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HRMT20022
HRM in the Global Environment

Study Guide
Edition 2009, T2
Published by the
Division of Teaching & Learning Services
CQUniversity Australia
Rockhampton, Queensland.

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Academic Author:

DEVELOPED BY

Dr Paul Davidson (Modules 1-6)


DBA SCU, CertEc Geneva, DPS Birm, BSc (Hons) UQ, BD UQ, MBA UQ

Peter Carswell (Modules 7-12)


BSc, MCom (Hons)

REVISED BY

Daryl Alcock, Lorraine White, Dr Vimolwan Yukongdi (in alphabetical order)

Faculty of Arts, Business, Informatics and Education


Contents
Module 1—Introduction: Global Human Resource Management 7

Introduction 7

Learning objectives 8

What is international human resource management? 8

A brief history of international human resource management 8

Linguistic and conceptual tools 9

Frameworks for organisational comparisons 9

Towards a concept of international HRM 10

Summary 11

References 11

Module 2—Recruiting and selecting staff for international assignments 13

Introduction 13

Learning objectives 13

Selecting the expatriate 13

Expatriate ‘failure’ 14

Expatriate adjustment 15

Foreign postings 22

Predicting expatriating success 24

The selection process in summary 25

Summary 26

References 26

Module 3—International training and development 31

Introduction 31

Learning objectives 31

Orientation programs 31

Expatriate preparation and training 33

Cross cultural training and development 35

Summary 38

References 39

Module 4—Managing expatriates: performance management 43

Introduction 43

Learning objectives 43

Challenges of performance appraisal in the international context 43

Uniquely international considerations 45

Summary 48

References 49
Module 5—International compensation 51

Introduction 51

Learning objectives 51

Remuneration and compensation in international HRM 51

The components of remuneration and compensation 54

The impact of repatriation on compensation 58

Summary 60

References 60

Module 6—Managing expatriates: re-entry and career issues 63

Introduction 63

Learning objectives 63

Supporting the expatriate 63

Repatriation 64

Relocation programs 67

International human resource development 68

Managing a multicultural workforce 69

Summary 69

References 70

Module 7—HRM in Western cultures: Australia and New Zealand 73

Introduction 73

Learning objectives 73

Australia 74

New Zealand 78

Summary 79

References 80

Module 8—HRM in the Asian context: People’s Republic of China 81

Introduction 81

Learning objectives 81

China 81

Summary 82

References 83

Module 9—HRM in the Asian context: Japan 85

Introduction 85

Learning objectives 85

Japan 85

Summary 87

References 88
Module 10—HRM in the Asian context: Thailand 89

Introduction 89

Learning objectives 89

Thailand 89

Summary 91

References 91

Module 11—HRM in the Asian context: India 93

Introduction 93

Learning objectives 93

India 93

Summary 94

References 95

Module 12—Global HRM: an integration 97

Introduction 97

Learning objectives 97

Global HRM—the future? 97

HRM: Convergence or adaptation 98

Summary 100

References 101
Module 1—Introduction: Global Human
Resource Management
Introduction
Faced with an increasingly globalised economy and ever intensifying
competition in world markets, today’s corporate executives, must, of
necessity, develop an international business perspective. (Blocklyn 1989)

Firms compete with truly global strategies involving selling worldwide,


sourcing components and materials worldwide, and locating activities in many
nations to take advantage of low cost factors. They form alliances with firms
from other nations to gain access to their strengths. (Porter 1990)

These quotations date from over a decade ago, and ought to give us pause for
thought. Are they still true for global business, and thus for Human Resources
(HR) management?

In a globalised marketplace, fed by globalised industries and organisations,


the role of HR can be and often is crucial. The development of effective HR
policies as part of the organisation’s international business strategy, and the
practice of culturally‑appropriate (and often expatriate) management, are
examples of challenges for the contemporary HR professional. Mistakes
can cost dearly. Committing the firm to a high-risk high-return venture in
a politically unstable environment on the basis of an erroneous assessment
of a stable pool of educated labour may prove an HR manager’s undoing. A
failed expatriate assignment can bring a fatal loss of face for the company in a
particular market, in addition to the loss of return on the substantial financial
outlay, and a devastating impact on a manager’s career.

In the international and multinational operations inherent in the global business


environment, human resource management functions have a key role, just as
they do in national or domestic management. Capelli and Crocker (1996) argue
that international human resource practices are a crucial factor in creating
unique organisational competencies, and these competencies, in turn, help
companies differentiate their products and services and thus build competitive
advantage.

However, HR functions in the international environment have the added


complexity and urgency brought on by potentially more complicated business
environments and high levels of cultural diversity. For example, alliances
between organisations are considered especially challenging, more so than
acquisitions or mergers, because the partners retain their own identities, yet
must work together towards common goals—so there is less freedom in
managing the business.

Yet the core HR tasks remain in areas of human resource planning,


recruitment, selection, placement, performance management, training and
development, career management, remuneration, and industrial relations.

It is also significant that domestic HRM is increasingly required to address


matters such as cultural diversity, which were formerly thought to be relevant
only to organisations operating overseas. In this way, international or global
HRM has relevance to areas beyond its already broad responsibilities.

HRMT20022 - Module 1 - Page 7


Learning objectives
After studying this module, you should:
•• be able to understand the basis of global HRM and how it relates to
international management
•• be able to use this knowledge to discuss how HRM can be used as part of
the strategic management of the organisation operating internationally and
globally, and
•• be able to discuss some of the competencies required by managers
Textbook operating internationally.
Dowling, Festing,
& Engle 2008 What is international human resource management?
Chs 1 & 2.
International HRM refers to two relatively separate areas of practice and
research (Dowling & Welch 2004):

1. Various comparisons of how HRM and Industrial Relations (IR) practices


are evident in various countries, and
2. The developing field of how HRM is conducted across countries and
cultures, in multinational and international companies (tending towards the
‘global HRM’ concept).
In the former, much can be gained by making comparisons across countries, with
each learning from the other (Pieper 1990). This requires careful consideration
of the environmental variables that apply, such as the economic, technological,
political-Legal and cultural environment in which the HR management takes place.

A brief history of international human resource


management
Up until the 1960s, even firms operating internationally maintained organisational
structures with centralised technical and managerial resources, manufacturing
ability, and the access to and control of the capital (Doz & Prahalad 1981). As
exports increased, it was seen as more attractive to establish sales subsidiaries in
other countries, often staffing them with skilled personnel from the home country.
These expatriates had the necessary product knowledge, and could even initiate
local manufacture, but also had a perceived primary loyalty to the home company
and country culture. Unfortunately, this was also an era of ‘convergence’ thinking
(usually towards the dominant U.S. culture), with sometimes lamentably little
attention being given to national sensitivities and cultural beliefs and behaviours
(Dowling, Schuler & Welch 1994).
With the developing internationalisation of many firms in the late 1960s and early
1970s, companies established overseas plants and entered joint ventures with
foreign affiliates. Firms sought commercial success through moving closer to their
customers by employing more host-country nationals. In some situations, they
aimed at being perceived more as ‘local’ rather than ‘foreign’, for various reasons.

In the 1990s, not only has the practice of IHRM become more sophisticated, but
research into its policy and practice has become established. It has a developing
body of research and practice which is regularly considered at dedicated
conferences, and published in general management as well as HRM journals.
Increasingly, international HRM is being taught in university faculties of business
management courses, and management MBA graduates, as well as graduates in
HRM, are now more frequently aware of the issues involved, and the functions of
HRM in an international context.
HRMT20022 - Module 1 - Page 8
Linguistic and conceptual tools
Before proceeding further, it is appropriate to define some common terms in
IHRM (Gilroy, Noer & Spoor 1979):

•• A multinational company (MNC) is a firm with substantial investment


outside its home country in plant (as a rule, 20 percent or more of its total
plant investment) and management. Such a company operates across
national borders and claims its legitimacy from its effective use of assets to
serve its far-flung customers.
•• An expatriate or foreign-service employee is a generic term applied to
anyone working outside her or his home country with a planned return to
that or a third country.
•• Repatriation is the process of assisting the re-integrating of an expatriate
into his or her home country and culture, at the conclusion of an
international assignment.
•• A parent-company national (PCN) is an expatriate from the country in
which the company is headquartered.
•• The home country is the expatriate’s country of residence.
•• The host country is the country in which the expatriate is working.
•• A host-country national (HCN) is a national of the host country, employed
by the MNC. Some US literature uses the term local national to denote the
same concept.
•• A third-country national (TCN) is an expatriate who has transferred to an
additional country while working abroad. An Australian working for an
American firm in Hong Kong is a third-country national.

Frameworks for organisational comparisons


The ethnocentric, polycentric or geocentric, with the later addition of the
regiocentric approach (EPRG Profile) originally developed by Perlmutter
in 1969, and further discussed by Heenan and Perlmutter in 1979, is a
well-known strategic concept for the description of the internationalisation
of companies. Perlmutter (1969) took the view that the extent of the
multinationality of companies could be explained by using ‘objective’
measures such as structural variables (e.g., number of subsidiaries,
organisation structure, etc.) and performance criteria (e.g., turnover in foreign
subsidiaries, number of local employees, etc.).

Consequently, he claimed that ‘the orientation toward foreign people,


ideas, resources, in headquarters and subsidiaries, and in host and home
environments, becomes crucial in estimating the multinationality of a
firm’ (Ibid, p. 11). This was the motivation for describing the management
style as ethnocentric, polycentric or geocentric (with the later addition of
the regiocentric approach). In this schema, the degree of multinationality
is measured by the extent to which the top executives of a firm think
geocentrically.

Reviewing the history of how IHRM has been conceptualised, Weber and Festing
observe that ‘without considering the product or any environmental factors, such
as the extent and kind of competition in the industry, the geocentric approach is
seen as the goal of every internationally-oriented firm’ (Weber & Festing 1994).
They submit that there is no longer one best way for the HR function in globally

HRMT20022 - Module 1 - Page 9


operating firms but—following a contingency perspective—there are ideal ways
according to different situations that have been identified.

This contingency model is confirmed by Adler and Ghadar (1990): ‘The


central issues for MNEs is not to identify the best international HRM policy
per se, but rather to find the best fit between the firm’s environment, its overall
strategy and its HRM policy and implementation.’

Some of the variables in international environments that must be continually


scanned by the organisation’s managers—including its human resource
managers—are as follows (Wheelen & Hunger 1990):

Sociocultural—Customs, norms, values; language; demographics; life


expectancies; social institutions; status symbols; life style; religious
beliefs; attitudes towards foreigners; literacy levels.
Economic—economic development; per capita income; climate; GNP
trends; monetary and fiscal policies; unemployment level; currency
convertibility; wage levels; and the nature of competition; membership in
regional economic associations.
Technological—regulations on technology transfer; energy availability/cost;
natural resource availability; transportation network; skill level of workforce;
patent and trademark protection; information-flow infrastructure.
Political-Legal—form of government; political ideology; tax laws;
stability of government; government attitude toward foreign organisations;
regulations on foreign ownership of assets; strength of opposition groups;
trade regulations; protectionist sentiment; foreign policies; terrorist
activity; legal system.
It can be seen that international HRM is considerably wider in scope than its national
equivalent. It is of concern when a domestic firm attempts to operate internationally
without thorough preparation in terms of investigation of these variables.

Towards a concept of international HRM


Bearing in mind these considerations, an approximation of the uniqueness of
international HRM is pointed to by Laurent (1986), as requiring the following:

1. An explicit recognition by the parent organisation that its own peculiar


ways of managing human resources reflect some assumptions and values
of its home culture.
2. An explicit recognition by the parent organisation that its peculiar ways are
neither universally better nor worse than others but are different and likely
to exhibit strengths and weaknesses, particularly abroad.
3. An explicit recognition by the parent organisation that its foreign
subsidiaries may have other preferred ways of managing people that are
neither intrinsically better nor worse, but could possibly be more effective
locally.
4. A willingness from headquarters to not only acknowledge cultural
differences, but also to take active steps in order to make them discussable
and therefore useable.
5. The building of a genuine belief by all parties involved that more creative
and effective ways of managing people could be developed as a result of
cross‑cultural learning.
HRMT20022 - Module 1 - Page 10
Summary
Increased globalisation has brought and will continue to bring many changes
to the workplace, and thus to HRM. Markets once local are now global, with
all the possibilities and risk that this shift entails. A number of effects are
contentious for HRM (Evans, Pucik & Barsoux 2002):

(i) a diminishing influence of local culture and customs


(ii) a negative impact on the environment (as the demand for energy increases
and with it pollution)
(iii) a continuing pressure on human rights and working conditions and
(iv) a loss of jobs in developed countries (as many services are outsourced and
‘off‑shored’).
It is likely that organisation will increasingly be held responsible for these
impacts. Global HRM is part of this scenario, and thus has as it concerns
those of culture, alignment (of strategy and practice, and of HR practice with
business strategy), and the question of standardisation vs localisation (a global
policy as in the geocentric vs the local adaptation of the polycentric).

Review questions

Question 1–1

Is IHRM so different from HRM? Why?

Question 1–2

Of what use are the terms ‘ethnocentric’, ‘polycentric’, ‘regiocentric’


and ‘geocentric’ in IHRM? Of what value, positive and negative, are
international stereotypes?

References
Adler, NJ & Ghadar, F 1990, ‘Strategic human resource management: a global
perspective’, in R Pieper (ed.), Human resource management: an international
perspective, Walter de Gruyter, Berlin 1990, pp. 235–260.

Blocklyn, PL 1989, ‘Developing the international executive’, Personnel,


vol. 66, no. 3, p. 44.

Capelli, P & Crocker, HA 1996, ‘Distinctive human resources are firms’ core
competencies, Organisational Dynamics, vol. 24, no. 3, pp. 7–22.

Dowling, PJ, Schuler RS & Welch, D 1994, International dimensions of


human resource management, Wadsworth, Belmont, p. 13.

Dowling, PJ & Welch, DE 2004, International human resource management,


4th edn, Thomson Learning, London.

Doz, Y & Prahalad, CK 1981, ‘Headquarter influence and strategic control in


multinational companies’, Sloan Management Review, Fall, pp. 15–29.

HRMT20022 - Module 1 - Page 11


Evans, P, Pucik, V & Barsoux, J 2002, The global challenge: frameworks for
international human resource management, McGraw-Hill, Boston, MA.

Gilroy, EB, Noer, DM & Spoor, JE 1979, ‘Personnel administration in the


multinational/transnational corporation’, in D Yoder & HG Heneman, Jr (eds),
ASPA Handbook of personnel and industrial relations, Bureau of National
Affairs, Washington, D. C., chap. 1.7.

Ibid., p. 11.

Laurent, A 1986, ‘The cross-cultural puzzle of international human resource


management’, Human Resource Management, vol. 25, pp. 91–102.

Perlmutter, HV 1969, ‘The tortuous evolution of the multinational


corporation’, Columbia Journal of World Business, January–February, pp.
9–18.

Pieper, R (ed.) 1990, Human resource management: an international


comparison, Walter de Gruyter, Berlin.

Porter, ME 1990, The competitive advantage of nations, The Free Press, New
York, p. 14.

Weber, W & Festing, M 1994, ‘Essentials and limits for IHRM practices’,
Proceedings of the Fourth Conference on International Human Resource
Management, Gold Coast, Australia, 5–8 July.

Wheelen, TL & Hunger, JD 1990, Strategic management, Addison-Wesley


Publishing Company, Reading, Massachusetts.

HRMT20022 - Module 1 - Page 12


Module 2—Recruiting and selecting staff
for international assignments
Introduction
The trend of business on a global scale appears to be increasing, and with it,
the number of persons employed by their organisations in countries other than
their own. It is increasingly common for employees of international companies
to spend several years working in other countries. It is also common for
expatriates to work for several years in two or three different countries, during
their careers with their employers.

Employees are sent to international assignments for one or more reasons:

1. to fill positions for which host country employees are judged to be


unsuitable (for whatever reason)
2. for reasons of management development; and
3. for reasons of organisational development.
Sometimes the first involves the intention of the organisation to maximise
management control and coordination. The second is often cited in terms
of giving the manager international experience before promotion within
the firm in the home country. The third is more diffuse, involving a general
internationalisation of the organisation and building of networks of
relationships across countries and cultures.

Sending an employee to another country to manage an organisation’s


operations has become a complicated process, typically requiring sophisticated
understanding and complicated procedures. For the organisation, and for the
individual manager, the stakes can be surprisingly high. Why this should be
so, and what companies are reported as doing about it in the quest to optimise
performance, warrants examination.

Learning objectives
After studying this module, you should:

•• be able to understand the dimensions of expatriate assignment success and


failure, and their consequences for expatriate selection
•• be able to use this knowledge as a basis for understanding expatriate selection.
Textbook
Dowling, Festing,
Selecting the expatriate & Engle 2008
Chs 4 & 5.
On the whole, the replacement of expatriates with host country nationals
(HCNs) has been seen as a positive trend ... In the short run it is easier to train
and promote host and third country nationals than it is to select high potential
candidates and expend the resources necessary to give them the attitudes and
cultural skills they need to function effectively abroad. (Kobrin 1988).

Research has recently suggested that the high failure rate of expatriates on
international assignment, and the subsequent difficulties and financial expense
of repatriating these managers, has made the alternative of employing host-
country managers more attractive to multinational companies.

HRMT20022 - Module 2 - Page 13


A 1983 survey by Kobrin (1988) reported that 80 percent of U.S. firms
employed a local national as head of a majority of country operations (Kobrin
1988). The Asian currency crisis of 1998 accelerated the move by many
companies employing expatriates to establish policies for the preferential
hiring of host-country nationals over expatriates, wherever possible. For
example, some Sheraton hotels in Asia (especially in Malaysia) have a notional
limit of two expatriates per property. The reason given is that expatriates are
too expensive to appoint.

A further argument cited by some host countries is that expatriates deny their
own people the essential jobs and training they need, and some critics have
suggested that ‘the expatriate’ is still seen in certain countries as a historical
throw-back to the privileged and frequently racist elite of colonial times.
If there is a strong feeling of nationalism in the host country, having home
country nationals as managers can make the subsidiary seem very foreign
indeed (Ball & McCulloch 1996).

In spite of all the reasons to the contrary, the evidence is that many companies
still prefer to expatriate their own home-country managers to run their
international operations, at least in the early stages of the operations.

One reason commonly given is that the parent company prefers to have someone
in the job whom it knows and who knows the headquarters way of doing things,
in addition to having someone who is demonstrably skilled and knowledgeable
about the technical aspects of the job. Another reason given relates to the
perceived need for the development of managers from the parent company,
through international assignments. There is every indication that a detailed
examination of the trends in this area of International HRM practice is required.

Expatriate ‘failure’
As business becomes globalised, many more Australian companies than ever
before are sending staff to overseas postings. The evidence from American
and European studies indicates that this is both expensive and risky (Bartlett
et. al 1990; Black et. al 1991; Brewster & Larsen 1992). The magnitude of the
problem being faced by many international organisations can be grasped from
the number of expatriate assignments judged to have failed (Shilling 1993).
With national variations, it has been estimated that twenty to fifty percent
of personnel sent abroad return prematurely from their overseas assignment
(Distefano & Lane 1992). Further, as many as 50 percent of expatriates who
do not return prematurely function at a low level of effectiveness (Black &
Mendenhall 1990). These are presumably the result of selection errors, or of
ineffective management policies and/or practices.

Such failure is usually described in the research literature as ‘expatriate retention


failure’, in terms of high levels of early returns of expatriates, either through
recalls by companies or through the manager’s voluntary early departure from the
assignment, and in terms of ineffective or suboptimal performance of expatriates
(Baker & Ivancevich 1971; Black et. al 1991; Copeland & Griggs 1985; Misa &
Fabricatore 1979; Tung 1982; Nicholson et. al 1990).

There seems to be general consensus that human resource managers in


organisations with expatriate staff have a responsibility to determine what
causes failure, and what expatriate needs might be provided for in order to
optimally support the expatriate on assignment.

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Expatriates ‘fail’ in their assignments for reasons which may have at least
as much to do with personal adjustment difficulties, and with the personal
difficulties of the spouse and family in particular, as with deficiencies in
technical competence. Such specifically job-related expertise aside, the logical
question concerns what can be done about enhancing personal adjustment
through selection, preparation and support.

Expatriate adjustment
Organisations have an obvious vested interest in assisting their expatriates
to adjust to their environments as quickly and effectively as possible. Much
can be learned from studies of personal relocation, of which expatriation is a
special case.

These are proposed as among the factors which may be important for the
adjustment of the expatriate. A six-month sideways transfer, alone, to an
unknown, less developed, and distant country where language, customs, and
climate are arduous, is likely to be a very different experience from a sojourn
in a pleasant country with similar language and customs, accompanied by
one’s spouse and children.

Expatriate couples and families

There is now strong research literature in regard to dual-career couples,


defined as ‘two people in a marital or other significant relationship, where both
partners display a high degree of commitment to their respective work roles’
(Pierce & Delahaye 1996, p. 905).

The ‘morbidity’ for dual career couples and families related to international
relocation is reputedly high (Hamill 1989). Coyle’s Australian study reported
that 52 percent of spouses suffered increased physical symptoms of stress after
moving, and 28 percent reported a decline in health (Coyle 1988). Worries
about ‘loss of social contacts’ and ‘problems with family property’ figured
importantly in relocations, along with ‘problems of spousal employment’ and
‘worries about children’s educational needs’ (Munton & Forster 1990, pp.
75–81).

Additional complications arise in the case of the children in expatriate


families; teenagers with strong peer-dependence may simply refuse to relocate.
Children of expatriates are often expected to be less involved with friends, and
they tend to spend their leisure time alone (Brett 1982). They are also required
to develop the skills of making and unmaking social friendships quickly and
without undue stress. With the expatriate working long hours and often away
from the home, the spouse and family may see little of him or her. The spouse
is thus forced to deal with domestic crises alone, usually in a strange land and
culture, and perhaps battling with a foreign language.

The nature of the expatriate experience depends on many different variables,


one of which is the way in which the manager and his or her family approach
it. While the stories of distress and failure are dramatic, there are many
expatriates who return from assignments they rate as highly successful, not
only in terms of business criteria, but in terms of enriching their family lives
and general education, to an extent that any negative aspects are more than
compensated for (Stokols & Shumaker 1982, pp. 149–171). ‘I’d go back
tomorrow’ is a common response from repatriates.

HRMT20022 - Module 2 - Page 15


‘The threat and challenge of people who are different’

The inability of expatriate managers to adjust to the host culture’s social and
business environment is costly in terms of management performance and the
productivity in the overseas operation (Hogan & Goodson 1990). Just how
successfully an expatriate adjusts to ‘the threat and challenge of people who
are different’ (Jenkins 1975) is determined by a multivariate process. The
need for a comprehensive consideration was pointed to by Mendenhall and
Oddou (1985), in terms of four dimensions of the adjustment process in which
the ability to adapt is proposed as strongly influential in the outcome of an
international assignment:

1. The Self-oriented dimension: This is the degree to which the expatriate


expresses concern for self-preservation, and is characterised by
reinforcement substitution (the ability of the expatriate to substitute other
reinforcements as interests in the new culture), stress reduction (the ability
to cope in a foreign culture without experiencing disturbing stress), and
technical competence (the mastery of the core competencies of the job to
which the expatriate is assigned).
2. The Others-oriented dimension: This identifies the expatriate’s abilities
to interact effectively with host-country nationals, and is composed of
the factors of relationship development (being able to form appropriate
relationships with host-country nationals) and willingness to communicate
(including the ability of the expatriate to communicate in the host-
country’s language). Well-adjusted expatriates are likely to collect
‘conversational currency’ (anecdotes, jokes, local phrases, sporting terms,
etc.) which can be used to indicate a desire to understand and relate with
host-country nationals.
3. The Perceptual dimension: This includes the expatriate’s ability to perceive
and understand why persons from other cultures think, feel and behave as
they do, and not to impose one’s own values on assessments of situations.
4. The Cultural-toughness dimension: This refers to the cultural ‘distance’
between the host country and the expatriate’s home country; how ‘tough’
the host culture is will have an effect on how well the expatriate is able to
adjust to it and succeed in the assignment.
Expatriate adjustment problems thus have to do firstly with the expatriate, and
what he or she brings to the international assignment, and secondly with the
environment, and the various influences it has on the expatriate. How then are
expatriates to be prepared for the environments they face? Indeed, what are the
environments of international HRM?

The ‘Hofstede model’


Dutch scholar Geert Hofstede defines cultures as ‘the collective programming
of the mind that distinguishes the members of one category from another.’
(Hofstede 1984) Its main features are:

1. Culture is based on a system of values about how things ought to be


2. Culture is learned and not innate
3. Culture influences the behaviour of group members to act in predictable
and uniform ways
4. Culture is particular to a group
5. Culture is both explicit and implicit.

HRMT20022 - Module 2 - Page 16


In short, ‘culture is a shared system of meanings that is coherent, orderly and
makes sense; the mental map that guides our relationship to our surroundings
and other people’ (Burns 1998, p. 6).

1. Power Distance—the extent to which the members of a society accept


that power in institutions and organisations is distributed unequally.
Larger inequalities would be acceptable in a high distance society, which
would typically accord great authority to people with titles (e.g., India,
Philippines). Such societies have greater centralisation, tall organisation
pyramids, and large wage differentials. The seller is subservient to the
buyer, and there is less inclination to trust unknown foreigners. Trust is
vital.
In a lower power distance society, inequalities are played down; superiors
have authority but are not revered (e.g., Denmark; Australia is moderately
low). Such societies show less centralisation, flatter organisation pyramids,
more open communication, and fewer wage differentials. They also exhibit
greater welfare‑orientation in their economies.
2. Uncertainty Avoidance—the degree to which the members of a society
feel uncomfortable with uncertainty and ambiguity, which leads them to
support beliefs promising certainty and to maintain institutions protecting
uniformity. Societies high in uncertainty avoidance are characterised by
an increased level of anxiety in people (e.g., France, Japan), said to be
manifested by nervousness, stress, and aggressiveness.
Such societies have rules that seek to minimise deviate behaviour, rely
on barriers in ambiguous situations, and are less given to risk-taking.
Their members are said to put great value on job security, career pathing,
retirement benefits, and health insurance, and prefer not to work abroad.
In return they tend to be loyal and work best with clear instructions and
tight controls from home country managers (Mead 1990). Belgium is
an example, where workers expect six months notice and two years’
severance pay.
Low uncertainty avoidance cultures (e.g., Denmark, USA, Great Britain;
Australia is just below average) have fewer written rules, less structuring
of activities, great variability, and more generalists, with greater risk-
taking. Managers in low uncertainty avoidance, entrepreneurial countries
such as Singapore and Hong Kong are thus required to alter their
behaviour accordingly, to cope with such cultural differences.
3. Individualism vs Collectivism—the preference for a loosely-knit social
framework in society in which individuals are supposed to take care of
themselves and their immediate families only, instead of forming cohesive
groups for protection and support. Collectivist cultures place great value
on harmonious relationships, and the company is likely to defend the
employee’s interests (e.g., Taiwan, Mexico, Greece). Loyalty may be
valued before efficiency, particularly loyalty to the family and to the work
group. This loyalty to the family (as in China) or to the workgroup (as in
Japan) is not altruistic, though, as it does not extend beyond the in-group.
There is little generalised charity to others.
Using individualised performance appraisal and motivation techniques
as in some Western societies is not always effective, for obvious reasons.
The employer-employee relationship is a moral one, there is an emphasis
on obligations to the group, in regard to shame, harmony, and respect for
opinions predetermined by the group. Patronage is common, as a reward
for loyalty, and power-distance is usually high.
By contrast, individualist cultures are more interested in maintaining an
individual’s self-respect, and companies rely on individual employees

HRMT20022 - Module 2 - Page 17


to defend their own interests (e.g., USA, Britain, Australia). Such a
dimension has clear relevance to managerial decision-making about how
to motivate workers. The emphasis is on individual achievement and
rights, and personal responsibility for actions. Intragroup competition
is common. Tasks may be given higher priority than relationships, and
there are few emotional attachments between management and workers.
Employee loyalty to the organisation may be instrumental and self-serving.
Individualism correlates with low power distance.
4. Masculinity vs Femininity—‘masculinity’ is used to describe the preference
for achievement, heroism, assertiveness, and material success, as opposed
to ‘femininity’, which is thought to imply a preference for relationships,
modesty, caring for the weak, and for quality of life.
In a masculine society, even the women prefer assertiveness (at least in
men); in a feminine society, even the men prefer modesty. Countries found
to be high on this scale (e.g., Japan, Austria, Mexico, Italy; Australia is
moderately high) have clearly defined sex roles, fewer women in qualified
jobs, reward aggression and competition, and have organisations that
interfere with individuals’ private lives. In masculine societies, leaders
have great independence, and work is valued as a central life interest.
Managers in such cultures usually emphasise merit-based reward practices
in their efforts to gain higher organisational performance (Newman &
Nollen 1996).
By contrast, cultures with low ratings on this scale (e.g., Sweden,
Denmark, Thailand) show minimisation of sex roles, have more women in
qualified jobs, reward soft and intuitive skills, and have organisations that
do not interfere with individuals’ private lives. Social rewards are valued.
Using Hofstede’s dimensions, the following distinctions can be arrived at
(Torrington 1994):

Table–2–1: Hofstede’s categorisation of national cultures


(Source: Hofstede 1981)

Criterion High Low

Individualism Australia Colombia


United Kingdom Pakistan
USA Peru
Canada Venezuela
New Zealand Indonesia

Power distance Malaysia Austria


Mexico Denmark
Philippines Israel
Venezuela Australia
Yugoslavia New Zealand

Uncertainty avoidance Belgium Denmark


Greece Hong Kong
Japan United Kingdom
Korea Singapore
Portugal Sweden

Masculinity Austria Denmark


Italy Norway
Japan Sweden
Venezuela Yugoslavia

HRMT20022 - Module 2 - Page 18


Clearly, with such complexities in the expatriate’s working environment, particular
skills and processes need to be employed in recruiting and selecting the expatriate,
and particular preparation before the assignment, and support systems during the
assignment, are required to optimise the expatriate’s performance. It is to these areas
of research and practice that attention is now directed.

Home-country (parent-company) managers

As ideologically attractive as the appointment of host-country nationals


might be, a number of factors make the recruitment of host-country managers
more difficult and costly compared with recruiting in the home country, and
expatriate assignment (Scullion 1992):

1. Lack of knowledge of local labour markets. The MNC is often without


adequate market experience to recruit effectively in the host country.
2. Ignorance of the local education system and the status of qualifications.
The MNC may be ignorant of the standards and content of the local
education system, and thus liable to error in recruitment and selection.
3. Language and cultural problems at interviews. Selection is unusually
prone to bias and error because of lack of cultural sensitivity on the part of
the MNC.
4. Trying to transfer recruitment methods which work well in the home
country to the ‘foreign’ country. What are effective, efficient and familiar
techniques for recruitment and selection in the MNC’s home country are
not always (in fact rarely) able to be transported to other countries and
cultures.
In addition, many organisations prefer what they see to be the advantages of sending
managers from the home country, over employing local host-country managers.
Reasons commonly cited for this process of expatriation include the following:

1. Home-country managers are more familiar with the corporate culture


and headquarters thinking. The needed integration of the organisation is
thought to be easier, in the face of the diversification effects of off-shore
operations; home country managers are less likely to identify with local
units than with global corporate objectives. The study reported that after
an international acquisition, it was more likely that for the maintenance
of ‘trust’, expatriate appointees were likely to be appointed, at least in
the short term. In terms of management, many companies have used
home country managers to control and coordinate operations among
subsidiaries and corporate headquarters (Boyacigillar 1990). In spite of
factors bearing against this policy, such as the personal problems posed for
dual career couples, and increasingly qualified local talent, there is still a
substantial body of opinion that regards expatriation as a prime method of
coordination and control (Kobrin 1988).
A further argument sometimes cited is that an apparently more independent
PCN can represent the company’s interests with the host government more
easily than a HCN might, if asked to handle a confrontation with his or
her own government (Khambata & Ajami 1992). The counter argument,
of course, is that home country managers are often not as sensitive to the
needs and expectations of the host country clients and governments, and
have a historical tendency to impose home country cultural biases on
their international subsidiaries, and on the cultures in which they operate
(Greene & Walls 1984).

HRMT20022 - Module 2 - Page 19


2. Home-country managers are able to be better developed through a series
of expatriate postings. Working with other cultures is thought to be
broadening in experience and builds valuable networks. In such cases,
the management of expatriate appointees is usually the responsibility of
the corporate human resource function. Some companies deliberately
give international experience to younger managers, when the potential
difficulties of spouse’s job and children’s education are less likely to
emerge. The return on the investment in training is also seen as greater in
the case of the younger expatriate manager.
3. Home-country managers are often better able than host country managers,
to train local staff to understand corporate financial and control
systems, as well as to introduce new technology. Companies often cite
underperformance by host-country managers as a reason for replacement
by expatriate managers, (Phatak 1989) and poorly performing companies
on acquisition are more often likely to have senior expatriates appointed.
However, an unexamined policy by a company to appoint PCNs is likely to
result in significant problems in regional positions, not only because of the
risks of expatriate failure due to personal and cultural factors, but also because
of the perception by the host-country nationals, who may regard the policy as
little more than ill-disguised racism. The ethnocentric staffing by appointing
PCNs sends the message to HCNs that their careers with the company are
limited to subordinate roles (Zeira 1976).

Further, a policy of appointing PCNs is expensive to implement, not only


because of remuneration, relocation costs, allowances, and the like, but
because of the longer time it takes the expatriate to acculturate and to become
productive. Also, the higher salaries often paid to expatriates may create equity
problems in relationships with HCN managers. It has also been suggested that
if HCNs are appointed to managerial jobs, other HCNs perceive greater control
and better career paths (Ring et. al 1990).

In summary, though arguments relating to management development, parent


company orientation and knowledge, and sometimes technical skill, all may be
used in favour of appointing PCNs and TCNs, situations are likely to exist that
challenge any ethnocentric staffing policy, in favour of appointing HCNs.

Host-country managers

As against the ethnocentric approach of appointing PCNs, the polycentric approach


favours appointing HCNs to local management positions. In favour of recruiting
and selecting host-country managers is the identification with the local operation
and culture, language skills of a high order, and the perception of the organisation as
a ‘good corporate citizen’, offering employment and training to local labour.

Without this, there can be a negative effect on host country staff morale, with
senior staff knowing that their chances of promotion to top local management are
slim (although, of course, they may be promoted as expatriates to other countries,
or spend time at corporate headquarters, or offered training in higher technology
as a prelude to promotion, etc.). Some firms report less costs in bringing HCNs to
headquarters for a year’s training and acculturation, prior to appointment back in the
host country, than is carried for assigning an expatriate (Laabs 1991).

A source of potential difficulty for the HCN is the need for comprehensive
training in order to avoid the ‘we-them’ split that may occur between parent
country headquarters and the culturally separate host-country operation, where

HRMT20022 - Module 2 - Page 20


the staff may be unfamiliar with the parent company’s policy and practices.
HCNs may identify with local business units over against global headquarters’
objectives, a situation generally thought to be less likely if the operation is
managed by a PCN (Rugman et al. 1985).

In some countries there are restrictions and even prohibitions on the


employment of parent company staff for the local operation. An obvious
advantage is hiring local nationals as host country managers is that of expense
to the organisation, since relocation costs are usually vastly reduced. As to
the total employment costs, especially with reference to significant salary
differentials between PCN and HCN remuneration, packages need careful and
culturally-sensitive attention, lest offence be given by inappropriate packages
relative to either local conditions or to what the organisation would have to
pay in salary, compensation, and benefits, were an expatriate to be appointed.

Third-Country managers

TCN managers are favoured by some companies because they offer unusual
flexibility of appointment: they are ‘foreign’ to the host country, yet they know
the policies and practices of the parent company through experience in other
assignments, and at headquarters. Often such TCNs are part of an international
cadre of global managers, highly skilled and multilingual, and able to be
assigned almost anywhere that the company needs them (Brooke 1988).

Other than the occasional difficulty of having some assignments precluded


by national or cultural animosities, TCNs also face the same limitation which
restricts the PCN: that many countries now prefer, and even legally require,
that HCNs be appointed instead of PCNs and TCNs whenever possible.

The staffing decision

There seems no instant formula for determining which type of manager—


PCN, TCN or HCN—ought to be appointed to an assignment. The mix of
nationalities will vary with the company’s internal culture, strategies, and
policies, as well as the nature of the particular assignment in question, and the
decision is likely to be made on a multiplicity of factors.

One such factor is the stage of development of the organisation. Milliman et


al suggest the companies transit through stages of organisational initiation,
functional growth, controlled growth, and strategic integration (Milliman et
al. 1991). Earlier stages are likely to require PCN appointments for reasons
of survival, with a heavy dependence on the parent company for support and
skills, and possibly capital. Product markets which are highly competitive and
dynamic are more likely to have higher proportions of HCNs (Boyacigillar
1990). The advantages of a deliberately mixed policy, of HCNs and PCNs, are
also worth considering (Desatnick & Bennett 1978).

A further factor in the staffing decision may be the desirability of returning an


expatriate to a region in which he or she has already an established network of
friendship and business relationships. This may be seen as especially important
in those countries or regions which place great reliance on personal contacts in
the conduct of business, such as in various Asian countries. It is also possible
that ‘reassignment to the same country implies strategic intentions of regional
entrenchment and a continuous, cumulative perspective’ (Selmer & Lee
1994, p. 10).

HRMT20022 - Module 2 - Page 21


For ethical and other reasons, many organisations appear to be favouring
HCNs whenever possible for international and regional positions, except when
a deliberate policy exists of using expatriate assignments for management
training of PCNs. A caution exists in staffing positions according to nationality
of managers, rather than on the basis of the merit principle, as allegations of
discrimination are both personally vexatious and corporately embarrassing.
Nevertheless, some judgement is called for with regard to political sensitivities
and cultural compatibility, other things being equal.

Foreign postings
In many cases, foreign postings require extensive investment by the
organisation and by the employee in learning a foreign language, and on
posting, working and living in conditions that are very different, and often far
less comfortable, than ‘at home’. Where the employee’s family accompanies
him or her, there is an extra burden for both organisation and for the employee,
such as where schooling, health and personal security are major issues.

Each of these factors requires the specific attention of the human resource
professional. For example, many organisations are now giving preference in
recruiting to graduates with modern languages. Others have well-developed
language programs for educating their potential expatriate managers in the host
country language and culture, not only to assist their effectiveness but also to
create a better impression of corporate ‘adaptation’. In Australia, languages
favoured by international organisations vary widely depending on their
operations, but frequently include Japanese, German, and Indonesian.

Women in international management


There is every reason to expect that in the immediate and longer-term future,
women will make up an increasing proportion of expatriate managers. Current
estimates are that about half the students in American business schools are female,
and it is generally reported that women are moving into upper ranks of management
in banks, businesses and government agencies (Ball & McCulloch 1992).

This is in contrast to the fact that up until the present decade, international
management has been an almost totally masculine preserve in Europe and
the USA. One study estimated that at least until recently, less than 3 percent
of North American expatriates were female (Adler 1986). The proportion
of women in the global expatriate pool is estimated to be about 5 percent
(Reynolds & Bennett 1991). Compounding the picture is the survey finding
that 45.8 percent of American, Australian, Canadian and European MNCs do
not employ women as expatriates (Reynolds & Bennett 1991).

An explanation given by some is that companies still shy away from using
female expatriates because of fears that women will not be accepted in
some countries, either socially, because of host culture attitudes, or as an
‘authoritative’ manager, as well as the disruption to the career of their partner
(Izraeli et al. 1980). A typically unstated reason is that women are still
discriminated against in much male decision-making, especially in regard to
business management (Dobbins & Platz 1986).

One of the reasons for a negative appraisal of the potential for female
expatriate managers is the tendency for organisations to confuse the role
of female expatriate with that of expatriate (female) spouse (Harris 1993).
However, the problems of adjustment experienced by the female expatriate
spouse are different from those faced by the female expatriate manager.
HRMT20022 - Module 2 - Page 22
Various reports indicate that Western female expatriates sometimes face
unique prejudice in Asian countries such as Japan, where a male culture
appears deeply entrenched. One 1996 study reported that only 10 percent of
a sample of 91 female respondents in Japan were ‘traditional’ expatriates, the
remainder being independent operators outside of organisational structures, or
accompanying partners (Taylor & Napier 1996).

However, other Asian countries, such as Thailand, do not demonstrate such


rigid gender roles, and there is evidence that the old barriers may be softening.
A paradoxical argument is to the effect that in certain countries, such as Japan,
a Western manager is already so different that gender becomes a secondary
matter, and in such a situation, the significance of the difference may have
been overstated. There is the further suggestion that being a woman in such a
culture confers unique advantage, because one is so obviously different from
the majority of expatriates.

This is confirmed by a much-quoted study by Adler (1993) in which three


prevalent anti-women myths are examined:

Myth No. 1. ‘Women do not want to be international managers’. The evidence


from 1000 graduating MBAs indicated no significant difference between
males and females in seeking international careers. Another study found that
while females were less willing to relocate, there was no difference between
males and females in such willingness when the females were the primary
income earners in the family (Wheeler & Miller 1990).

Myth No. 2. ‘Companies refuse to send women abroad’. Some 54 percent of


the companies surveyed do hesitate to send women abroad, citing opinions
that host country managers do not accept Western women managers, that
conditions are arduous and dangerous, and that dual career marriages are an
inhibition to such postings.

Myth No. 3. ‘Foreigners are prejudiced against women expatriate managers’.


The survey of more than 100 women managers, half responded that being a
woman was an advantage in the assignment, often gaining preferred treatment
from host country contacts, although some reported that being a woman had
no impact whatsoever on their professional life. One in five said that being a
women international manager was negative.

Adler also commented that the ‘gaijin’ syndrome can be avoided by the
assumption that foreigners will always be treated as foreigners, and are not
expected to conduct themselves as host country women do. This is especially
so in countries where Western women are visually distinct, such as Japan.
Thus, ‘the cultural norms limited the access of local women to managerial
positions and responsibility do not apply to foreign women ... local managers
see women expatriates as foreigners who happen to be women, not as women
who happen to be foreigners. The difference is crucial.’ (Adler 1993, p. 54).

For all the rational arguments in favour of removing discrimination, the reality
appears to be that in some countries and cultures, women are seen as inferior
and subordinate to men, and foreign women still experience difficulties in
obtaining work visas to Arab countries (Adler 1993). Nevertheless, Adler’s
conclusion, based on her research, is that gender has no defensible basis as a
bar to international assignment.

HRMT20022 - Module 2 - Page 23


Predicting expatriating success
With such high stakes riding on the success of the expatriate assignment, and
in the face of expensively-high failure rates, optimal expatriate selection is
critical, and poses a major human resource management challenge for most
companies (Overman 1993). Unfortunately, selection decisions regarding
expatriates appear to be made only on the grounds of the applicant’s
professional accomplishments, technical expertise, and availability (Chowanec
& Newstrom 1991). Important as these selection criteria may be, a wealth of
research data on predictors in expatriate success suggests that other selection
criteria be included in the process.

A review of research in predicting success in expatriation is given by


Mendenhall and Oddou (1985). The findings confirm the need for thorough
assessment and preparation of the employee who is being considered for a
foreign posting. A further empirical study by Tung on selection practices of
eighty American multinationals isolated 18 variables that predicted expatriate
success (Tung 1981). These she grouped into four categories:

1. Technical competence on the job—usually assessed through internal


evaluation, since most expatriate postings are of present employees; this
ability to perform at a technically high level, with personal confidence
and expertise, is seen by Mendenhall and Oddou (1985) as an essential
dimension of expatriate success. However, when making selections
on this criterion, it should be kept in mind that in an overseas posting,
infrastructure support may be significantly less than is offered to the
manager or technician in the home environment. A wider set of skills than
the job might usually require, could be seen as a desirable characteristic.

2. Personality traits or relational variables—though cited as important by


most companies, these were formally assessed by only 5 percent of firms;
Mendenhall and Oddou emphasise that the ability to develop long-lasting
friendships with host country nationals is a significant determinant of
expatriate effectiveness (ibid).

3. Environmental variables—such as the degree of similarity between


the home country culture and that of the host country; Mendenhall and
Oddou (1985) further specify that well-adjusted expatriates who are
able to be non-judgemental in interpreting the behaviour of host country
nationals facilitate clearer information exchange and better interpersonal
relationships between expatriates and nationals (ibid).

4. Family situation—52 percent of companies interviewed both candidate and


spouse for management positions, and 40 percent of companies interviewed
both candidate and spouse for technical positions. Mendenhall and Oddou
note the importance of the host culture in terms of its ‘toughness’ for the
expatriate and his or her family (ibid). For example, cultures where male
values dominate are likely to be seen as ‘tough’ for Western expatriate
women, and for the wives of male expatriates.

Despite the differences in demand between home country and foreign


assignments, a number of the companies used the same selection methods
(Dowling 1988). The findings reviewed by Mendenhall and Oddou (1985), and
those reported by Tung (1981), should offer the international human resource
manager some valuable information on how to optimise selection procedures
for expatriate postings: careful attention to the variables predicting success will
facilitate the choice of selection and orientation procedures for the employee.

HRMT20022 - Module 2 - Page 24


Assessment of the expatriate family

While these areas are essential for evaluation in selection, it is also very
important to interview the family, especially with regard to their general ability
to adapt to foreign cultures, and to screen out those couples or families where
marital or emotional instability is potentially problematic for the applicants for
expatriation (Shilling 1993).

Other family matters requiring assessment include responsibility for aging parents,
chemical dependencies on the part of any family member, behavioural problems
in teenagers and their commitment to their current peer group and extracurricular
activities, and possible effect of expatriation on the spouse’s career. Just as it
is irresponsible and possibly unethical to send a family on assignment without
adequate preparation, so it is also negligent to send on international assignment a
family who by any known and validated criteria, is ‘unsuitable’. The consequences
of doing so may be highly significant and long-lasting.

The selection process in summary


Akin to selection processes in domestic operations, selection for international
assignments is generally acknowledged to require some specialist skills. Black
et al. (1992) recommend the following process:

1. Create a selection team. This should have at least three members, of whom
one should be a home country manager, one a host country manager, and
one a human resource management professional.

2. Define a strategic purpose for the global assignment. For example, if the
assignment is aimed at improving the control function between headquarters and
the overseas operation, and to improve coordination between the offices, then
the candidate should be assessed with special regard to experience and contacts
within the company. If a high degree of resourcefulness is required to work
in an organisationally or ethically ‘ambiguous’ environment, then perhaps an
experienced expatriate with demonstrated street skills and particular personality
attributes might be sought.

3. Assess the global assignment context. The category of the assignment


should be detailed, such as in terms of operator or manager of division head
or ‘expert’, as this will determine the kind of person to be sent. Different
categories of jobs will require differing levels of interpersonal skills with
regard to relationships with host country nationals.

4. Establish selection criteria. Such criteria, known as a personal


specification, should be based on a clear job description, which in
turn should be derived from a job analysis. Factors such as technical
competence on the job, personality traits and relational variables,
environmental variables, and family situation, are all potentially important
selection criteria. Expect to interview the family.

5. Define the candidate pool. This will influence how recruitment is to be


undertaken, such as by internal and/or advertisement, corporate search, or
targeted training of existing staff.

6. Utilise multiple selection methods. Human resource management


professionals will be aware of the multiplicity of selection methods, and
their individual advantages and disadvantages. To this mix of possibilities
must be added the fact that no two assignments are alike, in that countries
and cultures differ widely, and applicants will bring varying characteristics,
talents and experience to the selection process.

HRMT20022 - Module 2 - Page 25


Summary
Expatriate recruitment and selection consists of the ‘normal’ domestic
recruitment and selection as well as many other complex considerations. The
policy decision concerning the merits of host country managers as against
home country managers is vital and the factors informing it need to be kept
explicit. As well, the particular problems faced by women in international
management, and the organisations who wish to appoint them, demand
attention.

Many expatriate ‘failures’ are probably better understood as assignment


failures consequent on failure to adapt to an alien culture, or to exhibit the
kind of personal resilience necessary to achieve the appropriate objectives. An
understanding of the process of adaptation is likely to be helpful in designing
HR policies for expatriate selection, preparation, and support, and it is to these
topics that we now turn.

Finally, the predictors of expatriate success require continual research


updating, and constant monitoring, to ensure that expatriates are appropriately
recruited and optimally selected, for their sake and in the interests of the
organisation.

Review questions

Question 2–1

What factors ought to be paramount when considering the


process of selection of expatriates?

Question 2–2

What themes are significant in the research on women in expatriate


postings?

Question 2–3

How can success in an expatriate assignment be predicted?

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(eds), Research in Personnel and Human Resource Management, JAI Press,
Greenwich, Connecticut, vol. 8, Supplement 2, pp. 127–145.

Overman, S 1993, ‘You don’t have to be a big fish to swim in international


waters’, HR Management, September, p. 49.

Phatak, AV 1989, International dimensions of management, 2nd edn, PWS-


Kent Publishing Company, Boston.

Pierce, J & Delahaye, BL 1996, ‘Human resource management implications


of dual-career couples’, The International Journal of Human Resource
Management, vol. 7, no. 4, p. 905.

Reynolds, C & Bennett, R 1991, ‘The career couple challenge’, Personnel


Journal, vol. 70, no. 3, pp. 16–18.

Ring, PS, Lenway, SA & Govekar, M 1990, ‘Management of the political


imperative in international business’, Strategic Management Journal, vol. 11,
pp. 141–151.

Rugman, AM, Lecraw, DJ & Booth, LD 1985, International business: firm and
environment, McGraw-Hill, New York, p. 398.

Scullion, H 1992, ‘Strategic recruitment and development of the global


manager’, Proceedings of the Third Conference on International Personnel/
Human Resource Management, Ashridge Management College, United
Kingdom, July 2–4.

Selmer, J & Lee, S 1994, ‘International transfer and assignment of Australian


and European business executives’, Asia Pacific Journal of Human Resources,
vol. 32, no. 3, p. 10.

Shilling, M 1993, ‘Avoid expatriate shock’, HR Magazine, vol. 38, no. 7, p.


58.

Shilling, M 1993, ‘Avoid expatriate shock’, HR Magazine, vol. 38, no. 7, p.


60.

Stokols, D & Shumaker, S 1982, ‘The psychological context of residential


mobility and well-being’, Journal of Social Issues, vol. 38, pp. 149–171.

Taylor, S & Napier, N 1996, ‘Working in Japan: lessons from women


expatriates’, Sloan Management Review, Spring, pp. 76–84.

Torrington, D 1994, International human resource management: think


globally, act locally, Prentice-Hall Inc., Englewood Cliffs, New Jersey, USA,
p. 40.

Tung, R 1982, op. cit.

Tung, R 1981, op. cit.

HRMT20022 - Module 2 - Page 29


Tung, RL 1981, ‘Selection and training of personnel for overseas assignments’,
Columbia Journal of World Business, vol. 16, no. 1, p. 68.

Wheeler, KG & Miller, JG 1990, ‘The relocation of career and family factors
to the expressed minimum percentage pay increase required for relocation’,
Journal of Management, vol. 16, no. 4, pp. 825–834.

Zeira, Y 1976, ‘Management development in ethnocentric multinational


corporations’, California Management Review, vol. 18, no. 4, pp. 34–35.

HRMT20022 - Module 2 - Page 30


Module 3—International training and
development
Introduction
Research examining consequences of insufficient cross-cultural understanding in
international business (Black, Gregersen & Mendenhall 1992) has revealed that:

1. premature return rates are significant, especially among U.S. expatriates;


2. each failure gives rise to substantial direct and indirect costs;
3. a notable share of especially U.S. expatriate managers who stay on are
regarded as ineffective by their parent organisations; and
4. ineffective expatriate managers incur large direct and indirect costs.
Increasingly, comprehensive programs for the orientation, preparation, in-post
support and repatriation of expatriates are being urged by researchers as both
desirable and necessary (Webb & Wright 1996). Such preparation and support
is necessary as supplementary to whatever global orientation and skills the
general manager may have acquired during the course of normal management
training and development (Ali & Camp 1996).

As part of overall expatriate preparation, orientation is reported as being


particularly important in overseas assignments, both before departure from
the home country and after arrival in the new assignment. Some firms offer
formalised orientation programs, such as audiovisual presentations for the
expatriate and his or her family, and discussions with recently-returned
employees and families. Additionally, the provision of cross-cultural
training for the expatriate, and increasingly for his or her family, is seen as a
worthwhile investment (Derderian 1993).

It is also regarded as being very useful for the expatriate to be briefed on the
way that corporate policy and practice in the international setting may differ
from that to which they might be accustomed in the home country. Some firms
offer the manager a brief ‘field trip’ for a week or two prior to the expatriate
assignment, to facilitate information gathering (job and family environment),
and to allay anxieties about the forthcoming posting.

Learning objectives
After studying this module, you should:

•• be able to understand the role of International training and development in


expatriate selection and development
•• be able to use this knowledge as a basis for understanding expatriate Textbook
preparation policy and practice. Dowling, Festin,
& Engle 2008
Ch. 6.
Orientation programs
The aims of orientation programs have been summarised by Sieveking, Anchor
& Marston (1981) as follows:

1. Develop an understanding of personal and family values so that expatriates


can anticipate and cope with the inevitably unsettling emotions which
accompany culture shock.

HRMT20022 - Module 3 - Page 31


2. Develop an appreciation of the important ways in which the host culture
will differ from the expatriate’s own culture so that the employee can guide
his or her behaviour accordingly.

3. Show the expatriate how he or she can be rewarded in ways in addition to


income and travel such as novelty, challenge and the opportunity to make
an income.

4. To help expatriates anticipate and begin to plan for hardships, delays,


frustrations, material inconveniences and the consequences of close living
and working with others.

To accomplish these aims, Conway (1984) recommends three separate phases


to orientation, the first being called initial orientation, lasting as long as two
full days. Key components are:

1. Cultural briefing. Traditions, history, government, economy, living


conditions, clothing and housing requirements, health requirements, and
visa applications. (Special emphasis is given to the different drug laws in
foreign countries. Alcohol use is recommended for special attention when
expatriates are going to Muslim countries, such as Saudi Arabia.)

2. Assignment briefing. Length of assignment, vacations, salary and


allowances, taxation consequences, and repatriation policy.

3. Relocation requirements. Shipping, packing, or storage; and home sale,


rental, or acquisition.

Conway (1984) recommends that during this time, it is important that


employees and their families understand there is no penalty attached to
changing their minds about accepting the proposed assignment.

The second phase is predeparture orientation, which may last another


two or three days. Topics covered at this stage include: Introduction to
the language; further reinforcement of important values, especially open-
mindedness; and enroute, emergency, and arrival information. As desirable
as it is for the expatriate to be fluent in the language of the host country, even
the commonly-used six-week language course is regarded as useful. For
senior-level appointments to exotic locations, there is often further language
training upon arrival in the destination country. Spouses are also encouraged
by researchers to take language training, to facilitate better adjustment
internationally (Tung 1988). However, predeparture training is sometimes not
as useful as expected, since it may ignore the cognitive state of the individual
who has limited receptivity to cross-cultural material presented prior to actual
experience. The rationale of self-motivation in post-arrival training safeguards
high involvement and commitment of expatriates, and is more likely to be of
immediate application (Selmer 1998).

The final aspect of overseas orientation is arrival orientation. It is


recommended that upon arrival, employees and their families should be met
by assigned company sponsors—experienced expatriates with the necessary
interpersonal skills to assist newly-arriving staff. This phase of orientation
usually takes place on three levels:

1. Orientation toward the environment. Language, transportation, shopping,


and other subjects that, depending on the country, may be understandable
only through actual experience. The company-appointed sponsor may play
an important role by acting as contact for any questions that may remain
unanswered or other emergencies.
HRMT20022 - Module 3 - Page 32
2. Orientation toward the work unit and fellow employees. Often a supervisor
or a delegate from the work unit will introduce the new employee to his or
her fellow workers, discuss expectations of the job, and share his or her own
initial experiences as an expatriate. The ultimate objective, of course, is to
relieve the feelings of strangeness or tension that the new expatriate feels.
3. Orientation to the actual job. This may be an extended process that focuses
on cultural differences in the way a job is done. Only when this process is
complete, however, can we begin to assess the accuracy and wisdom of the
original selection decision.
The arrival of the expatriate in post does not mean the end of formal training
and development for the assignment. Black, Gregersen and Mendenhall
(1992) are of the view that ‘learning about cultural concepts is useful before
departing, but theoretical arguments support the idea that rigorous, in-depth
training is most effectively delivered to global managers after they are
“in-country”’ (Black, Gregersen & Mendenhall 1992). Continued cultural
education, and especially language training, are therefore regarded as high
priorities for the expatriate even after taking up duties in the international
assignment.

Even with all the possible training, the expatriate will still need in-post
support, such as regular up-dates from the organisation, communication about
expectations with constructive feedback about performance, and access to
emergency medical and psychological assistance is required (Harris 1989).

Expatriate preparation and training


In the event that the use of expatriates by organisations continues, the human
resource manager has a role in his or her recruitment, selection, training,
and support. In particular regard to training and development, each of the
following areas, overviewed in summary, requires the specific attention of the
human resource professional:

1. Different skills. What is also clear is that managing in an international


setting requires a different set of skills from those which might be relied
upon in the home culture and organisational environment. A business
‘going international’ cannot simply transpose its structure and operational
style from its home culture to another country, and expect instant success.
Even after getting the cultural and other environmental factors resolved,
the MNC must accept that it will be continually adjusting the balance
between coordination and decentralisation of control, in response to the
dynamic environment.
2. A ‘different world’. In many cases, foreign postings are a different world
(McEnery & DesHarnais 1990). They require extensive investment by
the organisation and by the employee in learning a foreign language, and
on posting, working and living in conditions that are very different, and
often far less comfortable, than ‘at home’. Where the employee’s family
accompanies him or her, there is an extra burden for both organisation and
for the employee, such as where schooling, health and personal security
are major issues.
3. A different language. Many organisations are now giving preference
in recruiting to graduates with modern languages. Others have well-
developed language programs for educating their potential expatriate
managers in the host-country language and culture, not only to assist
their effectiveness but also to create a better impression of corporate

HRMT20022 - Module 3 - Page 33


‘adaptation’. Most obviously, the ability to speak the dominant language
in the host-country can improve markedly the expatriate’s effectiveness
and negotiating ability, through facilitating access to government,
economic and business information, as well as enabling relationships to be
established on favourable terms (Baliga & Baker 1985).
4. Expatriate Preparation and Expatriate Failure. Often thought to be a
matter related primarily to selection of the candidate for international
assignment, expatriate failure is also the result of failure to adjust to
the assignment because of inadequate or inappropriate training and
development (Baliga & Baker 1985; Harris 1989). Estimates of 20-
40 percent of expatriates’ returning prematurely from international
assignments are common (Desphande & Viswesvaran 1992). The costs of
such failures are financially high, in addition to the impact on operations,
and on the corporate image and relationships.
5. Empirical research on expatriate preparation. When comparing American
with European and Japanese expatriate success rates, Tung found the latter
two groups to have less failures, which she detailed as due to longer-term
orientation regarding overall planning and performance assessment, use
of more rigorous training programs to prepare nationals for expatriate
assignments, provision of a comprehensive expatriate support system,
better overall qualifications of candidates for overseas assignments, and
restricted job mobility (leading to greater organisational commitment).
An international orientation, a long history of overseas operations, and
language capability, was found to be especially helpful in European
multinationals in particular (Tung 1987).
Tung (1981) outlines five types of training programs:

i. area studies (giving extensive background knowledge);


ii. culture assimilation (testing cross-cultural communication);
iii. language training;
iv. sensitivity training (focussing on non-cognitive factors such as affect); and
v. field experiences in a micro-culture.
An additional note should be made referring to the recommendation that
training should incorporate regular ceremonies welcoming initiates into the
organisation (Wilkins 1983). For example, organisational stories have been
shown to be powerful in their impact on:

1. memory of values, principles and information


2. generating beliefs
3. attitudinal commitment through appeal to legitimate values.
Thus, ceremonial recounting of successful achievements by repatriated
managers is an important part of the ‘camp-fire’ rituals that encourage a sense
of organisational belonging and loyalty, and gives the experience of affect
along with the cognitive information concerning the assignment ahead.

HRMT20022 - Module 3 - Page 34


Cross cultural training and development

Overviewing cross-cultural training (CCT)

A review of cross-cultural training and its effectiveness indicates that


organisations are wrong to believe that CCT is neither necessary nor effective
(Black & Mendenhall 1989):

Most striking are those studies reporting that through CCT, expatriate failure
rates have been reduced to levels approximating 5 percent (Kohls 1985), and
in one case study of American firm Johnson Wax, only 2 percent (Caudron
1991). Regrettably, despite the desirability of CCT for expatriates, studies
indicate that as few as 32 percent of American expatriates are provided with
formal programs (Tung 1990). In Australia, such training is said to occur only
on an ad-hoc basis, and tends to be superficial in nature (Onto 1987).

In 1995, 29 percent of Australian companies using expatriate assignments


reported that they had no form of CCT, according to an Arthur Andersen
study (1996). Admittedly, this result showed an improvement by nine percent
since 1994, yet seven percent indicated that the training they used was for the
expatriate only, and only 37 percent could report any CCT for the entire family
of the expatriate. A reassessment by companies in general and HR managers in
particular, would seem to be overdue.

Many different approaches to CCT now exist, and differ according to


theoretical orientation, duration, and specific expatriates and assignments
involved. In summary, differentiation can be made according to the approach
to training (didactic or experiential), and the content of training (culture-
general or culture-specific). For example, Brislin has listed five types of
programs (Brislin 1979):

1. self-awareness training (in which people learn about the cultural basis of
their own behaviour)
2. cognitive training (where people are presented with facts about other
cultures)
3. attribution training (where people learn the explanation of behaviour from
the point of view of people from other cultures)
4. behaviour modification (where people are asked to analyse the aspects of
their culture that they find rewarding or punishing)
5. experiential learning (where people actively participate in realistic
simulation).

The content of pre-assignment cross-cultural training

Responsible organisational preparation of the expatriate and his or her family,


involves not only careful selection and training, but also in-post support
and monitoring for stress as well as performance, and later preparation for
repatriation (Stone 1986).

So-called ‘culture-general’ training allows the individual to learn about his


or her own ethnocentrism and enculturation in their own culture, as a basis
for appreciating the cultures of others (Nicholson, Stepina & Hochwarter
1990; Gudykunst, Guzley & Hammer 1996). Once such sensitivity has been
established, content can move to become more culture-specific for the country,

HRMT20022 - Module 3 - Page 35


culture, or region concerned. Culture-general assimilators use critical incidents
from different cultures to allow candidates for expatriation to learn principles
that apply across cultures (Cushner & Landis 1996). In addition to the more
experiential approaches aimed at individualised learning, there are available
a wide variety of sources of information (such as instructional videos) that
people facing expatriation can use to gain information about living in other
cultures, in general, as well as about regional matters of significance.

Culture-specific and task-specific training

Such training should include induction into the language, culture and religion,
history, and business environment, primarily, but should also include stress
management training. The social norms and courtesies should be addressed
in detail, as most cultures place great store by their formal and informal
rules (Copeland & Griggs 1985). Included also should be discussion on the
attitudes of the people in the targeted culture, regarding personality profiles
and information about their values and belief systems, as well as material
on how they tend to view foreigners. Details such as attitudes towards and
behaviour concerning cleanliness, sanitation, and personal habits, should
not be omitted. The differences between culture-general and culture-specific
training is that in the former, the training is given without specific targeted
cultures in mind, but rather on general differences between cultures and the
ways in which can adapt to them.

Levels of training

Reflecting these various training requirements, Mendenhall, Dunbar and


Oddou (1987) propose different levels of rigour in training:

1. Information-giving approaches using factual briefings about the culture


(Earley 1987);

2. Affective approaches using critical incidents techniques aiming at


attitudinal and cognitive change (using role plays and case studies), as well
as intermediate or moderate language training, and stress management
training (Tung 1982);

3. Immersion approaches using field experiences (in the host-country or by


visiting micro-cultures within the home country), assessment centres, and
simulations, to provide in-depth acculturation, along with more extensive
language training (Black & Mendenhall 1989).

Didactic and information-giving approaches are useful for intending expatriates to


learn facts and other information about targeted cultures; experiential approaches
are better at allowing them to learn about themselves in relation to people from
other cultures. Simulations exercises for groups are often used for experiential
culture‑general preparation (Hoppe, Michalis & Reinking 1995).

Most training programs use more than one approach, and combine didactic and
experiential approaches. Of course, predeparture training will always have an
air of unreality about it, since it may well be taking place in the comforts of a
familiar culture, divorced from the reality of what is to come. For this reason,
even though predeparture training is recommended, there is also a case to
be made for continuing it through to providing formal and informal learning
opportunities for the expatriate and his or her family after they have arrived in
post. Here, the training is likely to be much more specific and focussed—and
effective (Torbiörn 1982).

HRMT20022 - Module 3 - Page 36


Training the family for ‘everyday’ stressors

In addition to language training, acculturation training should assist families


with the skills of learning to cope with the stressors of everyday life in
their posting. This need not focus only on ‘hardship’ postings in remote or
dangerous areas, where climate makes life uncomfortable and terrorists make
it interesting, and where both require personal adaptation to life style. Stedham
and Nechita found that CCT offers the expatriate preparation for reducing the
uncertainties they will face on assignment, and provides enhanced ability for
coping with experienced uncertainty (Stedham & Nechita 1997).

Similarly, Black and Mendenhall take the view that

companies should give the expatriate’s spouse the same cross-cultural training
the employee receives ... While large portions of the training may be business-
related, much of it is applicable to the non-employee spouse, because cultural
values and norms that affect business behaviour also affect social behaviour
outside the workplace. Also, an understanding of the work challenges may
assist the spouse in offering support to the employee during the assignment
(Black & Mendenhall 1989).

The nature and kind of CCT for families should thus be matched with the
needs of the family concerned, and the particular culture and city to which they
are being assigned. As Hogan and Goodson conclude: ‘A family CCT program
can help ensure that the expatriate’s family becomes a positive rather than a
negative force on the overseas assignment’ (Hogan & Goodson 1990).

Training host-country nationals at ‘home’

For completeness, note must be made of the practice of companies’ training


foreign students in the companies’ home country, or recruiting foreign students
studying in the home country (usually in business administration), and
posting the students as junior managers to assignments in their own countries
(Blocklyn 1989; Lucke-Nunke 1984; Laabs 1991). This has the advantages of
avoiding the criticism of ‘not employing host-country nationals’, and saving
on the expense of predeparture training, as well as minimising the likelihood
of expatriate retention failure, while ensuring the quality of performance
through familiar controls.

However, while the host-country national may move easily between both
host‑country and home-country cultures, it should not be thought that he or
she is necessarily free of the prejudice or ignorance that others might manifest.
Those host‑country nationals who have grown up in country with colonial
histories may still harbour private antipathies to the values and customs
of their former colonial masters, and such irrationality, especially when
encouraged by host-country fundamentalism, may prove dangerous in the
extreme, to the person concerned as well as to the organisation.

In summary, cultural awareness training would appear to have a place,


regardless of the specific situation, but the details of the training need to be
adapted to that situation.

HRMT20022 - Module 3 - Page 37


Cross-cultural training in summary

With regard to the employee’s welfare, the performance of the employee,


and the wider commercial success of the assignment, it may be tantamount to
negligence on the part of the organisation, for thorough selection and training
in cross-cultural awareness not to be undertaken before the home country
employee becomes the host‑country expatriate.

When the cost of such training is weighed against the likely benefits to the
commercial success of the operation, as well as its investment value in terms
of management development, it is a matter for surprise that all international
companies do not consider it important enough to fund routinely, as require of
staff as compulsory.

A further argument exists for the training of the host-country workforce in


cultural awareness concerning the culture of the home country organisation,
with the aim of enhancing the relationship between host-country nationals and
expatriates. Such programs may be presently few in number, and have certain
ethical cautions attached, but have been propounded as significant in assisting
the joint success of the business venture (Phatak 1989; Vance, Paderon &
Wholihan 1992).

Summary
This module has examined some of the requirements for preparing employees
for expatriate assignments. It has considered the research and practice of
orientation programs, and in particular the role to be played by cultural
briefing, relocation briefing, and briefing on the organisational purposes for the
operation. Culture‑specific and task-specific training have been detailed, with
attention paid to the need for training for the ‘everyday’ stressors of living in
foreign environments.

HRMT20022 - Module 3 - Page 38


Review questions

Question 3–1

Just how extensive should pre-departure preparation be? Can it


be over-done?

Question 3–2

What about underdoing the preparation? Would the expatriate have a legal
right to action against the firm if it failed to adequately prepare him or her,
given what the research says about the importance of preparation, and the
risks associated with expatriation?

Question 3–3

How can training and development programs be ‘matched’ to assignments?


What are the relevant parameters? What are the main elements of
expatriate preparation programs? Why?

Question 3–4

What differences should expatriate preparation programs show in reference


to countries or regions? Why?

Question 3–5

What differences should there be in respect of differences in assignment


duration? Why?

Question 3–6

How would you justify to an employer the need for expatriate preparation
programs?

Question 3–7

What preparation should be offered to the expatriate family?

Question 3–8

What training should be offered ‘in post’? Why? How?

References
Ali, AJ & Camp, RC 1996, ‘Global managers: qualities for effective
competition’, International Journal of Manpower, vol. 17, no. 67, pp. 5–18.

Arthur Andersen International Executive Services. 1996, 1995 Australian


expatriate survey results, Arthur Andersen, Sydney, pp. 1–12.

Baliga, G & Baker, JC 1985, ‘Multinational corporate policies for expatriate


managers: selection, training, and evaluation’, Advanced Management
Journal, Autumn, pp. 31–38.

HRMT20022 - Module 3 - Page 39


Black, JS, Gregersen, HB & Mendenhall, ME 1992, Global assignments,
Jossey‑Bass Publishers, San Francisco, p. 106.

Black, JS, Gregersen, HB & Mendenhall, ME 1992, ‘Toward a theoretical


framework of repatriation adjustment’, Journal of International Business
Studies, vol. 23, no.4, pp. 737–760.

Black, JS & Mendenhall, M 1989, ‘A practical but theory-based framework for


selecting cross-cultural training methods’, Human Resource Management, vol.
9, no 4, pp. 514-534.

Black, JS & Mendenhall, M 1989, op. cit., vol. 9, no 4, p. 522.

Blocklyn, PL 1989, ‘Developing the international executive’, Personnel, vol.


66, no. 3, pp. 44–47.

Brislin, R 1979, ‘Orientation and programs for cross-cultural preparation’, in


A Marsella, R Thorp & T Civorowski (eds), Perspectives on cross-cultural
psychology, Academic Press, New York, pp. 287–305.

Caudron, S 1991, ‘Training ensures success overseas’, Personnel Journal,


December, p. 30.

Conway, MA 1984, ‘Reducing expatriate failure rates’, Personnel


Administrator, vol. 29, no. 7, pp. 31–38. op. cit.

Copeland, L & Griggs, L 1985, Going international, Random House, New


York.

Cushner, K & Landis, D 1996, ‘The intercultural sensitizer’, in D Landis


& RB Bhagat, (eds), Handbook of intercultural training, 2nd edn, Sage
Publications, Thousand Oaks, California.

Derderian, S 1993, ‘International success lies in cross-cultural training’, HR


Focus, vol. 70, April, p. 9.

Desphande, SP & Viswesvaran, C 1992, ‘Is cross-cultural training of expatriate


managers effective: a meta-analysis’, International Journal of Intercultural
Relations, vol. 16, p. 295.

Earley, PC 1987, ‘Intercultural training for managers: a comparison for


documentary and interpersonal methods’, Academy of Management Journal,
vol. 30, no. 4, p. 686.

Gudykunst, WB, Guzley, RM & Hammer, MR 1996, ‘Designing intercultural


training’, in D Landis & Bhagat, RB (eds), Handbook of intercultural training,
2nd edn, Sage Publications, Thousand Oaks, California.

Harris, JE 1989, ‘Moving managers internationally: the care and feeding of


expatriates’, Human Resources Planning, March, pp. 49–54.

Hogan, GW & Goodson, JR 1990, ‘The key to expatriate success’, Training


and Development Journal, vol. 44, no. 1, p. 52.

Hoppe, A, Michalis, D & Reinking, T 1995, ‘Alpha-omega negotiation’, in


S Sudweeks & R Guzley (eds), Instructors’ resource manual for building
bridges, Houghton Mifflin, Boston.

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Kohls, LR 1985, ‘Intercultural training’, in WR Tracey (ed.), Human resources
management and development handbook, Amacom, USA, p. 1126.

Laabs, JJ 1991, ‘The global talent search’, Personnel Journal, vol. 70, no. 8,
pp. 38–42.

Lucke-Nunke, B 1984, ‘Recruiting European nationals to return to their home


countries’, Personnel Administrator, vol. 29, no. 7, pp. 41–45.

McEnery, J & DesHarnais, G 1990, ‘Culture shock’, Training and


Development Journal, vol. 44, pp. 43–47.

Mendenhall, M, Dunbar, E & Oddou, G 1987, op. cit., pp. 331–345.

Nicholson, JD, Stepina, LP & Hochwarter, W 1990, ‘Psychological aspects


of expatriate effectiveness’, Research in Personnel and Human Resources
Management, Supplement 2, p. 138.

Onto, J 1987, ‘Preparing managers for international careers: a strategic


perspective’, Human Resource Management Australia, vol. 25, no. 3, p. 28.

Phatak, AV 1989, International dimensions of management, 2nd edn, PWS-


Kent Publishing Company, Boston.

Selmer, J 1998, ‘The expatriate manager in China: a research note’, Human


Resource Management, vol. 8, no. 1, pp. 80–86.

Sieveking, N, Anchor, K & Marston, R 1981, ‘Selecting and preparing


expatriate employees’, Personnel Journal, vol. 3, pp. 197–202.

Stedham, Y & Nechita, M 1997, ‘The expatriate assignment: research and


management practice’, Asia Pacific Journal of Human Resources, vol. 35, no.
1, pp. 80–89.

Stone, RJ 1986, ‘Expatriate selection and orientation’, Human Resource


Management Australia, vol. 24, no. 3, August, pp. 24–28.

Torbiörn, I 1982, Living abroad: personal adjustment and personnel policy in


the overseas setting, Wiley, New York.

Tung, RL 1981, ‘Selection and training of personnel for overseas assignments’,


Columbia Journal of World Business, vol. 16, no. 1, pp. 68–78.

Tung, RL 1982, ‘Selection and training procedures of U.S., European and


Japanese multinationals’, California Management Review, vol. 25, no. 1, p. 65.

Tung, RL 1987, ‘Expatriate assignments: enhancing success and minimising


failure’, Academy of Management Executive, vol. 1, no. 2, pp. 117–126.

Tung, RL 1988, The new expatriates: managing human resources abroad,


Ballinger, Cambridge, Massachusetts.

Tung, RL 1990, ‘International human resource management policies and


practices: a comparative analysis’, Research in Personnel and Human
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HRMT20022 - Module 3 - Page 41


Vance, CM Paderon, ES & Wholihan, JT 1992, ‘An ethical argument for
host‑country workforce training as part of the expatriate management
assignment’, Proceedings of the Third Conference on International Personnel
and Human Resource Management, Ashridge Management College, United
Kingdom, July 2–4.

Webb, A & Wright, PC 1996, ‘The expatriate experience: implications for


career success’, Career Development International, vol. 1, no. 5, pp. 38–44.

Wilkins, AL 1983, ‘Organisational stories as symbols which control the


organisation’, in PJ Frost, G Morgan & TC Dandridge (eds), Organisational
symbolism, JAI Press, Greenwich, Massachusetts, pp. 3–38.

HRMT20022 - Module 3 - Page 42


Module 4—Managing expatriates:
performance management
Introduction
Human resource management is complex in the national, or monocultural
setting. Because of the multitude of cultural and business variables, it is even
more complex in an international environment. How is an employee in one
country to have his or her performance assessed for possible promotion back to
headquarters in another country, when conditions in the expatriate assignment
have been unfavourable to goal achievement? How can a third country
national with three expatriate assignments completed be rated against a home
country novice in the area, in a totally different cultural environment?

The purpose of performance appraisal is to let employees know how the


management views their work with the organisation, to identify their strengths
and weaknesses, improve their job-related behaviour, and provide workforce
planning information. Various performance appraisal approaches include
rating scales, comparison methods, job results management systems, and
outcome-oriented methods (such as MBO—Management by Objectives)
(Nankervis, Compton & McCarthy 1996). The latter focus on identifying
measurable objectives and results, thereby avoiding personality and attitudes
that may lead to conflict between manager and subordinate. However, even
MBO is not without its problems, since it is vulnerable to the accuracy of the
measures being used, the subjectivity of human judgment, the requirement
for participative objective-setting. According to Deming and others, it
nourishes short-term performance instead of long-term, builds fear, demolishes
teamwork, and facilitates rivalry and politics, with its influence towards
quantifiable performance rather than quality. These deficiencies are even more
pronounced in the international context.

Learning objectives
After studying this module, you should:

•• be able to understand performance management and appraisal


•• be able to understand the dimensions of differences between cultures, as a
basis for managing interculturally Textbook
Dowling, Festing
•• be able to use this knowledge as an entry to later discussions of expatriate & Engle 2008
management. Ch. 11.

Challenges of performance appraisal in the


international context
Performance appraisal in the international context faces a number of
challenges:

1. Is it fair, and is it useful to the individual?


Any performance appraisal system, in domestic or international settings,
needs to be fair, and to be seen to be fair, by all who participate in it. It also
needs to be seen as relevant and useful (Gregersen, Hite & Black 1996).
In the international context, just as in the domestic context, it is important
that the individual expatriate not have his or her appraisal negatively

HRMT20022 - Module 4 - Page 43


influenced by the environmental factors outside his or her control. In
particular, the appraising officer in an organisation needs to take into
account the particular factors involved in the international assignment,
such as the language barrier, the economic constraints, the stress on the
expatriate and the family of living in the particular host country, and so on.
2. Is it useful to the company?
Companies are generally loathed to introduce schemes that are not
demonstrably useful to them, and often require such utility to be
demonstrated within a very short time. Thus, performance appraisal
systems are usually introduced for assessment purposes first (e.g., to
ensure organisational objectives are being achieved, as well as to establish
‘performance pay’, or promotion priorities, etc.), and used in a secondary
capacity for developmental purposes for the staff members concerned.
In the international context, companies must appreciate that performance
appraisal is even more complicated than the already complex procedures
that might be undertaken within the home country. For example, because
of the unique nature of the company’s operations in a particular country, it
may be that criteria for appraisal will be and must be different from those
which might apply in the home country.
Further challenges to performance appraisal in the international context are the
appropriate assessment of technical competence, and the appropriate appraisal
of the financial aspects of the assignment, both of which must be undertaken in
a manner that allows for the unique characteristics of the environment.

Technical competence on the job

While performance appraisal may have the sometimes-competing goals


of evaluation of performance (e.g., for pay and promotion decisions),
and personal development (e.g., to help the manager improve his or her
performance), the approaches to it usually begin with considerations of
immediate and observable behaviour.

The starting point is that the performance appraisal should yield feedback on
the expatriate’s technical competence on the job—as specified by Tung as
a crucial variable predicting expatriate success (Tung 1981). With so much
else to deal with in an international assignment, it is expected that at least,
the expatriate is technically competent. The problem is that a performance
appraisal oriented excessively towards the assessment of technical competence
may fail to grasp the more subtle realities of expatriate operations.

However, technical competence is not sufficient for a successful appraisal


overall in expatriate performance. Short-term achievement on merely technical
indicators of performance may in fact hide the long-term failure that looms
because the expatriate sought success on only the technical indices, and
neglected the need to build relationships across cultural divides, so necessary
for the ‘long haul’, where a company is committed to remaining in an overseas
market for more than the minimum duration.

Financial competence

Not only is it important that indicators of technical competence not dominate


performance appraisal, it is also important that even those indicators are
suitably examined for what is achievable in the host-country. For example, a
level of productivity, or a return on investment, which might be regarded as
minimal in the home-country, may be quite unrealistic as an expectation in a

HRMT20022 - Module 4 - Page 44


particular host-country. Also, because of the particular conditions prevailing,
performance appraisal at the intervals which might apply in the home country
may not be advisable; they may be too early to accurately and fairly reflect the
performance of the expatriate.

Such data must also be viewed within the context of the cultural and economic
environment. Garland et al warn against the dangers of superficial comparisons
of data from different operations in different countries (Garland, Farmer & Taylor
1992). There is the further caution about the use of easily-available data: Reilly
and Campbell point out that the use of financially-based indicators in performance
measurement encourage a manager to devote personal energy and organisational
resources towards short-term optimisation, to the neglect of longer-term and
ultimately more important strategic issues (Reilly & Campbell 1990).

These considerations made, it is logical that the appraisal of technical


and financial competence on the job will form a major part of the overall
performance appraisal; the caveats are that it should only be one part, and that
even then, it should be reviewed in terms of what is culturally realistic. How
the results were obtained may be just as important as what the results were.

Uniquely international considerations


Such is the variability of expatriate assignments that solutions to performance
appraisal are almost always likely to be seriously flawed. They will be
so general in formulation that they will be useless in the detail of the
application, or they will be so detailed in prescription that they will be unable
to take account of the variability of reality. With this caution, the following
suggestions are proposed:

1. Performance appraisal in an international context should take the context


into account in both structure and content of the appraisal.
In short, it should be culturally sensitive, individually developmental and
organisationally relevant. For example, it may be that in a series of pre-
assignment meetings, the expatriate and the company representatives (e.g.,
his or her manager, and an appropriate HR professional) may have agreed
upon the following criteria as part of the performance appraisal:to learn
skills of observation of cultural sensitivities that are appropriate to the
context of the assignment
i. to exhibit to host-country business contacts that he or she respects
the differences between his or her cultural background and the
cultural norms of the host country
ii. to show respect for the cultural norms of the host country as valid
for that country, with the possible exception of behaviours which
might be widely regarded as breaches of human rights
iii. to behave in ways that do not contravene the cultural sensitivities
in the country in which the organisation is operating.
These are performance criteria aligned along specifically personal lines,
as the expatriate interacts with the host-culture. Undoubtedly there will
be a number of other criteria in terms of which the expatriate knows
that he or she is expected to perform. Some will be financial, others
will be managerial, others will be informational, and so on. The point is
that all must be examined for cultural appropriateness. To this end, the
involvement of host country management may be advisable in the carrying
out of the performance appraisal.

HRMT20022 - Module 4 - Page 45


Thus, there exist in performance appraisal in the international context a
number of variables additional to those which might be expected in the
domestic or national scene. Some will be cultural, relating to how well
the expatriate adjusts to the business and social environment. Depending
on the circumstances, these might include language proficiency. Some
will also take account of the unique environmental variables over which
the expatriate has little control. Oddou and Mendenhall summarise such
considerations as:

…major variables in determining the difficulty level of the assignment (Oddou


& Mendenhall 1991):

1. Operational language used in the firm;

2. Cultural ‘distance’, based often on the region of the world (for example,
Western Europe, Middle East, Asia);

3. Stability of the factors affecting the expatriate’s performance (for example,


labour force, exchange rate).

All of this means that the manager in the home-country is not always the
best person to offer the major input to the performance appraisal of an
expatriate. The process may better be accomplished by using information
from the host country management (including peers and subordinates), and
if possible, an appraisal involving a manager who has been an expatriate
in that assignment or country previously. Otherwise, the appraisal may be
limited to narrow considerations of the financial profit of the enterprise,
rather than more comprehensive and more useful appraisal of the
performance of the person.

A performance appraisal system for a company operating in an Asian


country will need to consider very carefully the way in which feedback is
communicated, and the likely cultural variation that will require changes
to home country procedures. It may be that the results of a performance
appraisal will need to be shared privately with the employee, and special
precautions made to ensure that no apparent demotion in authority or
duties takes place which other workers might link to the performance
appraisal.

2. Performance appraisal in an international context should begin with


the objectives of the organisation in that field of operation, and should
progress to assessing achievement on criteria in appropriate fields of
activity.
It is rare to find these days a company that begins operations in a foreign
country with expatriate staff without very clear objectives and strategic
plans. Unfortunately, for many companies, their objectives often appear
to be weighted towards the short-term financial, and then are often
unrealistically optimistic (perhaps a carry-over from convincing the Board
of Management that the risk was worthwhile). Such incomplete planning
usually leads to incomplete performance appraisals, exhibiting either
narrowness or bias in the criteria used.
This can be seen in the way in which many MNCs structure their financial
control systems. The rapid movements of exchange rates, with their
effects on both costs and sales, exemplify the turbulent environment for
the company, and make the appraisal of the executive’s performance more
complicated than in a national environment where financial indicators of
success might be more stable.

HRMT20022 - Module 4 - Page 46


Similarly, many MNCs engage in transfer pricing between and within
divisions, in an endeavour to minimise costs, but resulting in artificial impact
on the financial status of certain divisions in the interests of the whole
organisation. In many cases, profits are repatriated to the home country
as ‘interest repayments’, successfully avoiding host country taxation, but
yielding an erroneous picture of the company’s operations, and especially
profit and loss, in the host-country.
Other significant factors include price controls, control over revaluation of
assets and depreciation allowances, and availability of local debt financing.
Schuler et al. make the point that because of the varying economic and
commercial environments under which international subsidiaries operate,
what constitutes success may be defined differently at varying locations
within an MNC; appraisal processes must be sensitive to these differences
(Schuler, Fulkerson & Dowling 1991). These may lend an aspect of
unreality, and unfairness, to the expatriate’s performance appraisal, if it does
not take account of the financial realities which are beyond his or her control.
Pucik suggests that parallel accounts might need to be kept, adjusted for the
impact of such factors, if such indices of corporate performance are to be
used as criteria for performance appraisal (Pucik 1985).
Nor are the concerns for accuracy and relevance limited to financial
management. For example, a transnational company may have as a
temporary objective on its strategic plan to ‘build a shared vision and
individual commitment, develop multiple and flexible coordination
procedures, and legitimise and incorporate diverse perspectives and
capabilities’ (Bartlett & Ghoshal 1989). Each of these objectives needs to
be broken down into sub-objectives which are practical and behavioural, if
possible quantifiable, and hopefully achievable. Many expatriate situations
are so complex and turbulent that job descriptions written even a year ago
can become almost irrelevant.
Thus, it is only fair to the expatriate, and realistic in terms of the job and
the environment, to allow for flexibility in performance appraisal criteria.
Input should be requested from former expatriates in the assignment, as
well as from the expatriate himself or herself. Host country management
should be consulted. Information from these sources then needs to be
matched up with the company’s objectives and performance criteria, and
appropriate adjustments and additions made.
Finally, the company’s stage of globalisation and strategy orientation needs
to be considered in the design and implementation of any performance
appraisal system. For example, one company may have deployed a small
number of expatriates in one or more countries where they operate as joint
venture partners. The expatriates reasonably expect to return to ‘routine’
positions in their company on completion of their overseas assignments.
Another company may have globalisation of strategy and operation well
established, and their large cadre of expatriates form a relatively stable
group of international managers who may spend, in the course of a career,
only a very limited period at the company’s home country. The nature of
the international assignments varies widely with this variation in company
profile, and the performance appraisal system needs to take account of this.
Further, the performance appraisal system should increase in complexity
to allow the assessment of the international manager’s ability and
performance in integrating corporate culture (Herriot 1995). So, with
regard to the optimal time for appraisal, ‘global managers should be
appraised not only by chronological time periods but after the completion
of significant projects, tasks, or other organisational milestones’ (Black,
Gregersen & Mendenhall 1992).

HRMT20022 - Module 4 - Page 47


The performance appraisal process provides the organisation with important
information about itself: how it stands in relation to achieving its goals, how
the succession planning and HR planning function is operating, how the
organisation is performing relative to competitors (through a benchmarking
process), and even how the expatriate or local manager is functioning with
regard to such matters as labour regulations and laws (Harvey 1997).

Dowling and Welch (2004) summarise the situation:

…the process remains problematic, irrespective of cultural impacts. For


example, recent research reported a common finding across 10 countries
or regions, which was the failure of performance appraisal to fulfil its
development purpose. The study formed part of the Best Practices in
International HRM project, described as a multi‑year, multi-researcher,
multinational project (Gerringer, Frayne & Milliman 2002). The 10 countries/
regions were Australia, Canada, China, Indonesia, Japan, Korea, Latin
America, Mexico, Taiwan, and the USA. The researchers noted: ‘It appears
that the potential of appraisal is not fully realised in current practice, not only
(as widely believed) in the US, but also in most other countries (Milliman et
al. 2002).

Summary
In summary, performance appraisal systems face the enduring questions of
being fair and useful to the person and to the organisation. In international
operations, however, there are added considerations. The mere appraisal of
technical competence on the job is unlikely to be sufficient.

Firstly, performance appraisal in an international context should take the


context into account in both structure and content of the appraisal.

Secondly, performance appraisal in an international context should begin with


the objectives of the organisation in that field of operation, and should progress
to assessing achievement on criteria in appropriate fields of activity.

This requires careful appreciation of the strategy and operations of the


company in a particular business and cultural environment—and it requires
more than usual attention to the complex matter of providing feedback of the
performance appraisal in a way that is culturally and individually appropriate.

HRMT20022 - Module 4 - Page 48


Review questions

Question 4–1

What is significant about performance management in an


international environment?

Question 4–2

Is Management-by-Objectives the only way to proceed? What does the


manager lose by using this method of performance management?

Question 4–3

Is MBO always likely to be culturally appropriate? Where might it not be?

Question 4–4

Can a centralised HR policy in a company apply across its global


operations? How? Why not?

References
Bartlett, CA & Ghoshal, S 1989, Managing across boundaries, Hutchinson,
London.

Black, JS, Gregersen, HB & Mendenhall, ME 1992, Global assignments,


Jossey‑Bass Publishers, San Francisco, p. 179.

Dowling, PJ & Welch, DE 2004, International human resource management,


Thomson Learning, London, p. 251.

Garland, J, Farmer, RN & Taylor, M 1992, International dimensions of


business policy and strategy, 2nd edn, PWS-Kent, Boston.

Gerringer, J, Frayne, C & Milliman, J 2002, ‘In search of “best practices” in


international human resource management: research design and methodology’,
Asia Pacific Journal of Human Resources, vol. 40, no. 1, pp. 9–37.

Gregersen, HB, Hite, JM & Black, JS 1996, ‘Expatriate performance appraisal


in U.S. multinational firms’, Journal of International Business Studies, fourth
quarter, pp. 711–715.

Harvey, MN 1997, ‘Focusing the international personnel performance


appraisal process’, Human Resource Development Quarterly, vol. 8, no. 1,
p. 41–49.

Herriot, P 1995, ‘The changing context of assessment and its implications’,


International Journal of Selection and Assessment, vol. 3, no. 3, pp. 197–201.

Nankervis, A, Compton, R & McCarthy, T 1996, Strategic human resource


management, Nelson, Australia.

Oddou, G & Mendenhall, M 1991, ‘Expatriate performance appraisal: problems


and solutions’, in M Mendenhall and G Oddou (eds), Readings and cases in
international human resource management, PWS-Kent, Boston, p. 370.

HRMT20022 - Module 4 - Page 49


Pucik, V 1985, ‘Strategic HRM in multinational corporations’, in HV Wortzel
& LH Wortzel (eds), Strategic management of multinational corporations,
John Wiley, New York.

Reilly, RR & Campbell, B 1990, ‘How corporate performance measurement


systems inhibit globalization’, Human Resource Management, vol. 29, no. 1,
pp. 63–68.

Schuler, RS, Fulkerson, JR & Dowling, PJ 1991, ‘Strategic performance


measurement and management in multinational corporations’, Human
Resource Management, vol. 30, no. 3, pp. 365–392.

Tung, R 1981, ‘Selection and training of personnel for overseas assignments’,


Columbia Journal of World Business, vol. 16, no. 1, pp. 68–78.

HRMT20022 - Module 4 - Page 50


Module 5—International compensation
Introduction
Related to performance management is the complex matter of remuneration
and compensation. Nationally or internationally, wages and salary
determinations are almost a natural arena for conflict, so bound up are they in
perceptions of self-worth, self-esteem, and self-respect. Other aspects such as
internal and external equity (‘market comparisons’—the way an organisation
rewards employees in comparison with competing organisations) (Lawler
1990), incentive and performance pay, and more latterly, ‘packaging’ other
benefits along with monetary remuneration, make for added complexity.

Finally, national and regional differences in the meaning, practice and


tradition of pay remain significant sources of variation in the international firm
(Dowling & Welch 2004). These contextual factors must also be balanced with
strategic intent and administrative economy, even as they become part of the
firm’s global strategy and practice (Dowling et al. 2002).

Learning objectives
After studying this module, you should:

•• be able to understand the differences between various kinds of


Remuneration and rewards, as a basis for managing interculturally
•• be able to use this knowledge as part of the management of expatriates and Textbook
others, globally. Dowling, Festing,
& Engle 2008
Ch. 7.
Remuneration and compensation in international HRM
The cost of living expenses in foreign countries, and the taxation effects,
plus the expectation of expatriates that they receive additional compensation
for the rigours and separation inherent in international assignments, are
further matters to be considered. Finally, there is the practical concern that
most expatriates have that they do not lose out financially by going on an
international assignment.

Organisations typically deal with this by supplementing salaries to maintain


the expatriate’s standard of living as if he or she were in the home-country. The
effect is that the expatriate may end up earning far more than the host-country
nationals with whom he or she works—a definite recipe for interpersonal
disaster, in many cases. Negotiating the many pathways of expatriate
remuneration and compensation may become something of a labyrinthine
excursion.

Mapping the concepts

A map of how pay is to be discussed can helpfully be constructed around five


dimensions (Heneman 1985):

1. Pay level represents pay relative to external comparisons.


2. Pay structure deals with internal comparisons—the hierarchy of pay
differences (rates or levels) within the organisation.

HRMT20022 - Module 5 - Page 51


3. Pay form includes those determinations as to how the pay is to be
presented—cash or benefits, including motor vehicle use, stock options,
housing assistance, and other such emoluments.
4. Pay system is the method the organisation uses to determine pay raises for
individuals, such as productivity increases, seniority, and other methods.
Lawler notes two core principles of this dimension:
…‘pay for performance’ is the way in which an organisation defines what
kinds of performance are to be rewarded, whether rewards are to be based in
individual, group or organisational performance, and how performance is to
be measured and evaluated; and

…‘basis for pay’, as the extent to which the individual, the job, work
experience, skills or performance, determine individual pay, and the relative
worth of jobs (Lawler 1990).

5. Pay policies and administration concerns how pay is communicated


and administered, which includes how information is disclosed and
communicated to employees, the nature of employee participation in pay
design and administration, and the nature of dispute resolution procedures.
Engle (1992) regards strategic compensation as decisions on a set of variables
within these five dimensions, and argues that within the international context,
compensation practices must contribute to strategic implementation and
organisational effectiveness.

Compensation and corporate culture


Decisions about remuneration and compensation may only be made
appropriately, notes Engle (ibid), by including a consideration of
organisational culture, using, for example, the model by Schein (1985), which
specifies the following levels of culture:

1. artefacts—the most obvious level of culture—the constructed physical and


social environment, the technology, the spoken and written language of the
group, and the overt behaviour of its members;
2. values—the often hidden set of shared beliefs about what should be, which
alternatives in a decision are to be preferred, which ends or goals are more
valuable; and
3. basic underlying assumptions—operating at an unconscious level, and held
almost universally by members of the group.
Decisions about remuneration and compensation must appropriately reflect
the culture of the organisation—and this is especially significant when cross-
cultural mergers and operations are under consideration, as in international
human resource management.

International considerations for expatriate compensation and


remuneration
Compensation policies can produce some of the most intense internal conflicts
within a multinational corporation. In regard to expatriates, compensation policies
can also influence the pattern of promotion that executives seek within the firm,
as employees compete for assignment to what they perceive as higher-paid posts
overseas. This can skew organisational development, as highly-paid posts in
relatively peripheral foreign activities attract executive talent away from more
important, but lower-paid posts in the mainstream of the firm’s operations.

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Further considerations relate to whether the assignment is in the nature of
a short visit, a temporary assignment of less than 12 months, a ‘normal’
expatriate assignment of between one and three years, or a permanent
relocation to the host country. In each case, different factors influence the
compensation and remuneration decisions.

The principal problem is straightforward: Salary levels for the same job differ
among countries in which an MNC operates (Cascio 1989). This is usually
taken as a source of difficulty for parent company managers who believe that
the same remuneration (usually in home country currency) ought to be paid
to all staff doing the same job, without reference to their location. The logical
consequence is the further problem that fluctuating exchange rates require
constant attention in order to maintain constant salary rates in home country
dollars (Capdevielle 1989).

Ideally, an effective international compensation policy should meet the


following objectives (Greene & Walls 1984):

1. The policy should attract and retain employees who are qualified for
overseas service.
2. The policy should facilitate transfers between foreign affiliates and
between home-country and foreign locations.
3. The policy should establish and maintain a consistent relationship between
the compensation of employees of all affiliates, both at home and abroad.
4. The policy should maintain compensation that is reasonable in relation to
the practices of leading competitors.
It is important that within each MNC, a worldwide compensation system be
established, so that cultural variables can be dealt with systematically. Without
such an approach, expatriates are likely to feel dissatisfied with inadequate or
inappropriate compensation, and organisations are likely to expend resources
unfairly or extravagantly.

The following two principles have helped establish such systems in many MNCs:

1. Home-Country Concept (the ‘Balance Sheet’ Approach)


With this approach, all expatriates are tied to their respective home-country
payrolls regardless of where they are working (Dwyer 1999). Doing so
provides, in essence, a cultural frame of reference within which to make
compensation decisions. The principle is that the expatriate should not be
any worse off financially in their overseas assignment than they would be
in a similar position at home and will not suffer any loss or change in their
standard of living when taking an international assignment (Mercer et al.
1998). This ‘balance sheet’ approach usually includes generous allowances
for cost of living, housing, education expenses for the expatriate’s children,
tax and social service levies, and additional benefits and allowances deemed
appropriate for the circumstances of the assignment (Mervosh 1997).
Dowling and Welch (2004) give the following summary of advantages and
disadvantages of the ‘balance sheet approach’:

HRMT20022 - Module 5 - Page 53


Advantages Disadvantages

Equity Can result in great disparities

•• between assignments •• between expatriates of different


nationalities
•• between expatriates of the same
nationality •• between expatriates and local
nationals
•• facilitates expatriate re-entry
Can be complex to administer
•• easy to communicate to
employees

2. Host-country concept (the ‘going rate approach’)


This approach breaks the compensation package down into separate
elements, and, relative to host-country pay rates, modifies the total
remuneration so that the expatriate neither loses nor gains because of the
posting. The expatriate’s salary is supplemented by a post differential
which may include a cost of living allowance, hardship allowance,
family allowance, and expenses for complying with local business and
entertainment practices. Inequities may occur through paying different
remuneration for expatriates doing what amounts to the same work in
different locations. A variation on this concept is to add specific ‘modules’
of the compensation package to balance out the total package. The
philosophy underlying this approach is to keep the employee ‘whole’ in
terms of home-country purchasing power (Gilroy, Nower & Spoor 1979).
Dowling and Welch (2004) give a summary of advantages of the ‘going
rate’ approach:

Advantages Disadvantages

Equality with local nationals Variation between assignments for


same employee
Simplicity
Variation between expatriates of same
Identification with host country nationality in different countries

Equity amongst different nationalities Potential re-entry problems

The components of remuneration and compensation


In analysing the international compensation package, there are two major
components: direct salary payments (with their associated tax consequences)
and indirect payments in the form of (1) benefits and (2) adjustments and
incentives. These are now considered.

Salaries and premiums

To be competitive, MNCs often follow local salary patterns in each country.


A firm that tried to maintain the same salary levels in all countries would cost
itself out of markets where lower salary levels prevail, and it would be unable
to attract managers in high-salary countries. Differentials appear to be a fact of
life.

HRMT20022 - Module 5 - Page 54


To deal with this problem, one approach is to establish base salaries relative to
those of the home country (the home-country concept) and then to add to these
various types of premiums. This has the advantage of control: the company can set
a level of base pay across all expatriate postings, and simply alter the remuneration
according to local host country taxation effects and cost of living, etc (Young 1973).
Alternatively, to avoid negative reactions from host country workers, an expatriate’s
base salary may be set to reflect local salaries, with assignment-specific allowances
to maintain standard of living (Black, Gregersen & Mendenhall 1992).

One of the most common additions to base salary is the foreign-service premium,
which typically ranges from 10 to 30 percent or more of base pay (Adkins 1990).
It is common for this premium to be offered tax-free. Its purpose also varies. In
MNCs that take a modular approach to international compensation, it represents
a combination of compensation for living away from the home country plus an
inducement to accept an overseas assignment. In this case, the percentage is usually
low. However, in MNCs that intend the expatriation premium to compensate for all
overseas problems, it is much higher.

Another adjustment usually made in international compensation is income


tax equalisation with the home country. Its objective is to ensure than when
expatriates are assigned overseas, they pay neither more nor less tax than
would have paid had they remained in their home country.

Australian taxation considerations


Probably the most important question for an Australian departing to work in
another country is whether to remain classed as a ‘resident’ (Dunn 1989). A resident
is taxed on worldwide income, both in and out of Australia. A non-resident is
taxed on Australian income only. The obvious attraction to being a ‘non-resident’
is that non‑Australian income is exempt from taxation in Australia1. Also, no
Medicare levy is deducted, and interest and unfranked dividends are subject only
to withholding tax. However, disadvantages are that non-residents are not entitled
to tax-free income thresholds available to residents, and are not entitled to certain
concessions, such as the dependant spouse rebate.

Curiously, one’s ‘residency’ is not a question of where one lives during the income
year. A person could live overseas, visit Australia once each year, and be considered
a ‘resident’ of Australia. There is no one rule that determines ‘residency’ in every
case; rather it is a complex question including such factors as:

1. whether the person retains a house or apartment in Australia, for his or her use
2. the terms and conditions of the person’s employment overseas
3. whether the employee’s family accompanies him or her
4. whether the person is identified as departing Australia ‘permanently’ or
‘temporarily’
5. the extent to which the person retains assets in Australia.

1 Changes to Taxation Law in Australia in the 2009 Budget has resulted in an


individual’s overseas income being subject to taxation at the Australian rate.
Previously, an individual had a number of options, the most attractive was to
pay the host-country rate of tax which in many cases was significantly less than
Australian rates. This made some overseas postings for Australian workers
financially lucrative. The recent changes mean that where a host country taxation
rate is lower than the Australian rate, the individual must pay ‘the gap’ to the
Australian Taxation Office so that the total is equal to the Australian rate.

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Clearly there is a need for the expatriate and the company to have access
to expert financial advice about the taxation laws of the host country. Some
countries adopt a ‘remittance’ rather than a ‘derivation’ basis, and others
impose ‘inheritance’ taxes. Taxation years vary from country (e.g., not all
operate on a 1 July—30 June basis as in Australia), and thus the timing of
a relocation may need to be examined in this context. Also, different host
countries have different provisions regarding bequests, gifts, and estate taxes;
some consider ‘world-wide assets’ as the taxation base. Further, the expatriate
should seek and be offered advice concerning insurance policies, as premiums
in host and home countries will almost certainly differ.

The human resource manager is not expected to be able to offer such


technical and individualised assistance. However, it would seem a reasonable
expectation that he or she be sufficiently aware of the complexities of taxation
of Australians, that at least preliminary questions from employees can be dealt
with, and advice of a policy nature can be offered to the organisation with
regard to company support for the expatriate.

Currency of remuneration

Some MNCs differentiate between their employees who spend only a brief
time in an international posting, with the majority of their careers spent in their
home country, as against those who for whatever reason, spend the larger part
of their careers serving away from their home country. In the former, salary
is usually paid in the denomination of the home country, and by arrangement,
made available locally to the expatriate, in whatever amount is specified.
The remainder may remain ‘at home’. Many expatriates with generous
international allowances (paid in host country currency), choose to live on
these, and retain most or all of their salary in their home‑country.

Remuneration and the third country national

Third-country nationals, who move regularly from one country to another


without necessarily spending any of their careers in home-country positions,
may be treated differently again. Some companies have experimented with
remunerating TCNs at a rate based on rates in their country of origin, instead
of the rate in the organisation’s home-country, or that of the host-country
during the assignment. Such arrangements are almost always negotiated
between the expatriate and the employer at regular intervals, to suit both
parties.

The equity problems that emerge with ‘home rate’ packages are obvious.
For example, an Australian working in Thailand may be being paid less
than the Americans reporting to him, because American rates are higher
than Australian. One alternative is to pay according to a unified scale for all
expatriates, regardless of country of origin. This maintains equity between
expatriates, and is seen as being internationally competitive. Benefits and
allowances can then be tailored to fit the circumstances of each assignment.

The effect of a single expatriate pay scale is the creation of an international


cadre of expatriates. While they may receive far higher remuneration than
home country managers, they face the prospect of a peripatetic life of
disruption, working in sometimes undesirable locations, and being constantly
required by their employers to perform at a superior level.

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Benefits

Benefits may vary greatly from one country to another. For example, in Europe
it is common for employees to get added compensation in proportion to factors
such as the number of family members or unpleasant working conditions. In
Japan, a supervisor whose weekly salary is relatively modest may also receive
benefits that include family income allowances, housing or housing loans,
subsidised vacations, year-end bonuses that can equal 3 months’ pay, and profit
sharing (Greene & Walls 1984).

MNCs commonly handle benefits coverages in terms of the ‘best of both


worlds’ benefits model (Gilroy, Noer & Spoor 1979). Wherever possible, the
expatriate is given home-country benefits coverages. However, in areas such as
disability insurance, where there may be no home-country plan, the employee
may join a host-country plan.

Another benefit provided by most multinationals is the cost-of-living


allowance (COLA). Its purpose is to provide for the difference in living costs
(that is, the costs of goods, services, and currency realignments) between the
home country and the host country. COLAs may include any one or more of
the following components:

•• Relocation allowance usually covers the costs of removal, shipping and


storage, temporary accommodation, and sometimes payments to meet
expenses in car registration and purchase or rental of household appliances
(which may be required because of differing power supplies);
•• Housing allowance to pay for a standard of housing approximating that of
the employee in the home country (Some organisations take responsibility
for renting or sale of the expatriate’s residence in the home country,
including transaction costs);
•• Income tax equalisation allowance to effectively compensate the employee
for host country taxation beyond the level payable in the home country,
so that the expatriate neither gains nor loses financially from the tax effect
consequent on the assignment;
•• Hardship pay, which is usually a percentage of base pay provided as
compensation for living in a culturally deprived area—one without
adequate schooling, transportation, entertainment—or with extremes of
climate, or geographical isolation (Stone 1986);
•• Hazardous-duty pay to compensate for living in an area where physical
danger is present, such as a war zone. Such a premium can be as high as
25 percent of base pay in some Middle Eastern and African countries (U.S.
Department of Labour 1990);
•• Home leave is commonly one trip every year to the expatriate’s home
country for the entire family, with return airfares paid by the company.
Hardship posts normally include more frequent travel for rest and
relaxation, often to destinations closer to the host country;
•• School allowance is usually paid by companies for private schooling for
the children of their expatriates, the rule being that the education allowance
should pay for schools, uniforms, and other educational expenses that
would not have been incurred had the expatriate remained in the home
country (Stuart 1991). (Sometimes by arrangement, companies reimburse
executives for their children’s boarding school fees in their home
countries)Adkins 1990);

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•• Security of expatriates and families, and company housing, is a major
concern in many countries, and it is common practice for companies to pay
for security guards in many overseas locations, such as the Middle East,
the Philippines, Indonesia, and Papua New Guinea. In certain areas this
extends to walled-off compounds with 24-hour protection, and specially-
protected vehicles.

Pay adjustments and incentives

In most Western countries, adjustments in individual pay levels are based, to


a great extent, on how well people do their jobs, as reflected in a performance
appraisal. In most areas of the third world, however, objective measures for
rating employee or managerial performance are uncommon. Social status is
based on characteristics such as age, religion, ethnic origin, and social class.
Pay differentials that do not reflect these characteristics will not motivate
workers.

Howard (1987) advises that when implementing remuneration-related


performance appraisal overseas:

1. determine the purpose of the appraisal;


2. whenever possible, set standards of performance against quantifiable
assignments, tasks, or objectives;
3. allow more time to achieve results abroad than is customary in the
domestic market;
4. keep the objectives flexible and responsive to potential market and
environmental contingencies.
Increasingly, U.S. MNCs that are exploring strategic compensation approaches
at home are beginning to adopt similar approaches for their senior executives
worldwide. They are beginning to introduce local and regional performance
criteria into these plans, and they are attempting to qualify the plans under
local tax laws. Their reasons for doing this include creating stronger linkages
between executives’ performance and long-term business goals and strategies,
to extend equity ownership to key executives (through stock options), and in
many instances to provide tax benefits (Brooks 1987; Brooks 1988).

The impact of repatriation on compensation


Advice about coming home? Don’t.
(Japanese expatriate)

Repatriation from an international posting can be even more difficult and


traumatic for the expatriate than the culture shock of going abroad on assignment
(Black, Gregersen & Mendenhall 1992). The expected hero’s welcome rarely
eventuates, and paradoxically, the returning employee is often shunned or
subjected to outright envy and vocational punishment. There may be strong
feelings of displacement in a re-organised work environment, compounded by
dramatic social and political changes in the repatriate’s old neighbourhood, city,
and even country. Friends from previous times are remembered as they were
when the expatriate went on assignment, and life moves on, carrying now-older
and different friends perhaps far away, often bringing a considerable disturbance
in the expatriate’s internal psychological world.

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Such is the extent of adjustment required, that there is merit in the employee’s
treating repatriation as another foreign posting (Adler 1986) — and in the
organisation devoting significant resources to support repatriation, just as it did
for expatriation.

Compensation on repatriation

Depending on the circumstances, compensation on repatriation can vary


widely. If the employee’s assignment is terminated involuntarily (such as in
a company merger), then not only should the company cover all repatriation
costs, but also the expatriate will be entitled to some form of compensation
for loss of future earnings. If the expatiate resigns during the assignment, the
responsibility for repatriation expenses for him or her, and the family, becomes
that of the expatriate.

In the normal run of events, most expatriates experience a significant decrease


in compensation after returning home from an international assignment. Loss
of a monthly premium to which the expatriate has been accustomed is a severe
shock financially, whatever the rationale. To overcome this problem, some
firms have replaced the monthly foreign-service premium with a one-time
‘mobility premium’ (e.g., 3 months’ pay) for each move—overseas, back
home, or to another overseas assignment.

Some companies provide low-cost loans or other financial assistance so that


expatriates can get back into their hometown housing markets at a level at
least equivalent to what they left. Those expatriates, who have rented their
houses while on overseas postings, may need assistance with temporary
accommodation while any damage done by tenants is repaired. Those who
did not keep their homes during their posting may need assistance in locating,
purchasing, and moving into new homes. Some firms even offer pre-
repatriation leave for returning managers, to make preliminary arrangements
for their return, which might include housing and education planning—all with
the assistance of the organisation (and in particular, with the help of the human
resources department).

There may also be a strong need for financial counselling for repatriates, to
advise them of changes that may have occurred in the home country during
their assignment, or perhaps to assist them in taxation and other financial
planning (Cascio 1989). Such counselling has the psychological advantage
of demonstrating to repatriates that the company is willing to help with the
financial problems that they may encounter in uprooting their families once
again to bring them home (Clague & Krupp 1978).

Remuneration after expatriate service

Much of the research on expatriation and repatriation by international


organisations indicates that ignorance and neglect of the naturally-occurring
phenomena seem to be rampant, with the expected negative consequences
for the individual, the employee’s family, and for the organisation itself
(Black, Gregersen & Mendenhall 1992). One of the most effective ways to
facilitate the recommitment of the returnee to the organisation ‘at home’ is
to review carefully his or her career path, making appropriate adjustments
for salary changes so that not only is there no disadvantage to having served
internationally, but so there is tangible evidence that the company appreciates
the service and values the personal development that the manager brings home.

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Summary
In summary, performance appraisal systems face the enduring questions of
being fair and useful to the person and to the organisation. In international
operations, however, there are added considerations. The mere appraisal
of technical competence on the job is unlikely to be sufficient. Firstly,
performance appraisal in an international context should take the context into
account in both structure and content of the appraisal. Secondly, performance
appraisal in an international context should begin with the objectives of
the organisation in that field of operation, and should progress to assessing
achievement on criteria in appropriate fields of activity.

This requires careful appreciation of the strategy and operations of the


company in a particular business and cultural environment—and it requires
more than usual attention to the complex matter of providing feedback of the
performance appraisal in a way that is culturally and individually appropriate.

The variables of performance management in general and international


human resource management in particular, add to the already complex tasks
of effective and appropriate remuneration and compensation. These variables
have to do with culture, salary and benefits, and incentives, as well as taxation
of the expatriate. Particular attention should be paid to the needs of the
returning employee.

Review questions

Question 5–1

What is significant about performance management in an


international environment?

Question 5–2

Is Management-by-Objectives the only way to proceed? What does the


manager lose by using this method of performance management?

Question 5–3

Is MBO always likely to be culturally appropriate? Where might it not be?

Question 5–4

Can a centralised HR policy in a company apply across its global


operations? How? Why not?

References
Adkins, L 1990, ‘Innocents abroad?’ World Trade, October/November, pp.
70–76.

Adkins, L 1990, op. cit.

Adler, N 1986, International dimensions of organizational behaviour,


PWS‑Kent Publishing Company, Boston.

HRMT20022 - Module 5 - Page 60


Black, JS, Gregersen, HB & Mendenhall, ME 1992, Global assignments,
Jossey‑Bass Publishers, San Francisco, pp. 199-220.

Black, JS, Gregersen, HB & Mendenhall, ME 1992, op. cit.

Brooks, BJ 1987, ‘Trends in international executive compensation’, Personnel,


May, pp. 67–70.

Brooks, BM 1988, ‘Long-term incentives: international executives need them


too’, Personnel, vol. 65, no. 8, pp. 40–42.

Cascio, WF 1989, Managing human resources, McGraw-Hill, New York,


p. 659.

Cascio, WF 1989, op. cit.

Capdevielle, P 1989, ‘International comparisons of hourly compensation


costs’, Monthly Labor Review, vol. 112, no. 6, pp. 10–12.

Clague, L & Krupp, NB 1978, ‘International personnel: the repatriation


problem’, Personnel Administrator, vol. 23, no. 4, pp. 29–33, 45.

Dowling, PJ, Lowe, J, Milliman, J & De Cieri, H 2002, ‘International


compensation practices in a ten-country comparative analysis’, Asia Pacific
Journal of Human Resources, vol. 40, no. 1, pp. 55–80.

Dowling, PJ & Welch, DE 2004, International human resource management,


Thomson Learning, London, pp. 140-148.

Dunn, J 1989, ‘Foreign shores and domestic chores’, Personal Investment,


June, pp. 89–99.

Dwyer, TD 1999, ‘Trends in global compensation’, Compensation and Benefits


Review, July/August, pp. 48–53.

Engle, AD 1992, ‘Compensation, culture, and global consolidation’, Third


International Conference on Personnel/Human Resource Management,
Ashridge Management College, Ashridge, United Kingdom, July 2–4.

ibid.

Gilroy, EB, Nower, DM & Spoor, JE 1979, ‘Personnel administration in


multinational/transnational corporation’, in D Yoder & HG Heneman, Jnr
(eds), ASPA handbook of personnel and industrial relations, Bureau of
National Affairs, Washington, D. C., chap. 1.7.

Gilroy, EB, Noer, DM & Spoor, JE 1979, op. cit.

Greene, WE & Walls, GD 1984, ‘Human resources: hiring internationally’,


Personnel Administrator, vol. 29, no. 7, pp. 61–66.

Greene, WE & Walls, GD 1984 op. cit.

Heneman, HG III 1985, ‘Pay satisfaction’, in KM Rowland & GR Ferris (eds),


Research in personal and human resource management, vol. 3, pp. 115–139.

Howard, CG 1987, ‘Out of sight—not out of mind’, Personnel Administrator,


vol. 32, no. 6, pp. 82–90.

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Lawler, EE III 1990, Strategic pay, Jossey-Bass, San Francisco.

Lawler, EE 1990, op. cit., pp. 43–45.

Mercer, Cullen, Egan & Dell 1998, Managing staff overseas: international
remuneration and HR practice, Jackson Press, Sydney.

Mervosh, EM 1997, ‘Managing expatriate compensation’, Industry Week, July,


pp. 13–18.

Schein, EH 1985, Organisational culture and leadership, Jossey-Bass,


San Francisco.

Stone, RJ 1986, op. cit.

Stuart, P 1991, ‘Global payroll—a taxing problem’, Personnel Journal,


October, p. 84.

U.S. Department of Labor 1990, U.S. Department of State indexes of living


costs abroad, quarters allowances, and hardship differentials, USGPO,
Washington, D. C., July, SupDoc no. L2.101:990–993.

Young, D 1973, ‘Fair compensation for expatriates’, Harvard Business Review,


July/August, pp. 115–124.

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Module 6—Managing expatriates: re-entry
and career issues
Introduction
Thoroughly prepared cross-culturally, and job-competent, the expatriate still
requires in-post support in the way of regular up-dates from the organisation,
communication about expectations with constructive feedback about
performance, and access to emergency medical and psychological assistance if
required (Harris 1989).

The availability of appropriate counselling assistance may be crucial for both


performance on assignment and successful repatriation (De Cieri, Dowling &
Taylor 1991). Even seemingly trivial matters, like the availability of a regular
newsletter to all the company’s expatriates, keeping them up to date with
both formal and informal news from headquarters, is viewed by expatriates as
helpful and supportive.

Learning objectives
After studying this module, you should:

•• be able to understand the dimensions of expatriate support, and their value


for the organisation and for the expatriate and his or her family
•• be able to use this knowledge as a basis for implementing understanding
Textbook
expatriate management policy and practice.
Dowling, Festing
& Engle 2008
Supporting the expatriate Ch. 8.

The key role played by the expatriate’s family—in success and failure—also
deserves detailed attention. Even apparently minor concessions by the
organisation in support of the expatriate can have a major influence on family
morale and well-being. For example, access to a motor vehicle from the day
of arrival in the foreign country, so that the spouse is not unduly isolated,
along with advice on schooling and community services, are comparatively
inexpensive but very valuable forms of assistance. Of the four stages of
recruiting and selecting, orienting and training, on-site support, and re‑entry
counselling for the expatriate, Harris states that ‘the third stage, on-site
support, is the least understood but perhaps the most important part of the
process’ (Harris 1986).

An Australian study by De Cieri et al. concluded that company support


during an international assignment is the most important positive predictor
of psychological adjustment to the foreign environment (De Cieri, Dowling
& Taylor 1991). In addition to the expected support systems taking in such
matters as housing, health, and schooling for expatriates’ children, as well as
language training and communication with home, considerable importance has
been attached to more subtle support than can be provided through facilitating
networks of expatriate families, and appointing a host country mentor to offer
practical guidance (Nicholson, Stepina & Hochwarter 1990).

In summary, the human and business-related costs of expatriation are such that
proactive companies ought to regard in-post support of their expatriates as both
normal and routine, ensuring performance and protecting their investment.

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Repatriation
It is not unexpected that at the conclusion of the international assignment,
the company brings the expatriate and his or her family ‘home’, with all
their new experience, their new possessions and physical baggage, and the
trauma of unresolved ‘baggage’ from the assignment. Not all international
assignments end with repatriation, as some expatriates are then posted to a
new international assignment. For others, such as Australian diplomats, there
is the knowledge that a posting to Canberra is only a brief interlude before
the next overseas assignment. For most, however, repatriation means ‘going
home’, re-entering the home company and the home country, re-establishing
relationships with friends and family, and finding one’s life again—but not
quite ‘where one left off’.

Repatriation effectiveness—how well an expatriate is able to adapt to


returning home—is best conceived of in terms of a ‘continuum ranging from
the returned expatriate’s leaving the organisation at one extreme, through a
midpoint where the employee remains with the company but is underutilised,
to the other extreme where the returned employee experiences a significant
career boost’ (Allen & Alvarez 1998).

Personal problems encountered in repatriation

Expatriates are reported to be frequently and especially concerned with


problems attaching to their personal finances (because of loss of generous
overseas allowances), with re-entering the home country life-style and
friendship networks (the ‘old’ culture is now ‘new’, and old friends have
moved on), and with adjusting to the corporate culture again (Clague & Krupp
1978). This reverse culture shock is both surprising as well as demanding:
surprising because they don’t expect to have to be enculturated again to
what they thought was a familiar culture, and demanding because expatriates
underestimate the adaptation required of them to a new ‘old’ environment
(Frazee 1997).

Having left their home culture and adapted to a new and often very different
culture on international assignment, many repatriates experience what has
been called, paradoxically, ‘reverse culture shock’ (Schuler et al. 1992). It is
estimated that 60 percent of repatriates experience significant reverse culture
shock (Black 1991).

Black and Gregersen argue that repatriation adjustment is a cross-cultural


adjustment process, since it involves moving from a culture in which one
is resident to a different culture in which one has not resided for some time
(Black & Gregersen 1991). They also suggested that the U‑curve proposed
by Gullahorn and Gullahorn (1963) could be applied to explain repatriation
adjustment: In the first ‘honeymoon’ stage, returning is interesting and
exciting, only to be followed by a period of disillusionment and culture
shock—and even anxiety (Brislin 1981)—before the third stage of adaptation
manifests in ‘fitting in’. The repatriation adjustment, like some other
significant adjustments in life, may take one to two years to complete (Harris
& Moran 1989).

The first phase of the adjustment might be considered to begin while the
expatriate is still in post, but anticipating the positives and negatives of the
repatriation that he or she knows is coming (Black & Mendenhall 1990). This
stage focuses on ‘predictive control’—trying to make sense of one’s future

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environment and circumstances, and may be characterised by information-
seeking and ambivalent emotions, as likely advantages are envisaged, and
certain losses are grieved.

The latter involve losing relationships with host-country friends and


colleagues, losing the experience of living in the environment of the host
country (even when it is less pleasant than ‘home’), and perhaps losing the
status and financial rewards of being an expatriate. This anticipatory grief is
structured with rounds of rituals at business and social levels: various projects
are brought to some kind of conclusion, if only to hand them on to a successor,
and many expatriates tell of a seemingly unending series of farewell parties in
the months leading up to their repatriation.

On relocation, the second stage of in-country adjustment begins, as the former


expatriate adjusts again to the delights and frustrations of home: the familiarity
of places and the curious distance from ‘old friends’ who now are older, whose
families have grown up, and who have not only established new careers and
interests, but poignantly, new friends.

The repatriates are bewildered when the old friends show little interest in
hearing of their exciting international experiences, and they are even more
dismayed when told, accusingly, ‘You’ve changed since you went away’.
The children of expatriates find it difficult to ‘join back in’ with their group,
where even the changes in the clothing fashions, and the essential slang that
denotes group inclusion, may have outpaced them. Indeed, the memories that
may have nurtured them throughout their assignment now seem to have been
self-delusory and a kind of punitive cynicism may become apparent. They may
be troubled by the thought that they have become strangers in their homeland.
Needless to say, this can be more than disturbing to some.

Organisational problems encountered in repatriation

Research indicates that organisations generally experience problems with


the repatriation of managers, with one study reporting that over 70 percent
of companies admitted they faced significant problems regarding re-entry
to the home company and the home country (Scullion 1992). Common
organisational effects of unsuccessful repatriation are low morale and a high
turnover of expatriates, as well as diminished value to the organisation through
ineffective ‘re-joining’ to the organisation. Knowing that repatriation can pose
re-integration problems, ‘good managers who are also good candidates refuse
to go abroad on managerial assignments because they fear a foreign stint might
have a negative impact on their career paths’ (Phatak 1989).

Organisations that give the repatriate low recognition and give the impression
that the employee is so far behind they are not useful, diminish repatriate
productivity. Thus the repatriate becomes dissatisfied and may leave the
organisation.

A major factor in repatriation difficulties is the appropriate placement of the


returning staff member of an organisation, into an appointment which is seen
and experienced to be such. It is not uncommon for the returning executive
to believe he or she has suffered a loss in status, a loss of autonomy, loss of
career direction, and to feel that the international experience is undervalued by
the organisation.

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It is also worth noting the findings of Feldman and Tompson (1993), to
the effect that the more culturally distant the assignment, the greater the
adjustment problems; that younger expatriates without family responsibilities
have been found to make easier adjustments to both assignments overseas,
and repatriation and re-entry to the home culture; and that individual
coping strategies may determine how the repatriate copes with the stresses
of repatriation—whether they will actively attempt to change the work
environment and seek new information, or whether they will psychologically
withdraw from the situation (Feldman & Tompson 1993).

Recommendations for assisting in repatriation

The literature generally recommends that organisations should treat


repatriation of staff from overseas as a matter deserving the kind of attention
(and expense) usually reserved for conducting the initial posting. Thus,
repatriation is both a major personal relocation for the staff member, and it
is a significant organisational event, requiring careful planning and support
for the employee and his or her family, and for re-entry into the home
organisation (Black 1988; Gomez-Mejia & Balkin 1987; Harvey 1989).
‘Best in class companies appear to recognise that treating their assignees to
more comprehensive services is just good business, and that by providing
their assignees with these programs, they are far less likely to lose them to
competitors at the repatriation phase’ (Bennet & O’Gorman 1998).

The critical components for effectively managing repatriation appear to be


continual communication between the organisation and the expatriate (such
as through an experienced ‘sponsor’ at headquarters), validation through
recognition (such as through explicit valuing of the international perspective
that the repatriate brings), and career planning (preferably well prior to the
expected date of repatriation) (Shilling 1993).

The amount of job-required interaction between expatriate and home-


country operations is likely to be positively related to accurate work
expectations, because such communication can include discussion of changes
at headquarters. Thus, the expatriate is able to maintain more realistic
expectations about his or her return to the organisation at home, which helps in
the adjustment process (Brandt & Julbert 1976; Boyacigillar 1990).

A practical recommendation is given by Wederspahn (1989):

Develop an identifiable career path that includes preparation for foreign


assignments and then reintegrate the expatriates back into the corporation and
upper management. It should be a synergistic kind of system that makes the
corporation smarter and smarter as it takes advantage of the learning obtained
by its people overseas.

Part of the difficulty appears to be that the organisation, and often the
employee, treat the expatriate assignment as an end in itself, instead of a phase
in an integrated career plan. Some researchers recommend that agreement
about the position, level and location of the job to which the expatriate
will return on repatriation, should be reached prior to his or her going on
assignment (Adkins 1990; Clague & Krupp 1978). Indeed, Stroh et al suggest
that ‘closing the gap between expectations and the reality for expatriates
returning to their parent company increases commitment, helping to increase
the odds not only of retaining these valuable employees but also helping them
to make the often challenging adjustment to being home’ (Stroh, Gregersen &
Black 1998).

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For example, an empirical study of problems encountered by Japanese
managers being repatriated to Japan, showed that having jobs to return to
as more demanding than expected, or having jobs with more freedom than
expected, were associated with positive outcomes such as work adjustment,
organisational commitment, and job satisfaction.

Some practical applications of these findings are:

1. organisations should gather a clear understanding of managers’ expectations


of job demand before they are repatriated, so these expectations can be met
organisationally if possible (Lane & DiStephano 1992)
2. organisations should try to deflate managers’ expectations of job freedom,
so that they do not have unmet expectations of their jobs when they do
return to their home country and organisation
3. organisations should provide training and orientation prior to repatriation
(Black & Gregersen 1992).
Similarly, Dowling, Schuler & Welch (1999) identify several topics that should
be covered by a repatriation support program:

1. Preparation, physical relocation, and transition information (what the


company will help with)
2. Financial and tax assistance
3. Re-entry position and career path assistance
4. Reverse culture shock (including family disorientation)
5. School systems and children’s education (including adaptation)
6. Workplace changes
7. Stress management, communication-related training
8. Establish networking opportunities
9. Help in forming new social networks.
In summary, the ‘repatriation-is-no-big-deal’ approach taken by many
companies and expatriates themselves, needs amending. Companies should
create an organisational culture than genuinely values the experiences of
their expatriates, and appreciates their sacrifices where appropriate, and
they should show their commitment by planning assignments with a view to
including career pathing considerations, preparation for both expatriation and
repatriation. Appropriate levels of communication, in quantity and quality,
between headquarters and expatriate during the course of the assignment, are
likely to facilitate the more successful repatriations.

Relocation programs
Relocation, either within a country or internationally, is the common
experience for many employees. Coyle estimates that over 50 percent of
company executives can be expected to relocate at least once in their career
(Coyle 1988). With such financial costs involved, and with such potential
for problems, as well as for business success, it is perhaps surprising that
organisations appear to treat the matter of relocation without the kind of
sophistication reserved for other operations. It is gratifying that human
resource management is at last showing a considered approach to what
relocations mean for those staff undergoing them, and what they require in the
way of resources to be committed by companies (Gottsman 1984; Lullo 1992).

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Employees, when asked to relocate, are found to express common concerns, which
companies need to take seriously: worries about cost of living, effects on the
spouse and children, and money potentially lost in the housing market, are the most
frequently-stated reservations (Caudron 1993; Strob, Reilly & Brett 1990).

Unless relocations are undertaken by companies frequently, the necessary


skills and experience are unlikely to be accrued by the human resources
department, and external agencies may be a cost-effective substitute (Mumma
1992). Alternatively, some companies routinely refer the relocation task to
external agencies, as a matter of business policy. The agencies may offer a
range of services including initial counselling, country briefing and cross-
cultural training for the employee and family if the move is to be international,
removal of household effects and assistance with rental or sale of home, in-
post orientation, supervision of tenancy agreements for property ‘at home’, and
other services individualised for the particular employee.

Bearing in mind the potential for distress to both individual and company, it
is hard to argue against expert assistance and sophisticated procedures being
applied in relocations of staff. Whether the services are offered within house,
or by a contracted external agency, or by a combination of the two, is a matter
for evaluation on a case-by-case basis, depending on the individual needs, the
company policy and extent of operations, and the level of human resources
management expertise within the company.

International human resource development


Much of what appears above is in the direction of developing the international
manager, but there are specific concerns in this area raised by a number of
authors. A popular text on global HRD offers the following definition:

HRD is the integrated use of (a) training and development, (b) organisation
development, and (c) career development to improve individual, group and
organizational effectiveness (Mumma 1992).

In the international arena, it would seem logical that the principles and practices
of HRD are systematically applied to the task of developing the international
manager, and the manager who manages a multicultural workforce. Thus, cross-
cultural training fits within the culture-sensitive requirements effective human
resource development, since it opens the way for the formal treatment of cross-
cultural differences in areas such as aesthetics, attitudes and beliefs, religion,
material culture, education, language, societal organisation, legal characteristics,
and political structures (Ball & McCulloch 1992).

Also, designing and delivering training and development programs clearly needs to
take account of cultural factors. For example, some cultures appear to be typically
deductive in educational expectations; for a Western HR manager to approach
such a group with an inductive approach could lead to otherwise unjustified
questioning of his or her competence as a trainer. In short, it is not just the content
of human resource development programs that needs to be culturally sensitive
and collaboratively established, but it is also the process of how the program is to
be offered. The Westerner may need to carefully set about learning how he or she
is perceived in that role by host-country nationals, the better to contribute to their
development. Not knowing such fundamental but subtle information may lead to
outright failure of the best-intentioned programs. For example, it may take some
time for a trainer familiar with direct and clear feedback to become accustomed to
course participants who say what they think the trainer wants to hear, regardless of
their own thoughts on the matter or intention to carry out the plan being discussed.

HRMT20022 - Module 6 - Page 68


Where formal programs are being contemplated, participation in development
of the content and delivery method is most likely to lead to a successful
outcome. Of course, along with the expected cultural sensitivity to be shown
by the trainer, the course’s objectives should be predetermined and the course
evaluated for success in achieving those objectives.

Managing a multicultural workforce


Managing ‘internationally’ is more than an expatriate working in a foreign
culture; it also invokes the reality of a home country manager working with a
multicultural workforce. This is an increasingly common reality for Australian
managers, who are confronted with the need for enhancing productivity
in organisations made up of persons with many different ethnic origins
and cultures. In some cases, the explicit establishing of cultural awareness
programs is required. The research findings from international HRM are of
value in informing the manager in such situations.

Programs for cultural awareness in the workplace may have as their explicit
goal that of enhancing intercultural communication (often with increased
occupational safety and productivity as objectives). They are not likely to have
optimal impact unless they also seek to enhance understanding of one culture
by another. For example, it is difficult for Australians to appreciate the natural
reticence Japanese have about prolonged eye contact (which they see as
aggressive); Japanese often fail to grasp the Australian sense of humour which
delights in appearing to repudiate the family member or friend held in respect
and affection. Even the Australian use of the term ‘mate’ in a wide variety of
situations can be very confused to the uninitiated.

Human resource managers, especially those involved with expatriate


management, as well as managers of culturally-diverse workplaces (including
expatriates), are likely to have their managerial competence enhanced by
mastering the subtleties of behaviour, relationships, values and traditions in
one national or regional culture (Torrington & Holden 1992). Even a thorough
consideration by the manager of the difficulty that workers from other cultures
may have with his or her language and communication, and active steps to
reduce the confusion and frustration experienced by those involved, can have a
dramatic positive effect.

Summary
Global managers, who are often third-country nationals with extensive
experience in managing across borders and cultures, attain their status
and value to organisations through progressive exposure to training and
development as well as to their own history of working and living in a number
of cultures. They represent the highest-trained of the expatriates. They also
provide a valuable resource for the training and development of staff members
who are about to embark on an overseas posting as well as home office staff
who provide support to overseas operations.

Most expatriates, however, will experience both the challenges and the
frustrations of a small number of international postings, and will seek to serve
their organisations well while in post. With proper training and development,
their effectiveness and thus value to their organisations, can be increased
significantly.

HRMT20022 - Module 6 - Page 69


Contemporary organisational structures are in a state of flux, especially
internationally, thus placing unusually complicated demands on human
resource managers to achieve effectiveness and efficiency in turbulent
environments. Also, the recent decade has seen extensive research reported in
the area of selecting, preparing, training, supporting, and repatriating managers
assigned internationally. While some of this effort is motivated by concern for
the individual who must often work under conditions of hardship, there is the
understandable motivation on the part of the organisation, to minimise expense
and maximise performance and productivity.

Review questions

Question 6–1

What is significant about repatriation? What are the risks to the


expatriate, and to the organisation?

Question 6–2

What should be the elements of any repatriation program?

Question 6–3

What social rituals might be considered as likely to be helpful to all


concerned? How?

Question 6–4

How can the practical demands of relocation be managed? What help


should companies offer? What should companies NOT do?

Question 6–5

What is international HR development emerging as a serious issue in


IHRM?

References
Adkins, L 1990, ‘Innocents abroad?’ World Trade, October/November, pp. 70–76.

Allen, DB & Alvarez, S 1998, ‘Empowering expatriates and organisations to


improve repatriation effectiveness’, HR Planning, vol. 21, no. 4, p. 29.

Ball, DA & McCulloch, WH 1992, International business: introduction and


essentials, Irwin, Homewood, Illinois.

Bennet, R & O’Gorman, H 1998, ‘Benchmark with the best’, HR Magazine,


vol. 23, April, p.23.

Black, JS 1988, ‘Workrole transitions: a study of American expatriate


managers in Japan’, Journal of International Business Studies, vol. 19.
pp. 277–294.

Black, JS 1991, ‘Returning expatriates feel foreign in their native land’,


Personnel, vol. 68, no. 8, p. 17.

HRMT20022 - Module 6 - Page 70


Black, JS & Gregersen, HB 1991, ‘When Yankee comes home: factors related
to expatriate and spouse repatriation adjustment’, Journal of International
Business Studies, vol. 22, pp. 671–694.

Black, JS & Gregersen, HB 1992, ‘O Kairinasai: the role of job expectations


during repatriation for Japanese managers’, Proceedings of the Third
Conference on International Personnel Human Resource Management,
Ashridge Management College, United Kingdom, July 2–4.

Black, JS & Mendenhall, M 1990, ‘Cross-cultural training effectiveness:


a review and theoretical framework for future research’, Academy of
Management Review, vol. 15, pp. 113–136.

Boyacigillar, N 1990, ‘The role of expatriates in the management of


interdependence, complexity and risk in multinational corporations’, Journal
of International Business Studies, vol. 21, no. 3, pp. 357–381.

Brandt, JM & Julbert, JM 1976, ‘Patterns of communications in the


multinational corporation: an empirical study’, Journal of International
Business Studies, vol. 7, no. 1, pp. 57–64.

Brislin, RW 1981, Cross-cultural encounters, Pergamon Press, New York.

Caudron, S 1993, ‘Options alleviate employee qualms about relocating’,


Personnel Journal, vol. 72, pp. 34–36.

Clague, L & Krupp, NB 1978, ‘International personnel: the repatriation


problem’, Personnel Administrator, vol. 23, no. 4, pp. 29–33, 45.

Clague, L & Krupp, NB 1978, op. cit.

Coyle, W 1988, On the move, Hampden Press, Sydney.

De Cieri, H, Dowling, P & Taylor, KF 1991, op. cit.

Dowling, PJ, Schuler, RS & Welch, DE 1999, International human resource


management: managing people in multinational context, Southwestern College
Publishing, Cincinnati, p. 222.

Feldman, DC & Tompson, MB 1993, ‘Expatriation, repatriation, and domestic


geographic relocation: an empirical investigation of adjustment to new job
assignments’, Journal of International Business Studies, 3rd quarter, pp. 507–522.

Frazee, V 1997, ‘Welcome your expatriates home’, Workforce, April, pp. 24–28.

Gomez-Mejia, L & Balkin, D 1987, ‘The determinates of managerial


satisfaction with the expatriation and repatriation process’, Journal of
Management Development, vol. 6, no. 1, pp. 7–17.

Gottsman, JJ 1984, ‘Employee relocation is here to stay’, Personnel Journal,


vol. 63, pp. 39–40.

Gullahorn, JR & Gullahorn, JE 1963, ‘An extension of the U-curve


hypothesis’, Journal of Social Issues, vol. 3, pp. 33–47.

Harris, PH 1986, ‘Employees abroad: maintain the corporate connection’,


Personnel Journal, vol. 65, no. 8, pp. 108.

HRMT20022 - Module 6 - Page 71


Harris, JE 1989, ‘Moving managers internationally: the care and feeding of
expatriates’, Human Resource Planning, March, pp. 49–54.

Harris, PR & Moran, RT 1989, Managing cultural differences, Gulf


Publishing, Houston, Texas.

Harvey, M 1989, op.cit.

Lane, HW & DiStephano, JJ 1992, International management behavior,


PWS‑Kent Publishing Company, Boston, pp. 254–255.

Lullo, J 1992, ‘Preparing for relocations’, HR Magazine, vol. 37, pp. 59–63.

Mumma, JS 1992, ‘Five steps to manage (relatively) painless moves’, HR


Focus, vol. 69, pp. 22–23.

Nicholson, JD, Stepina, LP & Hochwarter, W 1990, op. cit., p. 132.

Phatak, AV 1989, International dimensions of management, 2nd edn, PWS-


Kent Publishing Company, Boston, p. 105.

Schuler, RS, Dowling, PJ, Smart, JP & Huber, VL 1992, Human Resource
Management in Australia, Harper Education, Sydney, p. 422.

Scullion, H 1992, ‘Strategic recruitment and development of the global


manager’, Proceedings of the Third Conference on International Personnel/
Human Resource Management, Ashridge Management College, United
Kingdom, July 2–4.

Shilling, M 1993, ‘Avoid expatriate shock’, HR Magazine, vol. 38, no. 7,


pp. 58–63.

Stroh, LK, Gregersen, HB & Black, JS 1998, ‘Closing the gap: expectations
versus reality among expatriates’, Journal of World Business, vol. 33, no. 2,
pp. 111–124.

Strob, LK, Reilly, AH & Brett, JM 1990, ‘New trends in relocation’,


HR Magazine, vol. 36, pp. 42–44.

Torrington, D & Holden, N 1992, ‘Human resource management and the


international challenge of change’, Personnel Review, vol. 21, no. 2, p. 19.

Wederspahn, G in Callaghan, MR 1989, ‘Preparing the new global manager’,


Training and Development Journal, vol. 43, no. 3, p. 30.

HRMT20022 - Module 6 - Page 72


Module 7—HRM in Western cultures:
Australia and New Zealand
Introduction
In this module, a number of readings are provided to enable a more complete
picture of how HRM practices and policies in Australia have been developed.
Further, we will introduce some of the more recent trends and structural
reforms which are emerging in the labour market, particularly with respect
to labour market flexibility. Politically, the differences between the Liberal/
National coalition government at the Federal level and the State Labor
governments have created some interesting situations. Since the demise of the Reference Text
Federal Labor government there has been a greater emphasis on labour market Nankervis, Chatterjee
restructuring and flexibility. This is also seen in a quiet revolution whereby & Coffey 2006
industrial relations are being replaced with employee relations and where
industrial relations issues are being managed by a HRM practitioner rather
than an industrial relations expert.

As the first country to be examined, Australia provides an excellent case of the


meeting of the Western culture with the Eastern cultures, within the context
of the Asia-Pacific region. The contrast of cultural influences will assist us Electronic journal article
Michelson, G & Kramar, R
later when Asian economies are scrutinised. Further, it will demonstrate the 2003, ‘The state of HRM
benefits of understanding HRM practices and policies in a range of countries and Australia: progress and
and cultural settings, particularly as Australia, Canada, New Zealand and prospects’, The Asia-Pacific
other Western economies expand trade and investment in the Asian countries. Journal of Human Resources,
Finally, for the sizeable percentage of students studying this unit, it will vol. 41, no. 2, pp. 133–148.
(Search using the library’s
provide some insight into the cultural, philosophical and psychosocial aspects electronic resources page.)
of Western approaches to HRM practices and policies.
Mitchell, R & Fetter, J
In the second part of this module, we look at New Zealand. We particularly 2003, ‘Human resource
look at the pendulum swing from unions having a major influence prior to management and
1990, to a diminished role between 1990 and 2000, and a slight swing back individualisation in
in prominence with the introduction of the Employment Relations Act. In Australian labour law’,
The Journal of Industrial
exploring the move from the Employment Contracts Act to the Employment Relations, vol. 45, no. 3, pp.
Relations Act, this section of the module explores how New Zealand is 292–325.
managing to implement high involvement work systems—an important aspect (Search using the library’s
of contemporary HRM. electronic resources page.)

Walsh, P, Bryson, J & Lonti,


Learning objectives Z 2002, ‘Jack be nimble,
Jill be quick’: HR capability
On completion of this module you should be able to: and organisational agility in
the New Zealand public and
private sectors’, Asia-Pacific
•• outline the nature of HR practices and policies in Australia Journal of Human Resources,
•• identify the current issues and forces which are shaping or will shape of vol. 40, no. 2, pp. 177–192.
(Search using the library’s
HR practices and policies in Australia in the next five years electronic resources page.)
•• discuss the need for greater labour market flexibility
•• debate the value of HR professionals taking more responsibility for
employee relations rather than the old industrial relations paradigm of the
past
•• outline the dangers to Australia is HR practices and policies and not altered
with the company

HRMT20022 - Module 7 - Page 73


•• outline the cultural dimensions which contribute to the various HRM
practices and policies of both countries
•• discuss some of the strengths and weaknesses of the practice of HR in a
New Zealand
•• identify the contribution of political economic social and global factors to
the changes being experienced in both countries
•• discuss the impact of wisdom values on HRM practices and principles and
New Zealand.

Australia

Politics

The Australian political system has its foundations in the British Westminster
system of government. The Federation of Australia was formalised with the
Commonwealth of Australia Constitution Act in 1901, wherein the distribution
of powers between parliament, the states and the judiciary was enshrined.
From that period onward the distribution of powers vested in the various
bodies has contributed to a developed pluralist democracy that is envy of
many: in particular are the dynamics of power between unions, government
and industry. Over the years there has been two dominant federal political
groupings which have shared power: The Liberal Party–National Party
Coalition and the Australian Labor Party. There have been other minor parties
that have also been influential throughout Australia’s political history; some
of the minor parties have used their vote in the Senate (the upper house) to
influence industrial relations legislation and policy. It has been a fascinating
interplay of group dynamics as each group has endeavoured to achieve their
own individual political agendas. It has also been the catalyst for many
changes in the industrial relations (IR) sphere and has consequently generated
an interventionist need for HRM in industry.

In 1983 an incoming ALP under Bob Hawke’s leadership introduced financial


deregulation of the banking industry and allowed the Australian dollar (A$)
to float. The Prices and Incomes Accord (The Accord) was also introduced. It
was designed to limit abuses of union power and introduced wage restraint. At
the same time it avoided labour market deregulation.

In 1987 a ‘two-tiered’ wage system under the Keating labor government


(ALP) enabled an enterprise-level productivity bargaining model to emerge.
While the Industrial Relations Act, 1988 (IRA) had already provided for
enterprise bargaining by means of ‘certified agreements’, the Industrial
Relations Reforms Act, 1993, relaxed regulatory controls further with the
introduction of ‘enterprise flexibility agreements’ (EFAs). At the same time it
limited union’s capability to veto them, although the AIRC was bound to do
so if the EFA failed to meet a number of identified ‘disadvantage’ terms under
conditions. The 1996 election success of the Coalition saw the introduction of
the Workplace Relations Act which limited the intervention of the Australian
Industrial Relations Commission (AIRC) into industrial disputes. The act
also introduced individual Australian Workplace Agreements (AWAs) which
further excluded union participation. With its eventual control of the Senate in
2004 the Coalition introduced its Work Choices legislation. Work Choices was
clearly anti-union policy: it gave employers the capacity to marginalise unions
and avoid unionisation.

HRMT20022 - Module 7 - Page 74


In November 2007 The Liberal-National Coalition government was voted
out of office after eleven years in power and was replaced by Australian
Labor Party (ALP). One of its first actions was to implement legislation to
dismantle the previous government’s controversial Work Choices ‘industrial
relations’ legislation. Work Choices had been intended to deregulate the labour
market further as the existing IR system was considered to be incapable of
accommodating changes in the international marketplace. Throughout the
last three decades both sides of the political ‘fence’ have introduced changes
to the industrial relations system in order to address domestic, and latterly
international, barriers to economic efficiency. Paradoxically it has generally
been the ALP that has been more radical in implementing deregulation of both
the financial and labour markets in Australia.

Australian industry is now confronted with impending legislation that will facilitate
union involvement again in the workplace together with the abolition of the
Australian Workplace Agreements (AWAs) that can be replaced by ‘common law
contracts’. These changes will occur as the present government modernises industry
awards. Other factors that will impact upon how far reaching the changes will be
are, declining union membership, a change in the demographic profile of the labour
market, the changing nature of office and business structures. Union membership
has declined in concert with an ageing workforce, for example, union membership
for employees aged 25 to 34 have declined from 48 percent in 1986 to 15 percent
in 2006 (Editorial 2008). From this statistic a parallelism can be clearly drawn
between declining membership and power. The present government (which to a
considerable extent has been perceived as the political arm of unions) is also taking
a stronger position in relation to what might be considered inappropriate union
behaviour (Norington & Taylor 2007).

At the core of the labour market reforms is the need for organisations to
become more flexible and adaptable to the requirements of the marketplace.
Each organisation has an internal labour market, which is highly influenced
by a HRM system designed to organise the production and delivery of
goods or services. With the rapidity and discontinuity of change facing most
organisations in the 21st century, the internal labour market needs to be small
enough to be adaptive and flexible, while at the same time, having sufficient
core competencies to permit the organisation to move into new markets and
seize windows of business opportunity. A rigid, inflexible labour market, both
externally and internally, can prevent organisations from adapting to changed
circumstances rapidly enough. Smaller organisations, structured around
internal labour markets which have the appropriate mix of core competencies,
are relying on the availability of other smaller, adaptive organisations to
provide supplementary goods and services. Strategic alliances are becoming
more common and the boundaries between organisations are becoming less
distinct. Inflexible awards and third-party interventions are promoted as being
totally inappropriate. Thus both sides of the political fence have promoted
changes to the industrial relations system over the last two decades so that the
Australian labour market is more capable of competing in changing global
marketplace.

From the foregoing discussion it has become apparent that deregulation of the
Australian labour market has become the preferred approach of Governments.
Australia has moved away from a regulated labour market system towards a
deregulated IR system much closer to the global models of Australia’s trading
partners.

HRMT20022 - Module 7 - Page 75


The Economy
Despite the Global Financial Crisis (GFC) Australia could still be considered
to have one of the most stable economies in the world. The Australian financial
system has benefited from tight regulation and the economy’s reliance on mineral
exports, coupled with a close trading relationship with China, has resulted in a
relatively mild recession. As a result of nearly three decades of structural and policy
reforms the economy is flexible, resilient and increasingly integrated with global
markets. There are a number of factors that lends support to such a conclusion. It
is a society with many options and strengths, such as a generally well-educated
population and immense natural wealth, for a relatively small-sized population, that
has contributed to a stable socio-politico-economic system. The 2009 downturn
comes after almost two consecutive decades of growth and an unemployment
rate of 4.3 percent, in July 2008. By 2009 the unemployment rate had risen above
5 per cent. More importantly the percentage of underemployed had risen to 14
per cent. This reflects the move by some employers to move staff on to part-time
employment contracts in order to avoid some of the perceived shortcomings in the
changes to the employment relations legislation initiated by the incoming Labor
Party. The Australian economy was last in recession in 1991 and the subsequent
expansionary period continued until November 2007 when the Reserve Bank of
Australia (RBA) tightened monetary policy (raised the ‘cash’ interest rate) in an
attempt to dampen consumer spending. ‘Households have, over recent months,
adopted a more cautious attitude to borrowing and spending, the evidence for which
is a string of flat results for retail sales, and a significant decline in the flow of new
loan approvals for housing’ (Stevens 2008). At the onset of the GFC the Labor
government embarked on an expansive fiscal stimulus which turned a 24 billion
dollar budget surplus inherited from the previous Liberal-National government, into
a deficit of around 60 billion.

The increasing globalisation of financial and trade related activities has also
had an impact on the Australian economy. The rising cost of oil and its flow-on
effect into domestic commodity prices has contributed to rising inflation. The
CPI figure, in June 2008, was 4.5 percent; the highest in has been since 1995.
By June 1990 the rate had fallen to 3 per cent. Unemployment has also fallen,
from a peak of almost 11 per cent 15 years ago to approximately 6 per cent,
the lowest level since the 1970s. The effect has been an increase of monies
injected into the economy as a result of the resources boom that Australia
currently enjoys. Australia's trade balance turned to a surplus in June 2008 as
coal and iron exports jumped: Chinese demand for global iron ore imports has
increased from 11 per cent to 37 per cent in less than a decade. Paradoxically
Australian employers hired extra workers for a second month in July 2008; a
result of the expansion by mining companies. This has underpinned economic
growth, even as domestic demand slowed in response to a tightening monetary
policy. The resources boom tends to offset political predictions of a recession.
‘Australians also receive higher incomes as a result of higher resource
prices. As shareholders they experience higher profits. Employees in the
resource sector, as well as in the construction sector or the various areas that
supply goods and services to mining, are receiving larger pay packets. Even
governments are receiving higher revenue flows, which in some cases they will
spend, at least in part.’ (Stevens 2008). By June 2009 the reduction in private
employment had been moderated by state and federal government stimulus
packages and public works and training initiatives.

HRMT20022 - Module 7 - Page 76


In conclusion, demand forces, of the China and India economies, are having a
significant effect on Australia’s balance of trade performance and on relative prices.
They have contributed to increased incomes and spending and at the same time
have posed some challenges for Australia’s ‘domestic’ manufacturing industries.

In the short term the dependence of Asian countries on Australian raw materials will
drive strong growth in supply in these areas for some time to come, contributing
to a continuing strong economy with commensurate quality lifestyles. The current
slowdown of growth in the US economy will moderate global growth prospects, but
not significantly in terms of Australia’s balance of trade payments (The Economist
2008). In the longer-term, a significant issue will be the impact of climate change
policies on Australia’s export capacity as a consequence of the climate change
initiatives presently being considered by the federal labor government.

Social
Immigration has been a strongly debated issue in Australian politics since the
colonial period. On one side of the argument, immigration provided Australia
with an instant workforce particularly during the developing years just after
WWII in 1945 and up to the 1970s. The new Australian’s as they were referred
to played their role in contributing to the high economic growth at the time.
However, there are a large number of social issues which have arisen since
then which affected the labour market and resulted in a number of legislative
interventions. The first of these is diversity in the workplace. Different ethnic
groups believed they were disadvantaged in various aspects of employment
opportunities the work participation rate varied across different ethnic groups.
However other factors were identified as contributing to ethic participation
in certain types of employment and these include: level of skills; settlement
patterns; education and proficiency in speaking/writing English.

Federal and State government introduced legislation to outlaw discrimination


in employment. Chief among these statues is the Anti-Discrimination
legislation which makes it illegal to discriminate against a person on the
basis of age, gender, race, creed, colour or religion. Larger organisations,
particularly those with well-developed HR policies, have recognised the value
of diversity and actively support the removal of discrimination in employment.
However without the support of formalised HRM policies and procedures
many people employed in small business may not be aware of their legal
rights in relation to these laws. To further complicate the issue, many forms
of discrimination have become more covert than previously was the case. As
such, it would be foolish to argue that discrimination has been eradicated from
Australian workplaces altogether.

The next significant social factor is the changing nature of the workforce.
Over the past two decades Australia has experienced a major industry based
shift in employment. The shift in manufacturing jobs offshore and the rise
of the service sector has reduced job opportunities for unskilled labour.
Changing technologies also add to this problem resulting in increased levels
of unemployment. Added to this is the increase in unemployment of older
members of the labour market even with high skill levels. There is also a group
within the unemployed which are categorised as ‘long-term’ unemployed who
have not worked for over 12 months. These unemployment issues are not
isolated to Australia but they identify a need for macro level changes to ensure
Australia has an appropriately skilled labour market for the future.

HRMT20022 - Module 7 - Page 77


In December 2003 the population reached 20 million and national statistics
suggest a ‘greying’ of the Australian workforce. The median age of the
population is now 45. The ageing workforce means there is a decline in the
number of taxpayers supporting an increasing number of retired people.
This growing tax burden is acting as a disincentive to many employees as
promotion and salary increases also increases level of personal income tax.

The final social issue is the anxiety levels across the society. Because of the rapidity
of change the last two decades, many employees have become more anxious about
the long-term employment prospects. This is aggravated by the loss of job security
in return for organisational commitment and loyalty. Within the labour market, this
‘change weariness’ has: motivated many young people to ‘drop out’ of the labour
market; many elderly people losing their life savings to survive their job loss until
the old-age pension becomes available; and to those in employment very resistant
to efforts by governments and organisations to create more flexible and adaptive
organisations able to complete internationally.

Physical

Australia is the driest continent and the current government came to power
on a platform of responding aggressively to the problems posed by ‘climate
change’. The vast majority of Australia is arid or semiarid and this percentage
is increasing as marginal farmlands are overstocked, grazed or cropped.
Timber reserves in Australia are down to less than 3 per cent of what they were
200 years ago. Some state governments have responded with a ban on tree
clearing which, while it is popular with many city dwellers, has alienated many
farming communities. Coupled with the environmental degradation of the land
is air, water and soil pollution. The situation is becoming so critical that more
and more Australians are demanding a cutback in economic growth to the level
they call ‘environmentally safe economic development’ or ‘environmentally
sustainable development’. Many development projects in mining, agriculture,
forestry and tourism are being held up or prevented by environmental pressure
groups using the legal system to reduce economic developments. These
environmental concerns, the degradation of natural resources and the lack of
capital to rectify the environment, are also having significant impacts on the
economy. People desperate for good paying jobs are brought into conflict with
other members of society who are concerned to save the environment from
further damage. Environmental concerns will be likely to increase in the future
and will affect HR policies and practices.

New Zealand
The development of HR practice in New Zealand has progressed along similar
lines to other western democracies. New Zealand’s colonial experience
in the 19th century naturally led to the adaptation of British practices
and assumptions in managing employment. We inherited the assumption
of inevitable conflict between labour and capital (DJB) and a number of
employment laws were enacted in the 1890s that would set the scene for the
next hundred years.

A key founding piece of legislation was The Industrial Conciliation and


Arbitration Act 1894. This Act was designed ...‘to encourage and to facilitate
the settlement of industrial disputes by conciliation and arbitration’. It would
be fair to say that major industrial disputes have been comparatively rare
in New Zealand’s history. There have been some notable events such as the

HRMT20022 - Module 7 - Page 78


Mining Strikes early last century and the 1951 Waterfront dispute; however
conciliation and arbitration have been consistently been the means for the
resolution of disputes.

The last forty years have seen a significant shift in the nature of the
employment relationship. The Industrial Relations Act, 1973, The Human
Rights Commission Act, 1977, The Holidays Act, 1981, and The Wages
Protection Act, 1983, all sought to regulate the relationship between employers
and the labour market. This legislation legitimised the assumption of conflict
and enshrined in law the requirement to seek legal resolution to disputes.
The Trade Union movement thrived under this legislative regime, however
in 1989 The Employment Contracts Act (ECA) was passed into law. This Act
was a radical departure from previous approaches and enabled employees to
negotiate individual contracts with their employers. The result was a sharp
decline in Union membership and a virtual absence of industrial action. The
focus of the Act was on the rights of the parties involved and challenged the
polarising Marxist/capitalist assumption of inevitable conflict between labour
and capital.

The ECA was repealed by the incoming Labour government in 2000 and
the Employment Relations Act, 2000 was enacted. The Act has reinstituted
a focus on collective contracts, mediation based on the interests of the
parties and bargaining in good faith. The object of this Act is to build
productive employment relationships through the promotion of mutual
trust and confidence in all aspects of the employment environment and
of the employment relationship. The Act aims to do this by recognising
that employment relationships must be built on good faith behaviour; and
addressing an assumption of inequality between the parties to the relationship
in terms of bargaining power.

The Act promotes collective bargaining; and the protection of the integrity
of individual choice. It also sets out to promote mediation as the primary
problem‑solving mechanism with the aim of reducing the need for judicial
intervention. The Act promotes the observance of the principles established
by the International Labour Organisation Convention 87 on Freedom of
Association and Convention 98 on the Right to Organise and Bargain
Collectively.

The ERA follows 10 years of an employment relations environment that


promoted individual employment contracts and a desire to provide more
freedom for employees to negotiate their own contract. This had led to a sharp
decline in the number and membership of Trade Unions.

Summary
Australia and New Zealand have a number of similarities in areas of
economics, cultural diversity, social institutions, and political structures.
This results in the practice of HRM in both countries being somewhat alike.
Probably the major difference however is the continued liberalisation of the
workforce structures with the unions having in increasingly minor role to play.
New Zealand however, with the Employment Relations Act, is attempting to
foster a perceived equal partnership between employer and employee. The
hope of such a political manipulation is to foster an environment in which
high-performance work systems can flourish.

HRMT20022 - Module 7 - Page 79


Review questions

Question 7–1

Outline the development of the HR profession and Australia.


How has it contributed to the need for greater labour market
flexibility?

Question 7–2

Identify those HR policies and practices which, for Australia and a New
Zealand, are the most urgent in terms of reform. Which areas of HR
practices and policy are already developed?

Question 7–3

Outline the employment structures which have a major bearing on HR and


policies and practices in Australia and New Zealand?

Question 7–4

List some of the political, social, and economic actors of an ageing


workforce on HRM practices and policies in Australia and New Zealand.

References
Campbell, I & Brosnan, P 1999, Labour market deregulation in Australia:
the slow combustion approach to workplace change, International Review of
Applied Economics, vol. 15, no. 3, pp. 353 -394.

Cooper, R 2008, Remaking industrial relations? Unions, the state and


industrial relations regime change in Britain and Australia, Australian Review
of Public Affairs, University of Sydney

Editorial, 2008, State of the unions, The Weekend Australian, 2-3 August.

Green, R & Wilson, A 2000, Unemployment, labour market deregulation and


the ‘Third Way’, International Journal of Manpower, vol. 21, no. 5, pp.

Morris, S 2008, ‘Union hits out over Gillard’s award plans’, The Australian, 4
February.

Nankervis, AR, Chatterjee, S & Coffey, J 2006, ‘Perspectives of human


resource management in the Asia Pacific’, Pearson Education, Sydney.

Norington, B & Taylor, P 2007, Rudd to expel second union boss’, The
Australian, 22 June.

Norington, B 2008, ‘Bosses fear worker conflict’, The Australian, 4 February.

Stevens, G 2008, Address to the American Chamber of Commerce in Australia


Business Luncheon, viewed 13 June, http://www.rba.gov.au/Speeches/2008/
sp_gov_130608.html

The Economist, 2008, The great American slowdown, viewed 11 August,


http://www.economist.com/opinion/displaystory.cfm?story_id=11016333

HRMT20022 - Module 7 - Page 80


Module 8—HRM in the Asian context:
People’s Republic of China
Introduction
The People’s Republic of China (PRC) is now on its way to becoming the
economic ‘superpower’ of the coming decades, according to International
Monetary Fund estimates. However, the model of HRM practised in this
country is relatively immature compared to western nations. One of the main Reference Text
reasons for this has been the longevity of the paternalistic influence of the state Nankervis, Chatterjee
on commerce. This of course is slowly changing, particularly with the & Coffey 2006
influence of joint ventures and foreign ownership of enterprises within China.
This module outlines the practice of HRM in China and helps provide some
insight as to why it is practised in the way it is now, and how it may develop
into the future.

Learning objectives Resource Book


Reading 8–1
On completion of this module you should be able to: Ding, Ge
& Warner 2004
•• identify and outline the social, political and economic system of the pp. 10–31.
People’s Republic of China
Reading 8–2
•• outline the cultural dimensions which contributed to the various HR Fernandez, Wang
practices and policies of the People’s Republic of China & Chen 2002
pp. 115–144.
•• discuss the strengths and weaknesses of the practice of HRM in the
People’s Republic of China
•• discuss the impact of cultural and political values on HRM practices and
principles and the People’s Republic of China.

China
Electronic journal article
Ding, DZ, Ge, GL & Warner,
The PRC has enjoyed 25 years of economic growth since Deng launched the M 2004, ‘Evolution of
Open Door policy in 1979. Since then it has also been lauded as a potential organisational governance
‘economic superpower’ by international bodies like the World Bank. By the in human resource
year 2020, some estimates suggest the PRC will become the second largest management in China’s
economy behind the USA. Living standards have risen greatly in recent years township and the village
enterprises’, International
but the distribution of economic benefits has been uneven with those living
Journal of Human Resource
in cities receiving higher economic benefits than those living in the regions. Management,, vol. 15, no. 4,
A new middle class has also emerged, particularly in Beijing and Shanghai as pp. 836–852.
well as many of the big eastern coastal towns and cities. (Search using the library’s
electronic resources page.)
Economic growth since the mid-1990s has continued to remain high but a
little less than in the previous decade. Whilst the management of the economy
has not been without its difficulties due to continuing corporate indebtedness,
especially in the state sector, and ongoing deflation in the market place, the
PRC has grown faster than most of its Asian neighbours, many of which have
not fully recovered from the 1997 financial crisis.

China is now much closer to a fully operative labour market than it was five
years ago. Under the ‘iron rice bowl’ system, mobility between firms was
close to zero. This situation gradually changed as the Dengist labour reforms
were introduced in the mid to late 1980s. Whilst one could earlier speak of
a ‘nascent’ labour market, it is now closer to a ‘real’ labour market in many

HRMT20022 - Module 8 - Page 81


parts of the urban economy. In big cities at least, the viability of workers,
technicians and managers has reached levels never before seen in the PRC.
But in many parts of China, particularly in the interior provinces, changes have
been slower as a result of significantly reduced economic development.

The 1997 Asian financial crisis did not have a significant impact on the
Chinese economy as it did with other Asian nations, especially on the overseas
Chinese business community. The main reason being the PRC was less closely
coupled with foreign companies in terms of both imports and exports. Of all
the Asian nations China had one of the lowest degrees of economic openness
in the mid-1990s. However, since the Asian financial crisis, the Chinese
economy has continued to grow with an average annual growth rate of 8 per
cent per the year 2000. Nevertheless unemployment is still a major concern.
The number out of work is estimated to be one in eight in many large cities;
joblessness may even be as high as one in five in parts of the ‘rust-belt’ in the
North East, and the official unemployment figure of around 3 per cent has long
been regarded as an underestimate.

Such political and economic changes in China had in turn impacted upon
people management practices. The lifetime employment mentality has a
lessening influence on management practices in China as well as other Asian
nations. Managers are allowed more autonomy, particularly in state owned
enterprises, in hiring and firing and other decisions relative to personnel issues
signifying a more decentralised model of employment practices. However,
outside of joint ventures and wholly owned foreign firms of a reasonable size,
it is not clear if the has resulted in a full-blown HRM model. Studies have
shown that size, ownership and location, are important factors in determining
how people are managed in Chinese firms. It is more likely that HRM is
implemented in larger firms as opposed to small ones; more likely to be seen
in the south than the north; and more likely to be practised in jointly owned or
wholly foreign-owned businesses.

What is becoming clearer though is that the HRM in China is in transition


to market driven employment practices. The weight of tradition and inertia
has been such a drag that the change is now more noticeable, particularly as
the state owned enterprises wither away. Recruitment is more dependent on
the market rather than on allocation by the Labour bureau and selection is
increasingly based on merit. Reward systems remain complex but are more
performance driven. Motivation of employees is now based on material
rewards rather than a pledge of job security and benefits in kind. Training
is more systematic, at least in larger firms. In short, the long march from
personnel management to a full-blown HRM system is underway, with some
changes to the basic architecture of the system.

Summary
Since the start of Chinese economic reforms in the late 1970s management
practices have changed dramatically. Characterised by high economic growth
over more than two decades, it has become a ‘magnet’ for international
production and investment. However, movement to a market orientated
economy, a multi-ownership system, and an emerging new labour market has
intensified the pressure on the government, trade unions and enterprises, as
well as on individual workers to find ways of surviving from year to year. It is
still unclear as to what impact HRM practices will have on the future direction
of employee management in China.

HRMT20022 - Module 8 - Page 82


Review questions

Question 8–1

Discuss how the ongoing liberalisations of the Chinese labour


market, and its recent admission to the WTO, will impact on
the HR practices and policies in the PRC.

Question 8–2

Discuss how the challenges and opportunities presented by the 1997 Asian
financial crisis are changing the practice of HR within China.

Question 8–3

Read the case study ‘BOL China’ in your book of readings and answer the
following questions:

(a) Why is a performance management system important for BOL China?


(b) How would you design a performance management system for BOL
China?
(c) Identify the critical success of actors of BOL China. For each factor,
develop three to four performance indicators.

References
Cooke, FL 2004, ‘HRM in China’, in Managing human resources and Asia-
Pacific, PS Budhwar (ed.), Rutledge, London.

Ding, DZ, Ge, GL & Warner, M 2004, ‘Evolution of organisational governance


in human resource management in China’s township and the village
enterprises’, International Journal of Human Resource Management, vol. 15,
no. 4, pp. 836–852.

Ding, DZ, Ge, GL & Warner, M 2004, ‘HRM in China after the Asian financial
crisis: beyond the state sector’, International Studies of Management and
Organisation, vol. 34, no. 1, pp. 10–31.

Fernandez, JA, Wang, JZ & Chen, C 2002, ‘BOL China’, Asian Case Research
Journal, vol 7, no. 2, pp. 115–144.

Warner, M 2002, ‘China is HRM revisited: a step wise path to convergence?’,


Asia‑Pacific Business Review, vol. 9, pp. 15–31.

Warner, M 1998, ‘China’s HRM in transition: towards relative convergence?’,


in C Rowley (ed.), Human resource management in the Asia-Pacific region,
Frank Cass, London, pp. 19–33.

HRMT20022 - Module 8 - Page 83


Module 9—HRM in the Asian context: Japan
Introduction
Accompanying the success of Japanese manufacturing has been a belief
that their superior performance has been due to the nature and configuration
of HRM practices in large Japanese firms. Of course these firms constitute
only a small proportion of firms in a given industry. It would therefore be
incorrect to say Japan has a highly evolved HRM system. Rather, it has
pockets of excellence, with the bulk of the organisations giving average to
limited attention to HRM. This module outlines how HRM has developed over
time within Japan. It discusses the alignment of the values systems and the
practice of HRM, and how this spills over into the long held expectation and
importance of lifetime employment—a strategy which is creating a challenge
for contemporary practice of HRM in Japan today.

Learning objectives
On completion of this module you should be able to:

•• identify and outline the political and economic system of Japan


•• outline the cultural dimensions which contribute to various HR practices
and policies of the colony of Japan Reference Text
Nankervis, Chatterjee
•• discuss the strengths and weaknesses of the practice of HRM in Japan & Coffey 2006
•• identify the contribution of political, economic, social and global factors to
the changes currently being experienced
•• discuss the impact of cultural values on HRM practices and principles in Japan.

Japan
Electronic journal article
After the end of World War II in 1945, the Japanese economy recovered and Dalton, N & Benson, J 2002,
grew quickly supported by an annual economic growth rates of around 10 per ‘Innovation and change in
cent for the next 25 years. From 1970 the real GDP growth averaged around 5 Japanese human resource
management’, Asia-Pacific
per cent and this continued for another 20 years. This period was characterised Journal of Human Resources,
by declining real GDP growth and a series of economic cycles. Unemployment vol. 40, no. 3, pp. 354–362.
was low, ranging between one and two percent during the 1960s and 1970s, (Search using the library’s
and a slightly higher two to three percent during the 1980s. In this strong electronic resources page.)
economic environment, firms concentrated on expanding market share, and
management were able to encourage and support a range of HR practices Dedoussis, V 2001, ‘Keiretsu
and management practices
such as lifetime employment supported through seniority wage and promotion and Japan—resilience
practices. amid change’, Journal of
Managerial Psychology, vol.
Since 1992, the Japanese economy has alternated between periods of recession 16, no. 2, pp. 173–188.
and low economic growth. For any economy based on, and accustomed to, (Search using the library’s
high-growth, this economic downturn has had a serious effect on employment electronic resources page.)
which in turn has had an impact on Japanese HRM principles and practice.

These changes have occurred for a number of reasons. Firstly, the breakdown
of the keiretsu (inter-firm network) system of cross shareholding in preferential
trading among the big corporations has badly hurt the safety net of supporting
the long-term growth strategy of Japanese firms and consequently their ability
to protect employees from downside market rises.

HRMT20022 - Module 9 - Page 85


Secondly, the ageing population has clear implications for corporate human
resource practice. With an ageing workforce, the permanent employment
and seniority system burdens firms with rising numbers of higher paid
less productive workers. Previously, these systems were more suitable to
employers’ seniority pay structures reduced the possibility of staff turnovers.

Finally, the transition to a service economy combined with socio-cultural and


socio‑economic changes have had a profound effect on Japan’s employment
institutions. Although leading manufacturers are still competitive, their
contribution to Japanese domestic employment and income is shrinking,
whilst the emerging service sector is the next great driver of jobs and wealth.
Their younger workforce is more mobile and less committed to the firm.
Furthermore, since the organisation of work in service firms are less team
based, individual performance is more easily evaluated.

In response to the increased competitiveness, and low economic growth,


companies are using various means to scale down labour costs. One recent
study showed that just under half of all firms surveyed had used strategies such
as: overtime reduction; cutbacks in the recruitment of core workers; intra-firm
transfers; outplacement or outsourcing; dismissal of part-time and temporary
workers; and voluntary early retirements.

Changing economic conditions has also begun to challenge the long held
important practice of pay and promotion being underpinned by seniority and
not merit. People would be employed at the base level, usually young and
recent graduates from universities or higher level education institutions, and
their progression through the business was based on seniority. This practice
has continued for a long period and was designed as a motivational tool for
employees in developing high levels of organisational commitment. This
system is now under pressure and younger employees do not see why they
should wait for promotions if they have superior skills and abilities. Thus
many bigger organisations are seeing a rise in turnover rates especially at the
lower and middle levels resulting in a reduction of necessary organisational
skills. More recent HRM strategies to combat this exodus of talent has been
the introduction of sophisticated tests and other screening devices to select
high‑quality recruits.

Since the early 1990s, some companies have developed a system of job
ability based wages focusing individual work performance over one year.
This system is quite close to a true performance based pay system. It has
been termed ‘annual salary system’ and has been introduced by about 10
per cent of large companies and is primarily used for managers and general
managers. The monetary benefits to employees are however, typically small.
In addition, companies are now beginning to recruit mid‑career employees to
enhance the existing skill base within the organisation. The number of part-
time and temporary workers has also increased to be about 25 per cent of the
total workforce. This growth has lead to a less stable workforce and partly
underpins the record unemployment level now being experienced.

Training, regularly undertaken, is an important part of the internal labour


market. Japanese companies still place considerable emphasis on job rotation,
and on-the-job training. These features provide Japanese enterprises with
generalist managers, rather than specialised ones. There is however, an
increasing emphasis on off-the-job training. Promotion is a function of training
but other factors, such as merit and work performance, are increasingly
becoming parts of promotion criteria.

HRMT20022 - Module 9 - Page 86


The labour relations context in Japan has changed markedly in recent years.
Prior to the economic downturn unions would guarantee cooperative behaviour
by the members, in exchange for appropriate behaviour by companies into
the integration of the firms training, wage setting, and redundancy systems.
However, currently both sides police the situation to guarantee that the other
side will be well-behaved. Middle managers are the targets of the current
delayering process and they feel a growing need to defend their interests.
However, the Trade Union Law only recognises unions as representing the
interests of the employers. Short of official recognition, more groups may form
inside the companies to defend the interests of the core white-collar employees
into their implicit non-layoff contract. The system of company based unions
may be severely undermined if such groups extend outside companies to
become horizontal regional or national white-collar unions. Also non‑union
employee representation may pose a threat to the traditional enterprise‑based
unions.

Summary
Important changes have occurred in Japanese HRM. First, wage settlements
are becoming more disparate and are linked to the nature of employment.
Second, there has been a gradual shift towards a merit-based appraisal system
for wages and promotion in Japanese companies. Third, there has been a clear
departure from age and tenure as key criteria for wages and promotion. Whilst
this has been a trend for the past two decades, the process has accelerated over
the past five years. Finally, there has been a general restructuring of HRM with
the speed of change substantially increasing. What may have been considered
unique practices five years ago have now become more widely established.
Nevertheless, HRM reform is still seen ostensibly as the label of practice and
experimentation. There is little indication that the change is systematic or has
occurred at the policy or architectural level.

Review questions

Question 9–1

Discuss how the economic recessions since 1992 have


impacted upon the practice of HRM in Japan.

Question 9–2

Outline the implications of lifetime employment and seniority based pay


on various functions of HRM.

Question 9–3

Discuss the role of cultural values in determining how HRM is practised


with the Japan.

Question 9–4

Compare and contrast HRM practices appropriate for the older workforce
in Japan this is those practices that are appropriate for the new generation
of worker in Japan.

HRMT20022 - Module 9 - Page 87


References
Benson, J & Debroux, P 2004, ‘The changing nature of Japanese human
resource management: the impact of the recession in the Asian financial crisis’,
International Studies of Management and Organization, vol. 34, no. 1, pp.
32–51.

Benson, J & Debroux, P 1998, ‘HRM in Japanese enterprises: trends and


challenges’, in C Rowley (ed.), Human resource management in the Asia-
Pacific region, Frank Cass, London, pp. 62–81.

Dalton, N & Benson, J 2002, ‘Innovation and change in Japanese human


resource management’, Asia-Pacific Journal of Human Resources, vol. 40, no.
3, pp 354–362.

Dedoussis, V 2001, ‘Keiretsu and management practices and Japan—resilience


amid change’, Journal of Managerial Psychology, vol. 16, no. 2, pp. 173–188.

Selmer, J 2001, ‘Human resource management in Japan: adjustment or


transformation?’, International Journal of Manpower, vol. 22, no. 3, pp. 235–243.

HRMT20022 - Module 9 - Page 88


Module 10—HRM in the Asian context:
Thailand
Introduction
As the Thai economy grows so too do employment opportunities and the quest
for career advancement at all organisational levels. Against this background, it
is becoming increasingly difficult for organisations to cultivate a reliable and
committed workforce, especially in the growth sectors. Again, as with other
countries studied, high labour turnover resulting from job hopping is
discouraging employer investment in training, ultimately leading to a vicious Reference Text
cycle resulting in the scarcity of highly skilled labour. This module examines Nankerevis, Chatterjee
the Thai HRM landscape revealing a complex interplay of paradoxes & Coffey 2006
characterised by traditionalism and modernity, corporate welfarism, strong
cultural and religious effects, collectivism vis-a-vis individualism, and an
enduring quest for social harmony within a complicated social hierarchy.

Learning objectives
On completion of this module you should be able to: Resource Book
Reading 10–1
•• identify and outline the social, political and economic systems of Thailand Ananvoranich
& Tsang 2004
•• outline the cultural dimensions which contribute to the various HR pp. 83–103.
practices and policies of Thailand
•• discuss the strengths and weaknesses of the practice of HRM in Thailand
•• identify the contribution of political, economic, social, physical and global
factors in the economic progress currently being experienced by Thailand
•• outline the development of HRM practices in Thailand and the
involvement of the government Electronic journal article
Browell, S 2000, ‘The land
•• discuss the impact of diverse cultural and religious values on HRM of smiles’: people issues in
practices and principles in Thailand. Thailand’, Human Resource
Development International,
vol. 3, no. 1, pp. 109–119.
Thailand (Search using the library’s
electronic resources page.)
Prior to recent economic problems eventuating from the 1997 economic crash,
Thailand was widely perceived as one of the most promising ‘new tigers’ in Kamoche, K 2000, ‘From
Southeast Asia. In the 1980s and early 1990s, the economy experienced highly boom to bust: the challenges
impressive growth rates of 8 per cent and above. Rising standards of living of managing people in
coupled with an unprecedented spirit of consumerism fuelled economic growth Thailand’, International
as well as shift away from an agricultural focus to an industrial one with an Journal of Human Resource
Management, vol. 11, no. 2,
emphasis on consumer products, financial services and property speculation. pp 452–468.
Economic liberalisation, unbridled foreign borrowing, foreign direct (Search using the library’s
investment and a state led drive to promote exports further contributed to electronic resources page.)
economic and industrial success. Within a decade the country was transformed
into a vibrant, rapidly industrialising new tiger economy.

There are huge differences in the level of development between the Bangkok
Metropolitan area and most of the rest of Thailand. Bangkok enjoys the level of
development comparable to Singapore, yet Thailand as a whole has a surplus labour
economy with extensive poverty in many parts of the country. Although Thailand has
had a succession of ‘five-year plans’ to address economic development and Boards
of Investment to guide their development, much of the very substantial growth
that has occurred has been fairly chaotic and not well integrated. Overinvestment,
particularly in real estate, played a significant role in the economic crash of 1997.
HRMT20022 - Module 10 - Page 89
The country's ability to respond to the demands of globalisation is also
limited by a poorly developed human resource base, with education being
of significant importance. Most people have some level of formal education,
but a greater majority of Thais have only completed primary school. Thai
educational attainment is much lower than that of the least developed
countries in the region (e.g., Vietnam, Indonesia). Though devastated by
the 1997 financial crisis—which had its origins in Thailand—Thailand
has been experiencing a slow but steady economic recovery beginning in
2001. Nonetheless, there is still considerable unemployment and continuing
economic distress especially in areas outside of the capital.

Most private-sector Thai owned companies are controlled by families of Chinese


ancestry. Thus, the traditional Chinese family enterprise model seen in Taiwan
and Singapore is common. Larger companies, especially those with significant
external investors have been more prone to adopt Western-style management
and HRM policies and practices. However, many of the larger, more successful
organisations tentatively patterned in ways similar to the Korean chaebols and
are thus a complexity of interrelated companies.

The less educated Thai labour market has meant that the strategies
implemented by countries such as Korea, Taiwan and Singapore in responding
to globalisation (i.e. movement towards less labour intensive and more
sophisticated technologies) are not so readily available to Thailand. Therefore,
HR strategies aimed at improving flexibility in Thai organisations could be
expected to be thwarted by educational deficiencies and the prevalence of
traditional Asian cultural values, such as high‑power distance, fatalism and a
strong preference for harmonious social relationships.

Although Thai culture has certainly been influenced by the rapid growth
experienced in the 1980s and 1990s, Thailand remains a reservoir of more
traditional values, especially among the rural people that are often drawn
into the industrial workforce. Thailand is not fundamentally a Confucian
culture (though Confucian values have influence through the Chinese
business community); as the dominant religion is Theravada Buddhism, an
older and more traditional form of Buddhism than that Mahayana Buddhism
of Taiwan, Korea and Singapore. Connections to Indian culture mean that
Hindu beliefs also still have an influence within Thailand. Class distinctions
are often quite pronounced and rooted in prescriptive criteria. Thailand has
more of an English style class system (supported by the continuing existence
of the monarchy and royal titles). Class lines can be crossed, but not without
difficulty. The society, then, is collectivist and hierarchical, characteristics very
much reflected in Thai approaches to management. The quintessential Thai
manager is paternalistic, combining both authoritarian and more benevolent
styles of leadership. Authority relationships are very important in Thai society,
including those in the workplace.

The above suggests therefore the Thailand confronts many challenges to


secure economic sustainability and that the effective implementation of key
HRM practices may assist in the process. A large concern must be upgrading
skills and training of the labour force. If Thailand is able to compete in high
technology industries, developing skill and labour market capabilities is
critical to national competitiveness in coming years. Another important issue
continues to be flexibility, necessitating an introduction of HRM methods that
are not particularly well suited to Thai culture (for example, greater worker
empowerment and independence in the workplace, greater emphasis on merit
and performance in all HRM related decisions).

HRMT20022 - Module 10 - Page 90


Summary
Recent changes in HRM from a western management arena have been adapted
to the particular Thai context. As such, it is increasingly clear that companies
are exhibiting HRM approaches that are more consistent with flexible,
high-performance work systems than with the traditional approaches. Rule
adherence is somewhat relaxed and common values and norms exist. These
approaches, however, are more engendered by Thai culture. HR managers are
widespread in Thai companies and the increasing professionalisation of these
managers is enhancing their role. On the other hand personnel selection still
involves a focus on ‘job fit’ rather than ‘organisational fit’. Job evaluation
methods are widespread, at least in the larger and more sophisticated
companies and some movement has occurred towards performance‑based pay.
Continuous training is now increasingly emphasised. In contrast there has been
little promotion of collective bargaining in the private sector. It is too early to
say how far such changes have gone beyond the practice level and if they have
penetrated the policy and architectural level.

Review questions

Question 10–1

Discuss the difficulty of analysing HR practices and policies in


Thailand. What strategic implications are there for economic
development and growth?

Question 10–2

Buddhism, Confucianism, and Hinduism all exert significant influence on


HR practices and policies in Thailand. Identify and briefly outline these
influences and outcomes.

Question 10–3

Many commentators have suggested that the patchy distribution of


benefits from economic development across Thai society is creating social
pressures which need to be addressed very soon. What are some of these
issues and who should be addressing them, employers or government?

Question 10–4

In order to complete in the global marketplace Thailand needs to shift from


labour‑intensive industries to industry is that provide higher value-added.
What are the HR challenges Thailand faces in moving in such a direction?
What can HR professionals do to respond to these challenges?

References
Ananvoranich, O & Tsang, EWK 2004, ‘The Asian financial crisis and human
resource management in Thailand’, International Studies of Management and
Organization, vol. 54, no. 1, pp. 83–103.

Browell, S 2000, ‘The land of smiles’: people issues in Thailand’, Human


Resource Development International, vol. 3, no. 1, pp. 109–119.

HRMT20022 - Module 10 - Page 91


Kamoche, K 2000, ‘From boom to bust: the challenges of managing people in
Thailand’, International Journal of Human Resource Management, vol. 11, no.
2, pp. 452–468.

Lawler, JJ & Atmitanandana, V 2002, ‘HRM in Thailand: a post-1997 update’,


Asia‑Pacific Business Review, vol. 9, pp. 165–185.

Lawler, JJ, Siengthai, S & Atmitanandana, V 1998, ‘HRM in Thailand: eroding


traditions’, in C Rowley (ed.), Human resource management in the Asia-
Pacific region, Frank Cass, London, pp. 170–196.

HRMT20022 - Module 10 - Page 92


Module 11—HRM in the Asian context:
India
Introduction
At the time of its independence in 1947, India was among the two most
industrialised nations in Asia. Since then it has adopted a ‘mixed economy’
approach that has hindered its national growth and the optimum utilisation of Reference Text
its immense resources (both physical and human). To re-establish itself as an Nankervis, Chatterjee
economic force in the region, India liberalised its economy in the early 1990s. & Coffey 2006
The adoption of the ‘free market economy’ has created opportunities for
foreign businesses. This module explores the changing political, economic,
and social environment of India, and how HRM is responding to these
changes.

Learning objectives Resource Book


Reading 11–1
On completion of this module you should be able to: Budhwar
& Sparrow 2002
•• identify and outline the social, political and economic systems of India pp. 599–638.

•• outline the cultural dimensions which contributed to the various HR Reading 11–2
practices and policies of India Panda & Gupta 2002
pp. 129–166.
•• discuss the strengths and weaknesses of the practices of HRM in India
•• identify the contribution of political, economic, social and global factors
to the prosperity currently being experienced by the people and workers of
India
•• discuss the impact of diverse cultural and religious values on HRM
practices and principles in India. Electronic journal article
Budhwar, P 2003,
India ‘Employment relations and
India’, Employee Relations,
Upon independence from British colonial rule in 1947, India placed its faith vol. 25, no. 2, pp. 132–148.
(Search using the library’s
in centralised economic planning and built a command economy which had electronic resources page.)
few parallels outside the Soviet bloc. Industrial enterprises were protected
from external competition by territories and outright prohibition of imports, Budhwar, PS & Baruch, Y
and from each other by the policy of industrial licensing. The public sector 2003, ‘Career management
in particular could not fail as it was thought to serve the social rather than an practices and India:
economic purpose. an empirical study’,
International Journal of
Manpower, vol. 24, no. 6,
This approach prevailed until 1991 when double digit inflation lead to high pp. 699–719.
rates of borrowing and a lower level of foreign exchange reserves. As a result, (Search using the library’s
the World Bank and the IMF agreed to loan India money on the condition electronic resources page.)
the country changed to a free market economy. Evidence suggests that the
associated reforms have resulted in India now being considered as one of the
largest emerging economies.

Such liberalisation, and resulting competition from overseas companies, has


put pressure on the HRM practitioners to prepare and develop the human
capabilities of the India’s labour market. The changes have been intrinsically
linked to changing role of HRM from organisational functional or operational
role to a strategic role where one of HR’s primary roles is the development of
organisational human assets through formal training and development programs.

HRMT20022- Module 11 - Page 93


As with other countries studied throughout this course the socio-cultural
context, along side of economic contexts, has played a significant role in
practicing HRM. Indians believe in the importance of strong family ties and
the value of extended family relationships. As such, there is a strong emphasis
on collectivism, which often means that family and group attainments are
more important than work outcomes. Personal sources of power in India are
primarily from family, friends, and social status. As a result, there are times
that selection, promotion, and transfers within and across organisations are
based on social and political connections, or networks, rather than knowledge,
skills or abilities of which are key contemporary HRM practices.

Motivation strategies in Indian organisations are more likely to be successful


if they are based on a social, interpersonal, or even spiritual basis. This makes
performance management problematic because the employees’ orientation
is more likely to be towards valuing personal relationships rather than
focusing on measured performance outcomes. Further, Indian work culture
is characterised by the principle of ‘particularism’ and ‘stability’. This is
manifested in such things as lifelong jobs, experience base career system, and
job tenured based compensation packages.

With India now facing competition resulting from a free market economy
many enterprises are challenging the above norms. Even within a changing
business environment, Indian industrial relations are still based primarily
on an essentially adversarial culture, with little sustained effort by labour or
management to look for an alternative model, which is the opposite to the
western systems of Australia and New Zealand.

However, Indian companies seem to be looking towards human resource


development (HRD) rather than human resource management as a way to
respond to such increased competition. The reason for little evidence of human
resource management is likely to be because of India’s entrenched unions; a
framework of employment stability guaranteed by law; enormous obstacles
facing firms wishing to close plants; and union agreements restricting daily
output and flexibility of labour; firms wishing to introduce effective HRM
processes have to go through a tortuous process of negotiation with labour
and unions with relatively little to offer except the rate of increase competition
arising from liberalisation.

Consequently, it is likely that HRD practitioners are more likely to have a


sustainable effect in creating change by focusing on enhancing the individual.
This is likely to be seen by an Indian employee as more beneficial to them
than any HRM strategy. This is because a HRD system will give the individual
skills and prestige—factors that will enhance the all important social standing
in Indian society.

Summary
Like the majority of countries explored in this course, India also faces changing
economic, social, and political systems. However, India seems somewhat slower
to introduce what western owned MNCs would see as effective human resource
management practices and policies. This is primarily due to the strong influence of
an established unionised labour market. Within such a system that is underpinned
by high levels of formal and legalised protection for employees, companies find it
difficult to convince unions of the importance of HRM strategies. Rather, the Indian
workforce appears to be more open to human resource development initiatives,
particularly those at management levels.

HRMT20022 - Module 11 - Page 94


Review questions

Question 11–1

Read the case study ‘Hi-tech Communication Ltd’ in your book


of readings and answer the following questions:

1. How can the culture of HICOM be characterised or described?


2. Does HICOM have any subcultures? What are the implications of
subculture is far overall management of the culture of HICOM?
3. What more should Satish do to develop and maintain a strong culture
in HICOM?
4. What more should HR do to develop a desirable and strong culture in
HICOM?
Question 11–2
Discuss the challenges that the highly unionised environment within India
presents for effectively implementing HRM systems.

Question 11–3
Outline and provide a justification for five HRM practices that a HR
professional might use which leverages off the caste system in India.

Question 11–4
What sorts of career management strategies might be effective in India? Why?

Question 11–5
How might increasing liberalisation and global competition change employment
relation practices within Indian enterprises over the next five years?

References
Budhwar, P 2003, ‘Employment relations and India’, Employee Relations, vol.
25, no. 2, pp. 132–148.

Budhwar, P 2003, ‘Doing business in India’, Thunderbird International


Business Review, vol. 43, no. 4, pp. 549–568.

Budhwar, PS & Baruch, Y 2003, ‘Career management practices and India:


an empirical study’, International Journal of Manpower, vol. 24, no. 6, pp.
699–719.

Budhwar, PS & Sparrow, PR 2002, ‘Strategic HRM through the cultural


looking glass: mapping the cognition of British and Indian managers’,
Organization Studies, vol. 23, no. 4, pp. 599–638.

Panda, A & Gupta, R 2002, ‘Hi-tech communication Ltd.’, Asian Case


Research Journal, vol. 6, no. 2, pp. 129–166.

Ramaswamy, EA & Schiphorst, F 2000, ‘Human resource management, trade


unions, and empowerment: two cases from India’, International Journal of
Human Resource Management, vol. 11, no 4, pp. 664–680.

HRMT20022- Module 11 - Page 95


Module 12—Global HRM: an integration
Introduction
The purpose of this module is to summarise the material presented from the
last eleven modules. In addition, the module reviews the importance of
recognising that in a context of increasing economic interdependence no
country is an island in the global community. While the earlier modules have
focussed upon the functional HR issues of management as well as reviewing
the political and economic factors there still remains the reality that knowledge
of global business trends, cultural sensitivity, business knowledge, Reference Text
understanding local employment practices, technical skills and innovation are Nankervis, Chatterjee
increasingly important in the global HRM context. Central to this issue is their & Coffey 2006
relevance to Australian operations in other countries throughout the world. In
doing so, the question to be asked is whether the changes represent a
convergence to, or a divergence from the western HRM model and what the
implications are of these changes. Finally, this module introduces the idea that
some countries in sub-continental and South East of Asia have their own
theories of HRM—theories which draw upon western perspectives but are
contextualised within the complex political, religious, and social mix that Resource Book
makes Asia what it is. Reading 12–1
Burton, Butler
& Mowday, 2003
Therefore it is important that we do not lose sight of the reality of the global pp. 487–498.
marketplace. Negotiations carried out in Berlin may have far reaching
consequences in a small manufacturing industry in Saigon. An Australian SME Reading 12–2
operating in Canada may find itself hiring expatriate employees from Pakistan, Rowley & Benson 2002
Hong Kong and Jamacia. Examples such as those noted relate to the growing pp. 90–109.
diversity in human resources that are employed across the globe and presents a
growing challenge for human resources managers of the future.

Learning objectives
On completion of this module you should be able to: Electronic journal article
Rowley, C, Benson, J &
•• identify the positive and negative effects of globalisation on HRM. Warner, M 2004, ‘Towards
an Asian model of human
•• discuss similarities and differences in the practice of HRM in a global resource management? A
context rather than a regional (Asian or Australasian) context. comparative analysis of
China, Japan and South
•• identify how the practice of HRM has changed globally and in the Asia- Korea’, International
Pacific through the integration of global markets by MNCs. Journal of Human Resource
•• discuss where the convergence of HRM practice lies between East and West Management, vol. 15, no. 4,
pp. 917–933.
•• discuss the implications of changes in HRM practices on labour (Search using the library’s
productivity and flexibility. electronic resources page.)

Global HRM—the future?


When attempting to understand the HRM practices and their changes, globally,
it is useful to review why changes have occurred. Initial changes were fuelled
by globalisation and the impact of the Asian crisis which forced firms to
become more competitive and efficient. HRM in this context was seen as the
appropriate way to improve labour productivity and achieve ‘international
best practice’. The impact of these factors was not, however, uniform and they
were supplemented in particular countries by other more unique factors. For
example, in Japan, the depressed state of the economy, the ageing workforce,

HRMT20022 - Module 12 - Page 97


the changing attitudes of younger workers, and a more general loss of faith
in the traditional model of Japanese HRM were instrumental in the push for
HRM reform. On the other hand, the breakdown of the traditional divide
between the public and private sectors in Hong Kong after the handover to
China in 1997, was an important contextual factor driving change. Other
factors included the impact of MNCs (Taiwan and Thailand), the change
in attitudes of managers and workers (China), the removal of regulatory
protection (India), strategic choices of management (Korea), the need to
broaden the country’s economic base (Singapore), and the emergence of the
European Union in the northern hemisphere: not to forget the North American
economies and the emergent Russian models.

The changes observed in HRM practices in these countries suggest some


convergence towards more western approaches to HRM is taking place. The
adoption of the HRM model appears strongest at the level of practice and
far weaker at the policy or architectural levels. Yet, even at the functional
HR practice level there is some evidence that custom and practices are
constraining convergence. In addition, other factors, such as the stage of
economic development, new technologies and management styles, have the
potential to restrain the onward push of globalisation and the convergence of
the ‘one best way’ to managing people internationally.

HRM: Convergence or adaptation


For a German and a Finn, the truth is the truth. In Japan and Britain it is
alright if it doesn’t rock the boat. In China there is no absolute truth. In Italy it
is negotiable.
Richard D Lewis (2001)

Over the last few decades the integration of world economies into a single
huge marketplace has resulted in a growing awareness of the need to ensure
that consistency in HRM provides stability in multinational organisations as
they spread across the globe.

Throughout this course national and cultural differences between countries,


and the functional HRM strategies required to ensure organisational success,
irrespective of where the organisation operates, has been discussed. While
earlier modules explored the HRM styles used primarily from a MNC
standpoint, there is an increasing trend towards country specific industries
adapting their own ethnocentric HRM practices in order to align with a
multinational global partner.

While there has been much made about negotiating the cross-cultural
minefield when setting up joint ventures, and strategic alliances with MNCs
and SMEs at the management level the importance of cross cultural diversity
and its impact when managing HRM functions needs to be recognised: For
example, the Cameron Macintosh musical production of Miss Saigon has
played to 18 countries, in nine different languages throughout the world. It
included countries such as China, Singapore, Scandanavia, the UK and USA.
Managing and applying HR functions across such a multiplicity of legal,
political, cultural and religious factors would challenge any HR department
involved in strategic functions such as recruitment and selection, training and
development, remuneration and industrial relations.

HRMT20022 - Module 12 - Page 98


While cultural awareness is an essential personal skill other critical factors
will impinge heavily on the successful operation of global ventures. Not only
is there a need to be culturally aware of the multinational cast requirements in
such a scenario, but there is also the European Union that presents negotiation
challenges in such a major project (Murray 2005). Consequently a ‘contingent’
HRM model would have to be considered to accommodate the diversity of
talent that exists in across countries if such projects are to be successful. This
is becoming evident through the research.

In contrast and contrary to earlier research ‘western HR practices are


becoming more prevalent in China, although the legacy of traditional practices
endures and new challenges are emerging’ (Zhu, Cooper, De Cieri & Downing
2005, p. 525), and as China moves from a command economy to a market
economy the emphasis of HRM strategies has been recognised as a key to
international competitiveness. In fact, Chinese official sources cite both
Western and Japanese models of HRM as ‘worthy of emulation’ (Taylor 2005).
Its entry into the World Trade Organisation (WTO) has been the catalyst for
creating and sustaining effective HRM practices in order to compete within
its domestic and foreign markets. This should become more apparent as China
hosts the Olympic Games as well.

Changes are not confined to China or the Asia Pacific Basin per se: Research
shows that South Korean firms are breaking with tradition and experimenting
with western style HRM practices, in which ‘firms which keep traditional
HRM characteristics have maximised the advantages of Confucian values
and have been able to adapt performance based HRM in their own way’
(Choi 2004 cited in Miles 2008, p. 39). Indeed, while Australia finds itself
geographically located in the Asia Pacific basin its traditional links with
Great Britain have been severely tested with operations in the global market.
So much so that from its HRM foundations formed from British principles
and law an emergent philosophy of HRM is now influenced by its own
multicultural population. Other examples of the western influence on HRM
can be identified in research by Tokoro (2005), who discusses the changing
nature of HRM practices in Japan. From its post war growth period in the
nineteen fifties, with its HRM practices congruent with its culture, Japan has
seen a change in HRM architecture and practices in the nineteen nineties
due to encroachment of western capitalist principles. Further evidence of
the changing nature of HRM can be found in Namazie’s research into joint
ventures operations with Japanese, UK, Danish, Korean, French and Korean
partners, whose study on the impact of transferability of HRM can be impacted
upon by ownership and control of critical resources, the compatibility of
national culture and socio-cultural differences, mutual trust and respect
between partners and the compatibility of management styles. (Namazie
2003).

There are of course a number of implications with these changes in HRM


practice in Asia and the world. These include the issues of:

•• improved labour productivity and flexibility


•• the development of new ways to retain valued employees
•• the removal of the growing tensions that arise from the adoption of an
HRM approach, and
•• how to address the paradoxes arising out of the implementation of HRM.

HRMT20022 - Module 12 - Page 99


The change to HRM practices raises the more important question of how
changes to policy in architecture will take place. If change continues in a
gradual and continuous fashion, then practice developments will put pressure
on reform at higher levels. HRM will involve considerable experimentation at
the policy and architectural levels.

On the other hand, if more radical reform is undertaken and extended to all
levels of HRM, then it is likely that, in the transitional period, HR practices
will also be affected making HRM more uncertain and difficult to manage.
Workers may be alienated in this process and companies may not be able
to appeal to the wider norms and values of society to gain the necessary
commitment.

Rather than saying a convergence of practice has occurred, it would be better


to characterise the changes as a transitional stage where the final outcome is
difficult to predict and may differ substantially from the western HRM model.
What is less in dispute is that experimentation with western HRM practices
will continue, and in all likelihood will be modified to suit the unique needs of
each system.

The final issue therefore relates to the development of HRM theory for the
Global as well as Asian context. The countries explored within this course
raise a number of issues that will need to be incorporated into any broad theory
of HRM. In particular, hybrid systems (Korea), multiple approaches (Japan),
external and internal HRM (China), the superficial and paradoxical nature of
change, will all need to be considered.

Summary
This module suggests that HRM thought and practice is evolutionary. This
is as much a result of globalisation as the 1997 Asian financial crisis, and
the current Global Financial Crisis. There is some evidence of HRM being
practiced through varying HRM functions similarly to that seen in the western
world: however this is seen mainly within western owned MNCs. There is also
ample evidence of HRM practices being adapted to take into account the social
and political context of the individual countries. Consequently, this means any
generalised model of HRM must be based in context rather than on prescribed
outcomes, able to incorporate a multiplicity of approaches, and to recognise
the dynamic and inherently unstable nature of HRM. New models of HRM
must also accommodate the various levels at which any system operates and
develop clear linkage between these levels. Equally important is the need to
have less focus on convergence as a measure of HRM adoption and the need to
place more attention on how systems develop and change to accommodate the
various cultural, institutional and macro economic forces.

HRMT20022 - Module 12 - Page 100


Review questions

Question 12–1

Review the practice of HRM in all the countries explored


in this study guide. Where is the evidence of similarity of
practice, and where are there differences? What factors explain these
similarities and differences?

Question 12–2

Discuss the impact of the Asian financial crisis on the practice of HRM in
the Asia-Pacific region.

Question 12–3

Analyse how the changing HRM practices are impacting on labour


productivity and flexibility within the countries explored within this paper.

Question 12–4

Draw a conceptual model that outlines how you understand the emerging
Asian model of human resource management.

References
Belout, A Dolan, SL & Saba, T 2001, Trends and emerging practices in human
resource management, International Journal of Manpower, vol. 22, no. 3,
pp.  207-215.

Benson, J & Rowley, C 2002, ‘Changes in Asian HRM—implications for


theory and practice’, Asia-Pacific Business Review, vol. 9, pp.  186–195.

Burton, JP, Butler, JE & Mowday, RT 2003, ‘Lions, tigers and allocates:
HRM’s role in Asian business development’, Human Resource Management
Review, vol. 13, pp. 487–498.

Chiu, RK, & Luk, VW-M, 2002, Retaining and motivating employees,
Personnel Review, vol. 31, no. 4, pp.  402-431.

Lewis, RD 2001, When cultures collide: Managing successfully across


cultures, Nicholas Brealey Publishing, London.

Miles, L 2008, The significance of cultural norms in the evolution of Korean


HRM practices, International Journal of Law and Management, vol. 50,
no. 1, pp.  33-46.

Murray, P 2005, Australia and the European Superpower: engaging with the
European Union, Melbourne University Press, Carlton.

Namazie, P 2003, Factors affecting the transferability of HRM practices in


joint ventures based in Iran, Career and Development International, 8/7,
pp. 357-366.

HRMT20022 - Module 12 - Page 101


Rowley, C & Benson, J 2002, ‘Convergence and divergence in Asian human
resource management’, Californian Management Review, vol. 44, no. 2,
pp. 90–109.

Rowley, C, Benson, J & Warner, M 2004, ‘Towards an Asian model of human


resource management?: a comparative analysis of China, Japan and South
Korea’, International Journal of Human Resource Management, vol. 15, no. 4,
pp.  917–933.

Taylor, R 2005, China’s Human Resource Strategies: The role of enterprise


and government, Asian Business & Management, vol. 4, iss. 1, pp.  5-20.

Tokoro, M 2005, The shift towards American-style human resource


management systems and the transformation of worker’s attitudes at Japanese
firms, Asian Business & Management, vol. 4, pp.  23-44.

Yaw, AD, McGovern, I & Budhwar, P 2000, ‘Complementarity or competition:


the development of human resources in the South East Asian growth Triangle:
Indonesia, Malaysia and Singapore’, International Journal of Human Resource
Management, vol. 11, no. 2, pp.  314–335.

Zhu, C Cooper, B De Ceiri, H Dowling, P 2005, A problematic transition


to a strategic role: Human resource management in industrial enterprises in
China, International Journal of Human Resource Management, vol. 16, no. 4,
pp. 513-531.

HRMT20022 - Module 12 - Page 102