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Chapter 11
International Human Resource
Management
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Learning Objectives
• Know the basic functions of human resource
management
• Define international human resource management
• Understand the difference between international and
domestic human resource management
• Know the types of workers used by multinationals
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Learning Objectives
• Know how and when to use expatriate managers
• Know the skills necessary for a successful expatriate
assignment
• Understand how expatriate managers are
compensated and evaluated
• Appreciate the issues regarding expatriate
assignments of women managers
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Learning Objectives
• Know what to do to make the expatriate assignment
easier for their female expatriates
• Understand e.HR systems and how they can be useful
in IHRM
• Understand the relationship between choice of a
multinational strategy and international human
resource management
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Human Resource Management
and Functions
• Human resource management (HRM): deals with the
entire relationship of the employee with the
organization
• Recruitment: process of identifying and attracting
qualified people to apply for vacant positions
• Selection: process of filling vacant positions in the
organization
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Basic HRM Functions
• Training and development: giving employees the
knowledge, skills, and abilities to perform successfully
• Performance appraisal: system to measure and assess
employees’ work performance
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Basic HRM Functions
• Compensation: organization’s entire reward package,
including financial rewards, benefits, and job security
• Labor relations: ongoing relationship between an
employer and those employees represented by labor
organizations
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International Human Resource
Management (IHRM)
• All HRM functions, adapted to the international setting
• Two added complexities compared to domestic HRM
- Must choose a mixture of international employees
- Must decide the extent of adaptation to local
conditions
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Types of Employees in
Multinational Organizations
• Expatriate: employee from a different country
• Home country nationals: expatriate employees from
the parent firm’s home country
• Third country nationals: expatriate workers who come
from neither the host nor home country
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Types of Employees in
Multinational Organizations
• Host country nationals: local workers who come from
the host country where the unit is located
• Inpatriate: employees from foreign countries who work
in the country where the parent company is located
• Flexpatriates: employees who are sent on frequent but
short-term international assignments
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The Expatriate or the Host
Country Manager
• Multinationals must decide whether to use expatriates
or home country nationals
• Need to look at some questions
- Given the firm’s strategy, what is the preference for
the position?
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The Expatriate or the Host
Country Manager
• Using expatriate managers
- Do parent country managers have the appropriate
skills?
- Are they willing to take expatriate assignments?
- Do any laws affect the assignment of expatriate
managers?
• Using host country managers
- Do they have the expertise for the position?
- Can we recruit them from outside the company?
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Is the Expatriate Worth It?
• Decisions must take into account costs of such
assignments
- High cost
- High failure rate
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Exhibit 11.1: Paying for the
Expatriate Manager: Indices of
Cost of Living Abroad
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Reasons for U.S. Expatriate
Failure
• Individual
- Personality of the manager
- Lack of technical proficiency
- No motivation for assignment
• Family
- Spouse or family members fail to adapt
- Family members or spouse do not want to be there
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Reasons for U.S. Expatriate
Failure (cont.)
• Cultural
- Manager fails to adapt
- Manager fails to develop relationship with key people
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Reasons for U.S. Expatriates
Failure (cont.)
• Organizational
- Excessively difficult responsibilities
- Failure to provide cultural training
- Company fails to pick the right person
- Company fails to provide the technical support
- Excess of difficult responsibilities of international
assignment
- Failure of company to consider gender equity
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Strategic Role of Expatriate
Assignments
• Helps managers acquire international skills
• Helps coordinate and control operations dispersed
activities
• Communication of local needs/strategic information to
headquarters
• In-depth knowledge of local markets
• Provide important network knowledge
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International Cadre
• International cadre (or Globals): Separate group of
expatriate managers who specialize in a career of
international assignments
- Have permanent international assignments
- Move from international assignments to international
assignments
- Recruited from any country
- Sent to worldwide locations to develop cross-cultural
skills
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Flexpatriates
• The frequent flyers who travel on short notice for
shorter time durations while maintaining their family
and personal lives at the home-country location
• Key functions
- Sent to explore markets
- Consider problem areas in the foreign subsidiary
- Manage projects
- Help with transfer of technology
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Flexpatriates
• Advantages
- Do not experience many of the family and personal
difficulties and stress associated with expatriate
assignments
- Much less expensive than expatriate – no relocation
or repatriation costs
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Flexpatriate
• Disadvantages
- Taxation issues can become complicated if the
assignment exceeds six months – he company may
end up paying the tax
- Does not fully integrate into the local work
environment and does not learn low to adapt locally
- May be resented for neglecting the host-country
culture
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Key Success Factors for
Expatriate Assignments
•
•
•
•
•
•
•
•
Technical and managerial skills
Personality traits
Relational abilities
Family situation
International motivation
Stress tolerance
Language ability
Emotional intelligence
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Exhibit 11.2: Expatriate
Success Factors and
Selection Methods
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Priority of Success Factors
• Assignment length
- Technical and professionals skills are key for short
assignments
• Cultural similarity
• Required interaction with local people
• Job complexity and responsibility
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Exhibit 11.3: Selecting Expatriates:
Priorities for Success Factors by
Assignment Characteristics
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Training and Development
• Cross-cultural training: increases the relational abilities
of future expatriates and their spouses and families
• Training rigor: extent of effort by both trainees and
trainers required to prepare the trainees for expatriate
positions
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Training and Development
(cont.)
• Low rigor training
- Short time period
- Lectures and videos on local cultures
- Briefings on company operations
• High rigor training
- Last over a month
- Experiential learning
- Extensive language training
- Includes interactions with host country nationals
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Exhibit 11.4: Training Rigor:
Techniques and Objectives
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Exhibit 11.5: How the Rigor of Training
Relates to the Basic Expatriate
Assignment Conditions
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Expatriate Performance
Appraisal
• Conducting reliable performance appraisal for the
expatriate is very challenging
• Challenges
• Fit of international operation in multinational strategy
• Unreliable date
• Complex and volatile environments
• Time difference and distance separation
• Local cultural situation
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Steps to Improve the Expatriate
Performance Appraisal
1. Fit the evaluation criteria to strategy
2. Fine-tune the evaluation criteria
3. Use multiple sources of evaluation with varying periods
of evaluation
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Exhibit 11.6: Evaluation Sources,
Criteria, and Time Periods for
Expatriate Performance Appraisals
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Expatriate Compensation
• Compensation packages tend to include many
common factors includes:
- Local market cost of living
- Housing
- Taxes
- Benefits
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Exhibit 11.7: Average Rent of TwoBedroom, Unfurnished Apartments in
Selected European Cities
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The Balance-Sheet Approach
• Provides a compensation package that equates
purchasing power
• Allowances for cost of living, housing, food, recreation,
personal care, clothing, education, home furnishing,
transportation, and medical care
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Exhibit 11.8: Balance Sheet
Approach To Expatriate
Compensation
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Additional Allowances and
Perquisites
•
•
•
•
Foreign service premiums
Hardship allowance
Relocation allowances
Home-leave allowances
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Expatriate Manager
Compensation: Other
Approaches
• Headquarters-based compensation: paying home
country wages regardless of location
• Host-based compensation system: adjusting wages to
local lifestyles and costs of living
• Global pay systems: worldwide job evaluations,
performance appraisal methods, and salary scales are
used
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Repatriation Problem
• Difficulties faced coming back home
• Three basic cultural problems—“reverse culture
shocks”
- Adapt to new work environment and culture of home
- Expatriates must relearn own national and
organization culture
- Need to adapt to basic living environment
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Strategies for Successful
Repatriation
•
•
•
•
•
Provide a strategic purpose for the repatriation
Establish a team to aid the expatriate
Provide parent country information sources
Provide training and preparation for the return
Provide a home-leave policy to encourage expatriates
to make regular visits to the home office
• Provide support for the expatriate and family on return
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International Assignments for
Women: Two Myths
• Myth 1: Women do not wish to take international
assignments.
• Myth 2: Women will fail in international assignments
because of the foreign culture’s prejudices against
local women.
• Successful women expatriates
- Foreign not female—emphasize nationality not
gender
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International Assignments for
Women: Advantages
• More visible
• Strong in relational skills
• Wider range of interaction options
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International Assignments for
Women: Disadvantages
• Face the glass ceiling
- Isolation and loneliness
- Constant proving of themselves, working harder than
male
• Need to balance work and family responsibilities
• Need to worry about accompanying spouse
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More Women in the Future?
• Women expatriate managers are expected to grow
• Acute shortage of high-quality managers
• Increasing number of women provide role models
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What Can Companies Do To
Ensure Female Expatriate
Success?
• Provide mentors
• Provide opportunities for interpersonal networks as a
form of organizational support
• Remove sources of barriers
• Provide support to cope with dual-career issues
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Multinationals and Electronic
Human Resource Management
• Electronic human resources (e.HR): automation of
various aspects of the human resources system of a
company
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Strategic Benefits of e.HR
Systems
•
•
•
•
Reduce HR and administrative system cost
Improve HR services to employees
Employees take control of their own data
Repository of the wealth of knowledge and skills of
expatriates
• Employee tracking for career management and other
HR purposes
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Proper Steps to e.HR
Implementation
• Develop business case to justify using e.HR or
upgrade to e.HR
• Make the system customer-focused
• Be proactive
• Organize collected data in ways that is useful to the
organization
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Multinational Strategy and
IHRM
• IHRM orientation: company’s basic tactics and
philosophy for coordinating IHRM activities for
managerial and technical workers
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Exhibit 11.9: IHRM Orientation and
IHRM Practices for Managers and
Technical Workers
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Exhibit 11.9: IHRM Orientation and
IHRM Practices for Managers and
Technical Workers
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Exhibit 11.9: IHRM Orientation and
IHRM Practices for Managers and
Technical Workers
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Multinational Strategy and
IHRM
• Ethnocentric IHRM: all aspects of HRM for managers
and technical workers tend to follow the parent
organization’s home-country HRM practices
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Benefits of Ethnocentric IHRM
• Little need to recruit qualified host country nationals for
higher management
• Greater control and loyalty of home country nationals
• Key decisions centralized
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Costs of Ethnocentric IHRM
• May limit career development for host country
nationals
• Host country nationals may never identify with the
home company
• Expatriate managers are often poorly trained for
international assignments and make mistakes
• Expatriates may have limited career development
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Regiocentric and Polycentric
IHRM
• Regiocentric IHRM: region-wide HRM policies are
adopted
• Polycentric IHRM: firm treats each country-level
organization separately for HRM purposes
• Greater responsiveness to host country differences
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Benefits of Polycentric and
Regiocentric HRM Policies
• Reduces costs for training of expatriate managers from
headquarters
• No investment in language training
• Fewer problems with adjustments to local cultures
• Less expensive
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Costs of Polycentric and
Regiocentric IHRM Policies
• Coordination problems with headquarters
- based on cultural, language, and loyalty differences
• Limited career-path opportunities for host country and
regional managers
• Limited international experience for home country
managers
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Global IHRM Orientations
• Recruiting and selecting worldwide
• Assigning the best managers to international
assignments regardless of nationality
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Global IHRM Orientations
• Benefits
- Bigger talent pool
- Develops international expertise
- Helps build transnational organizational cultures
• Costs
- Importing managerial and technical employees not
always possible
- Added expense
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IHRM Orientation and
Multinational Strategy
• Early stages of internationalization—ethnocentric
IHRM
• Multilocal strategies—ethnocentric or regiocentric
• Regional strategy—regiocentric, polycentric or global
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Exhibit 11.10: IHRM
Orientations and Multinational
Strategies
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Conclusion
• When basic HRM practices are applied to a company’s
international operations, they become International
HRM
• Chapter focused on HRM practices as applied to the
expatriate employees
• Expatriates present special challenges for
multinationals
• It is important for multinationals to find ways to properly
manage expatriates to benefit from their experiences
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