent MNC

Move to Volume hiring as units global contributions are clear. Referral hiring Establishing long term liaisons with educational training institutions

Role of Parent unit is at a strategic level, taking Could get decisions to in to optimize global geocentric operating approach as costs. labor costs provide the competitive advantage for the achievement of global objectives.

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Staffing MNCs
own country of origin.
With

Managing expatriates

An expatriate is an individual who works anywhere but not in his or her

increasing globalization more and more employees work overseas and have expats on their payroll.
Recruiting

expats success depends on identifying potential expats: and passion for working on overseas assignment multiculturist, multilinguist, mulitfucntionalist, background,

Willingness Explore

citizens of the world and not of one country

Possess

appropriate (technical/technological) skills for the position

overseas
Family

background

Local
Cost

laws of host country that determine expats posting

differentials vs. benefits of a expat vs. a HCN

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Expats in India

Market leaders like Nokia, LG, Suzuki, IBM and Samsung have seen the number of expats in their Indian subsidiaries swell. Nokia has nearly 100 Finns at key positions in India. Samsung has 25 Koreans LG has 30 Koreans Maruti has 15 Japanese Huawie has approx.125 Chinese working at their offices in India.

Selection criteria for international staffing

Managing expatriates

1. Technical Competencies : ability to work independently with minimal dependence on parent company for day to day activities 2. Relational Skills : ability to interact effectively with peers, superiors, team members and clients/customers in a third country with its nationals as well as with the parent company nationals. 3. Ability to cope with Environmental variables : awareness and

ability to cope with the demands of the political-legal, cultural,

technological and economic factors. Knowledgeable about the host country nationals attitudes, beliefs, rules and norms, customs and social as well as corporate etiquette 4. Family situation : ability of the family to cope with relocation and living in a new country with its social and cultural differences
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Regional Selection Criteria: Some Realities*

Asia Pacific Europe & the Middle East Skills or Competencies Job Performance Marital Status The Americans Japan Most Important Criteria II Most Important Criteria Least Important Criteria II Least Important Criteria Skills or Competencies Job Performance Marital Status Skills or Competencies Job Performance Marital Status Job Performance Job Level

Projected assignment cost for the Individual Marital Status

Language ability

Projected assignment cost for the Individual

Language ability

* ORC Worldwide 2002 , Worldwide survey of International Assignment Policies and Practices

Mendenhall and Oddou Four Dimensional Framework for expat selection :

Managing expatriates

Self Orientation Self confidence Self esteem Mental hygiene

Others Orientations Expats ability to interact with host citizens Build close relationships Acculturate more easily in over

Perceptual Dimension Ability to understand and appreciate why foreign nationals behave the way they do Ability to make correct attributions about the reasons or causes of host nationals behavior

Cultural Toughness Dimension How culturally different is the host country from the expats own country determines the degree of cultural toughness The lesser the difference the lower is the cultural toughness

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Romens Model on five predictors for a successful international assignment :

Job Factors
Technical Skills

Managing expatriates

Relational Dimension
Tolerance for Ambiguity Behavioral flexibility Nonjudgementalism Cultural empathy and low ethocentricism Interpersonal skills

Motivational State
Belief in the mission Congruence with career path Interest in overseas experience Interest in specific host country culture Willingness to acquire new patterns of behavior and attitudes

Family Situation
Willingness of spouse to live abroad Adaptive and supportive spouse Stable marriage

Language Skills
Host country language Non-verbal communication

Familiarity with host country and HQ operations Managerial skills

Administrative competency

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Reasons Young Managers Would Accept International Assignments

Percent of MBAs citing reason (N 1129): 52 Cross-cultural experience and personal growth 40 Job 28 Money 21 Career Advancement 16 Good Location 11 Satisfying Life 4 Spouse and Family 3 Short Term; Other

Reasons Young Managers Would Reject International Assignments

Percent of MBAs citing reason (N 1129): Location 35 Job and Career 33 Spouse and Family 23 Money 19 Unpleasant Life Abroad 14 Disruption of Home Country Life 6 Contract Too Long; Other

Expatriate Failure &Causes for Expatriate failure

It means that the assignee returns to the home country or resigns from the job before the international assignment is completed. Globally, the expat failure rate varies between 25% and 40% and differs from country to country. Many of the US based MNCs, have 10% to 40% failure rates. Its less than 5% in Japanese and European organisations.

Reasons for Expatriate Failure

by Tung, California Management Review US Multinationals
1.
2. 3. 4.

Japanese Firms
1.
2. 3. 4. 5.

5.

Inability of spouse to adjust Managers inability to adjust Other family problems Managers personal or emotional maturity Inability to cope with larger overseas responsibilities

Inability to cope with larger overseas responsibilities Difficulties with the new environment Personal or emotional problems Lack of technical competence Inability of spouse to adjust

European Firms Only one consistent reason: Inability of managers

spouse to adapt to new environment

Causes for Expatriate failure

EFR : Expat Failure Rate The three stages of expat adjustment on a new international assignment: High
Tourist/ Honeymoon Stage

Managing expatriates

The Culture Shock Cycle

Mood

Adapting or Adjustment Stage Disillusionmen t Stage

Low

Months in a new culture

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The Right Way to Manage Expats

Black & Gregersen (1999) Harvard Business Review
Three General Practices from successful companies: 1. When they send people abroad, the goal is not just to put out fires. Once expats have doused the flames, they are expected to generate new knowledge for the organization or to acquire skills that will help them become leaders. 2. They assign overseas posts to people whose technical skills are matched or exceeded by their cross-cultural skills. 3. They recognize that repatriation is a time of upheaval for most expats, and they use a variety of programs to help their people readjust.

Hofstedes Model

Differences across countries in work-related values. Sampled over 100,000 IBM employees across 40 countries. Four dimensions:

POWER DISTANCE INDIVIDUALISM VERSUS COLLECTIVISM UNCERTAINTY AVOIDANCE MASCULINITY VERSUS FEMININITY

Power distance:

Focuses on how a society deals with the fact that people are unequal in physical and intellectual capabilities. High power distance cultures are countries that let inequalities grow over time into inequalities of power and wealth (e.g. China). Low power distance cultures are societies that tried to play down such inequalities as much as possible (e.g. Denmark).

Individualism vs. Collectivism:

Focuses on the relationship btw the individual and his or her fellows. In individualistic societies, the ties btw individuals were loose and individual achievement and freedom were highly valued (e.g. U.S. & Australia). In collectivist societies, the ties btw individuals were tight and the collective interests is above the individual interest (e.g. China, Japan, Turkey, Indonesia)

Uncertainty Avoidance:

Measures the extent to which different cultures accept ambiguous situations and tolerate uncertainty. High uncertainty avoidance cultures place a premium on job security, internal career patterns, retirement benefits, and so on. They also have a strong need for rules and regulations; managers are expected to issue clear instructions, and subordinate initiatives are tightly controlled (e.g. Japan, France, Spain). Lower uncertainty avoidance cultures are characterized by greater readiness to take risks and less emotional resistance to change (Sweden).

Masculinity vs. Femininity:

Looked at the relationship between gender and work roles. In masculine cultures, sex roles are sharply differentiated and traditional masculine values, such as achievement and the effective exercise of power (e.g. Hungary, Iraq, Venezuela). In feminine cultures, sex roles are less sharply distinguished, and little differentiation is made btw men and women in the same job (e.g. Finland, Netherlands).

Managing Expat Failure

Managing expatriates

1. Design a job that maximizes role clarity, minimizes role conflict and compensates for role novelty with proper selection if a candidate with a high level of international experience 2. Use discerning measures for selection of international employees and their companion 3. Educate native and foreign employees in intercultural communication competencies 4. Provide opportunity for language lessons 5. Provide a technical assistant to help with the details of starting life in a different culture 6. Create open, frequent communication with the home organization to dispel feelings of abandonment and to ensure a favorable position upon returning 7. Create opportunities for positive social interactions in order to communicate and become better acquainted with host 33 country members and with host country

Staffing MNCs

Female expatriates

Several reasons account for minimal presence of females in foreign assignments :

Lack of Motivation: there is a perceived lack of motivation for female employees to relocate internationally Stereotyping : common impression that women are best fit to work in their own countries Capabilities : include skills and rescission to cope with stress while they score well on all of the critical competencies and score particularly high on relational skills Organizational Process : include the diversity orientation of the organization, superior-subordinate relationship and home country selection processes for international assignments 34 Host Country limitations : certain countries do not

Staffing MNCs
Advantages of Female expatriates:

Female expatriates

Good Relational Skills Rarity of women expats make them unique Shortage of competent managers, more in the pool helps Female Role Models will facilitate more female managers entering the pool

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Recent trends in International staffing

Work Force Diversity Dual Career Couples Offshoring

International Staffing

Recruiting sources

Backgrou nd Checks
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Recent trends in International staffing

Work Force Diversity

Diversity is a key metric on which organizations measure themselves Diversity implies a workforce mix with fair representation of gender, ethnicities and races Organizations have diversity policies that drive focused hiring to ensure the desired workforce blend Diversity costs money, cash cost, opportunity cost and a heightened exposure to business risk, however organizations remain committed to it year after year 37

Recent trends in International staffing

Offshoring

Outsourcing of non-core standardized services is the new facet of globalization The spurt in hiring to staff these new-order companies in the emerging and the developing countries has hugely contributed to the revenue and growth of these countries On the other hand the outsourcing country, usually in the developed economies, stands to loose jobs to low cost and high skills countries making it 38 outplacement and retrenchment a core activity

Recent trends in International staffing

Background Checks

Background checks are carried out to verify personal, professional and other mandated information related to safe employment of candidates Priced by quantum/scope of the personal and professional level of check that is being carried out, it is a core responsibility of the staffing team to ensure that the employee being on-boarded is 39 cleared from all sides

Recent trends in International staffing

Recruiting sources

Increasing demand for resources has driven widespread innovation in sourcing Job portals and employee referrals are among the newer and more common sources Focus on hiring at entry level and then grooming employees for growth is a also gaining popularity as another high retention sourcing strategy
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Recent trends in International staffing

Dual Career Couples

Managing dual career couples Find a job for the trailing spouse Commute/remote assignments Sabbaticals Intra-company employment On assignment career support
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Difference between Domestic & International Staffing

Firms predisposition towards who should hold key positions in head quarters and subsidiaries(ethnocentric,polycentric,regi ocentric,geocentric) Constraints imposed by host government Firms ability to attract right talent Persuading managers to release bestemployees for international assignment

Issues in Staff Selection: The Myth of a Global Manager

There is a universal approach to management (ethnocentric attitude, convergence-divergence best practices, impact of
organizational culture over local culture)

People can acquire multicultural adaptability and appropriate behavior (depends on reaction to particular
cultural environment, depends on effectiveness (successful use of managerial and technical skill in a foreign env.) and coping skills (being reasonably comfortable or can atleast survive in a foreign env.)

There are common characteristics shared by global managers ( lang. familiarity, inclusive behavior,linking
the foreign assignment with their own career progress)

There are no impediments to global mobility (reality

is time, cost, host country requirements curtail the effectiveness of the MNC)

Choosing an Approach to IHRM

Corporate international strategy Political and legal concerns Level of development in foreign locations Technology and the nature of the product Organizational life cycle Age and history of the subsidiary Organizational and national cultural differences
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Recruitment and Selection

Processes through which an organization takes in new members Recruitment

Attracting a pool of qualified applicants for the positions available

Selection
Choosing the candidate whose qualifications most closely match the job requirements

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Selecting the Right Candidate

Need a balance between internal corporate consistency and sensitivity to local labor practices Consider cultural values Must comply with local labor laws

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Training and Development

Planned individual learning, organization development, and career development

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Delivery of Programs Worldwide

Centralized
Ethnocentric training originates at headquarters and corporate trainers travel to subsidiaries Geocentric - training develops through input from both headquarters and subsidiary staff and trainers could be from any location

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Delivery of Programs Worldwide

Decentralized
Training on a local or regional basis Local people develop training materials and techniques for use in their own area

Effective training considers cultural background of trainees

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Developing Globally Minded Managers

Companies whose CEO's have international assignment experience are better performers Companies must identify managers with global potential and provide them various training and development opportunities

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Performance Evaluation

Systematic appraisal of employees performance within the organization Depends on overall HRM strategy
Should consider cultural influences

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Compensation and Benefits

Develops and administers the salary system and other forms of remuneration Compensation and benefit levels reflect local labor market conditions Company usually develops policy to offer salaries and benefits representing a specific market level Culture influences value put on various compensation and benefit practices
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Labor Relations

Identifies and defines the roles of management and workers in the workplace In many countries, government regulated Unions organized at the local, company, regional (within country), or national level Number of workers within a country who are union members varies
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Managing Expatriates
Must deal with the complexities of employing and moving people outside of their home countries Cost a major factor

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Expatriate Failure Rates

Number who do not remain abroad for the duration of their assignment Varies by country and gender Failure rate correlated with the rigor of selection and training procedures

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Expatriate Selection

Western European, Japanese multinationals emphasize technical competence and ability to acclimate North American corporations select mainly on technical competence Behaviors successful at home may not work abroad Previous experience abroad may or may not predict future success
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Cross-Cultural Training Methods

Cultural Briefings
Explain the major aspects of the host country culture, including customs, traditions, every day behaviors.

Area Briefings

Explain the history, geography, economy, politics, and other general information about the host country and region.
Portray a real-life situation in business or personal life to illustrate some aspect of living or working in the host culture.

Cases

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Cross-Cultural Training Methods

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 Assimilator

Provides a written set of situations that the 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 the host country or another unfamiliar culture to experience living and working for a short time.
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Field Experiences

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How Situational Factors Influence the Selection of a CCT Method

Degree of Culture Novelty High

EXPERIENTIAL Simulations Field Trips Role Plays Degree of Interactive Language Training Training ANALYTICAL Rigor Degree of Sensitivity Training Job Novelty Culture Assimilators Case Studies Classroom Language Training Films FACTUAL Books Lectures Low Area Briefings High Low
Degree of Interaction with HCNs

Low High

Cross-Cultural Adjustment

Expatriates must adjust to new work situation, interactions with locals, and new general environment Company can facilitate adjustment by providing training for expatriates and their families before and during the assignment Expatriates often experience cultural shock
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Culture Shock Cycle

High

Mood
Low

Months in a New Culture

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Expatriate Evaluation
Job abroad may include more than what it does at home Senior expat managers often evaluated on financial performance of subsidiary

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Expatriate Compensation
Influenced by general corporate compensation policy Expats usually receive extra compensation and benefits Different packages offered in different locations

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Typical Expatriate Benefits

Overseas premium Housing allowance Cost of living allowance (COLA) Moving expenses Tuition for dependent education Home leave Tax reimbursement plans

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Expatriate Reentry
Reverse culture shock common Many organizations fail to successfully manage expatriate reentry Individuals may pursue boundaryless career Organizations can help to ease reentry

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Changes in Global Mobility

New types of cross-border employee transfers becoming popular Most important objectives for cross-border transfers to transfer skills and knowledge and to develop and manage global competencies

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Convergence or Divergence?

Large corporations preference for consistent worldwide systems Smaller companies desire for more professional systems

Need to follow local HRM laws Development of unique techniques and practices to suit local cultural and legal requirements

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Implications for Managers

Every international manager has responsibility for effectively managing human resources, therefore must understand IHRM functions Helpful to understand IHRM because of potential career impact

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