Download Study Guide

HRM386
International Dimensions of Human Resource
Management
FACULTY OF BUSINESS
Study Guide
201130
*HRM386*
International Dimensions of Human Resource
Management
HRM386 Study Guide
Faculty of Business
Written and compiled by
Dr Chrys Gunasekara
Produced by Division of Learning and Teaching Services, Charles Sturt University, Albury Bathurst - Wagga Wagga, New South Wales, Australia.
First Published
December 2010
Printed at Charles Sturt University
© Charles Sturt University
Previously published material in this book is copied on behalf of Charles Sturt University pursuant
to Part VB of the Commonwealth Copyright Act 1968.
ii
Contents
Page
Overview of the subject
1
Topic 1
Introducing international human resource management
2
Topic 2
Staffing international operations
7
Topic 3
Recruiting and selecting staff for international
assignments
11
Topic 4
International compensation
17
Topic 5
International training and development
22
Topic 6
International industrial relations
27
Topic 7
Performance management
31
Topic 8
IHRM Trends: Complexity, challenges and choices
in the future
36
iii
iv
Overview of the subject
Welcome to HRM386, and to the interesting and topical area of international
human resource management (IHRM).
In this subject we will be looking at aspects of human resource management
(HRM) in multinational organisations, that is, organisations that do business
across national boundaries. As we will see, the content of HRM practices may be
quite similar to those in organisations that operate within one country; for
example, in recruitment, training, performance management, and so on. The most
important difference between IHRM and domestic HRM is in the variables or
factors that shape the way that practices are applied in the international setting.
It has been said that the failure of multinational ventures may be explained in large
part by a lack of understanding of IHRM issues (Perkins and Shortland 2006).
This is still true today, even though it is true that many managers may be more
educated in the ways of doing business across cultures. Having knowledge and
being able to use this effectively in practice are different skills, and this is why it
is important to learn about the theory and the practice. That is what we will be
doing in this subject.
Before we begin, please be clear about the purpose of this Study Guide. The topics
and the content of this subject will follow the textbook quite closely. You will be
able to read the Study Guide and then look at the textbook and be able to see very
clear links between the two. There are two additional reading resources provided
for each topic, which will illustrate one or more aspects of the topic.
The Study Guide is intended to guide your reading of the textbook and the
additional resources provided. The Study Guide is not a summary of the textbook
chapters or the readings – it is a map that will help you to see where you are meant
to be going. It is very important, therefore, that you read the textbook, and keep up
with your instructor’s lectures and PowerPoint slides. At the end of this session,
CSU will be delivering a short series of revision classes. These classes will
highlight for you some of the important aspects of each topic, and they will also
include practice questions for your exam. This is meant to improve your exam
preparation and to help you to succeed.
We hope that you find this subject interesting and enjoyable.
1
HRM386 Study Guide
Topic 1 Introducing international human resource
management
Introduction
The first topic in this subject introduces the scope and nature of IHRM – what is
it? How is it different do domestic HRM? How do we apply a strategic view of
IHRM? There are several key pieces of knowledge that you will need to learn in
order to understand later topics in the subject. IHRM has quite a lot of jargon or
specific terminology that it uses. It can be difficult to keep up with all of the terms.
That is why, from the beginning, you should learn the key terms and concepts so
that you can use these later to understand other topics, and to answer exam
questions.
Learning objectives
Upon successful completion of this topic you should be able to:




define international human resource management
describe and apply a model of IHRM
explain the differences between IHRM and domestic HRM
describe a model of strategic IHRM.
The nature and scope of IHRM
There are different approaches that have been used in studying IHRM. The
approach that we will use in this subject involves the study of aspects of HRM in
multinational organisations.
The discipline of HRM involves those activities undertaken by an organisation to
effectively manage its human resources, or people. These activities would include:






Human resource planning
Staffing (recruitment, selection, placement)
Performance management
Training & development
Compensation (remuneration) and benefits
Industrial relations.
How do we understand these activities in an international context?
This question is answered in the model of IHRM presented on page 3 of your
textbook. As you will see, the model has three dimensions:



HRM activities
Countries
Categories of employees.
It is very important to learn this model and especially, the different terms, such as
‘host’, ‘home’ and ‘third country’. These terms are used constantly in IHRM.
2
HRM386 Study Guide
Learning activity
A key piece of terminology that you will see in the models and that you will
encounter throughout this subject is, expatriate. In this activity we ask: What is an
expatriate? Make notes on this term here.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
You may be wondering why it is necessary to study IHRM. Why is it important to
take this subject in your course?
Read
Reading 1.1:
Rollins, A. (November, 2010). West left out in shift in global
trade pattern. The Australian Financial Review, p. 23. Retrieved
from http://www.afraccess.com
This recent article from The Australian Financial Review helps to answer this
question by highlighting recent trends in world trade between the west and the
so-called developing countries. The article makes the point that international trade
from east to west is ‘the’ big issue in the international economy. This helps to
explain why IHRM is so important today.
Read this short article and make your summary notes below.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
What is different about IHRM?
The next point to consider in this topic is: What makes IHRM different to
domestic HRM?
Your textbook provides a good summary of the factors that help to explain why
IHRM is different to domestic HRM, on pages 5-16. There are two parts to the
explanation.
Firstly, IHRM is more complex than domestic HRM. Six reasons are given for this:
1.
2.
3.
4.
5.
6.
More HR activities
Need for a broader perspective
More involvement in employees’ personal lives
Variations in the mix of expatriates and locals
Risk exposure
Broader external influences.
3
HRM386 Study Guide
You need to study these six factors, on pages 5-8, and be able to explain the nature
of each one. Learn the examples also, or think or your own examples to illustrate
each factor.
The second part of the explanation of why IHRM is different to domestic HRM
relates to moderating variables. These are discussed on pages 9-16 of your
textbook. There are four variables or factors that influence the way that HRM
practices are applies across national boundaries. These moderators are:
a.
b.
c.
d.
The cultural environment
The industry environment
Extent of reliance by the multinational on its home-country domestic market
The attitudes of senior management.
Many of these concepts are not new to you. They were covered in your previous
studies in management and HRM. Here, we are looking at them from an
international perspective. Model 1-4 on page 9 of your textbook provides a good
summary of these factors.
You should learn about these moderators, be able to explain them, and be able to
use an example to illustrate each one. You can use an example from the textbook
or think of your own example.
Read
Reading 1.2:
Saha, S. K. (June, 1993). Managing human resources: China vs.
The West. Canadian Journal of Administrative Sciences, 10(2),
167–177.
This reading is a comparative study of HRM practices in Chinese and western
organisations. This reading will give you some insights into the practice of IHRM
and the factors that help to explain why there are different approaches taken in
different national settings.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
The third and last point to consider in this topic is a model of strategic HRM in
multinational organisations. The model presented in Figure 1-5 of your textbook
(page 17) makes three points:
1.
IHRM must support organisational goals. This is an interactive relationship,
where IHRM strategy shapes goals, and goals shape IHRM strategy.
2.
IHRM strategy influences, and is influenced by internal organisational
factors, such as structure.
4
HRM386 Study Guide
3.
External factors have a direct influence on internal organisational factors,
IHRM strategy and organisational goals.
The purpose of a model such as this is to help you in analysing what needs to be
done to address a specific problem in an organisation. Your analysis will be
guided by theory about the way that IHRM strategy works. This model gives you a
theoretical tool for this purpose.
Tutorial
The purpose of tutorial activities in this subject is to help you to understand the
subject content better. They are also good preparation for your exam.
There are two questions to look at in the tutorial for this topic.
1.
2.
Using the model of IHRM on page 3 of your textbook, think of examples of
how this model could be used to look at staffing in:
a.
A Chinese company based in Changchun, with operations in San
Francisco and Brazil.
b.
A Brazilian company with operations in Changchun and in New Delhi
c.
Indonesians employed by a Chinese company based in Changchun,
with operations in Changchun and New Delhi.
China has a large domestic market. It is also a major exporter of
commodities and goods to the world. How would this affect IHRM strategy
in Chinese multinationals? Look at page 14-15 of your textbook.
Topic summary
In this first topic we have set down some foundations. We’ve looked at the
meaning of IHRM – what makes it different from domestic HRM. We have also
started to define some key terms that relate to this discipline. Finally, we have
seen two important models – one that describes the basic structure of IHRM, and a
second model that shows how we can think of IHRM in a strategic way.
Read
Text:
Dowling, Festing, Engle. 2008. Chapter 1
5
HRM386 Study Guide
Additional reading
Gerhart, B., & Fang, M. (2005). National culture and human resource
management: Assumptions and evidence. International Journal of Human
Resource Management, 16(6), 971-986.
Harvey, M., Novicevic, M., & Speier, C. (2000). Strategic global human resource
management: The role of inpatriate managers. Human Resource
Management Review, 10(2), 153-175/
Hofstede, G. (1983). The cultural relativity of organisational practices and
theories. Journal of International Business Studies, 14(2), 75-89.
Perkins, S., & Shortland, S. (2006). Strategic international human resource
management: Choices and consequences in multinational people
management (2nd ed.). London: Kogan Page.
6
HRM386 Study Guide
Topic 2 Staffing international operations
Introduction to the topic
In the first topic we set the scene for this subject by examining the meaning and
scope of IHRM. In this second topic we begin our look at specific aspects of HRM
in the international context. Staffing is the logical starting point: what approach do
multinationals take to staffing their operations? How are international assignments
developed? How do we measure the return on investment of international
assignments? How should the HRM function be organised in a multinational
organisation? These are the key questions that we will be looking at in this topic.
It is important to remember that sending staff overseas on international
assignments is costly, and there are significant risks of failure. This is why
organisations need to look very carefully at the need, the process and the return
from using different approaches to staffing their operations. You will find that
there are several more new terms in this topic. It may be worthwhile making your
own glossary of terms and learning them throughout the session.
Learning objectives for this topic
Upon successful completion of this topic you should be able to:

describe four approaches to staffing multinational organisations, and explain
the advantages and disadvantages of each approach

explain the HR implications of international staffing approaches

understand the main elements of investment and return on international
assignments, and be able to use this knowledge in providing an example.
Approaches to staffing
There are four approaches to staffing of multinational organisations. These
approaches refer to managerial attitudes that reflect the sociocultural environment
in which the internationalising firm is embedded. They are:
1.
Ethnocentric - where all key strategic decisions are made at headquarters,
and all international appointments are from the parent country, i.e., PCNs.
2.
Polycentric - where subsidiaries have some decision making authority, and
where subsidiary operations are managed by host country nationals, i.e.,
HCNs.
3.
Geocentric - where a global approach is taken and nationality is ignored in
favour of ability.
4.
Regiocentric - where staffing is based on ability, but movements are
confined to a specific geographic area, such as South East Asia.
7
HRM386 Study Guide
Note that the freedom and flexibility of multinationals to follow one or more of
these approaches may be limited by demands of host governments, for example,
that key managerial positions are filled by its nationals.
Each approach has advantages and disadvantages. You need to learn these.
Read
Reading 2.1:
Gong, Y. (2006). The impact of subsidiary top management
team national diversity on subsidiary performance: Knowledge
and legitimacy perspectives. Management International Review,
46(6), 771-790.
This reading is a study of the impacts of diverse top management teams on
subsidiary performance. In regard to the approaches listed above, this article will
give you insights into some of the practicalities of making choices about which of
the four approaches to use.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Learning activity
Summarise the advantages and disadvantages of the four approaches to staffing
multinational organisations.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
HR implications of international staffing approaches
Next, we will look at some of the HR implications of the four approaches to
staffing multinational organisations. Another way to look at this is through a
question: What HR purposes are served by international staffing? Pages 88-98 of
your textbook sets these out for you in detail.
There are four aspects to answering this question:
1.
2.
3.
4.
8
The reasons for using international assignments
Types of international assignments
The roles of expatriates and non-expatriates
The role of inpatriates.
HRM386 Study Guide
Each of these four aspects is explained for you, with examples, in the textbook.
You need to learn these four aspects and be able to explain what each one means,
using an example. The example may be from the textbook or you can make up
your own.
Read
Reading 2.2:
Selmer, J. (2000). Adjustment of Western business expatriates in
Hong Kong versus the Chinese mainland. Asia Pacific Journal
of Management, 17(3), 519-538.
This reading is a comparative study of western expatriate adjustment in Hong
Kong and China. The articles illustrates some of the complexities involved in the
use of expatriates, and raises some interesting questions about why some
expatriates may adjust to one country better than another.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
As you will see, there are many reasons for using international staffing, and many
benefits for the management of HR. For example, expatriates perform several
roles on site, such as network building, knowledge transfer and boundary spanner.
You need to be able to explain these roles.
Return on investment of international assignments
The final section of this topic is devoted to understanding the concept of return on
investment of international assignments. The costs and risks associated with
sending staff abroad, or transferring staff between subsidiaries, is high. If, so some
reason, the assignment fails, the damage done to the staff member, to the
organisation and to its clients may be serious. Therefore, organisations need to pay
attention to return on investment. Is it better to take a more polycentric approach
instead of an ethnocentric approach? Are the risks reduced?
The measurement of return on investment in HRM can be difficult. Direct
expenses are easy to measure. But it may be hard to quantify certain benefits or
risks. Figure 4-3 on page 99 of your textbook provides a useful summary of the
various elements of investment and of benefit that are used. As you will see, not
all of these items are easy to measure and quantify.
It is not surprising that this aspect of staffing is sometimes neglected by
multinationals, because it is seen as too hard. It is much easier to use simpler
measures such as: completion of the assignment and failure rate.
9
HRM386 Study Guide
You should be familiar with a selection of these elements for each sub-category in
the table.
Tutorial
There are two tutorial activities suggested for this topic.
1.
Read the short case 4-1 on page 81 of your textbook, and discuss the
question at the end of the case.
2.
Is it better to use one main approach to international staffing, or a mixture,
or just make decisions according to the situation? See pages 84, 85 of your
textbook.
Topic summary
The main focus in this topic has been on why multinationals use international
assignments, and how they make decisions about international assignments. Even
though these kinds of assignments are costly and risky, we are still not well
equipped with ways of measuring the return on investment. This is an area that
needs further research and attention. Certainly, the direct cost items are not
difficult to capture. What is difficult, however, is to capture indirect costs, and the
potential range of benefits that may accrue from these assignments, for individuals
and for their organisations.
Read
Text:
Dowling, Festing, Engle. 2008 Chapter 4
Additional reading
Bonache, J., Brewster, C.. & Suutari, V. (2001). Expatriation: A developing
research agenda. Thunderbird International Business Review. 43(1), 3-20.
May, M., & Wong, L. (2001). Internationalising Japanese expatriate managers’.
Management Learning. 32(2), 237-351.
Scullion, H., & Collings, D. (Eds.). (2006). Global staffing. London and New
York: Routledge.
10
HRM386 Study Guide
Topic 3 Recruiting and selecting staff for
international assignments
Introduction to the topic
This topic examines issues surrounding the approach to acquiring staff for
international assignments. This would include selecting existing staff in an
organisation to undertake international assignments.
So far in this subject we have looked at the definition and scope of IHRM and
issues associated with staffing organisations that operate in multiple countries.
You have seen that there are many new terms used in this field of HRM, as well as
some new theoretical concepts, and, most important, some added complexities
that come with taking an international approach to HRM. This topic looks into
another HRM aspect of multinational organisations – the way that they choose
people to undertake international assignments. As we saw in the past topic,
staffing decisions will be influenced by host country regulation, and the
philosophy of the home country organisation, i.e., geocentric, polycentric, and so
on.
Perhaps you are interested in this area because this is something that you aspire to.
How prepared will you be to be considered? This topic will give you some helpful
insights into what it takes to be selected to pursue an international assignment in a
multinational organisation.
Learning objectives for this topic
Upon successful completion of this topic you should be able to:

Explain the myths about the global manager, and how these myths relate to
the recruitment and selection.

Explain the meaning of expatriate and the concept of expatriate failure.

Discuss the reasons for expatriate failure, and how these reasons influence
the approach taken to selection.

Explain the main factors involved in expatriate selection.
Review activity
To begin, review your understanding of the concepts, recruitment and selection.
Recruitment is
__________________________________________________________________
__________________________________________________________________
11
HRM386 Study Guide
Selection is
__________________________________________________________________
__________________________________________________________________
There are several myths regarding the global manager that we need to understand
before considering how recruitment and selection decisions are made for
international assignments. Unfortunately, the term ‘global manager’ itself has no
widely agreed meaning. Some see it as having a global mindset; others see it as
being formed through actual international experience. But, there are some myths
that we should be aware of.
1.
Myth 1 – there is a universal approach to management
2.
Myth 2 – there are common characteristics shared by successful
international managers
3.
Myth 3 – people can acquire multicultural adaptability and behaviours
4.
Myth 4 – there are no impediments to mobility.
The expatriate
Let’s now turn to look at the important term, ‘expatriate’.
Learning activity
What does a typical expatriate look like? What are some of the common
characteristics of an expatriate today? Answer this question based on the data
provided on page 111 of your textbook.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
One of the most important issues that we need to consider in IHRM is expatriate
failure. Why do you think this is so important?
Expatriate failure means the premature return of an expatriate (that is, return home
before the period of assignment is completed). This is the classic definition.
There has been debate about this, and you will look at this debate in your tutorial
for this topic.
There is also debate about just how significant is the incidence of expatriate
failure. The most recent evidence suggests that the failure rate is declining. You
need to study the reasons for expatriate failure and the conclusions that may be
reached based on the available data.
12
HRM386 Study Guide
Learning activity
What are the costs of expatriate failure? These costs may be direct and indirect.
List these cost elements here.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Expatriate failure is a well researched area, because the costs of failure are high.
Researchers have tried to identify the factors that seem to determine why people
may be perceived to fail. Five key reasons have been identified. You need to study
these reasons, be able to explain each reason, and provide an example. The
example may be from your textbook, or one that you make up.
1.
Inability to adjust to the foreign culture: this may be because of issues with
language, customs, business practices, or even climate.
2.
The process of adjustment: this refers to the time, patience, and persistence
required learning and becoming comfortable with working in a different
culture.
3.
The length of assignment: the assignment may be too short or too long for
an expatriate to make the required impact or achieve desired results.
4.
Willingness to move: an expatriate may be reluctant to undertake the
international assignment, and may never really overcome this reluctance.
5.
Work environment-related factors: this may include the ability to make
contacts, the business culture of the firm, the working conditions, and even
the ethics of management practice.
Read
Reading 3.1
Yamazaki, Y. (2009). Expatriate adaptation: A fit between skills
and demands among Japanese expatriates in USA..
Management International Review, 50(1), 81-108
This reading is a study of expatriate adjustment. This study investigates expatriate
adaptation using a sample of Japanese expatriates in the US. For a comprehensive
understanding, home managers in Japan and host managers in the US were also
used.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
13
HRM386 Study Guide
Selection of candidates for international assignments
The next issue to consider is: what criteria should be used to select people to
undertake international assignments?
As you study these criteria, bear in mind that the selection is a two-way process:
the candidate is considering whether the opportunity is suitable, well –supported,
and worthwhile, and the organisation is considering the merits of the candidate.
There are six factors involved in expatriate selection. These are:
1.
Technical ability: ability to undertake core business tasks, such as
engineering, marketing, and so on, that the expatriate has been trained in.
2.
Cross-cultural suitability: the suitability of the expatriate to work across
cultures, and to adjust to new practices, norms and situations.
3.
Family requirements: the suitability and willingness of the family to support
the expatriate’s assignment.
4.
Country/cultural requirements: the requirements of the host country’s
government and of its business culture, and whether the prospective
candidate is able to meet these requirements, or adjust to them.
5.
Language: the ability and willingness of the expatriate to learn the host
country language.
6.
Multinational organisation requirements: any requirements of the
multinational organisation relating to experience, and other desired
attributes for undertaking international assignments.
You need to learn and be able to explain each of these factors.
Dual career couples
Finally, we look at how companies deal with dual career couples. What
arrangements can be made to assist the spouse of an international assignee? These
so-called family-friendly policies include:

Inter-company networking: networking with employees in other companies
to learn more about the business culture of the host country, and to make
business contacts.

Job hunting assistance: for the expatriate’s partner.

Intra-company employment: this is also referring to possible employment
opportunities for the expatriate’s partner.

On-assignment career support: support offered to the expatriate regarding
how the assignment will contribute to career development.
14
HRM386 Study Guide
Read
Reading 3.2:
Konopaske, R., Robie C., & Ivancevich, J. M. (2009).
Managerial willingness to assume traveling, short-term and
long-term global assignments. Management International
Review, 49(3), 359-387.
This reading looks at managers’ willingness to undertake global assignments, and
the factors that mediate their decisions. Results suggest that individual
(adventurousness and destination country), family (eldercare, children at home,
community tenure, and spouse/significant other relocation willingness), and
organizational (compensatory rewards/benefits and career fit) factors influence
managerial willingness to assume global assignments.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Tutorial
The tutorial for this topic has two questions.
1.
Set up an in-class debate. The proposition is: That expatriate failure is best
measured by premature return of an expatriate. In two teams, develop
arguments for and against this proposition. Please make notes of this debate,
as it is core knowledge for the subject.
2.
Consider the diagram of factors in expatriate selection on page 119 of your
textbook. Imagine that you are on a selection panel to choose an Australian
executive to come to China (you can select a specific city) for a 12 month
assignment.
Working in groups of three people each, develop three selection interview
questions to assess cross cultural suitability. Explain why you developed
each question, and what it will measure.
Topic summary
In this topic we have looked at expatriate selection. One of the first things to be
careful of when making decisions in this area is that there are several myths about
what is ‘good’ or ‘poor’ about a global manager. But often these are just myths,
and, if followed, they can lead to poor decision making. We then looked at the
meaning of expatriate and the concept of expatriate failure. Expatriate failure may
be defined narrowly, or more broadly. Whichever approach is taken, it is clear that
there are serious consequences that follow, and so it is very important that we
15
HRM386 Study Guide
understand the causes of expatriate failure, and do something about trying to
prevent these from occurring.
There are some key points that can make or break the selection of staff to
undertake expatriate assignments, and we looked at these. These factors
underscore, or highlight, the importance of good practice in IHRM. Finally, we
looked at the challenging issue of dual career couples. This is not an easy issue to
address, because there can be conflicting priorities, values and assumptions.
Organisations need to tread carefully when trying to support the aspirations and
choices of these couples.
Read
Text: Dowling, Festing, Engle. 2008. Chapter 5.
Additional reading
Christensen, C., & Harzing, A-W. Expatriate failure: Time to abandon the
concept? Career Development International, 9(7), 616-626.
Harris, H., & Brewster, C. (1999). The coffee machine: How international
selection really works. International Journal of Human Resource
Management, 10(3), 488-500.
Karimer, M., Wayne, S., & Jaworski, R. (2001). Sources of support and expatriate
performance: The Mediating Role of Expatriate Adjustment. Personnel
Psychology, 54, 71-92.
16
HRM386 Study Guide
Topic 4 International compensation
Introduction to the topic
Globalization has increased awareness of and concern for creating internationally
equitable compensation systems in many companies. The complex nature of
international compensation dictates that it receives special attention from
organization operating in a multi-national environment. It is crucial that
organizations understand the kind of employees employed by international firms,
the elements that comprise an international compensation system, and the special
problems associated with returning citizens on overseas assignments to their home
corporation.
International compensation is about more than just expatriate pay. Compensation
today is seen as: a mechanism to develop and reinforce a global corporate culture;
a primary source of corporate control, and part of the corporate governance
framework. This HR aspect has seen increasing complexity, many challenges and
greater choice in customising compensation to individuals’ needs and performance
goals.
Learning objectives for this topic
Upon successful completion of this topic you should be able to:

Discuss the objectives that influence the approach that multinationals take to
developing international compensation policies.

Explain the key components of an international compensation package

Analyse the ‘going rate’ and ‘balance sheet’ approaches to compensation.
Objectives of international compensation
There are several key objectives that firms try to consider when developing
international compensation policies. These are:
1.
Consistency with overall strategy: like other HRM activities, the purpose of
compensation in an organisation is to achieve business objectives.
Therefore, alignment with corporate strategy is critical. For example, when a
firm is establishing a presence in a new international market, you might
expect to see the design of compensation arrangements include elements
focused on client relationship development, and revenue targets.
2.
Targeted attraction and retention of staff: one of the interesting
developments in compensation has been the emergence of customised
compensation packages that are tailored to an individual’s performance
objectives and needs. One of the objectives of compensation policies,
therefore, is to focus on attraction and retention of specific skills sets and
attributes.
17
HRM386 Study Guide
3.
Facilitate cost-effective international transfer of employees: as we saw
earlier, international assignments are costly and may involve relatively high
degrees of risk. One of the objectives of compensation strategy, therefore, is
to aid the mobility of employees across borders. This may involve, for
example, using combinations of standardised and flexible components that
apply to certain groups of countries.
4.
Give due consideration to equity and ease of administration: Organisations
need to keep an eye on issues of equity or fairness, as well as the cost and
time involved in administration of compensation policies. For example,
within a nation it may be typical that people doing similar tasks are paid at a
similar level. However, working across boundaries this may not occur.
Hence, it may be necessary to apply adjustments in certain countries to make
the compensation packages equitable, or, to create a level playing field.
Read
Reading 4.1:
Girma, S., Thompson, S., & Wright, P. (2002). Multinational
activity and CEO compensation: Preliminary evidence from
large UK firms. Review of World Economics, 138(4), 680-693.
This reading is a study of CEO compensation by Girma, Thompson and Wright.
Since the early 1980s the rate of growth in executive remuneration has
consistently outpaced that of average earnings. This phenomenon has been widely
assumed to be part of an internationalization of the executive labor market. This
paper starts from the premise that the multinational enterprise will be a major
agent in such a market and presents some preliminary tests for the impact of
multinational activity in general, and specific regional effects in particular, on
CEO remuneration using a sample of large UK firms.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Components of international compensation packages
What are the key components of an international compensation program?
1.
Base salary: this usually refers to an amount of monetary compensation
2.
Foreign service inducement/hardship premium: this element covers
incentive payments or other measures to make it attractive for an employee
to undertake the international assignment.
18
HRM386 Study Guide
3.
Allowances: this refers to payments to cover, for example, medical
expenses, insurance.
4.
Benefits: this last element would include things like return airfares, leave
provisions, and provision of accommodation.
You need to be able to define each component, and provide at least one example
to support your definition.
Approaches to the design of international compensation packages
Having looked at the basic components of international compensation, we next
look at the main approaches that are used in the design of these packages - the
Going Rate approach and the Balance Sheet approach. Organisations would use
one or other approach depending on their national and industry context, as well as
their previous practice.
There are advantages and disadvantages to each approach.
You need to be able to explain the meaning of each approach, illustrate this with
an example, and state the advantages and disadvantages of each approach.
[Note: you do not need to cover taxation, international living costs data,
differentiating between PCNs and TCNs, and the section on tentative
conclusions.]
Learning activity
List the advantages and the disadvantages of the two main approaches to
international compensation.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
19
HRM386 Study Guide
Read
Reading 4.2:
Tharenou, P. (2010). Women’s self-initiated expatriation as a
career option and its ethical issues. Journal of Business Ethics,
95(1), 73-88.
This reading looks at a different aspect of expatriate remuneration. This is a study
of women’s self-initiated expatriation and the outcomes that result, including
compensation outcomes.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Tutorial
The tutorial for this topic involves an individual written exercise. You need to use
the textbook to write a short answer to the following question. Your instructor will
collect these and provide general feedback to the class on areas for improvement.
What should be the main objectives for a multinational firm with regard to its
compensation policies?
Topic summary
The starting point in this topic was to understand what multinationals seek to
achieve when they turn to developing international compensation packages. This
is an important point to pay attention to. Too many practitioners will move into
designing a compensation package without taking the time to work out very
clearly what it is they are seeking to achieve. Therefore, in your study, please pay
close attention to the objectives that firms are seeking to pursue.
Next, it is important to know just what elements you can use in designing a
compensation package – what tools you have to work with, if you like. The core
part of this topic is the material on the going rate approach and the balance sheet
approach to package design. You must understand these two approaches, and be
able to analyse the strengths and limitations of each one.
20
HRM386 Study Guide
Read
Text:
Dowling, Festing, Engle. 2008. Chapter 7
Additional reading
Bebchuck, L., & Fried, J. (2004). Pay without performance: The unfulfilled
promise of executive compensation. Cambridge: MA: Harvard University
Press.
Festing, M., Eidems J., & Royer, S. (2007 April). Strategic issues and local
constraints in transnational compensation strategies: An analysis of cultural,
institutional and political influences. European Management Journal, 25(2),
118-131
Pomeroy, A. (2007). Executive Briefing: Global Pay for Performance. HR
Magazine, 51(4) 18.
21
HRM386 Study Guide
Topic 5 International training and development
Introduction to the topic
There are two main aspects to training and development in IHRM: first, training
as preparation for undertaking an international assignment, and second, the role of
international assignments as vehicles for the training and development of staff.
The focus in this topic is mainly on the traditional expatriate assignment.
Learning objectives
Upon successful completion of this topic you should be able to:

Explain the purpose of pre-departure training, and what is covered in these
programs.

Discuss the evidence relating to the effectiveness of pre-departure training.

Explain the purpose of international assignments for management
development and organizational development.

Discuss emerging issues that are influencing the way international training
and development programs are designed and delivered.
Review activity
Before we begin, it is important to recall the meaning of training and
development. This was covered in MGT 210. Define these terms here, before you
go on.
Training is:
__________________________________________________________________
Development is:
__________________________________________________________________
In traditional expatriate assignments, the training, first and foremost, centres on
pre-departure preparation. The objective of pre-departure training is to assist the
expatriate to adjust to the demands of living and working in a foreign location.
Pre-departure training
There are several well established approaches used here. These include:
1.
Cultural awareness programs: these are short programs that aim to give the
employee an understanding of the unique aspects of the host country culture,
including business culture.
2.
Preliminary visits: it is a good idea to send the employee (in some
circumstances, with family) to undertake a preliminary or familiarisation
22
HRM386 Study Guide
visit to the new location, in order to gain a firsthand experience of living
conditions and the work environment, to meet key people, and to make
enquiries relating to accommodation, educational facilities, and so on.
3.
Language training: this refers to learning to speak the host country language,
for basic business and conversation.
4.
Practical assistance: this would include assistance with relocation, finding
suitable schools, and making travel arrangements.
Study each of these approaches and learn an example of each one.
Learning activity
What does the evidence tell us about the effectiveness of pre-departure training?
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Read
Reading 5.1:
Hutchings, K. (2003). Cross-cultural preparation of Australian
expatriates in organisations in China: The need for greater
attention to training. Asia Pacific Journal of Management,
20(3), 375-396.
This reading is a research study by Kate Hutchings on the training provided to
Australian expatriates in China. This research indicates that while Australian
organisations are recognising the need to employ expatriates that have prior China
knowledge, organisational preparation remains negligible.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
23
HRM386 Study Guide
Read
Reading 5.2:
Vance, C. M., & Paderon, E. S. (1993). An ethical argument for
host country workforce training and development in the
expatriate management assignment. Journal of Business Ethics,
12(8), 635-641.
This reading is an older article, but one that still has important points to make
today. Written by Vance and Paderon, this article seeks to establish the ethical
foundation of MNCs' responsibility for providing host country workforce (HCW)
preparation and training as part of a new expatriate management assignment. This
is a different perspective on preparation for international assignments, as it
suggests that not only the expatriate needs preparation, but also those to whom
she/he is going to.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Other developmental goals of international assignments
We said earlier that international assignments are an important vehicle for training
and development of staff. For this purpose, the expected outcomes are:
management development, and organizational development.
Study each of these outcomes and explain how individual development and
international team development are supported by international assignments.
Issues affecting the design and delivery of international training and
development
Finally, we look at some emerging trends in international training and
development. These trends are:
a.
Convergence/localisation of training and development programs:
organisations operating across boundaries need to make decisions regarding
the extent to which they will use the same or similar programs in all
countries, and/or localise material for particular markets. There is certainly a
trend towards convergence of training and development programs, for
example, dealing with core aspects of managing. On the other hand,
programs dealing with certain skills sets such as negotiation still need to be
tailored to specific cultural contexts.
b.
The effects of globalisation versus pressure to take account of national
context: the further that organisations move down the path of
internationalisation, the more they need to make choices about the balance
24
HRM386 Study Guide
between taking a global approach, on the one hand, and paying attention to
aspects of national culture and practice. This is a delicate balance; one that is
influenced, for example, by local laws and regulations that may stipulate
requirements relating to employment, working conditions and even work
practices.
c.
The role of non-government organisations: the increasing importance of
non-government organisations globally is seeing the provision of training
and development fall to these institutions. This may reduce the burden of
this HRM function on organisations that move into a country.
d.
The importance of China: the increasing importance of China (at the time of
writing, the second largest economy in the world) means that globalisation is
commonly focused on establishing a viable presence in China. Given the
size of the Chinese market and its distinctive characteristics, an
organisation’s presence here will itself generate a range of important issues
in training and development.
Tutorial
For this tutorial you are asked to work in small groups to develop the elements of
a pre-departure training program for an Australian banking executive who is
preparing to take up a role in Beijing with a subsidiary of the bank.
What topics do you think should be covered?
Design an activity for each topic?
Topic summary
It may be surprising to you that the application of pre-departure training is not
more developed and comprehensive. We have seen in earlier topics that there are
risks and costs associated with international assignments. It would seem selfevident that a sound pre-departure training and education program is crucial. The
scope of such programs is quite broad, and, if they are well implemented the
international assignee should be very well prepared. Beyond this type of training,
we have seen in this topic that there are important benefits of international training
and development for both management development and organizational
development. You have studied these, and should be able to discuss the benefits.
Finally, in recent years, there are various emerging issues, not least being the
increased importance China in the global market, that are shaping the way we
design and delivery international training and development. No doubt, there are
other factors that are yet to be recognised.
Read
Text:
Dowling, Festing, Engle. 2008. Chapter 6
25
HRM386 Study Guide
Additional readings
Littrell, L., & Salas, E. (2005). A review of cross cultural training: Best practices,
guidelines, and research needs. Human Resource Development Review, 4(3),
305-334.
Metcalfe, B., & Rees, C. (2005). Theorizing advances in international human
resource development. Human Resource Development International, 8(4),
449-465.
Stahl, G., & Bjorkman, I. (Eds.). (2006). Handbook of Research in International
Human Resource Management. Cheltenham: Edward Elgar.
26
HRM386 Study Guide
Topic 6 International industrial relations
Introduction to the topic
This topic examines industrial relations conducted across national boundaries, for
example, where a multinational organisation has operations in several countries.
Here, it is important for the organisation to understand the similarities and
differences in the policies, systems and processes involved in each country, and be
able to work within these constraints. We will be looking at this topic from two
perspectives – employers and unions.
Learning objectives for this topic
Upon successful completion of this topic you should be able to:

Explain the difficulties involved in comparing industrial relations systems.

Discuss the factors that shape the way multinationals organise their
industrial relations activities.

Discuss the role that trade unions play in international industrial relations,
including their responses to the challenges of globalisation.
Review activity
Before we start, it is useful to recall the definition of industrial relations from your
previous studies. Write this definition here.
__________________________________________________________________
__________________________________________________________________
For this topic we are defining industrial relations as the study of issues relating to
work and employment. This is broad definition which covers several key aspects
of the employment relationship.
Read
Reading 6.1:
Terjesen, S., & Hessels, J. (2009). Varieties of export-oriented
entrepreneurship in Asia. Asia Pacific Journal of Management,
26(3), 537-561.
To get a taste of how industrial relations systems are important in shaping
economic outcomes, look at Reading 6.1 by Terjesen and Hessels.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
27
HRM386 Study Guide
Studying international industrial relations
Comparative industrial relations, that is, comparing industrial relations systems
across countries, can be a difficult area of study, because of philosophical and
methodological differences.
These differences include:

Differences in the meaning of concepts

Different objectives in industrial relations systems

Differences in the availability of statistics

Differences in the methods used to collect statistics

Differences in the historical and cultural contexts of industrial relations
systems.
Multinationals and industrial relations
What are the main factors that influence the way that multinationals organise and
conduct their industrial relations functions?
Study the factors listed on pages 250-252 in your textbook. You will need to be
able to explain each one.
There are 7 factors:
1.
2.
3.
4.
5.
6.
7.
The degree of inter-subsidiary production integration
Nationality of ownership of the subsidiary
International HRM approach
Multinational prior experience in industrial relations
Subsidiary characteristics
Characteristics of the home product market
Management attitudes towards unions.
Unions and international industrial relations
In addition to employers, trade unions are important institutions in international
industrial relations. This is because trade unions may limit the strategic choices of
multinationals: by influencing wage levels to the extent that cost structures may
become uncompetitive; by constraining the ability of multinationals to vary
employment levels at will; and by hindering or preventing global integration of the
operations of multinationals.
Study each of these potential effects of union behaviour.
28
HRM386 Study Guide
Read
Reading 6.2:
Taylor, B. (2000). Trade unions and social capital in transitional
communist states: The case of China. Policy Sciences, 33(3),
341-354.
This reading provides some interesting insights into the role and behaviour of
trade unions in transitional communist states, such as China. This reading will
give you some insights into the way that unions have evolved in these states, and
the way forward as industrial relations policy is adjusted to suit a more
expansionist economic policy.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Trade unions have faced many challenges in a globalised world. Unions have
largely operated within national boundaries, but firms have been moving beyond
national boundaries for quite some time now. How have unions responded?
Study these responses and be able to define and explain them. See pages 255 to
258 of your textbook.
(You do not need to study the material in your textbook on the European Union.)
Tutorial
This tutorial will help to reinforce your understanding of the factors that you
looked at above.
1.
What do you think might be the attitude of Chinese managers towards
unions in China?
2.
Look at the table on page 252 in your textbook. Do you think management
attitudes towards unions might have played a part in the decline of union
density? How?
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
29
HRM386 Study Guide
Topic summary
The task of comparing industrial relations systems should be done with care, as
there are several complications in ensuring that we are comparing like with like.
That said, there are some important lessons to be learned from this topic about the
distinctive factors that influence the way that multinationals organise their IR
activities. Similarly, trade unions have faced some key challenges in performing
their role amidst changes in economic organisation and international business.
These challenges continue and all parties in IR will need to be prepared to adapt
their strategies in order to ensure that this important aspect of IHRM is managed
effectively.
Read
Text:
Dowling, Festing, Engle. 2008. Chapter 10
Additional reading
Bamber, G., Lansbury, R., & Wailes, N. (2004). International and comparative
employment relations. (4th ed.). London: Sage.
Katz, H., & Darbishire, O. (2000). Converging divergences. Ithaca, NY: ILR
Press.
Shen, J. (2007). Labour disputes and their resolution in China. Oxford: Chandos
Publishing.
30
HRM386 Study Guide
Topic 7 Performance management
Introduction to the topic
The final aspect of IHRM that we will study is performance management. You
will be familiar with the purpose and basic methods of performance management
from your earlier studies. Here, we are looking at this topic in the international
context. To what extent are the ‘standard’ methods still applicable? How do we
manage the performance of employees in a subsidiary? For example, should a
team based approach that is used in the United States be applied without change to
a subsidiary in China? These are complex questions and there has been
considerable research devoted to this topic in recent years.
Performance management is an important part of an organisation’s control system.
In this topic performance management is defined as a process that enables the
multinational to evaluate and continuously improve individual, subsidiary unit,
and corporate performance, against clearly defined, pre-set goals and targets. You
can see that performance management is a multi-level construct, and that it is a
continuous process.
Learning objectives for this topic
Upon successful completion of this topic you should be able to:

Understand the relationship between performance management and firm
performance.

Discuss the constraints that face multinationals in developing performance
management systems.

Explain the key steps in the performance management process.

Discuss the challenges involved in applying performance management
systems to host country employees.
A key dilemma surrounding this topic is role clarity: a manager’s role may be
defined in one country, but performance in another. The cultural norms regarding
the set of behaviours that define ‘a manager in the US’ may not be the same as
those considered appropriate for a manager’s role in China. See pages 275-277 of
your textbook.
Review activity
Review the goals of a performance management system, drawing on your previous
studies.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
31
HRM386 Study Guide
Read
Reading 7.1:
Sels, L., De Winne, S. Delmotte, J. Maes, J. Faems, D., &
Forrier, A. (2006). Linking HRM and small business
performance: an examination of the impact of HRM intensity on
the productivity and financial performance of small businesses.
Small Business Economics, 26(1), 83-101.
This reading looks at mediators of individual performance issues in Indian firms.
The paper posits firm level HR practices as a mediator between organizational
culture and transformational leadership whose outcomes are hypothesized as
lower levels of individual employees’ intention to quit the organization and higher
level of performance.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Addressing performance management
Multinationals face several constraints when they try to evaluate performance.
You need to learn these constraints and be able to illustrate each one with an
example.
1.
Unity and diversity: the multinational is a single entity, but comprised of
several parts, each of which may be subject to different legislation and
cultural norms and work practices. These may affect the way that a
performance management system is designed.
2.
Non-comparable data: this is especially problematic when dealing with
multiple subsidiaries.
3.
Volatility of the global environment: this may require that long-term goals
be flexible in order to respond to potential market contingencies.
4.
Separation by time and distance: physical distance, different timezones and
the frequency of contact between head office and subsidiary management
may make it difficult to decide if the performance of a subsidiary is really
congruent with expectations.
5.
Variable levels of maturity: this refers to the pace of market development in
countries where the multinational is seeking to establish a presence.
32
HRM386 Study Guide
Performance management process
Next, we look at the process of performance management of international
employees. This covers:
a.
b.
c.
d.
e.
The specification of performance criteria: note the differences between hard
goals, soft goals, and contextual goals.
Who conducts the performance appraisal?
The forms used in the appraisal
The frequency of appraisal
Performance feedback.
Study each of these steps and be able to discuss how it is carried out.
Read
Reading 7.2:
Biswas, S. (2009). HR practices as a mediator between
organizational culture and transformational leadership:
Implications for employee performance. Psychological Studies,
54(2), 114-123.
This reading sets the scene for this topic by exploring the link between HRM and
firm performance. The existence and strength of this link is at the very heart of
this topic, and it is important to have a basic understanding of the evidence and
limitations of linking HRM and performance.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Performance management – host country employees
One area that can be quite problematic in international performance appraisal is
the appraisal of host country employees.
Why might this be a problem?
__________________________________________________________________
In fact, there has been limited research on this aspect of IHRM. The main issue to
consider here is what is called ‘cultural applicability’. That is, how applicable is a
particular performance appraisal process in a culture that’s different to the one
where the system was developed?
33
HRM386 Study Guide
Learning activity
Examine the discussion on this issue that is presented on pages 286-287 of your
textbook, and summarise the main reasons why cultural applicability may be a
problem, and possible solutions.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Tutorial
1.
Read the IHRM in Action Case 11-1 on page 283 of your textbook. List the
main problems that Richard is facing.
2.
Write a half page answer to this question.
3.
Why is it important to include hard, soft, and contextual goals when
assessing managerial performance?
Topic summary
Performance management is a universal HR activity – most organisations, in most
countries will apply some form of performance management process. Ws
informed practitioners we need to pay attention to the purpose of this activity: how
does it contribute to firm performance? This will influence the design of the
process. In the international context, there are some special considerations that
need to be taken into account when thinking about performance management. We
have considered these factors, and the way that they make the performance
management process challenging. One of the challenges that we paid closer
attention to was the application of performance management to host country
employees. Even the best performance management system needs to be culturally
appropriate.
Read
Text:
34
Dowling, Festing, Engle. 2008. Chapter 11
HRM386 Study Guide
Additional reading
Cascio, W. (2006). Global performance management systems. In G. Stahl &
I Bjorkman (Eds.), Handbook of Research in International Human Resource
Management. Cheltenham: Edward Elgar.
Shay, J., & Baack, S. (2004). Expatriate assignment, adjustment, and
effectiveness: An empirical examination of the big picture. Journal of
International Business Studies, 35, 216-232.
Shih, H., Chiang, Y., & Kim, I. (2005). Expatriate performance management from
MNEs of different national origins. International Journal of Manpower,.
26(2), 157-176.
35
HRM386 Study Guide
Topic 8 IHRM Trends: Complexity, challenges and
choices in the future
Topic summary
In this final topic we look at a selection of emerging issues in IHRM. Each of
these issues warrants more detailed study, but in this subject, we will be
considering these issues in a broad sense. The issues we will study are:
1.
International business ethics and HRM – notably, the way bribery is handled
2.
Challenges for the HR function of the multinational firm
3.
The emerging role of NGOs
4.
The challenges of safety, security and counterterrorism.
Learning activity
From your study of this subject, your previous studies, and your general
knowledge, what HR issues would you say are emerging in international business?
__________________________________________________________________
__________________________________________________________________
How important are the issues that you have identified for Chinese enterprises
operating in overseas markets?
__________________________________________________________________
International business ethics
There is a basic issue that you might have identified across the topics that you’ve
studied so far. The issue is this: is there a one best way to do IHRM, or do we
need to be willing to adapt policies and practices when doing business in host
countries?
If we do decide that we need to be ‘culturally sensitive’ in the way we do IHRM
outside the parent country, then, on what basis do we make adjustments? Do we
ask local employees what’s best? Do we ask the Government of the host country
for their opinion? Or, do we use some other basis to decide how to adapt out
policies and practices to better ‘fit’ the host country business environment?
Read
Reading 8.1:
36
McNeil, M., & Pedigo, K. (2001). Western Australian managers
tell their stories: Ethical challenges in international business
operations. Journal of Business Ethics, 30(4), 305-317.
HRM386 Study Guide
This reading by McNeil and Pedigo is an Australian study that investigates the
ethical challenges facing managers in Western Australia. It identifies the ethical
issues that managers confront in international business. Managers in this research
have identified a number of significant ethical issues when discussing the ethical
incidents that occurred in their international dealings. The research shows a degree
of congruence between managers' experiences and establishes the main ethical
dilemmas encountered, how they felt and actions taken when confronted with an
ethical dilemma. This reading, though a little dated now, illustrates in a clear,
practical way some of the ethical realities of doing business across cultures.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
One of the clearest examples of this ethical issue relates to bribery, also known as
‘grease money’ in some Asian countries. Should we adopt the local practice of
paying bribes, or grease money, or inducements to win a contract, or to speed up
the processing of our work by a government official?
The issue is discussed well in your textbook, on pages 294-296. As you read this
section, consider and make notes on:

the different types of ethical response to this question

international developments in the criminalisation of bribery, noting the
arguments that have been used to advocate for legislative action.
Challenges for the HR function of the multinational firm
If multinationals want to be culturally sensitive in the way that they design and
implement IHRM policies and practices, what kinds of activities do you think the
HR functions in these organisations might have to perform?
One of the necessary activities that the HR department will need to perform is to
raise awareness among parent company and host country employees about, for
example, ethical issues, the company’s policy, and the way that the policy will be
applied in different political, social, economic, cultural and legal settings.
37
HRM386 Study Guide
Learning activity
How would ethical considerations relating to bribery influence the performance
appraisal and compensation programs of the company? See page 297 in your
textbook.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
It is important to grasp the complexities involved when large firms that are used to
high levels of standardisation attempt to be more sensitive to local conditions.
Non-Government organisations (NGOs)
There are many interest groups and pressure groups today that operate in the
business environment, internationally. These include groups such as: Greenpeace,
Red Cross, and Red Crescent. Although they have diverse interests and causes that
they seek to pursue, they do have one thing in common: they seek to influence
decision making in organisations, urging firms to look beyond effectiveness and
efficiency, towards a values-driven, more charitable approach.
Read
Reading 8.2:
Audebrand, L., & Pauchant, T. (2009). Can the fair trade
movement enrich traditional business ethics? An historical study
of its founders in Mexico. Journal of Business Ethics, 87(3),
343-353.
This reading is a study of the Fair Trade Movement and its influence on business
ethics. This reading will give you a solid understanding of how pressure groups
can lead innovation in business practices, in a practical way. The Fair Trade
Movement has had a growing influence across the world and it is certainly
shaping the way that mainstream firms, such as Pacific Coffee Company, for
example, are doing their business.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
38
HRM386 Study Guide
Learning activity
How do you think the HR function should address the calls made by these groups
at a strategic level?
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
_________________________________________________________
Challenges in an uncertain world
The last emerging issue that we look at in this topic is the challenges presented to
multinational firms around safety, security, and counterterrorism. HR managers
have, for a long time, turned their minds to legal issues, certain types of corporate
risks, occupational health and safety strategies, and the like.
The emergence of global terrorism, however, raises a new set of risks that affect
multinationals. Corporate risk assessment now needs to be broader and more
comprehensive than what we have considered in the past. There are five areas of
risk assessment that need to be addressed:
1.
2.
3.
4.
5.
in-facility emergency and disaster preparedness
in-facility security
industrial espionage, theft, and sabotage
cyberterrorism
Out-of-facility fire and travel risks.
Study these risk areas and be able to explain each one, using an example.
Learning activity
What have been the responses of firms to the heightened risks associated with
national security? See page 302 of your textbook.
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Tutorial
Identify some of the HRM problems that typically arise with expatriate
assignments. In what ways might core ethical values and guidelines identified in
this topic apply to them?
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
39
HRM386 Study Guide
Review activity
What IHRM activities would be pertinent to the sending, by the Red Cross, of a
medical team into a country such as Bangladesh?
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
Topic summary
In this final topic we have looked at some of the emerging issues facing
practitioners in IHRM. If there was any doubt at the start of this subject that
IHRM was quite different to HRM in a domestic situation, this topic should dispel
this doubt. Issues such as international business ethics, criminalisation of certain
business practices, the role of IHRM in supporting ethical management, and the
implications of global terrorism are complex, challenging issues that are
exercising the minds of IHRM practitioners and their senior managers, as well as
national governments and international agencies. Added to all this, are the
increasingly vocal NGOs that insist on their voices being heard by governments
and by multinationals when they make decisions about products, services and
management and business practices. The world of IHRM is certainly an interesting
one. The skills and knowledge that you have acquired in this subject will be of
great benefit as you embark on your future career.
Read
Text: Dowling, Festing, Engle. 2008. Chapter 12
Additional reading
Cascio, W. (2006). Decency means more than “always low prices”: A comparison
of Costco to Wal-Mart’s Sam’s Club. Academy of Management Perspective,
20(3), 26-37
Ghemawat, P. (2006). Business, society, and the Wal-Mart effect. Academy of
management Perspectives, 20(4), 23-34
Suder, G. (2006). Corporate strategies under international terrorism and
adversity. Cheltenham: Edward Elgar.
40
HRM386 Study Guide
Concluding note
This completes our study of aspects of HRM from an international perspective.
We have covered a lot of ground over these 8 topics and you will soon have the
opportunity to work on revision of this material with a lecturer from CSU, in
preparation for the exam.
The revision classes will highlight key points from each topic. This will help to
reinforce your learning and to brush up on key concepts and ideas from this
subject. You will also have the opportunity to undertake practice exam questions,
and to ask questions of clarification of anything that has been covered in the
subject.
Best wishes for the exam, for your future study and for your future career.
41
HRM386 Study Guide
42