1. IHRM: Sustaining International Business Operations
Chapter 3
IHRM: Sustaining International Business Operations
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2. Chapter Objectives
The previous two chapters have concentrated on the global environment and organizational contexts. We now focus on the ‘managing people’ aspect. The aim is to establish the role of HRM in sustaining international business operations and growth. We will cover the following:
Issues related to various approaches to staffing foreign operations;
Reasons for using international assignments: position filling, management development and organizational development;
(cont.)
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3. Chapter Objectives (cont.)
Various types of international assignments:
Standard assignments: Short-term, extended, and longer-term;
Non-standard arrangements: Commuter, rotator, contractual, and virtual.
The role of expatriates and non-expatriates (international business travellers) in supporting international business activities
The role of the corporate HR functions
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4. Approaches to Staffing
Factors affecting approaches to staffing
General staffing policy on key positions at headquarters and subsidiaries
Constraints placed by host government
Staff availability
Ethnocentric
Polycentric
Geocentric
Regiocentric
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5. Ethnocentric Strategic decisions are made at headquarters;
Limited subsidiary autonomy;
Key positions in domestic and foreign operations are held by headquarters’ personnel;
PCNs manage subsidiaries.
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6. Polycentric
Each subsidiary is a distinct national entity with some decision-making autonomy;
HCNs manage subsidiaries who are seldom promoted to HQ positions;
PCNs rarely transferred to subsidiary positions.
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7. Geocentric A global approach - worldwide integration;
View that each part of the organization makes a unique contribution;
Nationality is ignored in favor of ability:
Best person for the job;
Color of passport does not matter when it comes to rewards, promotion and development.
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8. Geocentric Staffing Requirements
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9. Regiocentric Reflects a regional strategy and structure;
Regional autonomy in decision making;
Staff move within the designated region, rather than globally;
Staff transfers between regions are rare.
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10. Ethnocentric Approach
Advantages:
To ensure new subsidiary complies with overall corporate objectives and policies
Has the required level of competence
Assignments as control
Disadvantages:
Limits the promotion opportunities of HCNs, leading to reduced productivity and increased turnover among the HCNs
Longer time for PCNs to adapt to host countries, leading to errors and poor decisions being made
High cost
Considerable income gap, high authority, and increased standard of living may relate to lack of sensitivity
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11. Polycentric Approach Advantages:
Employment of HCNs eliminates language barriers, avoids adaptation of PCNs, reduces the need for cultural awareness training programs
Employment of HCNs allows a multinational company to take a lower profile in sensitive political situations
Employment of HCNs is less expensive
Employment of HCNs gives continuity to the management of foreign subsidiaries (lower turnover of key managers)
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12. Polycentric Approach Disadvantages:
Difficult to bridge the gap between HCN subsidiary managers and PCN managers at headquarters ( language barriers, conflicting national loyalties, cultural differences)
HCN managers have limited opportunities to gain experience outside their own country
PCN managers have limited opportunities to gain international experience
Resource allocation and strategic decision making will be constrained when headquarter is filled only by PCNs who have limited exposure to international assignment
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13. Geocentric Approach Advantages: Disadvantage:
Ability of the firm to develop an international executive team
Overcomes the federation drawback of the polycentric approach
Support cooperation and resource sharing across units
Disadvantage:
Host government may use immigration controls in order to increase HCNs employment
Expensive to implement due to increased training and relocation costs
Large numbers of PCNs, HCNs, and TCNs need to be sent across borders
Reduced independence of subsidiary management
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14. Regiocentric Approach
Advantages:
Allow interaction between executives transferred to regional headquarters from subsidiaries in the region and PCNs posted to the regional headquarters
Provide some sensitivity to local conditions
Help the firm to move from a purely ethnocentric or polycentric approach to a geocentric approach
Disadvantages:
Produce federalism at a regional rather than a country basis and constrain the firm from taking a global stance
Staff’s career advancement still limited to regional headquarters, not the parent country headquarters
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15. Parent-Country Nationals
Advantages
Organizational control and coordination is maintained.
Rising stars are given international experience.
PCNs may be the best people for the specific job due to special skills and experience.
An assurance that the subsidiary will comply with company objectives & policies.
Disadvantages
Promotional opportunities of HCNs are limited.
Time and performance costs associated with adaptation to the host country.
PCNs may impose an inappropriate HQ style.
Compensation for PCNs and HCNs may differ.
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16. Host-Country Nationals
Advantages
Language and other barrier eliminated
Reduced hiring costs
Continuity of management
Government policy may require hiring HCNs
Possible increased morale because of increased career potential
Disadvantages
Hiring of HCNs may encourage a federation of national rather than global units
HCNs have limited career opportunity outside the subsidiary
Control and coordination of HQ may be impeded
Hiring HCNs limits opportunities for PCNs to gain foreign experience
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17. 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
Transfers must consider national animosities.
Host government may resent hiring TCNs.
TCNs may not want to return to their own countries after assignment.
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18. Determinants of IHRM Approaches and Activities
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19. Reasons for International Assignments
Position filling, e.g.
Skills gap, launch of new endeavor, technology transfer
Management development
Training and development purposes, assisting in developing common corporate values
Organizational development
Need for control, transfer of knowledge, competence, procedures and practices
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20. Types of International Assignments
Short term: up to 3 months
Troubleshooting
Project supervision
A stopgap until a permanent arrangement is found
Extended: up to 1 year
May involve similar activities as short-term assignments
Long term
Varies from 1 to 5 years
The traditional expatriate assignment
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21. Non-standard Assignments
Commuter assignments
Rotational assignments
Contractual assignments
Virtual assignments
Some of these arrangements assist in overcoming the high cost of international assignments but are not always effective substitutes for the traditional expatriate assignment.
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22. Factors Influencing Virtual Assignments
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23. Informal contacts between
Roles of an Expatriate
A Simple Management Network
Agent of direct control
Agent of socialization
Network builder
Boundary spanner
Language node
Transfer of competence and knowledge G B C D A F E
Informal contacts between
managers within a MNE
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24. The Role of Non-expatriates
People who travel internationally yet are not considered expatriates as they do not relocate to another country
Road warriors, globetrotters, frequent fliers
Much of international business involves visits to foreign locations, e.g.
Sales staff attending trade fairs
Periodic visits to foreign operations
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25. A Glamorous Life
International business travelers cite the positives as:
Excitement and thrills of conducting business deals in foreign locations
Life style (top hotels, duty-free shopping, business class travel)
General exotic nature
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26. But a High Level of Stress!
Home and family issues
Frequent absences
Work arrangements
Domestic side of position still has to be attended to
Travel logistics
waiting in airports, etc.
Health concerns
Poor diet, lack of sleep, etc.
Host culture issues
Limited cultural training
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27. Various Roles of Corporate HR
Centralized HR Companies
Decentralized HR Companies
Transition HR Companies
Large well-resourced HR departments
Small HR departments
Medium-sized HR departments
Key role: Managing all high-grade management positions worldwide
Key role: Managing elite corporate managers
Key role: Management and development of senior managers and expatriates
Key activities: Planning international assignments and performance management globally, identifying high-potential staff
Key activities: Influencing operating units to support international assignments, supporting decentralized HR
Key activities: Persuading divisional managers to release key staff using informal and subtle methods, strategic staffing.
Source: Based on H. Scullion and K. Starkey, in Search of the Changing Role of the Corporate Human Resource Function in the International Firms, International Journal of Human Resource Management, V 11, N 6 (2000) pp
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28. The Role of the Corporate HR Function
Can we manage our people like a global product, e.g., the feasibility of:
The concept of a global internal labor market
Standardization of work practices and HR activities
What HR matters require central control and what can be decentralized?
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29. Chapter Summary
This chapter has expanded on the role of IHRM in sustaining international business operations. We have:
Looked at the various approaches to staffing international operations – ethnocentric, polycentric, geocentric and regiocentric – examining their advantages and disadvantages and factors that may determine the choice of these options.
Considered the reasons for using international assignments: position filling, management development and organization development.
(cont.)
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30. Chapter Summary (cont.)
Discussed the various types of international assignments: short, extended and long-term (traditional); and non-standard forms such as commuter, rotational, contractual and virtual assignments.
Examined the various roles of the expatriate: as an agent for direct control, as an agent for socialization, as network builders, as boundary spanners and as language nodes. These various roles of the expatriate help to explain why expatriates are utilized and illustrates why international assignments continue to be an important aspect of international business from the organization’s perspective.
(cont.)
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31. Chapter Summary (cont.)
Recognized that non-expatriates are also critical to international business operations. International business travellers present their own challenges, such as the effect of frequent absences on family and home life, the possible negative health effects and other stress factors. The management of such individuals, however, does not appear to fall within the domain of the HR department.
Looked at the role of the corporate HR function as the firm grows internationally, building on sections from Chapters 1 and 2.
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