1. INTERNATIONAL HUMAN RESOURCE MANAGEMENT
Week 2
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

2. HRM and the Organizational Context (1)
HRM activities determine, and are also influenced by organizational considerations:
The organization’s level of internationalization
Internationalization strategy in foreign markets
Control and coordination requirements
Strategic importance of foreign operations in relation to the organization’s overall profitability
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

3. HRM and the Organizational Context (2)
Ideally, HRM considerations should play a key role in an organization’s decision to internationalize itself, rather than a market-driven strategy, which is usually followed
HRM constraints and factors may have a significant impact on an organization’s internationalization strategy
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

4. Managing and Staffing Approaches in the International Context (1)
The HRM literature identifies the following four managing and
staffing approaches, which are also indicative of top management
attitude:
Ethnocentric Approach – High level of control exerted by the parent organization / corporate headquarters over foreign subsidiaries. Key positions in the subsidiaries are managed by expatriates from the parent country (i.e. PCNs)
Polycentric Approach – Subsidiaries are treated as distinct national entities with a certain level of decision-making autonomy. They are usually managed by local nationals (i.e. HCNs). These are seldom promoted to positions at corporate headquarters and, likewise, PCNs are rarely transferred to foreign subsidiaries
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

5. Managing and Staffing Approaches in the International Context (2)
Geocentric Approach – Global perspective resulting in there being no discrimination of PCNs, HCNs and TCNs, who, depending on capability and performance, are given the opportunity to work in key positions anywhere (parent organization, subsidiaries) in the organization
Regiocentric Approach – Considered a precursory step in the direction of geocentricism. Managers may be transferred freely within a particular geographic region. These may enjoy a considerable level of autonomy in decision-making but are usually not transferred to the parent organization
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

6. Organizational Typologies (1)
Bartlett and Ghoshal identify the following types of
corporate organizational modals:
Multinational Modal – Characterized by decentralization of many of the organization’s key assets, responsibilities and decisions. Management regards overseas operations as a portfolio of independent businesses. For example, Siemens has many different lines of business around the world, but it is not really consolidated into one whole, and each country of operation is autonomous. Bayer, ADP and Levi also fit into this category
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

7. Organizational Typologies (2)
Global Modal – It has a central hub where most of the strategic assets, resources and decisions are centralized. The management views overseas operations as a pipeline to a global marketplace. Examples include British Airlines, Deutsche Bank and NCR
International Modal - Sits midway between the decentralized and centralized models. Many of the key assets, responsibilities and decisions are decentralized, but controlled from headquarters. Management regards overseas operations as appendages to a central, domestic corporation. Johnson & Johnson fits this description
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

8. Organizational Typologies (3)
Transnational Modal – It's a distributed network with distributed resources and capabilities. The management oversees a complex process of coordination and cooperation in an environment of shared decision-making. It has distributed control. This kind of corporation can have very small corporate headquarters
Hewlett-Packard and Cendant are examples of transnational corporations
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

9. The Internationalization Process
Organizations have several options available for expanding their operations into foreign markets
The option pursued by the organization depends on a host of factors, for example, its size, available its resources (including human resources), strategy, confidence and environmental contingencies
Linked to the internationalization of organizations are the need for effective and efficient coordination and control mechanisms and, among other things, appropriate HRM policies
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

10. HRM and „Soft“ Modes of Internationalization by Organizations (1)
Typical „soft“ modes of internationalization include:
Licensing – A business arrangement in which the manufacturer of a product (or a firm with proprietary rights over certain technology, trademarks, etc.) grants permission to some other group or individual to manufacture that product (or make use of that proprietary material) in return for specified royalties or other payment. Often does not involve a heavy committment of human resources
Management Contracts – Involve the transfer of experienced managerial and technical staff to another organization for a fee and for a specified period of time. Management contracts usually involves training the organization‘s employees
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

11. HRM and „Soft“ Modes of Internationalization by Organizations (2)
Alliances – A collaboration between organizations under which their resources are pooled, exchanged or integrated for mutual benefit. The committment of human resources depends on the level of inter-organizational interaction
Projects and Joint Ventures – Potentially considerable challenges on the human resource management function due to the usually close and sustained inter-organizational interaction which is necessary for such collaborative vventures, and the consequent varying management styles and philosophies, work ethics and cultures
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

12. The HRM Function in the Context of Internationalization (Export)
By and large, little implications for HR policies for manufacturing organizations unless their export sales reach a “critical level”
Service-based industries would establish a branch office or go into a joint venture with a local partner as the nature of their business (i.e. provision of services) would necessitate this
HCN Intermediary
(local knowledge)
Export Manager
(PCN)
Export Department
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

13. The HRM Function in the Export Context (1)
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

14. The HRM Function in the Export Context (2)
PCNs
HCNs
Firms would tend to replace sales agents and distributors in foreign
markets with their own sales subsidiaries or branch offices for any
several reasons: Problems with foreign agents and distributors, more
confidence in self-handling international sales activities, the desire for
more control and because of increasing importance which exporting
activity has on the success of the organization
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

15. HRM in the Context of Internationalization (Foreign Production)
There may be several reasons for a firm desiring to establish
production facilities overseas, for example:
Cheaper production and transportation costs
Host government investment incentives and import restrictions
Maintaining markets
Means of establishing production facilities overseas include
setting up a facility independently, entering into joint ventures or
acquiring local companies. Usually, going international means
creating an international division at corporate headquarters
At this (initial) stage of internationalization, some organizations
will usually make extensive use of PCNs, others will use HCNs to
capitalize on local conditions or satisfy local regulations
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

16. IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan
Challenge of Internationalization for Organizations: Centralization versus Decentralization
Need for national responsiveness:
Differences in market structures
Distribution channels
Customer needs
Local culture
Host Government pressures
Need for more centralization:
Multinational Customers
Global Competitors
Economies of Scale
Flow of Information
Pressure for
Decentralization
Pressure for
Centralization
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

17. IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan
The HRM Function in the Context of Internationalization (International Division)
Managing Director
Production
Marketing
Finance
Human Resources
Staff
selection
Expatriates
Domestic
Division
(Product A)
Domestic
Division
(Product B)
International
Division
Exporting
Departing
Subsidiary
Country A
Subsidiary
Country B
Production
Marketing
Finance
Human Resources
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

18. The HRM Function in the Context of Internationalization (Global Product Division)
Chief Executive Officer
Production
Marketing
Marketing
Global Product
Division
Finance
Human
Resources
Product A
Product B
Product C
Product D
Europe
Americas
Asia-Pacific
Pakistan
Marketing
Human Resources
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

19. The HRM Function in the Context of Internationalization (Global Area Division)
Chief Executive Officer
Production
Marketing
Finance
Human
Resources
Europe
Americas
Asia-
Pacific
Pakistan
Marketing
Human Resources
Product A
Product B
Product C
Product D
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

20. The HRM Function in the Context of Internationalization (Matrix)
Chief Executive Officer
Production
Marketing
Finance
Human
Resources
Vice-President
Global Products
Vice-President
International
Europe
Americas
Asia-
Pacific
Product A
Human
Resources
Product B
Pakistan
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

21. IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan
The HRM Function in the Context of Internationalization (Network Structures)
The Heterarchy – An organization has different “centers” in different locations, for example, R&D activities are concentrated in one center, training in another. It places considerable demands on the human resource function management (experienced personnel, incentive packages to motivate and control employee performance, promotion of awareness of common corporate goals)
The Transnational – Characterized by interdependence of resources and responsibilities across subsidiaries and business units resulting in large flows of information, people, resources etc. Complex level of communication, cooperation and coordination required along with strong corporate identity and well-developed worldwide management perspective. Seeks to achieve global integration while retaining localized flexibility. Human resources need to be flexible, quickly transferable and think across national and subsidiary boundaries
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

22. IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan
The HRM Function in the Context of Internationalization (A Complex Network Structure)
Center
e.g. R&D
Subsidiary
Subsidiary
Corporate
Headquarters
Center
(e.g. Training)
Subsidiary
Subsidiary
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

23. Control Mechanisms in a Networked Organizational Environment
Structure
Reporting Systems
Budgets
Performance Targets
FORMAL
INFORMAL
Personal
Relationships
Corporate
Culture
In networked organizational environments, there is a tendency to rely more on
Informal controls instead of formal controls that are usually prevalent in the
hierarchichal-type environments
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

24. IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan
Control and Coordination Issues for HRM in International Networked Organizational Environments
In networked organizational environments, human resource
management has a crucial role to play, for example through:
Contact facilitation for information and knowledge diffusion
Training and development for fostering informal communication channels and building a corporate culture
Assisting in creating personal networks amongst key staff persons
Staffing Decisions and Transfers
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan

25. The “ideal” Organizational Structure?
There is no “ideal” structure for organizations which
are internationalizing. The determination of
organizational structure will depend on a plethora of
factors and considerations, such as:
Size of the organization
Management traditions and policies
Circumstances prevailing in the host countries
Some organizations have experimented with different
organizational structures with a view to finding the
appropriate structure best suiting their requirements
17 September 2018
IHRM (MBA III) Course Instructor: Dr. Aurangzeb Z. Khan