International Human Resource Managment

Human Resource Management (HRM) Refers to the activities an organization carries out to use its human resources effectively Four major tasks of HRM A) Staffing policy B) Management training and development C) Performance appraisal D) Compensation policy

Factors which differentiate international from domestic HRM More HR activities: taxation, culture orientation, administrative services The need for a broader perspective: cater to multiple needs More involvement in employees’ personal lives: adjustment, spouses, children Changes in emphasis as the workforce mix of expatriates and locals varies: fairness Risk exposure: expatriate failure, terrorism Broader external influences: government regulations, ways of conduct

Different Types of Companies International corporation Domestic firm that uses its existing capabilities to move into overseas markets. Multinational corporation (MNC) Firm with independent business units operating in multiple countries./Firm that attempts to balance local responsiveness and global scale via a network of specialized operating units. Global corporation Firm that has integrated worldwide operations through a centralized home office.

Main Challenges in IHRM

Main challenges in IHRM Issues of expatriation and repatriation Deployment – getting the right mix of skills in the organization regardless of geographical location Knowledge and innovation dissemination – managing critical knowledge and speed of information flow Talent identification and development – identify capable people who are able to function effectively Workforce Diversity issues International ethics Language (e.g. spoken, written, non-verbal)

Main challenges in IHRM(cond..) Different labor laws Different political climate Different stage(s) of technological advancement Different values and attitudes e.g. time, achievement, risk taking Roles of religion e.g. sacred objects, prayer, taboos, holidays, etc Educational level attained Social organizations e.g. social institutions, authority structures, interest groups, status systems

Types of international work Expatriation An employee sent by his/her company in one country to work in a different country. Global team project Bringing together employees from different locations to complete a specific team project. Short-term assignments Sending employees on assignments, such as a three- month assignment, to a foreign location. Virtual assignment. Assignments requiring employees in different locations to use information technology to communicate on job projects and tasks.

Model of IHRM Source: Adapted from P.V. Morgan, ‘International human resource management: Fact or fiction?’, Personnel Administrator, 31(9), 1986, p.44.

Types of employees in an MNE Parent-country nationals (PCNs)  Employees who were born and live in a parent country. A parent (or home) country: the country in which a company’s corporate headquarters is located. Host-country nationals (HCNs)  Employees born and raised in a host country. Host country: a country in which the MNE seeks to locate or has already located a facility. Third-country nationals (TCNs)  Employees born in a country other than a parent or host country.

Global Staffing Issues Selecting candidates for overseas assignment Assignment terms and documentation Relocation processing and vendor management Immigration processing Cultural and language orientation and training Compensation administration and payroll processing Tax administration Career planning and development Handling of spouse and dependent matters

Staffing policy Staffing policy Selecting individuals with requisite skills to do a particular job Tool for developing and promoting corporate culture View People as Resource Types of Staffing Policy Ethnocentric Polycentric Geocentric

Ethnocentric Approach Firms pursue an ethnocentric staffing policy for three reasons: First, the firm may believe there is a lack of qualified individuals in the host country to fill senior management positions. Second, the firm may see an ethnocentric staffing policy as the best way to maintain a unified corporate culture. Third, if the firm is trying to create value by transferring core competencies to a foreign operation.

Parent-Country Nationals Advantages Organizational control and coordination is maintained and facilitated. Promising managers are given international experience. PCNs may be the best people for the job because of special skills and experience. There is assurance that subsidiary will comply with company objectives, policies, and so on. Disadvantages The promotional opportunities of HCNs are limited. Adaptation to host country may take a long time. PCNs may impose an inappropriate HQ style. Compensation for PCNs and HCNs may differ.

The Polycentric Approach The host country nationals are recruited to manage subsidiaries in their own country, while parent country nationals occupy the key positions at corporate headquarters. The policy is best suited to firms pursuing a multi-domestic strategy.

Host-Country Nationals Advantages Language and other barriers are eliminated Hiring costs are reduced, and no work permit is required Continuity of management improves, since HCNs stay longer in positions Government policy may dictate hiring of HCNs Morale among HCNs may improve as they see career potential Disadvantages Control and coordination of HQ may be impeded HCNs have limited career opportunity outside the subsidiary Hiring HCNs limits opportunities for PCNs to gain foreign experience Hiring HCNs could encourage a federation of national rather than global units

Geocentric Staffing A geocentric staffing policy is one in which the best people are sought for key jobs throughout the organization, regardless of nationality. It is well suited to firms pursuing either a global or transnational strategy.

Third-Country Nationals Advantages Salary and benefit requirements may be lower than for PCNs TCNs may be better informed than PCNs about host-country environment Disadvantages Transfer must consider possible national animosities (e.g., India and Pakistan) The host government may resent hiring TCNs TCNs may not want to return to their own countries after assignment

Staffing Policies The Ethnocentric Approach –PCNs The Polycentric Approach- HCNs & PCNs The Geocentric Approach- PCNs,TCNs & HCNs The Regiocentric Approach-Limited PCNs, TCNs & HCNs

Selection Criteria for International Assignments Technical Ability SELECTION DECISION INDIVIDUAL SITUATION Cross-Cultural Suitability/ Personality Language Family Requirements Country-Cultural MN Exposure

Factors Important in International Assignee Success I. Job Knowledge and Motivation Managerial & organizational ability Imagination, creativity Administrative skills Alertness Responsibility Industriousness Initiative and energy High motivation Frankness Belief in mission and job Perseverance II. Relational Skills Courtesy Display of respect Kindness Empathy Non-judgmentalness Integrity Confidence Source: Adapted from Arthur Winfred Jr., and Winston Bennett Jr., “The International Assignee: The Relative Importance of Factors Perceived to Contribute to Success,” Personnel Psychology 18 (1995), pp. 106–107.

IV. Extracultural Openness Factors Important in International Assignee Success III. Flexibility/ Adaptability Resourcefulness Ability to deal with stress Flexibility Emotional stability Willingness to change Tolerance for ambiguity Independence Dependability Political sensitivity Positive self-image IV. Extracultural Openness Variety of outside interests Interest in foreign cultures Openness Local language [s] known Outgoingness & extroversion Overseas experience V. Family Situation Adaptability of spouse and family Spouse’s positive opinion Willingness of spouse to live abroad Stable marriage

Training and Development Essential training program content to prepare employees for working internationally: Language training Cultural training Assessing and tracking career development Managing personal and family life Culture shock Perpetual stress experienced by people who settle overseas. Repatriation

Training Methods Reviewing available information about the host company: books, magazines, video tapes. Conversations with host country natives. Sensitivity training to become familiar with the customs and overcome prejudices. Temporary assignments to encourage shared learning.

Performance Appraisal of International Managers Who Should Appraise Performance? Home-country evaluations Host-country evaluations Adjusting Performance Criteria Augmenting job duties Individual learning Organizational learning Providing Feedback Debriefing interview

Expatriate Compensation Systems Home-Based Pay Pay based on an expatriate’s home country’s compensation practices Balance-Sheet Approach A compensation system designed to match the purchasing power in a person’s home country Calculate base pay Figure cost-of-living allowance (COLA) Add incentive premiums Add assistance programs

Expatriate Compensation Systems (cont’d) Host-Based Pay Expatriate pay comparable to that earned by employees in a host country to which the expatriate is assigned. Localization Adapting pay and other compensation benefits to match that of a particular country Other Issues Adequacy of medical care Personal security Education

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