International Management

McGraw-Hill/Irwin Phatak, Bhagat, and Kashlak

© 2005 The McGraw-Hill Companies, Inc., All Rights
International Management
 Chapter 16

International Human Resources

Management

McGraw-Hill/Irwin
© 2005 The McGraw-Hill Companies, Inc., All Rights
International Management
 16-3

Learning Objectives

Understand the various approaches that multinational and global

organizations undertake for managing and staffing subsidiaries
in various parts of the world.
Distinguish between various functions of international human
resources management.
Identify the various strategies for selecting staff for foreign
assignments.
Explain how training programs prepare managers for overseas
assignments.
Understand the various schemes for compensation and benefits
used by multinational and global organizations.
 16-4

Learning Objectives (contd.)

Identify the issues inherent in repatriation, and why

multinational and global companies need to address issues
concerning managers returning from overseas assignments.
Understand that labor relations practices differ in each country,
and how these differences affect multinational and global
companies.
 16-5

Chapter Topics

What is International Human Resources Management?

Managing and Staffing Subsidiaries
Major IHRM functions
Selecting Expatriates
Managing Expatriates
International Human Resource Management and Competitive
Advantage
 16-6

Functions of International Human Resources

Management

1. Management of human resources in global

corporations, including issues of
expatriation and repatriation
2. Implementing corporate global strategy by
adapting appropriate human resources
management practices in different national,
economic, and cultural environments
3. Adopting labor relation practices in each
subsidiary that matches local requirements
 16-7

Major Approaches to Managing and Staffing

Subsidiaries
Ethnocentric
The company uses the approach developed in the home country, and
the values, attitudes, practices, and priorities of headquarters determine
the human resources policies and practices
Polycentric
The company considers the needs of the local subsidiary when
formulating human resources policies and practices
Regiocentric
The company considers needs of an entire region when developing
human resources policies and practices
Global or Geocentric
The company’s priority is the optimal use of all resources, including
human resources, and local or regional considerations are not
considered important for the success of the corporate strategy
 16-8

Factors to be Considered in the Ultimate

Selection of a IHRM Approach

1. National concerns
2. Economic concerns
3. Technological concerns
4. Organizational concerns
5. Cultural concerns
 16-9

Ex. 16-1: Strategic Approach, Organizational Concerns, and

IHRM Approach
Orientation
Aspects of the Enterprise Ethnocentric Polycentric
Primary strategic orientation/stage International Multidomestic

Perpetuation (recruiting, staffing, People of home country developed People of local nationality developed
development) for key positions everywhere in the for key positions in their own country
world
Complexity of organization Complex in home country, simple in Varied and independent
subsidiaries
Authority; decision-making High in headquarters Relatively low in headquarters

Evaluation and control Home standards applied to people andDetermined locally

performance
Rewards High in headquarters; low in Wide variation; can be high or low
subsidiaries rewards for subsidiary performance
Communication; information flow High volume of orders, commands, Little to and from headquarters; little
advice to subsidiaries among subsidiaries
Geographic identification Nationality of owner Nationality of host country
 16-10
Ex. 16-1(contd.) Orientation
Aspects of the Enterprise Regiocentric Global
Primary strategic orientation/stage Regional Transnational

Perpetuation (recruiting, staffing, Regional people developed for key Best people everywhere in the world
development) positions anywhere in the region developed for key positions
everywhere in the world

Complexity of organization Highly interdependent on a regional “Global Web:” complex,

basis independent, worldwide
alliances/network

Authority; decision-making High regional headquarters and/or Collaboration of headquarters and

high collaboration among subsidiaries subsidiaries around the world

Evaluation and control Determined regionally Globally integrated

Rewards Rewards for contribution to regional Rewards to international and local

objectives executives for reaching local and
worldwide objectives based on global
company goals

Communication; information flow Little to and from corporate HQ, but Horizontal; network relations
may be high to and from regional HQ
and among countries
Geographic identification Regional company Truly global co., but “glocal”
 16-11

Major IHRM Functions

1. Recruitment and selection

2. Performance evaluation
3. Compensation and benefits
4. Training and development
5. Labor relations
Also, management of expatriate
workers
 16-12

Terms Used in IHRM

Recruitment is the process of attracting a pool of qualified

applicants for available positions
Selection is the process of choosing qualified applicants from
the available candidates and ensuring that the skills, knowledge,
and abilities of the selected employees match the requirements
of the positions
Performance Evaluation is the process of appraising
employees’ job performance
The Compensation and Benefit function of HRM is designed
to develop uniform salary systems and other forms of
remuneration, such as health insurance, pension funds, vacation,
and sick pay
 16-13

Terms Used in IHRM (contd.)

The Training and Development function involves planning for

effective learning processes, organizational development, and
career development
The Labor Relations function is designed to assist managers
and workers determine their relationships within the workplace
 16-14

Classifying Employees
1. Parent country national (PCN): the
nationality of the employee is the same as that
of the headquarters of the global organization
2. Host country national (HCN): the
employee’s nationality is the same as that of
the subsidiary
3. Third country national (TCN): The
employee’s nationality is neither that of the
headquarters or of the local subsidiary
 16-15

Ex. 16-2: Impact of Culture on Training and Development Practices

United States/Canada East Asia

HRD Roles Trainer and trainee are equals; Trainees have great respect for
trainees can and do challenge trainer who should behave, dress,
trainer, trainer can be informal and and relate in a highly professional,
casual formal manner

Analysis and Design Trainer determines objectives with Trainer should know what trainees
input from trainees and their need, admitting needs might
managers, trainees openly state represent loss of face to trainees
needs and want to achieve success
through learning

Development and Delivery Programs should be practical and Materials should be orderly, well
relevant, using a variety of organized and unambiguous,
methodologies with lecturing time trainees most accustomed to lecture,
limited note taking, and limited questioning

Administration and Environment Hold training in comfortable, Quality of program may be judged
economical location, trainee on the basis of quality of location
selection based on perceived needs and training materials, ceremonies
of organization and individual with dignitaries, certificates,
plaques, and speeches taken as signs
of value of program
 16-16

Ex. 16-2 (contd.)

Middle East/North Africa Latin America

HRD Roles Trainer highly respected, trainees Preference for a decisive, clear,
want respect and friendly relation charismatic leader as trainer, trainees
ship, formality is important like to be identified with and loyal to
a successful leader

Analysis and Design Difficult to identify needs because it Difficult to get trainees to expose
is improper to speak of others’ faults, weaknesses and faults, design should
design must include time for include time for socializing
socializing, relationship building, and
prayers

Development and Delivery Need adequate opportunity for trainer Educational system relies on lecture
and trainees to interact, rely on verbal and has more theoretical emphasis,
rather than written demonstrations of training should be delivered in the
knowledge acquired, avoid paper local language
exercises and role playing

Administration and Environment The learning process should be Value/importance judged by location,
permeated with flourishes and which dignitaries invited for the
ceremonies, program should not be ceremonies, and academic affiliation
scheduled during Ramadan, the of trainer, time is flexible: beginning
month of fasting or ending at a certain time not
important
 16-17
Ex. 16-3: Union Membership in Selected Countries

Country Percentage of Union Year

Membership

Argentina 28% 1993

Brazil 13-30% (estimated) 1993
Canada 29.5% 1993
Chile 12.3% 1993
China 92% 1993
Costa Rica 15% 1993
Egypt 50% 1992
France 8-10% 1993
Germany 39.5% 1992
Greece 30% 1993
Italy 15% 1992
Japan 24.2% 1993
Malaysia 9.1% 1992
Mexico 25-30% 1991
New Zealand 34.3% 1993
Spain 11% 1992
United States 15.8% 1992
Zimbabwe 17% 1993
 16-18

Ex. 16-4: Effects of Culture Shock on Adjustment

7

6 Mastery
Honeymoon
5.5

Adjustment
Adjustment
Degree of

2.5

2
Culture Shock

0
0-2 3-4 4-6 6-9 10-12 13-24 25-36 46-48
49+ Time in Months
 16-19

Types of Compensation Systems

Headquarters Salary System

Headquarters pay scale plus differentials. The salary for the
same job at headquarters determines the base salary of the
home country national. The differential can be a positive
addition to an expatriate’s salary, or it can be a negative
allowance to account for the extra benefits that might be
associated with the particular overseas placement
Citizenship Salary System
The manager’s salary is based on the standard for the country
of his or her citizenship or native residence. An appropriate
differential is then added, based on comparative factors
between the two countries
 16-20

Suggestions for Policies for Managing Dual-

Career Expatriates

Frequent visitation trips of the family or the expatriate to

prevent the pain of separation from becoming too intense
Generous allowance for long distance telephone calls and other
costs of communication
Seek employment opportunities for the spouse within the
company or in the local area, if the spouse is willing to quit his
or her job in the home country to be with the married partner
Making connections with other global companies for
employment of spouses
 16-21

Repatriation

Repatriation is the term given to the return

of the home country manager.

Reasons for repatriation:

• The time of the overseas assignment is up
• Children’s education
• Unhappy with the assignment
• Family unhappiness
• Failure
 16-22

Key Terms and Concepts

International human resources management

Ethnocentric staffing approach
Polycentric staffing approach
Regiocentric staffing approach
Geocentric staffing approach
Performance evaluation
Expatriate
Repatriation
Culture shock