3 INTERNATIONALIZATION OF HR

HUMAN CAPITAL
 G. BECKER: The theory of human capital
= any stock of knowledge or characteristics the worker has that contributes to his or her “productivity”
 IN LABOR ECONOMICS: human capital is as a set of skills/characteristics that increase a worker’s productivity
 HR is valued in the market because it increases firms’ profits
SOURCES OF HUMAN CAPITAL DIFFERENCES
 INNATE ABILITY
o workers can have different amounts of skills/human capital because of innate differences
 SCHOOLING
o the focus of much research, since it is the most easily observable component of human capital
investments
 SCHOOL QUALITY AND NON-SCHOOLING INVESTMENTS
 TRAINING
o component of human capital -> that workers acquireafter schooling
o often associated with some set of skills useful for a particular industry, or useful with a particular
set of technologies
 PRE-LABOR MARKET INFLUENCES
HR MANAGEMENT (HRM) / IHRM
= set of distinct activities, functions, and processes that are directed at attracting, developing, and maintaining
multinational enterprises human resources HH
 DOMESTIC HRM: at national level
o concerned with managing employees belonging to one nation, less complicated
 IHMR: at international level
o managing employees belonging to many nations (home, host and third country employees)

HRM ACTIVITIES (Armstrong)

1. SELECTION: matching available human resources to jobs
2. APPRAISAL: performance management
3. REWARDS: reward system is one of the most misused managerial tools for driving organizational performance
4. DEVELOPMENT: developing high quality employees
IHRM ACTIVITIES
 international staffing (Planning, Hiring)
 pre-departure training for international assignments (Training and Development)
 compensation issues in international assignments (Renumeration)
 performance management in international assignments, repatriation
IHRM ACTIVITIES – STAFFING
 STAFFING POLICIES:
o Parent Country Nationals (PCNs), Host Country Nationals (HCNs), Third Country Nationals (TCNs)
PCNs
o expatriates, greater parent control and particular expertise
o expensive vs. failure rate, uncertain adaptation
o the private life of expatriates is severely affected
HCNs
o familiar with native culture, local business practices, local bureaucrats, local consumers / no adaptation
o unaware of the needs of HQ
o difficulty of achieving effective communication between HCN managers at subsidiary level and PCN
managers at corporate HQ
o LOCAL PERSPECTIVE > GLOBAL PERSPECTIVE
TCNs
o international managers
o lower compensation than for PCNs
o possibly better knowledge of host country than PCNs
EXPATRIATES
= an individual living and/or working in a country other than their country of citizenship, often temporarily and
for work reasons DD
LIFE CYCLE OF THE EXPATS:
 SELECTION: careful selection process
 PREPARATION: predeparture
 RELOCATION
 HONEYMOON: everything is new and exciting (positive feelings of excitement and discovery)
 CULTURE SHOCK: feelings of isolation, communication, issues and discomfort with the culture and l. envir.
o hardest part of adjustment cycle, could result in homesickness and depression
 ADAPTATION: the most comfortable, productive phase of the assignment
 REPATRIATION: the process of returning home, can be challenging and traumatic as the initial relocation
M. ARMSTRONG AND 7Cs
 the quality of management of international enterprises is a criterion for the success of global business
 important for the implementation of international corporate strategy dd
 7Cs and IHRM
o COSMOPOLITANISM: the tendency of workers to participate in international coordinating processes
 become an expatriate
o CULTURE: he difference between the national culture of the worker and the host organisational culture
o COMPENSATION: remuneration, including specifics, for expats andinpaters
o COMMUNICATION: an important tool for effective cooperation, intercultural communication
o CONSULTATION: requirement of expertise
o COMPETENCE: development of competences, intercultural competence in the internat. environment
o COORDINATION: ensuring closer cooperation between individual departments an internationalised
enterprise
IHRM APPROACHES – EPRG MODEL (H. Pelrmutter)
1. GEOCENTRIC
 organization seeks the best people for key jobs, regardless of nationality
 team members are chosen for their skills and experience
2. REGIO-CENTRIC
 employees are transferred to positions in subsidiaries in other countries but stay within the same region
 companies realize: even regional offices need to adopt a tailored approach to work
3. ETHNOCENTRIC
 to employ managers for key positions from the parent headquarters instead of employing local staff
 companies apply the values of their home country to the new office
4. POLYCENTRIC
 recruiting host country people to manage subsidiaries in their own country
 companies begin to appreciate the values and working styles of the host nation
MULTICULTURAL TEAMS
 a key prerequisite for internationalisation
 teamwork becomes important a factor for effective knowledge sharing and exchange of experience
 CLUSTER CHARACTERISTIC:
o 5 cluster of team member characteristics of special signifikance
o heterogeneous problems in the working group (ARROW, 1995)
 demographic attributes (e.g. nationality, ethnicity)
 expertise (e.g. knowledge and skills associated with the task)
 values, customs and status
INTERCULTURAL ADAPTABILITY
o confronts the national culture with the culture of the host country (different organizational cultures)
o the language is chosen by the organization as the main communication language
 working language (common to all), local language or language typical for the owner of the organization
COCKPIT CULTURE THEORY AND THE ASIANA CRASH
 siana airlines crashes in 1980s and 1990s -> pilots Korean (their behavior leading up to the crash?)
 KOREAN CULTURE: hierarchial (be deferential toward your elders and superiors -> unimaginable in the US)
 planes are designed to be piloted by a crew, that works together, unafraid to point out mistakes and
disagree with a captain
 KOREAN CULTURE NORMS: people should avoid directly questioning authority
 SOLUTION: cultural reorientation inside the cockpit, to encourage crew to speak up about dangers
CULTURAL DIMENSIONS (GERT HOFSTEDE)
o studied the interactions between cultures
o CULTURAL DIMENSIONS THEORY: systematic framework for assessing the differences between nations and
cultures (other factors: personality, family, history and personal wealth)
1. POWER DISTANCE INDEX: the degree to which the less powerful members of a society accept and
expect that power is distributed unequally
2. INDIVIDUALISM VS COLLECTIVISM: work style (collaboration, achieving our goals), decision-making
(responsibility)
3. MASCULINITY VS FEMININITY
 M. – preference in society for achievement, heroism, assertiveness, material rewards for success
 F. - preference for cooperation, modesty, caring for the weak and quality of life
4. UNCERTAINTY AVOIDANCE: tolerance for uncertainty, approach to risk
5. LONG TERM vs SHORT TERM ORIENTATION
o LOW: maintain time-honoured traditions and norms
o HIGH: more pragmatic approach => they encourage thrift and efforts in modern
education as a way to preparefor the future
 6. INDULGENCE vs RESTRAINT
o INDULGENCE: means a society where people can freely enjoy life and have fun
o RESTRAINT: means a society that controls and limits people's enjoyment of life and fun
through strict rules and social norms
RELATED TERMS
PERCEPTION
 mutual perceptions of people -> ability to see, hear, use senses
INTERPERSONAL PERCEPTION
 examines the beliefs that interacting people have about each other
SOCIAL INTERACTION
 the process of mutual impact (response, influence) of an individual and another person or group
SOCIAL COMMUNICATION
 tool, a means of social interaction - the process of communicating information and experiences