MBHD 2135 International HRM

Master of Business Administration
STREAM III – HUMAN RESOURCE MANAGEMENT (FUNCTIONAL ELECTIVE)
MBHD 1935
MBHD 2135
INTERNATIONAL HRM
Third Semester
Semester – III
DIRECTORATE OF DISTANCE EDUCATION

SRM Institute of Science and Technology,
Potheri, Chengalpattu District 603203,
Tamil Nadu,INDIA
Phone: 044 – 27417040 / 41
Website: www.srmist.edu.in / Email:office.dde@srmist.edu.in
EXPERT COMMITTEE
S.N NAME DESIGNATION ORGANISATION

o.
1 Dr.R.Rajagopal Director DDE - SRMIST
2 Dr.V.M.Ponniah Dean - Management FOM - SRMIST
FOM – SRMIST, KTR
3 Dr.G.Venugopalan Academic Coordinator
FOM – SRMIST, KTR
4 Dr.T.Ramachandran Head of II year MBA
FOM – SRMIST, KTR
5 Dr.V,M.Shenbagaraman Head of I year MBA
Course Writer(s) Dr.Jawahar P
Information contained in this book has been obtained by its Author(s) from sources believed to be
reliable and are correct to the best of their knowledge. However Publishers and the Author(s) shall in
no event be liable for any errors, omissions or damages arising out of this information and specifically
disclaim any implied warranties or merchantability or fitness for any particular.
DIRECTORATE OF DISTANCE EDUCATION

SRM Institute of Science and Technology,
Potheri, Kancheepuram District 603203, Tamil Nadu,INDIA
Phone: 044 – 27417040 / 41
Website: www.srmist.edu.in / Email:office.dde@srmist.edu.in
SYLLABUS
MBHD1935 INTERNATIONAL HRM
UNIT I – International HRM

Approaches, Challenges in global labour market–Linking HR to International expansion
strategies, Socio–cultural context– Human Resources in a Comparative Perspective
UNIT II
Culture and employee management issues , responding to diversity, challenges of
localization, global integration, differentiation, Mastering expatriation, Cultural
Factors/Issues in Performance Management
UNIT III
Institutional & Structural Context–Managing alliances and joint ventures, HR challenges in
cross border
Integrations–Legal issues in global workforce management, International Recruitment and
Selection Staffing in International context, Developing International Staff and Multinational
Teams –appraisal of expatriate, third and host country employees,
UNIT IV
Issues in international performance management, international training, international
compensation–approaches, composition, Approaches to International Compensation–
Repatriation – Managing Global, Diverse Workforce– International Labour Standards
UNIT V
Social security systems across countries, emerging issues, International Labour Relations,
HRM practices in different countries– Industrial Relations in a Comparative Perspective–
Global Unions, Regional Integration and Framework Agreements– Emerging Trends in
Employee Relations and Employee Involvement– HR/IR issues in MNCs and Corporate
Social Responsibility
LEARNING RESOURCES
1. International Human Resource Management by K. Aswathappa
2. International Human Resource Management–Peter J. Dowling–Cengage Learning
India Private Limited
3. International Human Resource Management–Anne–Wil Harzing, Ashly Pinnington
CONTENTS
MODULE I
1.0 Introduction
1.1 Approaches
1.2 Challenges in global labour market–
1.2.1 Linking HR to International expansion strategies
1.3 Socio–Cultural Context
1.4 Human Resources in a Comparative Perspective
MODULE II
2.0 Introduction
2.1 Culture and Employee management issues
2.2 Responding to Diversity
2.3 Challenges of Localization
2.4 Global Integration
2.5 Differentiation
2.6 Mastering expatriation
2.7 Cultural Factors/Issues in Performance Management
MODULE III
3.0 Introduction
3.1 Institutional and Structural Context
3.1.1 Managing Alliances
3.1.2 Joint Ventures
3.2 HR Challenges in Cross Border
3.3 Integrations
3.3.1 Legal Issues in Global Workforce Management
3.3.2 International Recruitment
3.3.3 Selection Staffing in International Context
3.4 Developing International Staff
3.4.1 Multinational Teams
3.4.2 Appraisal of Expatriate
MODULE IV
4.0 Introduction
4.1 Issues in International Performance Management
4.2 International Training
4.3 International Compensation
4.3.1 International Compensation Approaches
4.3.2 International Compensation Composition
4.3.3 International Compensation Repatriation
4.3.4 International Compensation Managing Global
4.3.5 Diverse Workforce
4.4 International Labour Standards
MODULE V
5.0 Introduction
5.1 Social security systems across countries
5.2 Emerging Issues
5.3 International Labour Relations
5.4 HRM practices in different countries
5.5 Industrial Relations in a Comparative Perspective
5.6 Global Unions
5.7 Regional Integration and Framework Agreements
5.8 Emerging Trends in Employee Relations and Employee Involvement
5.9 HR/IR issues in MNCs and Corporate Social Responsibility
NOTES
MBHD 1935 INTERNATIONAL HRM
Structure
MODULE I
1.0 Introduction
1.1 Approaches
1.2 Challenges in global labour market–
1.2.1 Linking HR to International expansion strategies
1.4 Human Resources in a Comparative Perspective
1.0 INTRODUCTION
International Human Resource Management (IHRM) is the term used for

organisations that manage their human resources activities at an international level.
Essentially, IHRM concerns the global understanding or management of HR
activities within an organisation. With the increasing of globalisation, international
human resource management (IHRM) plays an important role in achieving the
organisation's goals. ... They will be more ready to move their operations into
another country and effectively manage their employees to achieve smooth
operations of the organisations
1.1 APPROACHES
 Increasing globalization, firms and employees in them moving all over the
world.
 Major problems in international operations because of human resource
management blunders
 Hence need to understand human resource management in a global
perspective
NOTES Cross-cultural management
 Examine human behavior within organizations from an international

perspective
Comparative HRM and Industrial Relations
 Seeks to describe, compare and analyze HRM systems and IR in different

countries
HRM in multinational firms
 Explore how HRM is practiced in multinationals
Interrelationships between Approaches of IHRM
Diversity as an Organizational and HR Challenge in MNE
2 SRMIST DDE Self InstructionalMaterial

1.2CHALLENGES IN GLOBAL LABOUR MARKET–LINKING HR TO
NOTES
INTERNATIONAL EXPANSION STRATEGIES
Challenges in global labour market
• Lack of access to the formal labour market. ...
• Lack of recognition of skills and education. ...
• Poverty. ...
• Lack established work and social networks. ...
• Women and girls are the most vulnerable. ...
• Asylum policies. ...
• Engaging employers and other stakeholders. ...
• Language and vocational skills training.
The challenge of the world‘s 3.1 billion workers, 73 per cent lives in developing
countries while only 14 per cent lives in advanced industrial countries and the rest
lives in the countries of Central and Eastern Europe (CEE) and the Commonwealth
of Independent States (CIS), oil-rich countries and other high-income countries. And
some 46 million new workers will be joining the world‘s labour force every year in
the future, the bulk of them in developing countries. While the world‘s labour force
is concentrated in developing countries, its capital and skills are concentrated in
advanced industrial countries. The global employment situation reflects this huge
asymmetry in the distribution of the world‘s productive resources.
Millions of workers in the developing world are seriously under-employed and are
engaged in extremely low-productivity survival activities. Even in advanced
industrial countries and CEE and CIS countries, there are large numbers of
unemployed, precariously employed as well as discouraged workers who have given
up searching for elusive jobs. The challenge that the world faces is one of creating
productive jobs not just for the millions who will be joining the labour force but also
for the millions who are currently unemployed, underemployed, engaged in low-
productivity survival activities and discouraged.
In this context, improving the employment situation often reduces poverty and this
generally occurs in two different ways. First, when employment in the formal
segment grows faster than the labour force, some of the self-employed and casual
NOTES
wage labourers move into full-time productive jobs. Second, when government
policies successfully direct investment into the non-formal segment of the economy,
underemployment of some of the self-employed and casual wage labourers declines
and their productivity and income increases.
The 1990s were a period of rapid growth of cross-border trade and capital flows.
These developments are widely believed to have improved employment conditions
and reduced poverty in developing countries. The study finds no convincing
evidence to support this view. Trade growth and capital inflow were often
accompanied by stagnation or decline in investment in many developing countries.
And since increased trade and capital inflow induced a shift of investment from the
non-formal segment to the formal segment, growth of the non-formal segment was
often adversely affected.
Human resource Management in International Expansion
In today‘s global environment when expanding a business in to another country

IHRM would play a handle new key role. There can be identified very clear 6
differences between domestic and international HRM. They are more HR activities,
need for broader perspectives, the more involve with employees personal life, risk
exposure, broader external influence, changes in emphasis as work force mix of
expatriates and locals.
IHRM is concern with staffing policies, recruitment and selection, remuneration,

motivation, training and development, performance appraisals, promotion,
retirement, redundancy and lay off, industrial relations and foreign assignments.
Expatriates are the employees who is working and temporarily residing in a foreign
country. They could be PCNs, TCNs or HCNs.
Due to the development of technologies such as telecommunication, satellite and

computer technology and lower cost in going business globally has made the IHRM
much more important and easier to manage when compared to the last to few
decades.

For any organization that have global operations all around the world IHRM would
play a Key factor for the company success.
NOTES
When an organization do business internationally, understanding the cultural

differences among the countries is very essential to be successful in the long run. This
is because operations starting in another country, if there are huge cultural difference
among the parent and the subsidiary companies would face varies implications.
According to the Hofsted’s there are 5 cultural damnations.
Power distance
This is the extent to which power is distributed unequally among the employees in
between the higher positions and the lower positions. Eg – India is a high-power
distance culture (even have a cast system) and USA is a lower power distance
culture.
Individualism vs collectivisms
In an individualistic country people would priorities them self (USA) whereas

collectivism country people would priorities group needs.
Uncertainty avoidance
People would try to minimize risk they face in a situation (avoiding paralysis
through analysis) usually countries with long history and traditions have a high
uncertainty avoidance. Countries such as USA well come higher risks.
Masculinity/femininity
Masculine- tough value dominant Eg; success, money, satiates, competition
Feminine- tender values dominant such as personal relationships, care for others,
quality of life etc. When we take Sri Lanka for an example, I think we have feminine
culture even though have many masculinity futures. The best example for this is
during the tsunami situation whole county get together to help the tsunami victims
within ours.
Cross-cultural communication
Similarly, among various countries cross-cultural communication is very necessary
so that they can understand each other‘s through religion, culture, art, literature,
foreign policies, fiscal policies, etc. such type of bridges of understanding will help to
NOTES
lessen and minimize the gap between two culture. Thirukkural, a noted Tamil poet,
who has been translated in more than twenty-five languages and who had been
famous for ethical themes and brevity, has very aptly remarked on power of speech:
 The goodness called goodness of speech

 IS goodness which nothing can reach
 Since gain or ruin speeches brings
 Guard against the slips of tongue
 Weight the words and, speak, because
 No wealth or virtue words surpass.
 They over speak who do not seek
 A few and flawless words to speak
It is said that speech is greater than words, mind is greater than speech, will is
greater than mind consciousness is greater than will, meditation is greater than will
and power of understanding is greater than meditation .sanakumara, surmonzing
naradatma vidya or brahmavidya (knowledge of the supreme) says: power of
understanding beings sine quo non for proper meditation, that‘s is greater than
meditation. If we cannot correctly understand and discriminate good and bad, truth
and untruth and discriminate between good and bad, truth and untruth, and the like
pairs of opposites, how can we meditate? Thus, there is no doubt that the power of
understanding is linked with speech, one of the tools of communication.
1.4 HUMAN RESOURCES IN A COMPARATIVE PERSPECTIVE
There are many activities effecting the IHRM in a organizational context. Industrial
relations, health and safety, management style, authority structure, organizational
structure, leader ship style and etc.
And organization could implement a different structure such as global product

division, global area division and global matrix structure depends on the situation,
subsidiary age and size structure adopted. Controlling of subsidiary would have
both formal and informal control systems. Formal methods would be structure,

reporting systems, budget and targets whereas informal methods would be
cooperate culture and personal relationships.
NOTES
we know some of the transferable HRM policies such as physical layouts, use of
technologies, holiday entitlements, quality circles depending on the culture,
motivation and leadership style, performance appraisals and etc. company
expatriates would have to perform the key activities when implementing the
procedures in subsidiary an at the same time adopt the suitable local norms,
standards and value in to the system to make it more localize the operations.
Improving the performance, implementation of corporate culture, solve technical
problems, handling of sensitive information, reduces risk, improve trust and team
working skills are some of the important functions that expatriates should perform
during a foreign assignment.
Future more political stability, country infrastructure, technology and resources

available in the country, organizational and national cultural differences should be
looking to when implementing IHRM policies.
When starting a subsidiary in a foreign country, there are many reasons why
expatriates are needed. Teaching a new process, setting up a new branch, facilitating
the knowledge transfer between parent and the subsidiary, helping branch to
implement a matrix integration is some of the purposes. This would also depend on
the relationship between parent and subsidiary, amount of investment, other host
country environment factors. Depending on the host culture, size and the maturity of
firm, relative importance of the subsidiary, moral and ethics balancing of
standardization and localization of HRM could be done.
Localization would be the recruitments, holidays, leave procedures and etc.

according to Huo – ―the best IHRM practice ought to be the ones best adopted to
culture and national environment‖.
Developing staff members investing in human capital, career development, good

working conditions and good management practice could help the organization to
retain and attract skilled and qualified labour force in to the organizations. In Sri
Lanka Mas holdings is a very good example for a organization which is practicing
this method
Session 5
There are many ways of staffing international operations. They are ethnocentric,
polycentric, geocentric and regiocentric. Each of this method has its own advantages
and disadvantages. Most of the companies use ethnocentric approach at the initial
NOTES
stage and move to polycentric approach after some time. Eg;- after operating Sri
Lanka for many years Coca Cola has appointed a Sri Lankan as a country head for
the first time.
Organizations use expatriate for international assignment as position filling,

management and development and for organizational development. They could be
assigned for varies time periods and would have many roles to play as expatriate
such as agent of control/socialization, network builder, boundary spanner, language
node, transfer of knowledge etc.
Non-expatriates are people who travel internationally, yet no concede as expatriate

as they do not relocate to another county.. Examples for non-expatriates are auditors,
inspection department, regional managers etc. even though it‘s a glimmers life on
first site non- expatriates would have high level of stress because of family working
arrangements, health concern and host culture issues.
Even expatriates would face lot of difficulties such as spouse and family problems,
lack of cultural sensitivity, reluctant to change and adopt, them us mentality, home
country mentality and etc. There for organizations must use most appropriate
method when selecting a person for an expatriate job.
When recruiting a expatriate for a international assignment organizations has to be

extremely concern. This is because expatriate failure is extremely costly for an
organization. Career advancements financial incentives, interest in countries, interest
to travel are the factors that motivate the expatriates. For expatriate to be successful
in a foreign assignment they have to have the job knowledge and motivation, job
related skills, be flexible and adoptable, helpful family situations and extra cultural
openness.
Expatriate failure could be defined as premature return or under performance during

a foreign assignment. There could be varies reasons for early return of a expatriate
but direct cost of the failure is extremely high for the organization. Eg- salary and
training cost, airfares, relocation expenses, exchange rates, replacing the failed

manager etc. indirect costs would be the damagers to the relationship with stake
holders, family relationships, and negative effects on the local staff members.
NOTES
There are four phases in cultural adjustments which expatriate has to go through in a
foreign assignment. They are,
Tourist – everything is new and enjoyable
Crisis/ cultural shock – see differences and negative side off the new culture
Pulling up
Adjustment
There is a high possibility of expatriate to exit during the cultural shock period.
There for in this each stage organizations would have to take many steps to easy the
situation. Eg- food, customs, cultural values (seniority), home sickness etc.
Training and development of expatriates is essential for the success of a intentional

assignment. This is because expatriates are sent to subsidiaries to show how systems
and procedures work, ensure adoption and motivation of performance. There for
cultural differences and business out comes attitudes and how it effects the
behaviour, facts about the target country, skill building and language is some of the
areas that organization should look in to.
Effective pre-departure training should include cultural awareness programmes,

preliminary visits, language training, non-traditional assignments and training etc.
future more practical assistance for relocation, find accommodation and schooling,
future language training, would also contribute to adaptation of expatriates and his
family members to settle down.
Many methods could be use ot train the expatriates and many examples Some of
them was showing videos, giving case studies, role play and anointing an experience
mentor.
Multinational organizations would face lots of performance management issues and

expatriate re-entering career issues. Performance management is also a way of
controlling the subsidiaries. It also contributes shape the organizational culture.
HCNs and non-expatriate performance would have to be evaluated separately.
Appraisal of host country nationals could be done with standardizes company
evaluation form. But customization of the form according to the local staff should be
done to get the maximum benefits to the all parties. Performance evaluation criteria
NOTES
would be done on hard goals, soft goals and contextual goals. When evaluating the
performance of a non- expatriate stress associated with constant air travel, family
relationship issues should also be considered.
Expatriate performance would be evaluated on how well he/she achieve

organizational targets, relationship and network build up with key parties,
implementation of cooperate culture in the organization and etc. evaluation results
would also have an impact from who is doing the appraisal, frequency, timeliness
and use of standards and customization of the appraisal form.
Re-entry of expatriate after completion of foreign assignment would also have to be

given consideration. Preparation, physical relocation, transactional readjustments are
the phases which have to go through again. To retain the staff in the organization
and repatriation pre-departure career discussions, naming a contact person,
succession planning and etc could be done.
Eg- decrease of living standards, children schooling issues and etc.
For a multinational organization to be successful they should have a good

compensation package in place for their employees. This is because different
countries different currencies, labour laws and customs are in place. There for
expatriate pay should be determine according to cost of living, hardship, currency
fluctuations, health care, housing, taxation and education expense of children.
To determine the compensation package awarded to the expectorates going rate

approach and balance sheet approach can be used. Even though both approaches
have its advantages and disadvantages the balance sheet approach is the most
commonly used system in multinationals. Balance sheet approach would consider
about the goods and services cost, housing cost, income tax and reserves when
determining the benefit package.
When an organization do business with another country to make this transaction

successful knowing the business ethics and social customs are very essential.
Different countries have different values, practices, and taboos which you have to
understand and be respectful.

From country to country the way they use first name, title, position and states, dining
practices, tipping, gift giving, and that a traveling etiquettes, greetings, superstitions
and taboos differ. NOTES
Japanese people show and have a great respect to the business card and exchange
and consider are in tipping as an insult. Different countries have different meal
times, number of courses. Eating everything in the plate or leaving something in the
plate could be reason to be offended in some cultures. Sometimes it‘s better not to
know what is in your plate which you are serve to eat and be restrain form giving
comments on the foods. (it is better to eat without knowing what‘s in the plate (eg-
dog meat, snake meat) without offending your counter party.)
When going abroad for business deal proper dressing, footwear and packing and
even and quality luggage could add some value to your transaction. Male and female
relationships would also in a differ from culture to culture and it is wise not to use
you are hummer during a business meeting. Holidays and holy days also differ from
country to country according to the religion they and practice and the traditions.
And organization should look to this because many cultures do not make any
business decisions in holy days.
Even though bribery is conceding illegal, unethical and immoral it almost takes place
all over the world. But if an organization is doing this kind of transactions, they
would have to be extremely careful because it could lead to fines and damage of
organization reputation.
The strategy demands global H.R. leadership with standard systems but local
adaptation. The key underlying ideas are to satisfy your company's global human
resources needs via feeder mechanisms at regional, national and local levels, and to
leverage your current assets to the fullest extent by actively engaging people in
developing their own careers.
Implementing these ideas can be broken down into 10 steps. By taking these steps, a
company should be able to put into place an effective global human resources
program within three to four years.
1. Break all the "local national" glass ceilings

The first, and perhaps most fundamental, step toward building a global H.R.
program is to end all favouritism toward managers who are nationals of the country
in which the company is based. Companies tend to consider nationals of their
NOTES
headquarters country as potential expatriates and to regard everyone else as "local
nationals." But in today's global markets, such "us-versus-them" distinctions can put
companies at a clear disadvantage, and there are strong reasons to discard them:
Ethnocentric companies tend to be xenophobic -- they put the most confidence in

nationals of their headquarters country. This is why more nationals get the juicy
assignments, climb the ranks and wind up sitting on the board -- and why the
company ends up with a skewed perception of the world. Relatively few
multinational companies have more than token representation on their boards.
A.B.B. is one company that recognizes the danger and now considers it a priority to
move more executives from emerging countries in eastern Europe and Asia into the
higher levels of the company.
Big distinctions can be found between expatriate and local national pay, benefits and
bonuses, and these differences send loud signals to the brightest local nationals to
learn as much as they can and move on.
Less effort is put into recruiting top-notch young people in overseas markets than in
the headquarters country. This leaves fast-growing developing markets with shallow
bench strength.
Insufficient attention and budget are devoted to assessing, training and developing
the careers of valuable local nationals already on the company payroll.

NOTES
Conventional wisdom has defined a lot of the pros and cons of using expatriates
versus local nationals. (See Exhibits I and II). But in an increasingly global
environment, cultural sensitivity and cumulative skills are what count. And these
come with an individual, not a nationality.
NOTES
After all, what exactly is a "local national"? Someone who was born in the country?
Has a parent or a spouse born there? Was educated there? Speaks the language(s)?
Worked there for a while? All employees are local nationals of at least one country,
but often they can claim a connection with several. More frequent international
travel, population mobility and cross-border university education are increasing the
pool of available hybrid local nationals. Every country-connection a person has is a
potential advantage for the individual and the company. So it is in a multinational
company's interests to expand the definition of the term "local national" rather than
restrict it.
2. Trace your lifeline
Based on your company's business strategy, identify the activities that are essential
to achieving success around the world and specify the positions that hold
responsibility for performing them. These positions represent the "lifeline" of your
company. Typically, they account for about 10 percent of management.

Then define the technical, functional and soft skills needed for success in each
"lifeline" role. As Ms. Major of I.B.M. notes, "It is important to understand what
people need to develop as executives. They can be savvy functionally and NOTES
internationally, but they also have to be savvy inside the organization."
This second step requires integrated teams of business and H.R. specialists working
with line managers. Over time, they should extend the skills descriptions to cover all
of the company's executive posts. It took 18 months for I.B.M. to roll out its
worldwide skills management process to more than 100,000 people in manufacturing
and development.
A good starting point is with posts carrying the same title around the globe, but local
circumstances need to be taken into account. Chief financial officers in Latin
American and eastern European subsidiaries, for example, should know how to deal
with volatile exchange rates and high inflation. Unilever circulates skills profiles for
most of its posts, but expects managers to adapt them to meet local needs.
Compiling these descriptions is a major undertaking, and they will not be perfect
because job descriptions are subject to continuous change in today's markets and
because perfect matches of candidates with job descriptions are unlikely to be found.
But they are an essential building block to a global H.R. policy because they establish
common standards.
The lifeline and role descriptions should be revisited at least annually to ensure they
express the business strategy. Many companies recognize the need to review the
impact of strategy and marketplace changes on high-technology and R&D roles but
overlook the fact that managerial jobs are also redrawn by market pressures. The
roles involved in running an emerging market operation, for example, expand as the
company builds its investment and sales base. At I.B.M., skills teams update their
role descriptions every six months to keep pace with the markets and to inform
senior managers which skills are "hot" and which the company has in good supply.
3. Build a global database to know who and where your talent is
The main tool of a global H.R. policy has to be a global database simply because
multinational companies now have many more strategic posts scattered around the
globe and must monitor the career development of many more managers. Although
some multinational companies have been compiling worldwide H.R. databases over
the past decade, these still tend to concentrate on posts at the top of the organization,
neglecting the middle managers in the country markets and potential stars coming
through the ranks.
NOTES
I.B.M. has compiled a database of senior managers for 20 years, into which it feeds
names of promising middle managers, tracking them all with annual reviews. But it
made the base worldwide only 10 years ago. Now the company is building another
global database that will cover 40,000 competencies and include all employees
worldwide who can deliver those skills or be groomed to do so. I.B.M. plans to link
the two databases by 2000.
Unilever has practiced a broader sweep for the past 40 years. It has five talent "pools"
stretching from individual companies (e.g., Good Humor Breyers Ice Cream in the
United States and Walls Ice Cream in Britain) to foreign subsidiaries (e.g., Unilever
United States Inc. and Unilever U.K. Holdings Ltd.) to global corporate
headquarters. From day one, new executive trainees are given targets for personal
development. Those who show the potential to move up significantly are quickly
earmarked for the "Development" list, where their progress through the pools --
company, national, business group and/or region, global, executive committee -- is
guided not only by their direct bosses but by managers up to three levels above. "We
want bigger yardsticks to be applied to these people and we don't want their direct
bosses to hang on to them," explains Herwig Kressler, Unilever's head of
remuneration and industrial relations. To make sure the company is growing the
general management talent it will need, the global H.R. director's strategic arm
reaches into the career moves of the third pool -- those serving in a group or region --
to engineer appointments across divisions and regions.
To build this type of global H.R. database, you should begin with the Step 2 role
descriptions and a series of personal-profile templates that ask questions that go
beyond each manager's curriculum vitae to determine cultural ties, language skills,
countries visited, hobbies and interests. For overseas assignments, H.R. directors
correctly consider such soft skills and cultural adaptability to be as important as
functional skills. The fact that overseas appointments are often made based largely
on functional skills is one reason so many of them fail.1
4. Construct a mobility pyramid

Evaluate your managers in terms of their willingness to move to new locations as
well as their ability and experience. Most H.R. departments look at mobility in black-
or-white terms: "movable" or "not movable." But in today's global markets this NOTES
concept should be viewed as a graduated scale and constantly reassessed because of
changing circumstances in managers' lives and company opportunities. This will
encourage many more managers to opt for overseas assignments and open the
thinking of line and H.R. managers to different ways to use available in-house talent.
Some multinational companies, for example, have been developing a new type of
manager whom we term "glopats": executives who are used as business-builders and
trouble-shooters in short or medium-length assignments in different markets. Other
multinational companies are exploring the geographical elasticity of their local
nationals.
Consider the five-level mobility pyramid in Exhibit III. To encourage managerial

mobility, each personal profile in your database should have a field where managers
and functional experts assess where and for what purposes they would move. When
jobs or projects open, the company can quickly determine who is able and willing to
take them.
NOTES
Managers can move up and down a mobility pyramid at various stages of their
career, often depending on their family and other commitments. Young single people
or divorced managers, for example, may be able and eager to sign up for the glopat
role but want to drop to a lower level of the pyramid if they wish to start or restart a
family life. Or seasoned senior managers may feel ready to rise above the regional
level only when their children enter college.
I.B.M. uses its global H.R. database increasingly for international projects. In
preparing a proposal for a German car manufacturer, for instance, it pulled together
a team of experts with automotive experience in the client's major and new markets.
To reduce costs for its overseas assignments, I.B.M. has introduced geographic
"filters": a line manager signals the need for outside skills to one of I.B.M.'s 400
resource coordinators, who aims to respond in 72 hours; the coordinator then
searches the global skills database for a match, filtering the request through a series
of ever-widening geographic circles. Preference is often given to the suitable
candidate who is geographically closest to the assignment. The line manager then
negotiates with that employee's boss or team for the employee's availability.
The shape of a company's mobility pyramid will depend on its businesses, markets
and development stage and will evolve as the company grows. A mature
multinational food-processing company with decentralized operations, for example,
might find a fiat pyramid adequate, whereas a multinational company in a fast-
moving, high-technology business might need a steeper pyramid with
proportionately more glopats.
1 Kevin Barham and Marion Devine, "The Quest for the International Manager: A
Survey of Global Human Resource Strategies" (Economist Intelligence Unit, 1991).
5. Identify your leadership capital
Build a database of your company's mix of managerial skills by persuading people to

describe the information in their c.v.'s, their management talents and their potential
on standard personal-profile templates. Jump-start the process by having your senior
managers and those in the lifeline posts complete the forms first. Add others

worldwide with the potential to move up. Include functional specialists who show
general management potential.
NOTES
Require over time that every executive join the global H.R. system. This makes it
harder for uncut diamonds to be hidden by their local bosses. Recognizing that
people's situations and career preferences shift over time, hold all managers and
technical experts responsible for updating their c.v.'s and reviewing their personal
profiles at least once a year.
Companies should make it clear that individual inputs to the system are voluntary
but that H.R. and line managers nevertheless will be using the data to plan
promotions and international assignments and to assess training needs. Be mindful
of the personal privacy provisions in the European Union's new Data Protection
directive and similar regulations forthcoming in Japan that basically require
employee consent to gather or circulate any personal information.
6. Assess your bench strength and skills gap
Ask each executive to compare his or her skills and characteristics with the ideal
requirements defined for the executive's current post and preferred next post. Invite
each to propose ways to close any personal skills gaps -- for example, through in-
house training, mentoring, outside courses or participation in cross-border task
forces.
Compare the skills detailed in the personal assessments with those required by your
business strategy. This information should form the basis for your management
development and training programs and show whether you have time to prepare
internal candidates for new job descriptions.
Unilever uses a nine-point competency framework for its senior managers. It then
holds the information in private databases that serve as feeder information for its five
talent pools. The company thoroughly reviews the five pools every two years and
skims them in between, always using a three- to five-year perspective. In 1990, for
example, its ice cream division had a strategic plan to move into 30 new countries
within seven years. Unilever began hiring in its current markets with that in mind
and set up a mobile "ice cream academy" to communicate the necessary technical
skills.
I.B.M. applies its competency framework to a much broader personnel base and
conducts its skills gap analyses every six months. Business strategists in every
strategic business unit define a plan for each market and, working with H.R.
NOTES
specialists, determine the skills required to succeed in it. Competencies are graded
against five proficiency levels.
Managers and functional experts are responsible for checking into the database to
compare their capabilities against the relevant skills profiles and to determine
whether they need additional training. Their assessments are reviewed, discussed
and validated by each executive's boss, and then put into the database. "Through the
database, we get a business view of what we need versus what we have," explains
Rick Weiss, director of skills at I.B.M. "Once the gaps are identified, the question for
H.R. is whether there is time to develop the necessary people or whether they have
to be headhunted from the outside."
7. Recruit regularly
Search for new recruits in every important local market as regularly as you do in the
headquarters country. Develop a reputation as "the company to join" among
graduates of the best universities, as Citibank has in India, for example.
The best way to attract stellar local national recruits is to demonstrate how far up the
organization they can climb. Although many Fortune 500 companies in the United
States derive 50 percent or more of their revenues from non-domestic sales, only 15
percent of their senior posts are held by non-Americans.
There may be nothing to stop a local national from reaching the top, but the
executive suite inevitably reflects where a company was recruiting 30 years earlier.
Even today, many multinational companies recruit disproportionately more people
in their largest -- often their longest-established -- markets, thereby perpetuating the
status quo.
To counter such imbalances, a multinational company must stress recruitment in

emerging markets and, when possible, hire local nationals from these markets for the
middle as well as the lower rungs of its career ladder. Philips Electronics N.V., for
example, gives each country subsidiary a target number of people to bring through
the ranks for international experience. Some go on to lengthy international careers;

others return to home base, where they then command more respect, both in the
business and with government officials, as a result of their international assignments.
NOTES
8. Advertise your posts internally
Run your own global labour market. In a large company, it is hard to keep track of
the best candidates. For this reason, I.B.M. now advertises many of its posts on its
worldwide Intranet. Unilever usually advertises only posts in the lower two pools,
but this policy varies by country and by business unit.
Routine internal advertising has many advantages in that it:
 Allows a competitive internal job market to function across nationalities,

genders and other categories.
 Shows ambitious people they can make their future in the company.
 Makes it harder for bosses to hide their leading lights.
 Attracts high-flyers who may be ready to jump ship.
 Helps to break down business-unit and divisional baronies.
 Reduces inbreeding by transferring managers across businesses and
divisions.
 Gives the rest of the company first pick of talent made redundant in
another part of the world.
 Solidifies company culture.
 Is consistent with giving employees responsibility to manage their own
careers.
There are also certain disadvantages to this practice: Line managers have to fill the
shoes of those who move; a central arbiter may need to settle disputes between
departments and divisions, and applicants not chosen might decide to leave. To
prevent that, disappointed applicants should automatically be routed through the
career development office to discuss how their skills and performance mesh with
their ambitions.
I.B.M. used to hire only from the inside, but five years ago it began to recruit
outsiders -- including those from other industries -- to broaden thinking and add
objectivity. Unilever is large enough that it can garner a short list of three to five
internal candidates for any post. Yet it still fills 15 percent to 20 percent of managerial
jobs from outside because of the need for specialist skills and because of the
decreasing ability to plan where future growth opportunities will occur.
NOTES 9. Institute succession planning
Every manager in a lifeline job should be required to nominate up to three

candidates who could take over that post in the next week, in three months or within
a year, and their bosses should sign off on the nominations. This should go a long
way toward solving succession questions, but it will not resolve them completely.
The problem in large multinational companies is that many of today's successors

may leave the company tomorrow. In addition, managers name only those people
they know as successors. Third, the chief executives of many multinational
companies keep their succession plans -- if they have any -- only in their heads. This
seems to overlook the harsh realities of life and death. A better approach is that of
one European shipping magnate who always carries a written list with the name of a
successor for the captain of every boat in his feet.
10. Challenge and retain your talent
Global networks that transfer knowledge and good practices run on people-to-
people contact and continuity. Executive continuity also cuts down on turnover,
recruitment and opportunity costs. As international competition for talent intensifies,
therefore, it becomes increasingly important for companies to retain their good
managers. Monetary incentives are not sufficient: the package must include
challenge, personal growth and job satisfaction.
A policy should be adopted that invites employees to grow with the company, in
every market. In addition, a career plan should be drawn up for every executive
within his or her first 100 days in the organization. And plans should be reviewed
regularly to be sure they stay aligned with the business strategy and the individual's
need for job satisfaction and employability.
Overseas assignments and cross-border task forces are excellent ways to challenge,
develop and retain good managers. They can also be awarded as horizontal
"promotions." This is particularly useful since the fiat organizations currently in

fashion do not have enough levels for hierarchical promotions alone to provide
sufficient motivation.
NOTES
Unilever has long had a policy of retentive development and manages to hold on to
50 percent of its high-fiyers. As an integral part of its global H.R. policy, it develops
the "good" as well as the "best." Unilever reasons realistically that it needs to back up
its high-fiyers at every stage and location with a strong bench of crisis-proof,
experienced supporters who also understand how to move with the markets.
Unilever bases these policies on three principles:
1. be very open with people about the company's assessment of their potential and
future.
2. Pay people well -- and pay those with high potential really well, even though it
may look like a distortion to others.
3. Don‘t hesitate too long to promote people who have shown ability.
Sometimes this policy involves taking risks with people. But the point of a good
system is to enable a company to place bets on the right people.
Difference between international and comparative HRM
International HRM has been defined as HRM issues, functions, policies and practices
that result from the strategic activities of MNEs (Scullion, 1995). IHRM deals
principally with issues and problems associated with the globalisation of capitalism.
It involves the same elements as domestic HRM but is more complex to manage, in
terms of the diversity of national contexts and types of workers. The emphasis is on
the MNCs‘ ability to attract, develop and deploy talented employees in a
multinational setting and to get them to work effectively despite differences in
culture, language and locations. International HRM tends to mitigate the impact of
national culture and national employment practice against corporate culture and
practices.
Comparative HRM, on the other hand, is a systematic method of investigation that

seeks to explain the patterns and variations encountered in cross-national HRM
rather than simply describe HRM institutions and practices in different societies.
According to comparative HRM literature, different national business systems arise
from differences in specific historical, cultural and institutional heritage in certain
countries. Comparative differences occur due to decisive historical events such as the
process of industrialisation or due to the legacy of pre-modern forms of social
NOTES
organisation. Hofstede‘s (1980) adopted the ‗culturalist‘ perspective where he argued
that national business styles emerge due to ingrained cultural attitudes and mental
schemas. He described culture under five dimensions which are power distance,
individualism, masculinity, uncertainty avoidance and long-term orientation. Other
researchers claim that HR management practices differ between nations due to the
presence of specifically national institutions such as education, banking services or
state/legal support.
In what ways (if at all) does an understanding of comparative HRM assist academics
and HR practitioners appreciate the difference in the strategies and processes in
MNCs which are often termed as International HRM?
The contrasted view to a divergence point mentioned above is that some academics
claim that with HRM policies and practices are becoming universal (tending more
towards the dominant American models) and that country-of-origin effects are no
longer relevant. The pressure to build standardised operations internationally is
strongest in sectors where competition is highly internationalised and where firms
compete on the basis of a similar product or service across countries such as in cars
and fast foods. They have put forward several reasons to explain this trend. Firstly,
all MNCs operate in one global market and therefore have to respond to the same
environmental pressures such as globalisation and technology, the growth in
international trade and the move towards an internationally-integrated financial
system. Secondly, the widespread practice of benchmarking ‗best practice‘ in terms
of cost, quality and productivity may also have contributed to convergence of
international HRM models for e.g. Japanese style ‗lean-production‘ system in the
1980s and 1990s. Moreover, these pressures towards convergence stem in part from
the influence of MNCs themselves through their ability to transfer practices across
borders and erode country-of-origin effects. Finally, the formation and development
of like-minded international cadres mostly from American or European business
schools may have contributed to homogenised international HRM policies and
practices.

Since the early 1990s, the international HRM literature has been dominated by
models and typologies aimed at identifying how international HR fits with
organisational strategy. Bartlett and Ghoshal (1998) argue that the main issue for all NOTES
multinational companies is the need to trade-off the advantages global efficiency
namely the coordination of its operations to achieve economies of scale and scope as
opposed to the need to differentiate its products and services to meet the local
demands. They also identified a third pressure, namely worldwide innovation and
learning, whereby firms are encouraged to support innovation and learning across
their network of subsidiaries rather than simply relying on research and
development at the headquarters. MNEs then follow the appropriate HRM policies
and practices according to the structure of the organisation, the competitive strategy
chosen or stage of corporate evolution reached. Below, the Taylor‘s (1996) model of
strategic international HRM has been described.
Exportive: This is essentially a model where the HQ management takes home

country management approach and try to implement them in their foreign
subsidiaries in order to achieve economies of scale. In this model, there is a system of
hierarchy and a centralised control. This is especially useful in instances of uncertain
political environment and high risks demanding greater control from corporate
parents. Given this pattern of centralisation, there is a considerable amount of
‗forward policy transfer‘ and less ‗reverse transfer from subsidiaries to the HQ, i.e.
they rely mainly on the technical know-how of the parent company. Global firms
offer products or services that are standardised to enable production to be carried in
a cost-efficient way. Their subsidiaries are not subject to rigid control except over the
quality and the presentation of the product or service. This structure is normally
associated with the American firms with their formalised, bureaucratic control and a
dominant finance system to internalise risks.
Adaptive: Differences in the host environment demands and conditions mean that
overseas subsidiaries have to operate independently. This is common where
departing from established practices in host environments is unlawful. For example,
in some Germany, there is a legal obligation to negotiate with employee
representatives concerning major organisational changes. In other cases, transferring
practices may be legal but would go against traditional practices at the risk of losing
goodwill from staff. Firms may decide to forgo HQ control if there is the possibility
to exploit most efficiently the local labour markers. For example, MNCs which origin
from high-cost highly regulated economies such as Germany may well choose not to
transfer important elements of their HR systems such as collective bargaining or
NOTES
apprenticeship if they move to lower wage, lightly regulated economies such as
China.
Integrative: It is also argued that the more management processes and activities can
be integrated across geographical boundaries, the easier it is to share resources and
knowledge. They can identify and best use the skill and management talent that
exists across the MNC network allowing for both global integration and local
differentiation.
As mentioned previously, international HRM processes consist of the same activities

as domestic HRM but applied in an international context. These include an accurate
human resource planning to ensure that the MNCs have the right people at the right
place around the world, good staffing policies that capitalise on the world-wide
expertise of expatriates and locals, performance appraisals that fit with the
competitive strategies of the HQ, adequate training and development to ensure that
expatriates do not suffer from ‗culture shock‘ and compensation policies that are
strategically and culturally relevant. The focus in international HRM strategy is how
MNEs coordinate their geographically dispersed operations strengthening the
organisational culture, promoting commitment and encouraging willingness in
employees to act in the interests of the firm.
Recruitment and selection of international managers
Employees play a crucial role in sustaining and coordinating their geographically

dispersed operations. The challenge is that of resourcing international operations
with people of the right calibre. Traditionally, MNEs sent expatriates, i.e. a parent
country national abroad to ensure that the policies and procedures set by the parent -
company were being followed as well as to bring expertise to the local employees.
However, the high number of expatriate failures has meant that more and more
MNEs are turning to host country nationals to satisfy the international staffing needs.
The prominent reason to explain international assignment failures was the inability
of the expatriate or his family to cope with the ‗culture shock‘. Researchers revealed
that international business travellers faced problems in their personal lives and were

victims of stress. Moreover, changes in legislative conditions affecting labour
relations combined with security issues have made it more costly to use expatriates
at senior management positions at subsidiary level. The advantages of employing NOTES
local nationals are that they are familiar with local markets, the local communities,
the cultural setting and the local economy. They speak the local language and are
culturally assimilated. They can take a long-view and contribute for a long period (as
distinct from expatriates who are likely to take a short-term perspective). Expatriates
are only used as technical trouble-shooters and general management operatives. This
means academics need to find the best ways to recruit and select local managers and
help them cultivate a global perspective rather than a narrow outlook on how to
conduct business in the local environment.
International pay and reward and performance management
The concept fair pay and reward is also subject to different interpretations depending
on the national business system. Triandis (1998) differentiated between vertical
cultures which accept hierarchy as given whereas horizontal cultures accept equality
as given. In individualistic cultures, there are few rules and norms about correct
behaviour and employees expect to be rewarded on their own merits and
performance. Countries like US feature at the higher end of the individualistic
spectrum. On the other hand, collectivism emerges in societies that have many rules
and regulations about correct behaviour. In these societies, employees accept
rewards or recognition on the basis of their seniority, efficiency and conformity with
the organisational values rather than on the basis of their creativity or
professionalism (Pascale and Athos, 1981). China is an example of a collectivist
society. In such societies, rewards for individual performance or differentiating
between employees are not acceptable. Indeed, the prevailing view is that it takes
the contribution from everyone to achieve continuous improvement (‗kaizen‘) in
Japanese enterprise. Singling one employee may cause him to lose face and
consequently a loss of goodwill for the expatriate manager.
Moreover, an understanding of the body language is vital for senior expatriate

managers when providing feedbacks. While in individualistic society, it is perfectly
acceptable for a subordinate to participate in a discussion with his senior, in
collectivist societies such as India, disagreeing with one‘s supervisor is considered
disrespectful. Furthermore, countries like Korea and Taiwan prefer more subtle ways
of communicating feedbacks. Up-front reprimand or performance appraisal is likely
to clash with the society‘s norms of harmony and the employees may view it as a
personal affront. Understanding these local customs and mapping them across
NOTES
countries is an exciting field of study for researchers interested in global performance
management systems.
Training and development
Training and development is vital to ensure that the workforce remains competent
and flexible by developing the ‗know-how‘ thought necessary for success in the
company and on the job. Scholars have highlighted the importance of national
culture on training and development in terms of the hard and soft approach. The
hard approach views employees in the organisation as a mere resource to achieve
goals of the organisation while the soft approach views them more as valued assets
capable of development (Tyson and Fell, 1986). This approach obviously influence
the level amount of institutional (percentage GDP) spent on education. The German
tradition adopts the soft approach and relies on formal apprenticeship, functional
rotation and career path where technical expertise is gradually developed. UK which
support the hard approach, believes that the individual is responsible for funding his
own education and career advancement. This difference in national training and
education systems will mean that the skill and competence profile of the workers
available on the labour market will vary from one country to another.
Comparative studies have also shown that there are national differences in the way
that managerial careers and management development are organised. Both Japan
and France rely on elite recruitment, that is, future managers are decided at the point
of entry based on their exceptional qualifications. This contrasts with the American
belief of self-improvement where the philosophy is ‗it‘s never too late to change‘.
Also, there are also noticeable differences in the teaching and learning style across
countries. The idea of working in groups is more natural to Asian than individualist
Anglo-Saxon managers. German and Swiss manager‘s favour structured learning
environments and coming to the ‗right‘ answers and are tolerant of confrontation.
Asian countries, in contrast, are more concerned about status differences and may be
unwilling to exchange ideas against their mentors. This will consequently impact on
the format of delivering training for the practitioner, whereby the Asian employees

might prefer lecture-type training and German and Swiss might prefer the seminar-
type interpersonal interaction.
NOTES
Employment relations
Finally, the type of employee relations pursued by the MNE depends principally on
the national business systems characteristics of the both the home and host countries.
According to Hall and Soskice (2001), there are two varieties of capitalism: Liberated
market economies and coordinated market economies. In liberal market economies,
firms coordinate their activities primarily via hierarchies and competitive market
arrangements. Market relations are characterised by arm‘s length exchange of goods
and services and formal contracting. The demand and supply of goods and services
are regulated though market mechanisms. There are comparatively fewer state
controls. Nations like US and UK fall under this category of market. Consequently,
US MNEs adopt a short-termist shareholder value mentality which means they are
less willing to offer secure employment to their workers. Therefore, management of
labour in the US mirrors the economic model of demand and supply, with market
determined wages, hire-and-fire practice and many workers employed on a
temporary basis. Employers in US are also more resistant to trade union
organisations than in other developed industrial democracies and the legal support
for trade union organisations and collective bargaining are relatively weak in the US
compared to those in other countries.
In contrast, in coordinated market economies, firms depend more heavily on non-

market relationships to coordinate their activities with other economic actors. These
non-market modes means there is greater reliance on private information inside
networks and a greater reliance on collaborative relationships. Coordinated market
economies are also characterised by a higher degree of government intervention.
Countries such as France, Italy and China are examples of such economies. To
illustrate, countries like Germany and Japan have adopted the long-termist approach
whereby the interests of stakeholders are considered rather than simply of
shareholders. This means these MNEs can offer its employees long-term
employment. German trade unions are considered as a powerful stakeholder in the
labour market and have the right of ‗collective bargaining‘, i.e. employers need to so
consult their workers before any major changes are carried out.
To conclude, the basic purpose of examining human resource from a comparative
and international perspective is that it contributes to an understanding of the extent
to which there are differences between organisations and their subsidiaries located in
NOTES
different countries. The main difference between comparative and international
HRM is comparative HRM seeks to explain the differences arising between different
business systems while IHRM downplays the importance of host and home country
differences. The greater cultural distance between home country and host country,
the harder it will be for the MNCs to transfer home country philosophies and
practices. This impact on the way HR practitioners have to implement their policies
but opens up new avenues for research for the academics.

MODULE II
NOTES
Structure
2.0 Introduction
2.5 Differentiation
2.0 Introduction
The key to a successful organization is to have a culture based on a strongly held and
widely shared set of beliefs that are supported by strategy and structure. When an
organization has a strong culture, three things happen: Employees know how top
management wants them to respond to any situation, employees believe that the
expected response is the proper one, and employees know that they will be
rewarded for demonstrating the organization's values. HR has a vital role in
perpetuating a strong culture, starting with recruiting and selecting applicants who
will share the organization's beliefs and thrive in that culture. HR also develops
orientation, training and performance management programs that outline and
reinforce the organization's core values and ensures that appropriate rewards and
recognition go to employees who truly embody the values.
Organisational Culture definition. The collective behaviours, values, actions, beliefs,

desires and prospects of a group of human beings working in a defined
environment. Ravasi and Schultz (2006) define organisational culture as a set of
'shared mental assumptions' that guide behaviours in the workplace. Cultural values
are part of the external factors that influence HR exercises. Cultural values command
employee behaviour. In organizational cultures where employee engagement is
common, it is more likely to have higher employee satisfaction and encouragement
than the ones that do not favour employee involvement.
An organization's culture defines the proper way to behave within the organization.
This culture consists of shared beliefs and values established by leaders and then
communicated and reinforced through various methods, ultimately shaping
NOTES
employee perceptions, behaviours and understanding. Organizational culture sets
the context for everything an enterprise does. Because industries and situations vary
significantly, there is not a one-size-fits-all culture template that meets the needs of
all organizations.
A strong culture is a common denominator among the most successful companies.

All have consensus at the top regarding cultural priorities, and those values focus not
on individuals but on the organization and its goals. Leaders in successful companies
live their cultures every day and go out of their way to communicate their cultural
identities to employees as well as prospective new hires. They are clear about their
values and how those values define their organizations and determine how the
organizations run
What Is Organizational Culture?
For HR professionals to have any impact on culture, they must first have a thorough
understanding of what culture is in a general sense and what their organization's
specific culture is. At the deepest level, an organization's culture is based on values
derived from basic assumptions about the following:
Human nature: Are people inherently good or bad, mutable or immutable, proactive
or reactive? These basic assumptions lead to beliefs about how employees, customers
and suppliers should interact and how they should be managed.
The organization's relationship to its environment: How does the organization

define its business and its constituencies?
Appropriate emotions: Which emotions should people be encouraged to express,

and which ones should be suppressed?
Effectiveness: What metrics show whether the organization and its individual
components are doing well? An organization will be effective only when the culture
is supported by an appropriate business strategy and a structure that is appropriate
for both the business and the desired culture.

Culture is a nebulous concept and is often an undefined aspect of an organization.
Although extensive academic literature exists relating to the topic of organizational
culture, there is no generally accepted definition of culture. Instead, the literature NOTES
expresses many different views as to what organizational culture is. Organizational
culture can manifest itself in a variety of ways, including leadership behaviours,
communication styles, internally distributed messages and corporate celebrations.
Given that culture comprises so many elements, it is not surprising that terms for
describing specific cultures vary widely. Some commonly used terms for describing
cultures include aggressive, customer-focused, innovative, fun, ethical, research-
driven, technology-driven, process-oriented, hierarchical, family-friendly and risk-
taking. Because culture is difficult to define, organizations may have trouble
maintaining consistency in their messages about culture. Employees may also find it
difficult to identify and communicate about perceived cultural inconsistencies.
Factors That Shape an Organization's Culture: Organizational leaders often speak

about the unusual natures of their company cultures, seeing their domains as special
places to work. But organizations such as Disney and Nordstrom, which are well-
known for their unique cultures, are rare. See Viewpoint: 3 Steps to Cultivating a
Customized Culture.
Most company cultures are not that different from one another. Even organizations
in disparate industries such as manufacturing and health care tend to share a
common core of cultural values. For example, most private-sector companies want to
grow and increase revenues. Most strive to be team-oriented and to demonstrate
concern for others. Most are driven, rather than relaxed, because they are competing
for dollars and market share. Some of the cultural characteristics that distinguish
most organizations include the following.
Values: At the heart of organizations' cultures are commonly shared values. None is
right or wrong, but organizations need to decide which values they will emphasize.
These common values include:
 Outcome orientation - Emphasizing achievements and results.

 People orientation - Insisting on fairness, tolerance and respect for the
individual.
 Team orientation - Emphasizing and rewarding collaboration.
 Attention to detail - Valuing precision and approaching situations and
problems analytically.
 Stability - Providing security and following a predictable course.
NOTES
 Innovation - Encouraging experimentation and risk-taking.
 Aggressiveness - Stimulating a fiercely competitive spirit.
Creating and Managing Organizational Culture: An organizational culture tends to

emerge over time, shaped by the organization's leadership and by actions and values
perceived to have contributed to earlier successes. A company culture can be
managed through the cultural awareness of organizational leaders and HR
professionals. Managing a culture takes focused efforts to sustain elements of the
culture that support organizational effectiveness. See Addressing the Six Sources of
Workplace Cultural Conflicts.
How culture develops?
An organization's customs, traditions, rituals, behavioural norms, symbols and

general way of doing things are the visible manifestation of its culture; they are what
one sees when walking into the organization. The current organizational culture is
usually due to factors that have worked well for the organization in the past. See
How to Create a Culture of Civility.
Founders typically have a significant impact on an organization's early culture. Over

time, behavioural norms develop that are consistent with the organization's values.
For example, in some organizations, resolution of conflicts is hashed out openly and
noisily to create widespread consensus, whereas in other places disputes are settled
hierarchically and quietly behind closed doors.
Though culture emerges naturally in most organizations, strong cultures often begin
with a process called "values blueprinting," which involves a candid conversation
with leaders from across the organization. Once the culture is framed, an
organization may establish a values committee that has a direct link to leadership.
This group makes sure the desired culture is alive and well. For values blueprinting
to work, organizations must first hire people who live the values and have the
competency needed to perform the job.

Sustaining a culture: The management of organizational culture starts with
identifying a company's organizational culture traits or "artifacts." Artifacts are the
core business activities, processes and philosophies that characterize how an NOTES
organization does business day-to-day.
Identifying these traits—and assessing their importance in light of current business

objectives—is a way to start managing culture. Three broad concepts help identify
the traits specific to a culture:
Social culture: This refers to group members' roles and responsibilities. It is the
study of class distinctions and the distribution of power that exists in any group.
Material culture: This involves examining everything that people in a group make or
achieve and the ways people work with and support one another in exchanging
required goods and services.
Ideological culture: This is tied to a group's values, beliefs and ideals—the things
people view as fundamental. It includes the emotional and intellectual guidelines
that govern people's daily existence and interactions.
Leaders and HR professionals within an organization should approach culture

management by initially gaining an understanding of the common traits found in all
businesses. Then, they should take the following steps to manage their organization's
culture:
 Identify common artifacts or traits, including those from the standpoint of an

organization's social, material and ideological culture.
 Convene groups of employees—representatives from all levels, functions and
locations of the organization—to assess the validity, significance and
currency of key artifacts.
 Subject those traits to a rigorous assessment of their underlying shared
assumptions, values and beliefs.
 Summarize findings and share them with all participants to solicit additional
insights.
 Create a culture management action plan. The plan should enhance traits that
support corporate growth or organizational effectiveness and correct traits
that might hinder a company's advancement.
NOTES
Typically, shared assumptions and beliefs originate with an organization's founders
and leaders. Because those beliefs proved successful (otherwise the company would
not exist and the leaders would not be in their positions), often they go unchallenged;
however, those assumptions and beliefs might be outdated and may hinder future
success. See 6 Steps for Building an Inclusive Workplace.
Global Issues: Research suggests that national culture has a greater effect on
employees than the culture of their organization. Organizational leaders and HR
professionals should understand the national cultural values in the countries in
which the organization operates to ensure that management and HR practices are
appropriate and will be effective in operations in those countries. National cultural
differences should be considered when implementing organizational culture
management initiatives in global businesses.
Managers must be able to respond to nuances in communication styles, as well as

deal with different expectations that employees have of their leaders across national
cultures. Not meeting those expectations may doom the global organization's chance
for success in particular countries. These issues become even more complex in global
business mergers. Success in international mergers depends on the merged
organization's willingness to enable people with different cultural perspectives to
engage in meaningful and valuable discussions about the new business.
Diversity means understanding that each individual is unique, and recognizing our
individual differences. These can be along the dimensions of race, ethnicity, gender,
sexual orientation, socio-economic status, age, physical abilities, religious beliefs,
political beliefs, or other ideologies. Diversity means understanding that each
individual is unique, and recognizing their individual differences. These differences
can be along the dimensions of race, gender, ethnicity, gender and sexual orientation.
Understanding that diversity includes not only ways of being but also ways of
knowing.
Five Tips for Dealing Better with Workplace Diversity

 Redefine, and recognize the many types of diversity. As already stated,
diversity has many categories, and not all are readily noticeable.
 Redefine discrimination, and clamp down on all its forms. NOTES
 Celebrate diversity in all ways possible.
 Keep reaching out.
 Don't assume people understand your jokes.
Ten Tips for Responding to Cultural Differences: Going on a volunteer trip often
means traveling to a new culture. Every culture is unique, and even if you‘ve
travelled abroad before, you‘re likely going to run into some sticky situations. How
do you respond?
How to Engage Different Cultures:
1. Keep an Open Mind: The ability to keep opinions flexible and receptive to new
stimuli is important to intercultural adjustment. Even if you don‘t understand why
people do a particular thing, be careful not to jump to conclusions.
2. Learn to Cope with Failure: Learning to tolerate failure is critical because

everyone fails at something overseas!
3. Be Flexible: The ability to respond to or tolerate the ambiguity of new situations is

very important to intercultural success. Keeping options open and judgmental
behaviour to a minimum helps you adapt well.
4. Maintain a Healthy Curiosity: Curiosity is the demonstrated desire to know about

other people, places, ideas, etc. This personality trait is important for intercultural
travelers because they need to learn many things in order to adapt to their new
environment.
5. Hold Positive and Realistic Expectations: There are strong correlations between
positive expectations for an intercultural experience and successful adjustment
overseas. Being realistic in what to expect will help you feel prepared for any
situation.
6. Be Tolerant of Differences: A sympathetic understanding of beliefs or practices

different from your own is key to successful intercultural adjustment.
7. Regard Others Positively: The ability to express warmth, empathy, respect, and
positive regard for other persons is an important component of effective intercultural
relations. Try to think of things you really enjoy or like about their culture and
NOTES
embrace differences.
8. Be Good Guests: As a guest in someone‘s home, you would never remark about
the ―dirty‖ kitchen, the ―terrible‖ food, or the ―crazy‖ seating arrangement. As a
traveller you are, in a broad sense, going into someone‘s ―home.‖ Show respect.
9. Have a Sense of Humour: A sense of humour is important because in another

culture so many things can lead to intense emotions. Sadness, anger, annoyance,
embarrassment and discouragement are all common. The ability to laugh in spite of
the circumstances will help guard against despair.
10. Have Fun: Its okay to acknowledge cultural differences – don‘t take them too
seriously and don‘t hold an ―I‘m right/you‘re wrong‖ attitude. Relax, have fun, and
enjoy your new friends.
Responding to diversity:
 The risks and experiences of violence may be shaped by multiple factors,

such as age, race, ethnicity, education and social-economic status, marital
status, occupation, national origin, religion, disability, sexual orientation or
other status. As such, policies and programmes should be tailored to address
them in order to be relevant and effective.
 Initiatives should be informed by comprehensive research and analysis
regarding the specific context of violence against women and girls (forms,
settings, groups affected) and the different variables that affect a particular
group‘s vulnerability to violence. Such information and data should guide the
design of policies and interventions.
 Programme design should also be informed by an understanding of the
distinct contexts in which violence against women and girls occurs
throughout the life cycle, from before birth through old age, with
interventions tailored accordingly to address the specific forms of violence
affecting different age groups and appropriately support the needs of
survivors.

 Interventions should consider national, sub-national and local variations in
regards to the nature of violence, the policy context and the extent to which
actions are implemented to address the violence. For example, where national NOTES
legal and policy frameworks are underdeveloped, advocacy to raise
awareness and public commitment to address the issue is critical. However,
in countries where legal reforms have been established, the advocacy efforts
may prioritize implementation and monitoring of existing laws and policies.
 Programmes should seek to identify and equally address less documented
forms of violence that may affect particularly marginalized groups within the
population, such as domestic workers, adolescent girls or communities
affected by conflict. These groups may be more vulnerable to violence and
lack access to health care, legal assistance, economic opportunities and other
resources critical to addressing an abusive situation. Given their peripheral
social status, these sub-groups of women and girls face issues that are often
less visible in public and policy agendas. For example, post-conflict
demobilization processes should consider the distinct forms of violence
experienced by women and girl soldiers, and develop tailored interventions
that address their specific reintegration needs.
Localization is the entire process of adapting a product or content to a specific

location or market, according to the Globalization and Localization Association.
Translation is the process of converting text from one language to another.
Translation is one aspect of localization, but localization is more extensive.
The 6 Biggest Challenges of Localization: Localization is essential, but it isn‘t easy.

Understanding the challenges of localization when expanding into new markets will
help your company better prepare for the road ahead and choose the Translation
Management System (TMS) best aligned with your globalization strategy. After over
a decade of helping companies of all sizes go global and providing a best-in-class
SaaS translation platform, we‘ve been able to identify the most common challenges
that companies of sizes and stages run into when localizing. Here are the six biggest
challenges of localization and translation management, and how to overcome them.
1. Not knowing where to start: Localization is a growing industry. Companies
looking to expand to new territories are often uncertain where to begin. Before
researching localization platforms, it‘s important to understand the translation
NOTES
management industry, as well as hone in on your company‘s local and global
business needs. Things like how often translated content will be published, how
many translators will be working on projects, and whether or not content will be
uploaded manually or automatically are all key considerations when choosing a
Translation Management Platform.
2. Lacking the necessary resources: Successful localization goes beyond choosing a

translation management platform. Finding the right translators or translation agency
is also important. High-quality translations lead to increased engagement, more
conversions, and improved SEO efforts, while poor translations can make the
company look unprofessional and even run the risk of offending local customers.
3. Still relying on manual processes: Traditionally, translations have been

completed by putting translatable strings in a spreadsheet, sending the document to
translators, waiting for confirmation the document has been received, waiting for the
translated strings to be sent back, then having developers manually enter the
translated strings into the code or CMS. Manual processes are not only antiquated
and inefficient, they have a higher margin of error and are not as cost-efficient as
streamlined automated processes. The truth is that with today‘s technology,
companies are now able to translate and localize their content with far more
advanced methods and processes than manual processes.
4. Delaying or extending launches: Manual processes also contribute to delayed or

extended launches, as does lacking the right translation tools. This combination can
lead to increased translation time, result in low-quality translations that often require
a rework before being deployed, or force translators to use complicated source code
that can make it challenging to clearly understand and accurately translate the source
language.
5. Not enough communication: Without clearly understanding a brand‘s values,

product benefits, communication style, and target audience, translators will have a
hard time providing quality translations that will resonate within the local market. In
addition to keeping the lines of communication open throughout the translation

process and encouraging collaboration, it‘s crucial to provide translators with context
for their translations through resources like glossaries and style guides.
NOTES
6. Not shopping around: In a nascent industry like localization, some companies
choose to work with whatever platform appears to be the biggest and best or the
cheapest. There is no one-size-fits-all solution to localization, and what works for a
Fortune 500 company may not work for a growing start-up. What‘s most important
is finding a solution that not only fits the company‘s present needs but one that is
agile and can be scaled easily to accommodate growth as well.
Global HR: Localization in Human Resource Management: In today‘s society,

physical borders between countries are becoming less and less rigid, making it easier
for people to relocate. This is why, especially in big companies, management is faced
with an abundance of cultural differences between employees. Below are some tips
on how to manage and promote cultural diversity and how to make each and every
employee feel valued and respected, no matter where they come from.
Learn about cultural differences: If you want to be able to manage cultural

differences, you must first be able to understand those cultures. People are taught to
speak and act in a certain way, based on where they come from. Germans, for
example, are more straightforward in communication and prefer to be more
business-oriented in discussions, leaving jokes and humour aside. Italians, on the
other hand, prefer a more personal connection and can often forget the boundaries
between work and friendships. A good HR manager should spend time learning
about the culture of foreign employees, so they know how to handle various
situations that may come along the way.
Promote open communication: For people to be able to feel included, they need to
feel they can speak their mind. Most conflicts happen because of small
misunderstandings, and when you put people from different cultural backgrounds
in the same room, it can happen quite often. Some people might take the politeness
and friendliness of Americans as being fake, while others might think their French
colleague is too much of an arrogant, simply because he does not speak much.
Encourage employees to speak their mind in a way that does not offend or affect
others.
Show respect and consideration: If you want to be considered a company that
promotes cultural diversity, then you don‘t only need to acknowledge those
differences, but to also show consideration. Some cultures are more focused on their
NOTES
family life, while others are more centred on their business life. You cannot expect
them to change those beliefs, as it is the way they are accustomed to behave.
Immigrants may sometimes have trouble understanding legal paperwork, so it may
be a good idea to have the documents translated into their native language as well.
Professional translation services, such as Pick Writers, can be used to make sure the
papers are correctly translated and nothing is left for interpretation.
Allow a flexible schedule when necessary: Part of embracing and managing

cultural diversity involves being familiar with their holidays and respecting their
traditions. Some cultures celebrate various holidays on different days, so giving them
the day off on the 25th of December may not do them any good. If the work
environment allows, discuss those particular situations with your employees and try
to find the middle-ground. Again, with open communication and consideration,
anything is possible. Cultural diversity is more and more present in work
environments, which is why companies should take a step forward towards
embracing it and finding the proper ways to manage it.
Global integration is the degree to which the company is able to use the same
products and methods in other countries. Local responsiveness is the degree to
which the company must customize their products and methods to meet conditions
in other countries.
Global integration is needed for existing literature argues that global integration
helps MNCs save costs and achieve global efficiencies. For example, global
integration minimizes duplication, thus saving costs through standardization
(Dunning 1998), and global integration creates efficiencies due to global economies of
scale.
Background of Global Integration:
The economy of India has developed drastically since independence from the British
rule. The government‘s priorities immediately after 1947 were to focus on social

upliftment of people and eradicating poverty. The economy was largely agrarian and
industries were scarce.
NOTES
Gradually, the government started establishing its own industries. There were
several public sector corporations operating in many industries. The government
ensured that they flourished by creating monopolistic markets. Hence, private
companies were heavily regulated and controlled.
This approach did not last very long because the government ended up with a
balance of payment crisis in 1991. When India approached international institutions
like the World Bank for help, they asked the government to open up its economy. As
a result, India adopted radical measures to integrate its economy with that of other
nations. These measures, thus, are broadly termed as global integration of the Indian
business environment.
Elements of Global Integration
Global integration means the process with which the local Indian market opens up to
the global economy. Consequently, it amounts to letting foreign factors influence
India‘s local business environment. The process of global integration of India‘s
business environment began in 1991. The following elements were largely
responsible for this:
 Liberalization
 Privatization
 Globalization
Liberalization: Every government imposes restrictions on the way its citizens

conduct business activities. One way of doing this is by making it compulsory for
people to obtain several licenses and permissions for business. This process, for
example, was called ‗License Raj‘.
Liberalization basically refers to the removal of these restrictions. This happens when
the government removes unnecessary license requirements, allows more freedom in
conducting business, dilutes regulation and reduces taxes. Another way to do it is by
NOTES
making imports and exports easier. Liberalization has been responsible for several
large MNCs coming to India. The government has been able to attract crores of
Rupees as foreign capital because of it.
Privatization: Privatization simply means allowing private players and companies to

conduct business. This did not happen commonly before 1991 because the
government controlled many industries. It also implies withdrawal of the state‘s
interference in business.
The main objectives of privatization are to reduce the burden on tax-payers,

encourage private competition, facilitate capital inflow, etc. Some common modes by
which a government indulge in privatization include disinvestment, franchising,
public-private partnerships and liquidation of public sector undertakings.
Due to privatization, there are very few government companies remaining in India
now. The ones that remain do not even enjoy a monopoly. Government companies
like Air India, ONGC, LIC and HAL have to compete with private companies and
MNCs. As a result, India‘s economy has become more diverse and growth-oriented.
Globalization: The restricted nature of India‘s economy before 1991 had made it
over-dependant on local companies. Indian firms only competed amongst each
other. Foreign companies, thus, could not even think of working here. This finally
changed when India adopted globalization.
Globalization, in simple words, means growing inter-dependence between countries

with regards to business and trade. Modern means of communication and
transportation technology have made this possible. Even international organizations
and treaties between countries have played a big role in globalization. There are
several benefits of globalization. For example, many new markets like insurance,
transportation, and banking services have grown due to it. Furthermore, people now
have access to more choices and international brands because of free trade between
countries.
GLOBAL INTEGRATION AND THE PERFORMANCE OF MULTINATIONALS’

SUBSIDIARIES IN EMERGING MARKETS

In the global integration model, management power in the multi-national
corporation is primarily centralized at the MNC headquarters (HQ). MNC
subsidiaries have little flexibility or autonomy. In the localization model, on the other NOTES
hand, the MNC HQs do not standardize the business activities of their subsidiaries,
and the subsidiaries therefore enjoy more freedom and autonomy than that in the
integrated model.
MNC global integration may cover various business activities. One of these is
sourcing, where MNC subsidiaries receive inputs or supplies for their operations.
Jarillo and Martinez (1990) assessed the global integration of MNC subsidiaries by
measuring the percentage of inputs that the subsidiaries sourced from their parents
and their networks. The more a subsidiary relies upon its parents for supplies, the
more globally integrated is the subsidiary‘s operations. Similarly, global integration
can also be measured by the level of centralization of R&D functions, and the
subsidiary‘s autonomy in selling its products to local markets or through its parents‘
integrated systems (Rugman and Verbeke 2001). Existing literature argues that global
integration helps MNCs save costs and achieve global efficiencies. For example,
global integration minimizes duplication, thus saving costs through standardization
(Dunning 1998), and global integration creates efficiencies due to global economies of
scale. Kogut (1985) argues that MNCs achieve high efficiency through two methods.
Firstly, they rely upon supplies (sourcing) from low labour cost countries. Secondly,
even if MNCs do not rely upon supplies from low labor cost countries, they can still
enjoy high efficiency if they centralize their operations and/or aggregate their
sourcing to enjoy global economies of scale. Similarly, Ghoshal (1987) indicates that
MNCs gain efficiency advantages from national differences in labour costs (i.e.,
getting supplies from low labour cost countries), and from global economies of scale
and scope, which are generated by the scale of operations/sourcing rather than by
the low cost of some locations.
Integration in Supplies (Global sourcing): Several subsidiaries in our study

purchase components or raw materials from their parents‘ networks located outside
of China. For example, APPLIANCE sources its core components from a sibling
subsidiary located in France. The supplies of hardware components to IT and
SYSTEM are also controlled and coordinated by their respective HQs. These globally
integrated supplies, though helpful to the subsidiaries in improving product or
component quality, are very costly to these subsidiaries. These costs emanate from
high government tariffs and higher labor and raw material costs in the supplying
countries. Several managers indicated that ―due to high sourcing costs from parents‘
NOTES
internal networks, the subsidiaries started to develop local supply sources.‖
EQUIPMENT is a good example of this behavior. As indicated in Table 2, its R-
Chiller controlled 70 percent of market share in China while its C-Chiller only had 20
percent market share. Managers at EQUIPMENT indicated that the key reason for
this difference was the different levels of local sourcing. 90 percent of R-Chillers‘ raw
materials and components come from local suppliers while C-Chiller only has 50
percent local supplies. One manager said that ―for our R-Chiller products, I am not
afraid of competitors using low prices to compete as our costs and prices are already
competitive enough. But for our C-Chiller, it is much harder to face competition
because of the high costs in importing components. For these imported components,
we have to pay as high as 40 percent import tariffs‖.
Integration in management control – expatriates
We find that increasing expatriate control, another form of global integration, also
negatively affects cost competitiveness of the subsidiaries. Expatriates, especially
long-term expatriates, are important for HQs to control subsidiaries and implement
HQ strategies; they are also good conduits for transferring HQ technologies and
organizational capabilities to the subsidiaries. However, these managers represent
large cost burdens for the subsidiaries. As a manager at EQUIPMENT mentioned,
―each of their expatriate‘s salaries is equivalent to the salaries of 100 local
employees‖. IT managed to reduce these costs by reducing the number of expatriates
from five in early 90s to two in late 1990s. All six subsidiaries gradually reduced the
number of expatriates as they developed more local managers.
Integration in subsidiary sales (export): We find that exports help subsidiaries to

reduce their cost structure. Exports help the subsidiaries increase production
volume, thus enabling them to achieve better economies of scale. In the case of
APPLIANCE, for example, more than 50 percent of its microwave ovens
manufactured in China were for export. ELEC also has more than 10 percent of its
products for export, while IT‘s exports accounted for 30% of its total sales. Managers
in these subsidiaries indicated that exports allowed to them to use their facilities
more efficiently and reduce costs. In some cases (e.g., APPLIANCE and IT), the

export businesses are more profitable because the subsidiaries can sell products at
higher prices in export markets. These benefits help the subsidiaries reduce their
overall cost structure and become cost competitive in the Chinese market. NOTES
Factors affecting global sourcing: Several factors affect the purchasing/sourcing of

components from corporate networks. First, quality is a primary reason for the
subsidiaries‘ reliance upon their corporate networks for sourcing. Because local
suppliers in China frequently do not have the technologies or skills to meet
subsidiaries‘ standards in product quality and features, MNCs have to rely upon
high-cost foreign suppliers. Second, product technology stability also affects
subsidiaries‘ ability to develop local supplies. For example, one of the key reasons
that EQUIPMENT has 90 percent local sourcing in R-Chillers while only 50 percent
local sourcing in C-Chillers is because the technologies found in the former product
are more stable. This stability allowed the subsidiary to take time to learn and
transfer the capabilities internally or to local suppliers. But for newer products (e.g.
C-Chillers), new government regulations on ozone emission required that
EQUIPMENT‘s parent change its C-Chillers‘ technology to meet the new regulations.
This change made it harder for EQUIPMENT to accumulate its learning of
manufacturing technologies and develop local suppliers. Similarly, APPLIANCE was
able to quickly localize its component supplies because microwave oven and air
conditioners are mainly stable technologies. A manager indicated that by 2002
APPLIANCE had transferred almost all manufacturing and R&D activities to China.
2.5 Differentiation
Differentiation involves achieving competitive advantage through pinpointing

product or service attributes that customers perceive as valuable and positioning the
firm to meet those demands better than the competition. Virtually any value activity
is a potential source of uniqueness. Product differentiation is a marketing strategy
that strives to distinguish a company's products or services from the competition. If
successful, product differentiation can create a competitive advantage for the
product's seller and ultimately build brand awareness.
Product differentiation is essential in today's financial climate. It allows the seller to

contrast its own product with competing products in the market and emphasize the
unique aspects that make its product superior.
Example of differentiated marketing is when a differentiated marketing strategy is
when a company creates campaigns that appeal to at least two market segments or
target groups. For example, a store can promote a sale that appeals to people in at
NOTES
least two cities or locations, or a company can market a product that appeals to
women in at least two age groups.
The function of differentiation is the action of computing a derivative. The derivative

of a function y = f(x) of a variable x is a measure of the rate at which the value y of
the function changes with respect to the change of the variable x. It is called the
derivative off with respect to x.
Examples of Differentiation & Integration in a Company
When businesses give autonomy and power to each of their divisions and
departments, the result is differentiation, in which each section develops its own
cultures and methods. When a company brings its separate parts together under one
leader or a single mission, the business undergoes integration. Integration leads to a
unified and cohesive company structure. Companies select between a differentiated
and an integrated structure depending on their industry, personnel and leadership. It
is important to understand the differences and uses of differentiation versus
integration.
Product Differentiation: Product differentiation offers customers a wide range of

products within a specific industry. Many companies employ product differentiation
– from their own products and those of competitors – by developing different
product lines, according to Mail Chimp.
Each of these product lines may have its own accounting, computer networking, and
marketing departments, and operate like separate companies, all under the same
corporate umbrella. For instance, Coca-Cola produces soft drinks under brand names
such as Coke, Sprite and Diet Coke, but the company also produces Minute Maid
fruit juices and Powerade sports drinks. Coke, meanwhile, offers its own distinct
taste and brand from its Pepsi counterpart.
Brand Differentiation: Another form of differentiation comes when a company

produces a single type of product, but wishes to market that product to different
audiences. The audiences can consist of different genders, ethnic groups or socio-
economic levels. For instance, auto manufacturers can have one brand for low- to

middle-income buyers and another for high-income and luxury buyers. Examples of
the "luxury buyer" strategy include the Acura brand from Honda, the Lexus from
Toyota and the Infiniti brand from Nissan. NOTES
Vertical Integration: Vertical integration brings together two aspects of an industry

that work at different points on the production line, according to The Street. For
instance, if a manufacturer develops or acquires a chain of retail outlets, the two
companies join in a vertical integration strategy, with each portion working with the
others to achieve overall company goals. Apple serves as one of the high-profile
examples of vertical integration. Apple controls nearly all aspects of its hardware
manufacturing, software development, marketing efforts and retail outlets.
Horizontal Integration: Horizontal integration is a strategy that involves a company

merging with or taking over another firm at the same stage of production. Horizontal
integration gives the acquiring company more resources and a larger market share.
In recent years, The Walt Disney Company engaged in horizontal integration by
purchasing several sources of creative material, including Marvel Comics, Lucas film
and Jim Henson Studios. These purchases allowed them to bring in properties such
as "The Avengers," "Star Wars" and "The Muppets" into their libraries.
All in all, you shouldn't be choosing between differentiations vs. integration in your
business, but rather finding a way for the two to work in tandem. There are not set
integration and differentiation rules, so you can be creative to maximize your
business efforts.
What Is Differentiation & Integration in Organization Development?
Businesses, much like individuals, develop in their own way and at their own pace.
Several factors influence how a business develops, from the personality of its leaders
to its chosen industry to the economic climate. The results can range from a
structured, vertical hierarchy run a bit like a military operation, to a loose, horizontal
free-form group that has more the feel of busy but enjoyable summer camp.
Businesses can develop from teams splitting off and pursuing their goals, known as
differentiation. Conversely, they can develop from diverse individuals coming
together for a common cause, a process known as integration.
Differentiation within a Company: Differentiation occurs in large companies when

different departments, sections or branch offices create their own corporate culture
within the parent company's overall structure. For instance, the sales staff at a
differentiated company will have a different approach to their tasks than the
accounting department. Companies also can be differentiated based on product lines.
NOTES
A highly-differentiated brewery will have sections that brew pilseners, lagers and
ales, each with its own production, accounting and marketing operations, while
operating under the same corporate umbrella.
Differentiation can be inherited, so to speak. An established company may acquire a

hot, young start-up developing an exciting new technology or business model. The
parent firm might prefer to leave the start-up's entrepreneurial culture intact – that
is, leave it differentiated – rather than trying to mold it in the image of the larger
company.
Integration of Different Areas of a Company: Integration relates to how the

different areas of the company coordinate their operations. A highly-integrated
company has strong connections between departments and product lines, with each
section working under a cohesive set of rules and strategies. Integrated companies
are highly vertical and hierarchical in nature. These companies operate from a "top-
down" mindset, where the management dictates the structure of each department
rather than allowing the individual departments to set their own agendas.
Many Japanese firms are well-known for their practices in creating highly integrated
corporate cultures. Employees may be expected to participate in group exercises,
recitations of company mottos, and a style of dressing or behaving all meant to instill
an integrated sense of corporate identity.
Prioritization and Time Constraints: One factor that determines whether a company
practices differentiation or integration is how each department sorts its priorities. For
instance, sales staff focus on bringing in revenue, while accountants place their
attention on reducing costs, but both priorities contribute to increasing the
company's profits. Another type of prioritization involves how departments handle
time constraints. In a software company, the development staff work in terms of
months or years, while the customer support staff must come up with solutions in
hours or days.
Communication Methods Dictate the Approach: Communication methods also

dictate whether a company employs a more differentiated or more integrated

approach. As an example, sales staff deal primarily in face-to-face or telephone
communications, while information technology workers depend on e-mail and text
messages. The marketing department may also use less formal language when NOTES
communicating, where legal staffers are trained to parse every word for multiple
meanings. When departments must work together, they must develop an integrated
communication strategy to achieve their goals.
What Is an Expatriate?
An expatriate, or ex-pat, is an individual living and/or working in a country other

than his or her country of citizenship, often temporarily and for work reasons. An
expatriate can also be an individual who has relinquished citizenship in their home
country to become a citizen of another.
Key Takeaways
 An expatriate is somebody who has left their country of origin in order to

reside in another country.
 Ex-pats may leave home for work reasons, including migrant labor who seeks
more lucrative employment in a different country.
 Expatriates may live temporarily overseas, or completely renounce their
citizenship of one country in favour of another.
 The IRS may impose an expatriation tax on individuals who renounce their
citizenship, usually based on the value of a taxpayer's property or income in
the United States.
Understanding Expatriates
An expatriate is a migrant worker who is a professional or skilled worker in his or

her profession. The worker takes a position outside his/her home country, either
independently or as a work assignment scheduled by the employer, which can be a
company, university, government, or non-governmental organization. If your
employer sends you from your job in its Silicon Valley office to work for an extended
period in its Toronto office, you would be considered an expatriate or "expat" after
you arrive in Toronto.
Expats usually earn more than they would at home, and more than local employees.
In addition to salary, businesses sometimes give their expatriate employees benefits
such as relocation assistance and housing allowance. Living as an expatriate can be
NOTES
exciting and present an excellent opportunity for career advancement and global
business exposure, but it can also be an emotionally difficult transition that involves
separation from friends and family while adjusting to an unfamiliar culture and
work environment. Hence, the reason behind the higher compensation offered to
these migrant workers.
The Right Way to Manage Expats
In today‘s global economy, having a workforce that is fluent in the ways of the world
isn‘t a luxury. It‘s a competitive necessity. No wonder nearly 80% of midsize and
large companies currently send professionals abroad—and 45% plan to increase the
number they have on assignment.
But international assignments don‘t come cheap. On average, expatriates cost two to
three times what they would in an equivalent position back home. A fully loaded
expatriate package including benefits and cost-of-living adjustments costs anywhere
from $300,000 to $1 million annually, probably the single largest expenditure most
companies make on any one individual except for the CEO.
The fact is, however, that most companies get anaemic returns on their expat
investments. Over the past decade, we have studied the management of expatriates
at about 750 U.S., European, and Japanese companies. We asked both the expatriates
themselves and the executives who sent them abroad to evaluate their experiences.
In addition, we looked at what happened after expatriates returned home. Was their
tenure worthwhile from a personal and organizational standpoint?
Overall, the results of our research were alarming. We found that between 10% and
20% of all U.S. managers sent abroad returned early because of job dissatisfaction or
difficulties in adjusting to a foreign country. Of those who stayed for the duration,
nearly one-third did not perform up to the expectations of their superiors. And
perhaps most problematic, one-fourth of those who completed an assignment left
their company, often to join a competitor, within one year after repatriation. That‘s a
turnover rate double that of managers who did not go abroad.

If getting the most out of your expats is so important, why do so many companies
get it so wrong? The main reason seems to be that many executives assume that the
rules of good business are the same everywhere. In other words, they don‘t believe NOTES
they need to—or should have to—engage in special efforts for their expats.
Take the expat assignment process. Executives know that negotiation tactics and
marketing strategies can vary from culture to culture. Most do not believe, however,
that the variance is sufficient to warrant the expense of programs designed to select
or train candidates for international assignments.
Further, once expats are in place, executives back home usually are not inclined to
coddle their well-paid representatives. When people are issued first-class tickets on a
luxury liner, they‘re not supposed to complain about being at sea.
Finally, people at the home office find it difficult to imagine that returning expats
need help readjusting after just a few years away. They don‘t see why people who‘ve
been given an extended period to explore the Left Bank or the Forbidden City should
get a hero‘s welcome. As a result of such thinking, the only time companies pay
special attention to their expats is when something goes spectacularly wrong. And by
then, it‘s too little, too late.
Of course, some companies do engage in serious efforts to make foreign assignments

beneficial both for the employees and the organization. Very often, however, such
companies consign the responsibility of expat selection, training, and support to the
human resources department. Few HR managers—only 11%, according to our
research—have ever worked abroad themselves; most have little understanding of a
global assignment‘s unique personal and professional challenges. As a result, they
often get bogged down in the administrative minutiae of international assignments
instead of capturing strategic opportunities.
Over the past several years, we have concentrated on examining the small number of
companies that have compiled a winning track record in the process of managing
their expats. Their people overseas report a high degree of job satisfaction and back
that up with strong performance. These companies also hold on to their expats long
after they return home. GE Medical Systems, for example, has all but eliminated
unwanted turnover after repatriation and has seen its international sales expand
from 10% to more than 50% of its total sales during the last ten years.
The companies that manage their expats effectively come in many sizes and from a
wide range of industries. Yet we have found that they all follow three general
practices:
NOTES
When making international assignments, they focus on knowledge creation and
global leadership development. Many companies send people abroad to reward
them, to get them out of the way, or to fill an immediate business need. At
companies that manage the international assignment process well, however, people
are given foreign posts for two related reasons: to generate and transfer knowledge,
to develop their global leadership skills, or to do both.
They assign overseas posts to people whose technical skills are matched or exceeded
by their cross-cultural abilities. Companies that manage expats wisely do not assume
that people who have succeeded at home will repeat that success abroad. They
assign international posts to individuals who not only have the necessary technical
skills but also have indicated that they would be likely to live comfortably in
different cultures.
They end expatriate assignments with a deliberate repatriation process. Most

executives who oversee expat employee‘s view their return home as a nonissue. The
truth is, repatriation is a time of major upheaval, professionally and personally, for
two-thirds of expats. Companies that recognize this fact help their returning people
by providing them with career guidance and enabling them to put their international
experience to work.
Let‘s explore the practices in turn, illustrating them with companies that have put
them to good use over the past several years.
Sending People for the Right Reasons
For as long as companies have been sending people abroad, many have been doing
so for the wrong reasons—that is, for reasons that make little long-term business
sense. Foreign assignments in glamorous locales such as Paris and London have been
used to reward favored employees; posts to distant lands have been used as
dumping grounds for the mediocre. But in most cases, companies send people
abroad to fill a burning business need: to fight a competitor gaining market share in
Brazil, to open a factory in China, to keep the computers running in Portugal.

Immediate business demands cannot be ignored. But the companies that manage
their expats effectively view foreign assignments with an eye on the long term. Even
when people are sent abroad to extinguish fires, they are expected to plant forests NOTES
when the embers are cool. They are expected to go beyond pressing problems either
to generate new knowledge for the organization or to acquire skills that will help
them become leaders.
Imagine a large Canadian company that wants to open a telephone-making plant in

Vietnam. It would certainly send a manager who knows how to manufacture phones
and how to get a greenfield facility up and running quickly. The manager‘s
performance rating and compensation would reflect those objectives, but that‘s
where most companies would stop. Companies that manage their expats effectively,
however, would require more of the manager in Vietnam. Once the plant was
established, he would be expected to transfer his knowledge to local professionals—
and to learn from them, too. Together, they would be expected to generate
innovative ideas.
Nokia, the world‘s second largest manufacturer of mobile phones, is a good example
of a company that effectively uses international assignments to generate knowledge.
Unlike most large technology companies, Nokia does not rely on a central R&D
function. Instead, it operates 36 centers in 11 countries—from Finland to China to the
United States. Senior executives scan their global workforce for engineers and
designers who are likely to generate new ideas when combined into a team. They
bring these people together in an R&D center for assignments of up to two years,
with the explicit objective of inventing new products. The approach works well:
Nokia continues to grab global market share by rapidly turning new ideas into
successful commercial products, such as the Nokia 6100 series mobile telephones that
were launched last year in Beijing and have quickly captured a leading position in
markets around the world.
Other companies have more need to focus on the second reason for international
assignments: to develop global leadership skills. Such companies would concur with
a recent observation by GE‘s CEO: ―The Jack Welch of the future cannot be like me.
I‘ve spent my entire career in the United States. The next head of GE will be
somebody who has spent time in Bombay, in Hong Kong, in Buenos Aires.‖ An
executive cannot develop a global perspective on business or become comfortable
with foreign cultures by staying at headquarters or taking short business trips
NOTES
abroad. Such intangibles come instead as a result of having spent more than one
sustained period working abroad.
Indeed, the only way to change fundamentally how people think about doing
business globally is by having them work abroad for several months at a time.
Everyone has a mental map of the world—a set of ingrained assumptions about what
people are like and how the world works. But our maps may not be able to point us
in the right direction when we try to use them in uncharted territory. Consider the
case of a tall American businessman who, during a recent trip to Japan, dined at a
traditional restaurant. Upon entering, he bumped his head on the doorjamb. The
next day, the same thing happened. It was only on the third time that he
remembered to duck. People on international assignments hit their heads on
doorjambs many times over the years. Eventually, they learn to duck—to expect that
the world abroad will be different from the one they had imagined. Hard experience
has rearranged their mental maps or, at the very least, expanded the boundaries on
their maps.
It is with such a broadened view of the world that global leaders are made. A vice
president for Disney, for example, was posted in 1993 to EuroDisney, the company‘s
struggling theme park just outside Paris. Stephen Burke arrived in France with the
same mental map of the company as the senior managers at home. He believed, for
instance, that families and alcohol do not mix at Disney theme parks. But after living
in France for several months, Burke came to see what an affront Euro-Disney‘s no-
alcohol policy was to most of its potential local customers. A glass of wine with
lunch was as French as a cheeseburger was American. Further, Burke came to see
that Disney‘s lack of focus on tour operators—a more important distribution channel
in Europe than in North America—made it inconvenient to book reservations for
complete vacation packages, which many Europeans prefer to arrange.
With his new perspective on the local market, Burke pushed hard to persuade
Disney‘s top management to sell wine at its French park and to create complete
vacation packages for tour operators. He succeeded. Because of those and other
changes, attendance and hotel occupancy soon skyrocketed, and Euro Disney posted

its first operational profit. Burke told us afterward, ―The assignment to Euro Disney
caused me to challenge long-held assumptions that were based on my experiences
and career at Disney. After living in France, I came to look at the world quite NOTES
differently.‖
The two principal goals of international assignments—generation of knowledge and

development of global leaders—are not mutually exclusive. But it is unlikely that an
international posting will allow a company to achieve both goals in every case or to
an equal degree. Not every employee going abroad has abundant knowledge to
share or the right stuff to be the company‘s future CEO. What matters, however, is
that executives explicitly know beforehand why they are sending a person
overseas—and that the reason goes beyond an immediate business problem.
The reason for sending a person overseas must go beyond an immediate business
problem.
Just as important, it is critical that expats themselves know the rationale for their
assignments. Are they being sent abroad to generate knowledge or to develop their
leadership skills? At the effective companies we studied, this kind of information
helps expats focus on the right objectives in the right measure. For example, a
communications company recently transferred one of its top lean-manufacturing
experts from Asia to the United States. His task was to help managers understand
and implement the practices that had been perfected in Singapore and Japan. The
company‘s senior executives did not expect him to hone his leadership capabilities
because they did not believe that he would ascend the corporate ranks. Knowing the
main purpose of his posting, the expert was able to focus his energy on downloading
his knowledge to other managers. Moreover, he did not build up unrealistic
expectations that he would be promoted after returning home.
Companies with foreign operations will always face unexpected crises from time to
time. But the companies that reap the most from sending their people abroad
recognize that international assignments can‘t just be about sending in the medics.
They must also be about ensuring the organization‘s health over the long term.
Sending the Right People
Just as managers often send people abroad for the wrong reasons, they frequently
send the wrong people. Not because they send people who don‘t have the necessary
technical skills. Indeed, technical skill is frequently the main reason that people are
selected for open posts. But managers often send people who lack the ability to
adjust to different customs, perspectives, and business practices. In other words, they
NOTES
send people who are capable but culturally illiterate.
Managers often send people on overseas assignments who are capable but
culturally illiterate.
Companies that have a strong track record with expats put a candidate‘s openness to
new cultures on an equal footing with the person‘s technical know-how. After all,
successfully navigating within your own business environment and culture does not
guarantee that you can maneuver successfully in another one. We know, for instance,
of a senior manager at a U.S. carmaker who was an expert at negotiating contracts
with his company‘s steel suppliers. When transferred to Korea to conduct similar
deals, the man‘s confrontational style did nothing but offend the consensus-minded
Koreans—to the point where suppliers would not even speak to him directly. What
was worse, the man was unwilling to change his way of doing business. He was soon
called back to the company‘s home office, and his replacement spent a year undoing
the damage he left in his wake.
How do you weed out people like the man who failed in Korea? The companies that
manage expats successfully use a variety of tools to assess cultural sensitivity, from
casual observation to formal testing. Interestingly, however, almost all evaluate
people early in their careers in order to eliminate some from the potential pool of
expats and help others build cross-cultural skills. Although the companies differ in
how they conduct their assessments, our research shows that they seek the following
similar characteristics in their expats:
A Drive to Communicate: Most expats will try to communicate with local people in
their new country, but people who end up being successful in their jobs are those
that don‘t give up after early attempts either fail or embarrass them. To identify such
people, the most effective companies in our research scanned their ranks for
employees who were both enthusiastic and extroverted in conversation, and not
afraid to try out their fractured French or talk with someone who‘s English was
weak.

Broad-Based Sociability: The tendency for many people posted overseas is to stick
with a small circle of fellow expats. By contrast, successful global managers establish
social ties to the local residents, from shopkeepers to government officials. There is NOTES
no better source for insights into a local market and no better way to adjust to
strange surroundings.
Cultural Flexibility: It is human nature to gravitate toward the familiar—that‘s why

many Americans overseas find themselves eating lunch at McDonald‘s. But the
expats who add the most value to their companies—by staying for the duration and
being open to local market trends—are those who willingly experiment with
different customs. In India, such people eat dal and chapatis for lunch; in Brazil, they
follow the fortunes of the local jai alai team.
Cosmopolitan Orientation: Expats with a cosmopolitan mind-set intuitively

understand that different cultural norms have value and meaning to those who
practice them. Companies that send the right people abroad have identified
individuals who respect diverse viewpoints; they live and let live.
A Collaborative Negotiation Style: When expats negotiate with foreigners, the

potential for conflict is much higher than it is when they are dealing with
compatriots. Different cultures can hold radically different expectations about the
way negotiations should be conducted. Thus a collaborative negotiation style, which
can be important enough in business at home, becomes absolutely critical abroad.
Consider the approach taken by the vice chairman of Huntsman Corporation, a

private chemicals company based in Salt Lake City with sales of $4.75 billion. Over
the last five years, Jon Huntsman, Jr., has developed an informal but highly
successful method for assessing cultural aptitudes in his employees. He regularly
asks managers that he thinks have global leadership potential to accompany him on
international trips, even if immediate business needs don‘t justify the expense.
During such trips, he takes the managers to local restaurants, shopping areas, and
side streets and observes their behavior. Do they approach the strange and unusual
sights, sounds, smells, and tastes with curiosity or do they look for the nearest Pizza
Hut? Do they try to communicate with local shopkeepers or do they hustle back to
the Hilton?
Huntsman also observes how managers act among foreigners at home. In social
settings, he watches to see if they seek out the foreign guests or talk only with people
they already know. During negotiations with foreigners, he gauges his managers‘
NOTES
ability to take a collaborative rather than a combative approach.
Although time consuming and sometimes costly, Huntsman‘s approach to screening

potential expats is actually remarkably efficient. He is able to assess candidates
before the pressures of an impending international problem make a quick decision
necessary. Consequently, he makes fewer expensive mistakes when choosing whom
to send abroad.
Other companies, such as LG Group, a $70 billion Korean conglomerate, take a more
formal approach to assessing candidates for foreign assignments. Early in their
careers, candidates complete a survey of about 100 questions designed to rate their
preparation for global assignments and their cross-cultural skills. Afterward, LG
employees and their managers discuss how specific training courses or future on-
the-job experiences could help them enhance their strengths and overcome their
weaknesses. From this discussion, a personalized development plan and timetable
are generated. Because LG‘s potential expats are given time to develop their skills,
about 97% of them succeed in meeting the company‘s expectations when they are
eventually sent on international assignments.
The surveys used by LG were purchased from an outside company and cost from
$300 to $500 per person. Other organizations develop them in-house, with the help of
their training or HR departments. In either case, the survey questions generally ask
people not to evaluate their own characteristics but to describe their past behavior.
For example, they might be asked when they had last eaten a meal from a cuisine
that was unfamiliar to them.
A third approach to identifying potential expats is used by Colgate-Palmolive, which

has about 70% of its sales outside the United States and decades of international
experience. To fill its entry-level marketing positions, the company recruits students
from universities or business schools who can demonstrate an ability to handle cross-
cultural situations. They may have already worked or lived abroad and will at the
very least have traveled extensively; they will often be able to speak a foreign

language. In this way, Colgate-Palmolive leverages the investment that other
companies have made in an employee‘s first experience abroad.
NOTES
Colgate-Palmolive takes a similarly cautious approach once such promising young
people are on staff. Instead of sending them on long assignments abroad, it sends
them on a series of training stints lasting 6 to 18 months. These assignments do not
come with the costly benefits that are provided to high-level expats, such as
allowances for housing and a car. This strategy means the company can provide
young managers with a broad range of overseas experience. One manager hired in
the United States, for example, spent time in the Czech Republic and the Baltic states
and recently became country manager in Ukraine—all before celebrating his thirtieth
birthday.
Companies face a trade-off between the accuracy and the cost of expat assessment.
Although Colgate-Palmolive‘s approach is probably the most accurate way to assess
an individual‘s potential to succeed on international assignments, it comes with a
substantial price tag. That approach is probably most appropriate for a multinational
that needs a large cadre of global managers. For companies with lesser workforce
requirements, the less costly approaches of Huntsman and LG may make more
sense. In any case, the key to success is having a systematic way of assessing the
cross-cultural aptitudes of people you may want to send abroad.
Finishing the Right Way: Virtually every effective company we studied took the
matter of repatriation seriously. Most companies, however, do not. Consider the
findings of our research: about one-third of the expats we surveyed were still filling
temporary assignments three months after coming home. More than three-quarters
felt that their permanent position upon returning home was a demotion from their
posting abroad, and 61% said that they lacked opportunities to put their foreign
experience to work. No wonder the average turnover rate of returning professionals
reaches 25%. We know of one company that over a two-year period lost all the
managers it sent on international assignments within a year of their return—25
people in all. It might just as well have written a check for $50 million and tossed it to
the winds.
The story of a senior engineer from a European electronics company is typical. The
man was sent to Saudi Arabia on a four-year assignment, at a cost to his employers
of about $4 million. During those four years, he learned fluent Arabic, gained new
technical skills, and made friends with important businesspeople in the Saudi
community. But upon returning home, the man was shocked to find himself
NOTES
frequently scolded that ―the way things were done in Saudi Arabia has nothing to do
with the way we do things at headquarters.‖ Worse, he was kept waiting almost nine
months for a permanent assignment which, when it came, gave him less authority
than he had had abroad. Not surprisingly, the engineer left to join a direct competitor
a few months later and ended up using the knowledge and skills he had acquired in
Saudi Arabia against his former employer.
International assignments end badly for several reasons. First, although employers
give little thought to their return, expats believe that a successful overseas
assignment is an achievement that deserves recognition. They want to put their new
skills and knowledge to use and are often disappointed both by the blasé attitude at
headquarters toward their return and by their new jobs. That disappointment can be
particularly strong for senior expats who have gotten used to the independence of
running a foreign operation. As one U.K. expatriate recently observed, ―If you have
been the orchestra conductor overseas, it is very difficult to accept a position as
second fiddle back home.‖
Changes in and out of the office can also make homecoming difficult. The company
may have reshuffled its top management, reorganized its reporting structure, or even
reshaped its culture. Old mentors may have moved on, leaving the returning
employee to deal with new decision makers and power brokers. Things change in
people‘s personal lives, too. Friends may have moved away, figuratively or literally.
Children may find it hard to settle back into school or relate to old playmates.
The effective companies in our research used straightforward processes to solve

these problems. At Monsanto, for example, the head office starts thinking about the
next assignments for returning expats three to six months before they will return. As
a first step, an HR officer and a line manager who is senior to the expat—both with
international experience—assess the skills that the expat has gained during her
experience overseas. They also review potential job openings within Monsanto. At
the same time, the expat herself writes a report that includes a self-assessment and
describes career goals. The three then meet and decide which of the available jobs
best fits the expat‘s capabilities and the organization‘s needs.

In the six years since it introduced the system, Monsanto has dramatically reduced
the turnover rate of its returning expatriates. And because returning employees
participate in the process, they feel valued and treated fairly—even if they don‘t get NOTES
their job of first choice.
Along with finding their returning expats suitable jobs, effective companies also
prepare them for changes in their personal and professional landscapes. For
example, the oil and gas company Unocal offers all expats and their families a
daylong debriefing program upon their return. The program focuses on common
repatriation difficulties, from communicating with colleagues who have not worked
abroad to helping children fit in again with their peers. The participants watch
videos of past expats and their families discussing their experiences. That sets the
stage for a live discussion. In many cases, participants end up sharing tips for coping
with repatriation, such as keeping a journal. The journal is useful, many returning
expats say, because it helps them examine the sources of their frustrations and
anxieties, which in turn helps them think about what they might do to deal with
them better.
Although participants find repatriation programs useful, it is seldom cost effective

for a company to provide them in-house unless its volume of international
assignments is heavy. Most companies that offer such programs outsource them to
professional training companies or form consortiums with other companies to share
the costs. Effective companies have realized that the money they spend on these
programs is a small price to pay for retaining people with global insight and
experience.
Companies that manage their expats successfully follow the three practices that
make the assignments work from beginning to end. They focus on creating
knowledge and developing global leadership skills; they make sure that candidates
have cross-cultural skills to match their technical abilities; and they prepare people to
make the transition back to their home offices.
Given the poor record that most companies have when it comes to managing expats,
it‘s probably no surprise that we often encounter organizations in which none of the
three practices are at work. Some companies, however, are committed to one or two
of the practices, and so the question arises, Do you have to follow all three to see a
payback on your expat investment? The answer, our research would suggest, is yes.
The practices not only reinforce one another, they also cover the entire expat
experience, from assignment to return home.
NOTES
Consider the dividends reaped by Honda of America Manufacturing, perhaps one of

the best examples of a company that implements all three practices. Honda starts
expat assignments with clear strategic objectives such as the development of a new
car model or improved supplier relations. Assignees then complete a survey to
identify personal strengths and weaknesses related to the upcoming assignment. Six
months before an expat is scheduled to return home, the company initiates an active
matchmaking process to locate a suitable job for that person; a debriefing interview is
conducted upon repatriation to capture lessons learned from the assignment.
As a result of Honda‘s integrated approach, nearly all of its expats consistently

perform at or above expectations, and the turnover rate for returning employees is
less than 5%. Most important, its expats consistently attain the key strategic
objectives established at the beginning of each assignment.
Companies like Honda, GE, and Nokia have learned how to reap the full value of
international assignments. Their CEOs share a conviction that sustained global
growth rests on the shoulders of key individuals, particularly those with
international experience. As a result, those companies are poised to capture
tomorrow‘s global market opportunities by making their international
assignments—the largest single investments in executive development that they will
make—financially successful today.
Organisational cultures can have varying impacts on employee performance and

motivation levels. Oftentimes, employees work harder to achieve organisational
goals if they consider themselves to be part of the corporate environment. Different
cultures operating in one company can also impact employee performance.
Cultural Dimensions & Impact on Performance Management
In every culture in the world the facts like authority, bureaucracy, creativity and
accountability etc. are dealt in different ways. The internal and external

environments of the organization influence in managing human resources in
organizations require understanding of the influence of both internal and external
environments of organization. In the internal environment it is the organization NOTES
culture is the basis. In the external environment, ownerships one of the major issues.
For the multinational companies with base in overseas countries but having presence
in UAE, the culture of the country of shareholders will be linked to the culture of
UAE as the top management and the corporate polices of the owner country will
have to linked to branch office country. In similar way there will be difference in
nature of industry scenario, available resources and market characteristics in country
of origin and the different branches of the corporate entity. The social cultural
environment which includes power, paternalism and distance also impact the human
resources policies. It is also fact that internationalization will lead to common culture
globally which will make the lives of the managers much simpler. The globalization
integrates the world‘s economies and provides number of ways to conduct business
activities as technology narrows borders (Pleissisr, 2009). Management deals with
reality that is man-made. People build organizations according to their values, and
societies are composed of institutions and organizations that reflect the dominant
values within their culture (Hofstede, 1984). Management is a coordinated efforts of
different people (could be senior, middle level or other knowledge workers) on the
way which uses available economical and technical resources so as to obtain the
desired results or outcomes. Further no management activity could be culture free
(Hofstede, 1984).
It is the people (management) who are critical for the organization and who make the
critical decisions and stand by or the success and failure of the company.
Effectiveness of the organization lies in the effective management, development,
motivation, involvement, use of available resources, contribution and finally the
management willingness to put themselves into the organizational strategies and
objectives (Patterson et. al, 1997).
Performance management is defined as creating the context for - and the measures of
performance. Performance is defined as the potential for future successful
implementation of actions in order to reach the objectives and targets (Lebas, 1995).
Next talking about performance it could be related to efficiency, effectiveness,
resistance, outcomes and so on. Performance management is generally based on the
past achievements further focusing on the future and management creating and
shaping the future of the organization. Generally in any organization performance
management is based on six main steps as depicted in the picture which clearly states
NOTES
the major responsibilities that needs to be taken up by the management to perform
their best (Lebas, 1995).
Considering cultural especially in the international context, it has become a hot topic
as here globalization, team working and diversity plays a major role in
organizations. International organizations should identify the developing cultural
challenges and develop practices so as to meet the global competitiveness, flexibility,
and learning capabilities so as to maintain a balance where in international
organizations have to build up cultural sensitivity and the capability to manage
performance (Higgs, 1996). It is important for organizations to identify and
understand the framework for analysing the cultural differences.
Stating the impact of culture and cultural dimensions on performance management

Jaegar & Kanungo (1990) states that management attitude and climate of belief is
maintained and affected by power distance (in other words status quo), low
uncertainty avoidance (distrust in eco system), high individualism (more reliance on
bureaucratic practices) which leads to negative impact on performance management.
Many cultural constraints become obstacles for effective implementation of
performance management. Here building cultural values and beliefs are important as
they create potential and facilitate smooth process of performance management.
People are the most valuable resource of an organization, and that the management
of people makes a difference to company performance (Patterson, West, Lawthom
and Nickell, 1997). Many studies have been brought up to study the effectiveness of
people management and business performance, but very few studies were conducted
on the cultural impact on performance management. Every nation has a varying
effect of cultural dimensions in organizations and the employees working over there.
It is important to consider the cultural dimensions before creating strategies and
objectives in organizations as this helps he management in effective performance
(Patterson et. al., 1997).
Thus this research tries to focus on this issue and studies the impact of culture and
cultural dimensions on performance management especially in UAE organizations.

This research intends to bring about awareness in the readers and to make them
learn the importance of focusing on cultural dimensions this research study is
completely based on the review of literature that focuses on analysis of various NOTES
researches conducted on performance management and impact of culture and
cultural dimension on managing performance in organizations. The following
sections discusses and the views, analysis and results of various researches.
Culture and Cultural Dimensions
Zeynep Aycan, Rabindra Kanungo, Manuel Mendonca, Kaicheng Yu, Jurgen Deller,
Gunter Stahl and Anwar Kurshid (2000) defines culture as common patterns of
beliefs, assumptions, values and norms of behavior of human groups (represented by
Societies, institutions and organizations‖ As cited by Lu, Lung-Tan,Lee & Yuan-Ho
(2005) culture is defined as "the collective programming of the mind which
distinguishes the members of one human group from another" (Hofstede, 1980)
Organizational culture varies from industry to industry and forms country to

country. It shows its different characteristics like diversity in workforce. It can create
both positive and negative effect on the staff and the workplace. In fact culture
determines the survival of an organization over the long term. Cultures can be a
liability to an organization if it creates barriers to change, create barriers to diversity
or barriers to mergers and acquisitions (Robbins, 2009).
Understanding the organizational culture can help you to understand why change
does not take place, or why a project fails. It will also help you to determine where to
strive to make changes to the culture. Internationalization and globalization has led
to tremendous changes making business environments more complex. Groeschl
(2003) states that it is important for organizations to look for appropriate and
effective organizational processes and further focus on managing performance based
on the cultural dimensions. Studies on comparative management and cross cultural
aspects show that management approaches and perceptions differ with culture. Next
talking about the studies done by theorists and practitioners past two decades it is
seen that they have been analyzing and discussing the appraisal process as an
important tool that helps in managing people and performance in organizations
(Groeschl, 2003).
The cultural framework provided by Hofstede‘s has been overall accepted as unit for
measuring differences among nations (Triandis, 1982). It is also fact that number of
studies to investigate the effect of culture on human resource polices are limited. The
NOTES
cultural dimensions have been grouped into two categories, namely relations
between people and motivational orientations (Hofstede, 2000).
Individualism, Versus Collectivism: This parameter is measured by an index which

reveals the degree to which individuals look after themselves or remain integrated
into groups, usually around the family. In individualism the ties between individuals
are loose. Everyone is expected to look after himself and her immediate family.
Collectivism stands for a society which are integrated into strong, cohesive in-
groups, which throughout people‘s lifetime continue to protect them in exchange for
unquestioning loyalty‖ (Hofstede, 2002, p 225). Individualism is measured by
Individualism Index (IDV) and it is observed that most developed countries have
highest index as compared to developing countries. Societies do face uncertainty of
living. According to the theory suggested by Hofstede there are three dimensions:
masculinity versus femininity, amount of uncertainty avoidance, and power
distance.
Masculinity versus Femininity: Issue comes on surface due to the emotional

differences between two genders. Masculinity Index (MAS), differ with each country
based on high gender roles, distinction at work. It has been found to be highest in
Japan.
Uncertainty Avoidance: This aspect measures how much the culture has made its
members feel comfortable or uncomfortable in unstructured situations. In the study
by Hofstede‘s, there is mention of score on Uncertainty Avoidance Index (UAI)
(Hofstede, 1991, p. 113)
Power Distance: This is another index in which the less powerful members of
organizations and institutions accept and expect that power is distributed unequally.
The power distance is measured in a Power Distance Index (PDI) (Hofstede, 1991).
The values and attitudes found at the national level contrast ―low-PDI countries‖
with ―high-PDI countries‖, with some countries placed in between. High PDI
countries include Malaysia,Guatemala, Panama, Mexico, and East Africa. Low PDI
countries include the US, Austria, Sweden, and Denmark (Hofstede, 2000).

In addition to the above, Hofstede introduced the fifth dimension which is Long
term orientation which is mostly related to individualism dimension (Lu, Lung-
Tan,Lee & YuanHo, 2005). Hostfede (1984) states that international managers need to NOTES
understand deeply the ranges of culture determined value system which exist
between the nations and this should be used to transfer in other words share
knowledge of management ideas from one nation to another. Here it is important for
us to learn about the cultural variables that directly or indirectly affect the
performance management in an organization. Zeynep Aycan, Rabindra Kanungo,
Manuel Mendonca, Kaicheng Yu, Jurgen Deller, Gunter Stahl and Anwar Kurshid
(2000) states that there are three different levels where in the cultural variables effect
the human resource management practices. Where in at the first level organizations
internal work culture is seen as a way that shares managerial beliefs and
assumptions which relate to tasks and employees. At the second level task driven
assumptions are driven by the organizational characteristics such as industry,
ownership status, availability of resources, market competition. Finally at the third
level employee related assumptions are driven by socio cultural characteristics. Thus
it can be said that the organizational work culture (internal work culture) refers to
shared managerial beliefs and assumptions (Zeynep Aycan, Rabindra Kanungo,
Manuel Mendonca, Kaicheng Yu, Jurgen Deller, Gunter Stahl and Anwar Kurshid,
2000) which shows a major impact on organizational and societal level cultures.
For the corporate operating in more than one country the human resources
department job includes work involving the management of staff in a variety of
different cultural settings, decisions on the ideal mix of local expatriate staff and the
pay and remuneration of those working in a foreign location (Woods, 2001). There is
different view by Watson (1997), who has a unique approach to employment
management including the cultural, structural and personnel techniques. Cultural
diversity is a reality in multinational companies and it is the responsibility of line
management to get the support of their employees, their understanding and
participation according to Du Plessis, Beaver and Nel (2006).
Performance Management:
According to Lu, Lung-Tan,Lee & Yuan-Ho (2005) performance management

included management style of managing things within the organization. This mainly
included style of supervision – this shows the different types of relationship between
the superior and their subordinates in the organization. It is seen that supervision
style s related to power distance and individualism. Next decision making tactics –
this relates the various activities that lead to accomplishment and outcomes which is
NOTES
influenced by high centralization and formal authority at senior most levels.
Next comes the differentiated patterns of communication – this refers the various
types of flow of information within the organization and between the departments.
This also focuses on the barriers of information flow. This is influenced by high
power distance, low individualism and high masculinity dimensions. Next
mechanism of controlling – this refers to the various operations conducted in the
organization and checks for the results obtained by meeting employees. Next,
paternalistic orientations – this refers to the degree of supervision and their concerns
towards the employees especially in non-work related issues (employee family life
and social support).
Finally, maintaining relations within the departments (interdepartmental) - as said

this clearly states the relationships between the departments in the organization. This
is highly influenced by power distance and high individualism (Lu, Lung-Tan, Lee &
Yuan-Ho, 2005).
Culture and Performance Management
The practices and processes of human resource management can be linked to other
countries but it is a difficult process and can lead to difference in perception and
becomes a debateable issue. This aspect if significance to the MNC‘s as foreign direct
investments (FDI) which is key feature of any economy mainly is routed through
opening of establishments or joint ventures etc. There are legal bindings to recruit
local staff and also to follow local culture to large extent. Wherever, there is violation,
it is dealt with penalty. Performance Management is a strategic HRM process and
MNC‘s use this tool to improve individual, subsidiary unit and corporate
performance linked to company‘s strategy The research studies are limited regarding
the effects of performance management of the employees in MNC subsidiaries where
the majority of the work force is of host-country nationality, and where the host-
country's culture may differ substantially from that of the MNC's home country. This

issue is not as simple as there can be number of other aspects like attitude problem of
people sitting at higher posts in owner countries with the country of and especially
of non-managerial employees in MNC subsidiaries (Malcolm G Patterson, Michael A NOTES
West, Rebecca Lawthom and Stephen Nickell, 1997). In such circumstances,
employees with negative attitudes do not perform to full extent, at times they will
cause disruptions in operations which can jeopardize the viability of the
organization.
In their hypothesis Zeynep Aycan, Rabindra Kanungo, Manuel Mendonca, Kaicheng

Yu, Jurgen Deller, Gunter Stahl and Anwar Kurshid (2000), states that the managers
from India, China, Pakistan, Russia, Romania are considered to be on the top which
means there is wide range of delegation of power difference between hierarchy
levels. Managers from Canada and USA are at middle level. It is sort of paternalistic
relationship wherein the seniority and gender is given high importance. There is no
cross cultural study regarding paternalism. This is second type of cultural
dimension. There is third cultural dimension of loyalty towards community. It refers
to the extent up to which the people are loyal to their communities are compelled to
fulfil their commitments. The last socio cultural dimension was fatalism which
means whatever happen must happen.
Conclusion for the above study
The culture is the best way in which group of people solves problems and reconciles
dilemmas. The culture is like book with each page giving sequence of the next page.
Inter culture communication is essential for exchange of ideas and emotions. It has
been observed that either the neutral or expressive cultures have problem in doing
business with each other.
As per records in UAE there are 76% Muslims, 15% Christians and 9% Hindus and
others. Arabs are known for their informal, relaxed behaviour, good manners and
consideration of others. There is strong vertical hierarchy in most Emirates
companies. Emirates people prefer to do business with those they know. Arabs by
nature are trust worthy and they are not comfortable with low trust and as per
records approximately 10% UAE nationals change their job due to this reason. The
human resources policies are implemented with difficulty in case of multinational
companies (MNC‘s) as such companies try to implement global strategies. It is
complex situation for corporate human resources department as the company is
operating in different countries involved and also people with diverse national
backgrounds. The studies done in regards to the HRM show that strategic factors
NOTES
influence international human resource management. The policies and procedures
need to be shaped in such a way that it comply with culture of both the countries.
The most important explanatory variable is Subsidiary role and national culture of
the country of origin. This carry significance as organizational capabilities of the
subsidiary companies increase, the role of subsidiary employee in achievement of
corporate objectives also increases.
In UAE, there has been number of steps taken by Government to empower women
as against previous times when the women were restricted to home makers. It is
basically in culture of UAE and men will never shake hands unless the women offer
the same. Though the prevailing laws show equality of women in all spheres of field
but the empowering of women is still to go a long way in all segments of society. In
very of the Islamic countries in the world the culture may follow certain special rules
because their knowledge of the world is limited. The leaders of a certain culture may
suppress the people in order to remain in control.
Recommendations from the Above Study
In one of his lecture Hofstede advised the nations that the power distance need to be
reduced and the relationship between management and employees to be
strengthened. He said that the organisation structure should be that the decision
making should not be centralised. Employee involvement will lead to better results.
He has taken the IBM study in 70 countries and observed that economy and the
culture impacts the power distance. He also emphasized that all employees to be
treated as equal and the inequality should be removed. In the second dimension of
uncertainty, he is of the opinion that unless risk is taken the flexibility and creativity
is less. For the third dimension it is the individualism and collectivism, highly
individualism value autonomy, personal success and personal goals, looking for
themselves. These societies are having low level of transition and low level of social
benefits. In collectivism, social acceptance of team work is highly valued. Masculinity
and femininity: By masculinity he mentioned competitiveness and assertiveness.

If these approached are applied in UAE, power distance is in existence. There is
hierarchy system prevalent in most of the companies. The moderate opinion is
suggested. UAE has parity between masculinity and femininity though it is in NOTES
transition phase; it is suggested to take immediate steps. The collectivism is prevalent
in UAE. This will add to the growth and benefit to the society and recommended to
be continues. In the similar way for the dimension named as uncertainty, people in
UAE will like to take low risk. The culture needs to accept change in the social
environment and structured management is need of the time.
UAE is developing fast and there is number of expatriates to work for local as well as
MNC‘s. Their performance management can be made effective in the organization if
there is need for the right system in place. The employees including managers and
staff need to be imparted training to be aware of the importance of managing
performance. Getting performance management right involves changing what
people do, and how they do it and by developing the right culture. There are number
of ways by which organization in UAE can improve the effectiveness of the
performance management. As per UAE culture people need sense of ownership and
responsibility to take action for improvement. They also need directions in the
opportunities for setting further directions and reviewing progress.
There are chances that organization culture of culture of the country is not
supporting and unless proper steps are not taken it can be prove to be risky for
future progress. Such cultures may not be able to improve the performance
management. Except for the rich families and educated society the UAE remains
underdeveloped. The change in culture is restricted to a few professional
associations and voluntary groups. There is limited social and political polarization
in UAE. The UAE has strong reliance on foreign labor which is a major worry,
because current projections forecast that the local national population will form only
2% of the total population by the year 2025 (based on statistics as developed by the
Ministry of Education).
The organizations in UAE need to realize that an important aspect of capitalizing on

their business strategy is through its people. They have had to acquire new
knowledge or skills, learn new methods of working, or simply gone without certain
functionality for a while. Employers need to assess how much of this has occurred
and begin to take appropriate measures to mitigate the risk of discontinuity.
Issues of Performance Management System
Many organizations will most likely say they utilize a performance management
NOTES system but far fewer will admit that it‘s not actually achieving its original goals.
Namely, performance management systems often fail in motivating better employee
performance! Why is that? The short answer is that it‘s too simple to not follow
through with the very components required to make the system work well.
In order to actually motivate employees to perform at their best, a performance

management system should be tied closely to organizational and personal goals and
should be a means for employees and managers to stay continually on the same
page. It can also house employee development plans. So, where does it all go awry?
There are several ways that a well-meaning organization can miss out on the benefits
of a performance management system. Here are 10 of the biggest issues—try to steer
clear of them!
Not Giving Employees Timely Feedback: If the only time an employee hears of how
he or she is performing is once per year, there are bound to be some surprises in
there. Many managers use the existence of a performance management system as an
excuse to delay giving feedback until the formal review period—but this is a recipe
for disaster. The formal review period should be just that: a formal summary of
status. There should be no surprises at that time if employees are given feedback at
appropriate times throughout the year. In other words, this should not be the first
time an employee hears how he or she is tracking against goals and expectations.
Setting Inappropriate Goals: For example, consider these simple missteps: Not tying
employee goals to company goals. If employee goals are set randomly, they may
help individuals achieve their goals but may not bring the business any closer to
achieving its organizational goals or mission. Ideally, individual goals should be
clearly linked to company goals.
Failing to set stretch goals. Goals that are set at levels that are easily achievable
without any extra effort don‘t motivate employees to perform at their best. Goals
should be realistic, but they should require some effort to achieve and maintain—
otherwise the system isn‘t helping to motivate behaviours.
Creating goals that are not measurable or objective. There should be a clear
understanding of what it looks like to achieve a goal and how it will be measured.

Goals need to be specific, measureable, achievable, relevant, and time-bound
(commonly referred to as ―SMART‖ goals). Goals should not be vague.
NOTES
Also remember that goals should be updated as needed for changes in the business‘s
situation. They should also be reviewed often to see whether you‘re on track.
Failing to Follow Through on the Performance Appraisal Schedule: Even worse

than not providing timely feedback is not providing feedback at all! If managers
cannot be bothered to treat the program with the respect it warrants, then why
bother even having a system? Employees will get discouraged if they‘re never given
feedback.
Not Explaining Clear Paths to Improvement: Even if a performance management

system is used well and employees are given appropriate feedback, the system can
go awry if an employee needs to improve but does not understand how to do so. The
performance management system should have a clear path for employees to meet
expectations as well as a clearly communicated plan for when they don‘t.
Not Documenting the Process: The rating of employees should be justified, and that
justification should be put into writing. The appraisal should be clear, complete, and
easily interpreted (that is, able to be correctly interpreted) by a third party.
Ignoring Problem Employees: This is a problem on multiple levels: It decreases

employee morale because others don‘t feel like problems are being addressed. It can
make other employees resentful that they cannot get away with the same actions of
their co-workers.
It fails to solve productivity problems. Managers often mistakenly think that giving a
performance review that is better than the employee deserves will be a motivator—
but instead it sends the signal that the poor performance is acceptable. It can be a
legal nightmare if the employee is later let go for poor performance, and there is no
record of performance reviews indicating any problem at all.
Not Recognizing Star Employees: On the other hand, if an employee is performing

well above average, he or she should get the deserved recognition. If every employee
is given a ―satisfactory‖ (or equivalent) rating even if some are going above and
beyond expectations, star performers will lose faith that their efforts are being
recognized. Managers should understand how important it is to use the system to
give appropriate ratings across the full spectrum of options—they should not be
trying to avoid tough conversations, and they certainly should not be simply giving
everyone the same rating because they don‘t (or won‘t) have the time to put real
NOTES
thought into it.

MODULE III
Structure
NOTES
3.0 Introduction
3.3 Integrations
3.3.3 Selection Staffing in International Context
3.0 Introduction
In the face of globalization, organizations are concerned with how to design and
implement IHRM practices to fit the global as well as the local context. Based on a
thorough review, the institutional/structural contingencies influencing of IHRM
practices in six key areas: human resource planning and career management; job
analysis and design; recruitment and selection; performance appraisal; compensation
and reward management; and training and development. The framework presented
in this paper will, it is hoped, guide future cross-cultural research as well as the
practices of multinational corporations.
Despite the all-pervasive talk of globalization, the seasoned international business

traveller will be acutely aware of differences in the ‗way of doing things ‗from
country to country and from region to region. Such differences are seldom more
apparent than in the field of organization and management. Not only will the
traveller be aware that conventions for doing business are culture bound, but also
that systems and structures for ‗the management of people‘ are uniquely determined
by forces of tradition. If the business traveller were to discuss the issue of fairness of
pay with a Japanese worker, the latter could well reiterate the proverb ‗The nail that
sticks out should be hammered down‘, thus stressing the need for egalitarianism and
NOTES
group compliance. The counterpart of this worker in the USA however, particularly
if a high performer, may well be aggrieved if his or her superior contribution to
enterprise success is not individually recognized in financial terms. Similarly, as the
recent case of the highly contested closure of the Paris branch of the UK-owned
retailer Marks & Spencer (M&S) demonstrated, French employees‘ expectations of
job security (and consultation in the case of job loss) are considerably higher than
those of their British counterparts It is the purpose of this chapter to assist
understanding as to why observed manifestations of HR and employment practices
demonstrate distinctiveness and ‗embeddedness‘ within specific geographic
territories. It is therefore pitched at the intermediary level, capturing regional and
national influences on IHRM. We pursue two complementary lines of theoretical
explanation, the first relating to institutional arrangements, which may be regarded
as the ‗hardware‘ of underlying systems for IHRM, and the second concerning
cultural stereotypes, which, continuing the metaphor, relate to the more intangible
and psychological determinants of international diversity, or the systems ‗software‘.
According to the Concise Oxford English Dictionary (2002), an institution may be

defined as ‗an official organization with an important role in a country‘ or ‗an
organization founded for a religious, educational, or social purpose‘. In the era of
globalization there has been serious debate concerning the status and viability of
existing institutional arrangements, including nation states. Giddens, for example,
argues that many institutions have become ‗shell‘ like, and ‗have become inadequate
to the tasks they are called upon to perform‘ (2002: 19). Nevertheless, a common set
of institutions can be found in most societies, including public and private
enterprises, public utilities, financial establishments, educational institutions, trade
unions and government/quasi-governmental agencies. The relative strength of these
institutions can vary, as can the manner in which they interact.
Dore (2000: 45–47) refers to ‗institutional interlock‘ as typifying national economies

and the relationship between the economy and the broader society. Thus, it may be
argued that in some societies, as a result of socio-political traditions, institutions
operate in an interlocking, mutually supportive fashion, while in others, there exists

a greater ‗space‘ between key institutions, and an emphasis on institutional
autonomy and self-support. For the purpose of this analysis, various complementary
institutional perspectives are offered. First, broad policy prescriptions concerning the NOTES
role of the state and related institutional arrangements are explored. Second,
variations in ‗business systems‘ from region to region depending primarily on
patterns of ownership will be examined.
Now we going to introduce the challenges that IHRM had to face. We know the main
challenge was to convince the mangers that the culture is different, the social system
is different, the legal principles are different etc. Overall, it‘s a completely new
environment and it is a challenge for the international HR manger to identify these
changes and adopt accordingly. This is the main difference between HR and IHRM,
in IHRM the manager operates in an alien environment which makes decision
making and implementation much difficult. Thus, the recruitment and training of
these mangers, communication between the head office and the subsidiary becomes
more important than in a local operation.
The IHRM is focuses more on how to select, recruit and retain managers for
international operations, rather than focusing on how to manage international
employees. Now, we moved along, ―expatriates‖. An expatriate is an employee who
is working and temporary residing in a foreign country (Dowling & Welch, 2004,
p.g.5). The fundamental difference between domestic HR and IHRM is that staff are
moved across national boundaries, thus expatriates e are born. Hence it is natural in
an IHRM subject to focus more on handling these expatriates.
All the previous section discussed about the external environment and this topic
discussed how the internal environment should be arranged in accordance to
international operations. Again we touched upon areas such as importance of culture
in IHRM and also the organization strategy and HRM etc. Although these areas are
very interesting we found it difficult to see the practicality of it. For an example in
one point it was said that if a certain culture is high in power distance and have
respect for authority then the authority should be centralized and if not, it should
decentralize. But in practice it is not the culture that influences the structure most but
the objectives and the task of the organization (manufacturing companies are more
centralized while service-oriented companies are decentralized).
The most interesting form of structure for us it was the Matrix structure; it was
different from all other traditional structure and had certain unique features. A
matrix structure creates dual lines of authority and combines functional and product
NOTES
departmentalization (Robbins, Millett, 2004, pg. 475). The most interesting part about
the Matrix structure was that it broke the departmental boundaries and goes against
the unity of command where now one employee reports to two mangers. This type
of structure is ideal for a large matured organization. When an organization grows
its information processing capacity could get overloaded, under a matrix structure
this can be changed as it allows the flow of communication and greater flexibility.
But what we found out was even large complex organizations are reluctant to move
along with a matrix structure. First of all, it is a complex structure, and secondly
breaking departmental boundaries has its own repercussions such as there is greater
room for conflicts, there will be constant issues about span of control and level of
authority and there will always be a struggle for power among managers etc.
What was clear for us is that it‘s difficult to look at an organization and say this is the
best structure for you. Whatever the structure selected it must be flexible enough to
change according to situations and most importantly factors such as national culture,
employee behaviour must be taken into account prior to deciding on a structure.
An organizations structure is the spine that allows it to stand still, the HR activities of
the organization and all other activities will depend on the support it gets from the
structure. Thus, HR has a greater responsibility in designing the structure, the
structure should be strong enough not only to stand still against the internal
environment but also against the external environment as well. That is why in IHRM
we look at aspects such as national cultures, work practices, ethics, norms,
behaviours etc. So that HR managers can design a structure that is suitable for the
external environment.
Host country is the place where the subsidiary is going to be set out. HRM in host
country is how you organize your employees, recruit them, train them and
compensate them once the subsidiary is operational. But as always, the subject went
a step further than what I anticipated. Certain type of questions an international HR
manager would ask himself. Such as should pay for performance be implemented?
Should EEO be practiced here? How far are we going to distribute authority?

We feel that we always focus on big areas such as compensation, recruitment,
training etc. that we somehow consider the above questions as irrelevant. But we
believe in today‘s context those questions are the burning issues. Before deciding on NOTES
training and compensation we need to outline the way the organization is going to
operate. This ‗way‘ could be the overall corporate strategy, or may be the vision of
the organization, whatever it is, it should be the platform of the new subsidiary.
In general, strategic alliances involve two or more firms agreeing to cooperate as

partners in an arrangement that's expected to benefit both firms. Sometimes strategic
alliances involve one firm taking an equity position in another firm. In the most
extreme case, one firm acquires the other firm. But less extreme equity positions also
are common. Ford, for example, has equity in both foreign and U.S. auto parts
producers, but it has not acquired these companies. Many strategic alliances do not
affect legal ownership, however. In the airline industry, a common type of alliance is
between an airline and an airframe manufacturer. In high-tech industries, strategic
alliances allow older, established firms to gain access to the hot new discoveries
being made by scientists in universities and in small, creative organizations. For
example, the U.S. biotechnology industry is characterized by networks of non-equity
relationships between new biotechnology firms dedicated to research and new
product development and established firms in industries that can use these new
products, such as pharmaceuticals. In return for sharing technical information with
the larger firms, the smaller firms gain access to their partners' resources for product
testing, marketing, and distribution (Liebeskind, Oliver, Zucker & Brewer, 1996).
In this subdivision, we focus on strategic alliances between firms that are

headquartered in different countries. We refer to these as cross-border alliances, or
CBAs. Cross-border alliances can be defined as partnerships that are formed between
two or more firms from different countries for the purpose of pursuing mutual
interests through sharing their resources and capabilities (Doz & Hamel, 1998; Yan &
Luo, 2001).
As is true for strategic alliances in general, there are many types of cross-border
alliances. Two broadly categories of cross-border alliances are those that involve
equity investments and those that involve no shared equity or joint capital
investment. A non-equity cross-border alliance is an investment vehicle in which
profits and other responsibilities are assigned to each party according to a contract.
Each party cooperates as a separate legal entity and bears its own liabilities. Non-
NOTES
equity
In European law, the term "joint venture" is an elusive legal concept, better defined
under the rules of company law. In France, the term "joint venture" is variously
translated "association d'entreprises", "entreprise conjointe", "coentreprise" or
"entreprise commune.
A joint venture is a business entity created by two or more parties, generally

characterized by shared ownership, shared returns and risks, and shared
governance. Companies typically pursue joint ventures for one of four reasons: to
access a new market, particularly emerging markets; to gain scale efficiencies by
combining assets and operations; to share risk for major investments or projects; or to
access skills and capabilities. Work by Reuer and Leiblein challenged the claim that
joint ventures minimize downside risk. Most joint ventures are incorporated,
although some, as in the oil and gas industry, are "unincorporated" joint ventures
that mimic a corporate entity. With individuals, when two or more persons come
together to form a temporary partnership for the purpose of carrying out a particular
project, such partnership can also be called a joint venture where the parties are "co-
venturers".

NOTES
Types of joint venture
 Limited co-operation. This is when you agree to collaborate with another

business in a limited and specific way.
 Separate joint venture business. This is when you set up a separate joint
venture business, possibly a new company, to handle a particular contract.
 Business partnerships.
We can see few examples of joint ventures and they are (1) Joint ventures, although
they are a partnership in the colloquial sense of the word, can take on any legal
structure. (2) A common use of JVs is to partner up with a local business to enter a
foreign market. (3) Sony Ericsson is another famous example of a JV between two
large companies.
An international joint venture (IJV) occurs when two businesses based in two or
more countries form a partnership. A company that wants to explore international
trade without taking on the full responsibilities of cross-border business transactions
has the option of forming a joint venture with a foreign partner. International joint
ventures (IJVs) are an increasingly popular form of voluntary co-operation between
organizations of different sizes, sectors and geographical locations to satisfy strategic
purposes and manage increasingly complex business environments. However,
international joint ventures may fail, and HRM plays an important role in their
success or failure. From a systems perspective, IJVs offer several kinds of complexity
which may contribute to the generation of conflict and failure. The paper proposes
that we explore the role of HRM in IJVs through viable systems theory, especially in
relation to knowledge migration and organizational learning. The theory presented
distinguishes between the cognitive, organizing and behavioural domains of the IJV
as a system in the analysis of the relationship between types of worldview and
behaviour in IJVs. It proposes a model of viable knowledge development in IJVs and
its relationship to HRM, involving knowledge migration, appreciation and action,
leading to organizational learning, and identifies directions for future research
HRM issues in IJVs are entities with particularly complex sets of HR practices due to
the high levels of interaction between employees from collaborating partners of
different corporate and national backgrounds (who may be nationals of the parent-
NOTES
country (PCNs), host- country (HCNs) or a third-country (TCNs)), which presents
many HR challenges (e.g. Dowling et al., 1994; Schuler et al., 1993; As-Saber et al.,
1998). Two sets or more of HR practices interact, with potential clashes between the
need to comply with local HR practices (over staffing or labour relations, for
instance) and the desire of the partners to retain parent-country practices for reasons
of familiarity and/or control. Establishing a shared vision, developing negotiation,
communication and conflict management skills, harmonizing management styles
and HR practices, acculturating managers to work with foreign partners, developing
a teamwork culture and using staffing and career- management practices to reduce
psychic distance and encourage identification with the IJV have often been cited as
key challenges for HRM in IJVs (e.g. Pucik, 1988).
A framework summarizing empirical research into and theorizing of IJV

performance and HRM, especially in terms of knowledge migration and
organizational learning, is presented in Figure 1 (building on Schuler 2001a, 2001b).
IJV formation is seen as influenced by partner recruitment and selection criteria.
Partners‘ motives, objectives, resource contributions (including knowledge and HR
contributions), prior relationships, organizational and national cultures, management
styles, especially over issues of trust, control and conflict, transaction costs and HRM
practices (both organization-specific and environmental) are also seen as important
factors. In particular, formation is seen as influenced by partners‘ cognitive interests
and purposes, concepts we discuss further later in relation to knowledge migration
and IJV cognitive purposes and interests. Crucial HRM issues are HRM support in
terms of knowledge, learning, staffing, communication, negotiation and conflict
management. IJV development and implementation are then seen in terms of
strategy, structure, mission, vision, value, policies and practices, including HR
practices and policies, influenced by ongoing partner interaction, support,
forbearance, expectations and ongoing contractual and non- contractual inputs,
including HR inputs, with performance dependent on the development of mutual
trust, resource complementarity, inter-partner learning and, particularly, knowledge
development and migration. HR practices supporting learning and the development

of trust and a positive learning climate and knowledge migration are critical factors,
and a particularly important issue concerns the cognitive influences the partners
bring to the IJV, also to be discussed later. Monitoring and evaluation of IJV NOTES
performance may then lead to advancement, especially in terms of learning and
knowledge migration (both back to the parents and to other locations, again
requiring HR support). Restructuring, seen here as dependent on knowledge
tracking (assessing the organizational environment and change from a knowledge
perspective), line- management involvement, management team diversity and
experience and the presence.
Cross border means the flow or involvement of undertaking activity between two
countries and also it would be best described as companies doing business together
between two different countries. The money, the product, the communication and
culture – all happen from 2 different sides of a border. We also feel it is a fancy way
of saying ―international business‖. If you‘ve worked on domestic deals before, then
you already know they have plenty of moving parts. In cross-border deals, HR
professionals must consider multiple additional logistics issues like language, time
zone differences, employee benefit, organizational & national culture, roles of HR,
work practises etc...,
Language: There is always a risk for misunderstanding when people are using a
second language, no matter how proficient in that language they may be. In addition
to potential for misinterpretation, there‘s also opportunity for mismatch in formality,
NOTES
directness and display of emotion. And even if individuals at the target company
speak English, they may be not be comfortable conducting business in a non-native
language. This can be incredibly stressful, especially during major business
transactions or complicated negotiations.
Time-zone Differences: Employees from the buyer and target companies may
exhibit varying degrees of willingness to be flexible in accommodating the needs of
people in other time zones. As HR leader, you‘re well positioned to discuss the
importance of flexibility and accommodation whenever possible
Employee Benefits: In many cross-border M&A deals, the HR team must build in
even more time for employee benefits transfers. This process is already a frequent
source of delays in domestic deals, and cross-border deals are even more
complicated. The HR team should work closely with the legal team and engage HR
in each country to maintain continuity of employee benefits.
Organizational and National Culture: Organizational cultural incompatibilities are a

leading cause of deal failure for domestic M&A deals. In cross-border deals, the HR
team must also contend with differing national cultures, which can impact
everything from work hours to leadership expectations.
Varying Roles for HR: The roles and responsibilities of HR may change based on
local culture. In some places, the HR team acts as ―order takers,‖ while they act as
strategic advisors in others. Be mindful that your cross-border counterparts may not
have the same level of input as you. Furthermore, as an HR leader you may even
encounter resistance to your participation or leadership during due diligence and
integration.
Differences in Work Practices: HR leaders usually find that in addition to differing

response times and attitudes toward vacation and work hours, foreign labor markets
are also more heavily regulated. These regulations require careful analysis during
due diligence.
Human Capital Differences: Differences in employment practices, plans and

program design, for instance, can even influence how you ask questions during the

due diligence process. Furthermore, the structure of the deal itself may change from
country to country, further complicating the human capital puzzle.
NOTES
Feeling Loss of Control: Staff outside of headquarters may feel out of control,
potentially affecting quality and timeliness of work; the level of cooperativeness; and
willingness to work toward resolution of people issues that affect deal value and
productivity.
Risk of poor coordination: Despite a strong need for multi-national coordination,

HR leaders may encounter reluctance to adopt central control from one foreign
country. Consider which issues can actually be handled at the local or national level,
versus those that must truly be controlled from the U.S.
Regulatory and Legal Issues: To navigate the additional regulatory and legal issues
of cross-border deals, the HR team must work closely with an interdisciplinary team
that includes both legal and accounting.
Information: Outside the U.S., publicly available information is much more limited,
and accounting disclosures tend to be much less reliable. From an HR perspective,
this means that HR leaders not only will have much less information available
during due diligence, but also will need to be much more protective of confidential
employee information.
Labour Relations: Each country has its own labour relations challenges. In some
countries, it‘s necessary to consult unions, works councils or employee
representatives prior to finalizing any merger or acquisition. These entities may have
NOTES
considerable power, including the power to prevent a deal altogether. HR leaders
should ensure that adequate time and resources are dedicated to navigating these
labor relations concerns.
Immigration Considerations: Employees at the target company may be employed

through work permits or visas, and all these documents will need to be properly
transferred. In some transactions new permits or visas may be required prior to the
employee being employed by the buyer, especially in an asset transaction.
Meanwhile any of the buyer‘s employees who will be working on site at the foreign
subsidiary will also need to complete all required documentation. HR should
identify these immigration issues during the due diligence phase and oversee their
completion.
Employment Regulations: Outside the U.S, at-will employment is incredibly

uncommon. Most countries require significant notice and severance—along with
cause—for terminating employment, and often a simple duplication of roles due to
an acquisition is insufficient cause. Furthermore, the HR team must be aware of any
limitations on changing the terms and conditions of employment.
Tax Implications of Informal Integration Activities: It‘s not uncommon for foreign
subsidiaries to confer significant tax benefits for deals that are structured as mergers.
However, these advantages can be negated if HR and business teams undertake any
informal integration activities (sometimes called ―deemed integration‖), such as
consolidating reporting lines or locations.
3.3 Integrations
Integration between human resource management and businesses strategy is

amongst the most important demands that are put forward by modern day
organisations. It is generally acknowledged that the development and deployment of
corporate strategy with cooperation from human resource strategy is a difficult
preposition. Some go even further by saying that its organisations‘ human resource
strategy that gives the ‗competitive advantage‘. Marchington and Wilkinson (2008)
argue that Human Resource Management is now often seen as the major factor

differentiating between successful and unsuccessful organisations, more important
than technology or finance in achieving competitive advantage. In UK the shift of
industry from manufacturing to service has made it even more significant as most of NOTES
the staff is in face-to-face contact with the customers, hence emphasizing the
importance of human capital in routine operation of the organisation. Human
resource strategy, particularly in last two decades has emerged as a corner stone
strategy that has much of positive correlation with performance of the work force.
The term "integration" has multiple definitions, particularly in the context of studies
on European integration (Anderson and Wever 2003; De Boe, Grasland and Healy
1999; Hansen and Serin 2007; Sohn, Reitel and Walther 2009). For cross-border
regions, the integration process is fundamentally based on the existence of
interactions between areas separated by an international boundary. These
interactions are not limited to the economic sphere, but also concern other flows or
transactions (migration, political relations, cultural exchanges, etc).
The existence of interactions across a border does not necessarily mean that the
territories converge. Some relationships can be highly asymmetric and can be fed by
strong differentials. It is therefore necessary to complete an analysis of interactions
taking into account the possible convergence of the territories concerned. The need or
the desire of actors to cooperate is also to be taken into consideration, as cross-border
relations are not necessarily based on shared motivations.
As a consequence, cross-border integration is considered in this study as a process of

convergence between separate territories resulting from the intensification of the
interaction between actors located in different geographical units.
This definition allows us to consider the two main dimensions of cross-border

integration: first, this process refers to the existence of interactions between
territories and is based on flow analysis and barrier effects; second, cross-border
integration also refers to the convergence of territorial characteristics and is based on
an analysis of homogeneity and discontinuities.
One of the most common and costly mistakes organizations make is assuming
foreign markets operate exactly as they do in the U.S. Global employment is
complex, and organizations face a number of compliance challenges as they attempt
to expand their workforce, including:
NOTES New Market Compliance: Each territory comes with its own laws regarding
employee on-boarding/registering, tax calculations, and more. Stretch this
complexity across the globe and your job becomes exponentially more difficult.
Payroll Compliance: Keeping employees paid, on time, is crucial to company morale

and productivity. But what about tax deadlines? Withholding and reporting laws?
Regulations requiring employee tax slip signatures? Failure to adhere to and keep up
with any of these payroll compliance rules can result in serious penalties,
significantly affecting your bottom line.
Benefits and Expectations: Few aspects of global employment differ as widely as

benefit requirements. For example, while certain levels of benefits are required by
law, in the U.S. most countries offer more than adequate state-provided health care.
Careful consideration must be given to your benefit plan on a country-by-country
basis, or you risk redundant coverage, under-staffing, or penalties for
noncompliance.
Liability Insurance: It‘s essential to organizational culture that every employee

knows they are treated equally and fairly, regardless of the country in which they
work. Liability insurance can help accomplish this. But not all countries have a state
mandated plan for companies to pay into. Are you prepared for its limitations? Or
would setting up your own plan to protect work-sites and employees be more
advantageous?
Termination Policies and Practices: Termination is part of doing business, wherever

you operate. Unlike in the U.S., the only country where ―at-will employment‖ exists,
termination rules and regulations around the world are more complex. For example,
in many countries, before employees can be legally terminated for performance, the
employer must make every attempt to bring performance levels up to required
standards. Documentation of process and severance are some issues HR
professionals must have intimate knowledge to avoid penalty and loss in
productivity.
Retirement and Pension Plans: As the number of Gen Xers and Baby Boomers
planning to exit the workforce continues to rise, so too does the complexity of

pension planning and retirement. Employers with international workforces need to
understand fully each country‘s regulations as they apply to retirement. What age is
mandatory? Is national social insurance part of the equation? Are employee pension NOTES
contributions voluntary or required by law?
Get Started with Innovative Global Products: Knowing and understanding the key
global compliance issues outlined above is a great start toward creating opportunity.
Having a partner who has been through it helps, too.
Recruitment is the process of actively seeking out, finding and hiring candidates for a
specific position or job. The recruitment definition includes the entire hiring process,
from inception to the individual recruit's integration into the company. The
recruitment process in this method involves four stages: self-selection, creating a
candidate pool, technical skills assessment, and making a mutual decision. Then the
database is analysed for choosing the best and most suitable persons for global
assignments and this process is called technical skills assessment.
International or global recruiting is a method of recruiting that, among other of its

features, can be very specialized and niche, e.g., in targeting overseas senior talent, or
focused on capitalizing on lower labour costs in other regions.
There are many potential reasons for wanting to recruit internationally. You might
be looking at expanding your operations into a new, remote location. But you might
as well simply want to ensure that you constantly hire only the best candidates, so
you cannot focus your efforts on local candidates only.
The global recruitment challenges - In any case to be successful in your approach

there is a lot to learn about the unique challenge of recruiting globally. This goes
from managing cultural and linguistic differences to dealing with complicated
international law. There is no doubt whatsoever that your hiring process needs to
adapt to those external factors.
―Survey respondents believe that expanding workforces in new markets – including

the identification and hiring of talent across borders – has been the second-biggest
concern for Hr departments (after talent retention) in recent years and they expect it
to remain so. Nevertheless, only one-quarter of respondents say that their Hr
departments excel at sourcing key talent globally and 24 percent say the same of
their ability to support the company‘s globalization strategies‖ – KPMG
NOTES
Tips for recruiting internationally - In its study Rethinking Human Resources in a
changing World KMPG outlines a lack of knowledge when it comes to hire
internationally. According to them ―HR is struggling with the challenges of
managing a global, flexible workforce‖. Only 25% of respondents could say their
company excels are recruiting and retaining key talents globally. On the same time,
they rank it among their top 3 priorities. We think this is of strategic importance for
recruiting professionals and present you with some tips successful recruiting around
the globe.
Use job board finder - The leading job board comparator is by its very nature the
place to start when you want to understand how to best address candidates in a
foreign country. Job board Finder is a website gathering tools and services that
recruiters can use to search and compare employment websites from all over the
world. The recruiters also have the possibility to purchase job advertisements for the
job boards they selected and then manage their postings directly from this unique
platform.
Tailor your social-media recruitment strategy to the local market - We spoke

previously about Social Network Recruiting. LinkedIn seems the first choice for
European recruitment. Nevertheless, its strength ends when entering the German-
speaking borders. If you want to recruit in Germany you should use Xing as this is
the dominant player in that country. In France LinkedIn has a competitor called
Video and in the eastern part of Europe other social media companies hold an
important position as well (such as Golden line in Poland).

According to a Nielsen study Orkut is the most visited social site in Brazil. So, make
sure you tailor your social-media recruitment channel usage according to the local
market preferences. NOTES
Make sure you understand the visa laws - It is important to understand the visa
process as this is a huge part of the international recruitment process. Employment-
related laws vary significantly from country to country. You need to make sure that
you completely understand hiring obligations for contract vs. full-time employees
and termination regulations.
Make the hire in person - Doing an interview par skype is more and more common
and video recruitment is an emerging trend. However, a meeting in person with the
shortlisted candidates should always follow it. This is absolutely necessary to assess
the cultural fit between the individual and your organization core values. Ideally,
your company could refund plane tickets for interview candidates.
Evaluate language competency - You need to be able to determine that the candidate
you are going to hire speaks the required language fluently enough. You need to test
whether they will be able to speak the language of your industry and if the level of
their language proficiency will be relevant to the specific role you are hiring them
for.
Get a sense of a country or city’s recruiting potential - It is crucial that the recruiters
stay on top of shifting trends. For instance, if this is the industry you are in, you
should know that Amsterdam has recently become a tech hub. Frequently reading
HR reports like the KPMG review mentioned above or this website will help you to
be up to date with this kind of information. You should aim at knowing what the
average level of education is in the target country, what is the English proficiency
level. Good research can also avoid in making costly hiring mistakes.
International recruiting can be a time-consuming, challenging process, but nothing is
more essential to ensuring business success than putting together the right team.
NOTES 3.3.3 Selection Staffing in International Context
International staffing is a necessary piece to your global expansion puzzle. Moving

into a new market requires hiring local employees or contractors to assist effectively
and efficiently with growth. For example, hiring an in-country sales representative
boosts sales because that rep understands the market and culture.
While recruiting people for international operations, the international HR managers

must identify the global competitiveness of the potential applicants at the time of the
recruiting process. It is essential that the workforce of an international organization is
aware of the nuances of international business. Understandably, the company must
keep international knowledge and experience as criteria in the recruitment and
selection process.12 Besides, the international HR department must have a fairly
good idea about the skills and availability of human resources in different labour
markets in the world. The HR department must have the capacity to foresee the
changes in these markets and exploit those changes productively. A truly
international HR department would insist on hiring people from all over the world
and place them throughout the international business operations of the organization.
Approaches to Recruitment in IHRM Though the general aim of any recruitment

policy is to select the right people for the right task at the right time, the HR
department of international companies may adopt one of the following three specific
approaches available for recruiting employees for global operations.
H-1B workers may be employed temporarily in a specialty occupation or as a fashion

model of distinguished ability. A specialty occupation requires theoretical and
practical application of a body of specialized knowledge along with at least a
bachelor‘s degree or its equivalent. An H-1B alien may work for any petitioning U.S.
employer for a maximum period of six years.

International Recruitment Methods
Ethnocentric Approach: Countries with branches in foreign countries have to decide

NOTES
how to select management level employees. Ethnocentric staffing means to hire
management that is of same nationality of parent company. When a company
follows the strategy of choosing only from the citizens of the parent country to work
in host nations, it is called an ethnocentric approach. Normally, higher-level foreign
positions are filled with expatriate employees from the parent country. The general
rationale behind the ethnocentric approach is that the staff from the parent country
would represent the interests of the headquarters effectively and link well with the
parent country. The recruitment process in this method involves four stages: self-
selection, creating a candidate pool, technical skills assessment, and making a mutual
decision. Self-selection involves the decision by the employee about his future course
of action in the international arena. In the next stage, the employee database is
prepared according to the manpower requirement of the company for international
operations. Then the database is analysed for choosing the best and most suitable
persons for global assignments and this process is called technical skills assessment.
Finally, the best candidate is identified for foreign assignment and sent abroad with
his consent.
The ethnocentric approach places natives

of the home country of a business in key positions at home and abroad. In this
example, the U.S. parent company places natives from the United States in key
positions in both the United States and Mexico.
Polycentric Approach: When a company adopts the strategy of limiting recruitment

to the nationals of the host country (local people), it is called a polycentric approach.
The purpose of adopting this approach is to reduce the cost of foreign operations
gradually. Even those organizations which initially adopt the ethnocentric approach
may eventually switch over to the polycentric approach. The primary purpose of
handing over the management to the local people is to ensure that the company
understands the local market conditions, political scenario, cultural and legal
requirements better. The companies that adopt this method normally have a
localized HR department, which manages the human resources of the company in
NOTES
that country. Many international companies operating their branches in advanced
countries like Britain and Japan predominantly adopt this approach for recruiting
executives lo manage the branches."
The polycenlric approach uses natives

of the host country to manage operations in their country and natives of the parent
country to manage in the home office. In this example, the Australian parent
company uses natives of India to manage operations at the Indian subsidiary.
Natives of Australia manage the home office.
Geocentric Approach: When a company adopts the strategy of recruiting the most
suitable persons for the positions available in it, irrespective of their nationalities, it is
called a geocentric approach. Companies that are truly global in nature adopt this
approach since it utilizes a globally integrated business strategy. Since the HR
operations are constrained by several factors like political and ethnical factors and
government laws, it is difficult to adopt this approach. However, large international
companies generally adopt the geocentric strategy with considerable success.
For international recruitment, especially on foreign soil, organizations generally use

manpower agencies or consultants with international connections and repute to
source candidates, in addition to the conventional sources. For an effective utilization
of the internal source of recruitment, global companies need to develop an internal
database of employees and an effective tracking system to identify the most suitable
persons for global postings.

NOTES
The geocentric approach uses the best

available managers for a business without regard for their country of origin. In this
example, the UK parent company uses natives of many countries at company
headquarters and at the U.S. subsidiary.
Regio-centric Approach: The Geocentric Approach is one of the methods of

international recruitment where the Multi-National Companies recruit the most
suitable employee for the job irrespective of their Nationality. The Regio-centric
approach uses managers from various countries within the geographic regions of
business. Although the managers operate relatively independently in the region,
they are not normally moved to the company headquarters. The Regio-centric
approach is adaptable to the company and product strategies. When regional
expertise is needed, natives of the region are hired. If product knowledge is crucial,
then parent-country nationals, who have ready access to corporate sources of
information, can be brought in. One shortcoming of the Regio-centric approach is
that managers from the region may not understand the view of the managers at
headquarters. Also, corporate headquarters may not employ enough managers with
international experience.
The Regio-centric approach

places managers from various countries within geographic regions of a business. In
this example, the U.S. parent company uses natives of the United States at company
headquarters. Natives of European countries are used to manage the Italian
subsidiary.
The top 7 destinations for women expats like to work are Singapore, Hong Kong,
South Korea, Japan, China and Malaysia are the other countries most preferred by
expat working women ahead of India, according to an HSBC survey. The survey was
NOTES
done among 27,587 expats from 159 countries and territories, including India,
through an online questionnaire in March-April 2017.
International Selection: Even though cultural differences influence the selection

procedure to some extent; organizations tend to follow similar criteria and methods
worldwide. This is due to the fact that the end objective of any selection process is to
choose the most capable persons for the job. The selection criteria for international
jobs usually revolve around the five core areas of behaviour, attitudes, skills,
motivation and personality. More specifically, the focus of selection for international
operations normally includes cultural adaptability, strong communication skills,
technical competence, professional or technical expertise, global experience, country-
specific experience, interpersonal skills, language skills, and family flexibility.
Employers around the world usually rank personal interviews, technical competency
and work experience in similar jobs as important criteria for selection. International
firms, while choosing employees for overseas operations, usually prefer people with
 Highly developed technical skills

 Good language and communication skills
 Tolerance towards other culture, race, creed, colour, habits, and values
 High level of motivation
 Stress resistance
 Goal-oriented behaviour
Finally, at the time of selection for international assignments, an organization should

consider the previous overseas experience, family circumstances and cultural-
adaptability level of the candidates aspiring for the global jobs.
Most common mistakes when hiring international employees: Whether you are
looking for international employees who can take on roles that your local job market
is unable to handle sufficiently or you just want to diversify your workforce, you will
need to avoid the common, costly mistakes that recruiters make when hiring
internationally. Or maybe you have opened an international shop and you are now
looking for local employees to help you with business localization. To simplify things

for you, we have provided you with 5 of the most common hiring mistakes that you
cannot afford to make. Be our guest.
NOTES
Prioritizing language skills over core skills: It is common practice for recruiters to
hire staff members who are experts in the language of their target market. While this
is perfectly in order, it is extremely dangerous to put unnecessarily huge emphasis
on a candidate‘s language skills to the point of overlooking some more fundamental
skills.
Let‘s say you are opening shop in China. Your business will stand a great chance to
prosper if you can hire competent Chinese professionals to run the business for you.
But in the event that you don‘t get qualified locals to hire, avoid panic hiring. The
best thing to do is to hire foreign talents with a fairly good grasp of the local
language and then help them develop their language skills through a specially-
designed management development program.
Failure to comply fully with set employment/termination laws: Multinational

companies are in most cases subjected to more scrutiny than local companies when it
comes to their adherence to employment laws. Foreign businesses in China, for
example, have to follow stricter reporting structures and administration protocols
than their local competitors. If your employees understand the regulatory aspects of
running an international office in China, they will use that knowledge against you in
case of future employment disputes. The best thing is to understand and comply
with all regulations before, during, and after the recruitment process.
Avoiding uncomfortable conversations with new employees: Because taking a local

business to the international stage can sometimes be intimidating, some employers
opt to play safe with their new staff by avoiding direct, uncomfortable
confrontations. That way, they conceal their dissatisfaction with some workers‘
performance, making problem-solving processes slow and, in most cases, unfruitful.
According to experts from Globalization Pedia ―the only way of getting the most out
of your workforce is through having those candid, uncomfortable discussions with
them regarding their competency and dedication to their assigned roles. If an
employee is too incompetent for your preferences, don‘t shy away from firing them.
Just remember to follow the right termination law
Ignoring mandatory employee benefits: In most of Europe and the US, employment
laws do not obligate employers to give their employees mandatory annual paid
vacations. The decision to or not to grant such benefits rest with an individual
NOTES
employer. However, employment laws in Asia specify sick leaves, paid vacations,
and many other mandatory benefits that you have to grant your staff members on an
annual basis. There are some limitations to these benefits, which basically attempt to
provide checks and balances so that neither the employer nor employee can take
undue advantage over the other.
The mistake some employers make is to assume that their international employees
will conform to the employment laws as applied to the US or Europe, for example.
To avoid future friction with authorities, it is imperative that you familiarize with the
employee benefits in the international market from which you are hiring, and then
fully comply with each one of them. Be sure to understand how leaves are
administered, how the compensation during the leave should be done, the
definitions and expectations of a ―sick day‖, and any other relevant benefits.
Hasty hiring: Hiring processes are known to be tedious, lengthy, and sometimes
inconveniencing. Everything gets worse when it comes to international hiring. If you
are interviewing candidates who don‘t speak your language, then you already have a
major stumbling block in your way. On the other hand, you can get the best talent for
the job but then due to travel hurdles, the process gets more sophisticated and
exhausting. Then there is the issue of paperwork and other legal formalities that you
have to comply with, most of which are new to you. Lastly, you may not have
enough prior information about universities and colleges in the country from which
you are hiring, so you may have a hard time authenticating the academic papers that
candidates present to you.
In the midst of all these hiring challenges, many employers opt to trust their gut and
hire people without following the due process. But because you don‘t want to keep
hiring and firing even before your business gains enough momentum, the best thing
to do is to take your time to understand the process, internalize the hiring laws, and
learn everything there is to learn regarding local universities and colleges. Take all
the time that you need to find the best talent for the job.

In many companies‘ staff development has to adapt to the needs of multicultural

NOTES
workforces and international locations. This is the only way the companies can
reduce the risk of issues like hiring the wrong people, failed projects or the
premature termination of foreign assignments.
The necessity of systematic, professional international staff development is

recognised today by more and more companies. International HR development is
focused on processes and projects spanning a number of different business locations
that are related to employee and organisation management.
Intercultural communication situations where different thought and behavioural

patterns come together are inevitable in the daily work environment. The challenge
is building a mutual identity around the company and the organisation despite the
broad diversity of the various cultural imprints involved. Cultural differences and
commonalities have to be recognised and utilised positively in the interest of the
international collaborative work.
This is the only way to implement appropriate behavioural and working methods
and to shape the process of assembling, qualifying and managing individuals and
teams in accordance with management directives. In addition to implementing HR
tools along with communication and motivation processes, other aims of
international staff development include the creation of synergies, the development of
resources and the promotion of potentials.
In our ―International HR Development‖ seminars you get to know the special

challenges of international staff development and learn successful methods of
employee and organisation management.
Multicultural product and project teams work together in today‘s globalised business
world, often on a cross-departmental and even pan-national basis. The success of
such international organisation units depends not only on technical organisational
elements and structures, but above all on sturdy human relationships, trust, clear
rules and smooth communication.
An inspiring, constructive working environment is enhanced by the understanding

of different, often culturally influenced motives and behavioural patterns and the
recognition of individual potentials and strengths. Ultimately the appreciation of
diversity in every regard pays off in a company‘s success. For a team to function well
the individual‘s individuality has to be integrated and the diversity of the others
NOTES
(based on origin, sex, age and religious affiliation) must be appreciated.
The most frequent causes of weak performance capability in a team are a lack of clear
communication about the objectives, inadequate working methods, insufficiently
structured processes and interpersonal conflicts. Team development should therefore
account for the technical work issues while promoting the relationships among the
team members and communication within the team as key elements for collaborative
work.
The way we work together is changing. Globalisation, expansion into new markets
and flexible workplaces require diverse teams of people working together: virtual
teams, cross-border teams, matrixed organisations. Working with people you do not
see — or who live in a different time zone, or think, talk, feel or act differently from
you — can make even simple tasks difficult.
From my discussions with managers, most see the value of diversity to avoid group
think. However, when it comes to working together, it is often easier to see how we
are different, rather than how those differences can be harnessed. With the rapid
growth of Asian multinationals, we need leaders for the new workplace – leaders
who can connect with a broad range of employees across time zones, locations,
cultures and backgrounds.
At Hudson, we have identified the five crucial traits of leadership as: Vision, Action,
Impact, Connection and Drive. Of these, to bridge gaps across teams, we emphasise
the importance of the leader‘s Connection to the team. This means that leaders need
to show social intelligence, embrace and leverage diversity across perspectives and
cultures, and foster positive emotions in others.
Here are three tips to harnessing Connection as a leader, despite geographical and
cultural barriers.
Build trust with your team: In his book The Speed of Trust, Stephen Covey
emphasises the importance of connection between leaders and the people they

manage. ―If you think your leaders don‘t care about you, you‘ll tend not to trust
them. If they think you don‘t care, they are going to view everything you do with
scepticism, suspicion and distrust.‖ NOTES
Typically, in Asian culture, trust is built starting with character — a personal level of
trust, while in Western culture, trust tends to start with competence — a professional
level of trust. For leaders emerging onto the global scene, you need to start building
trust at both levels by looking out for your employee‘s personal and professional
well-being.
For example, several years ago, my role scope changed from leading Hudson‘s TM
business in Singapore to leading in Asia. I knew that my new role began with
Connection — building personal trust. I needed to understand the diverse people in
those businesses: how they thought, what was important to them, how they would
communicate with me and how I should communicate with them. Only after
establishing personal trust could I then build professional trust and sell the vision
ahead.
Seek to understand the cultural differences: The most challenging aspect managing
a multinational team can be in understanding just what the cultural differences are
Often, leaders are aware that there are cultural differences, but have no idea exactly
where these differences may lie. I‘ve worked with an American company in China
that had this struggle. We helped the company understand where the cultural
differences were, and help overlay that with corporate culture (what the company
stands for with its customers and employees). Overtime, the phrase ‗this is China
and we do things differently here‘ became less used, and was eventually removed
from the corporate vocabulary.
As you come to know the working culture and dynamics of your various teams, it
may be that you will have to utilise different way of engaging with different groups.
Try to find out what each location and team responds to best, as well as their
motivations and what they find rewarding.
Unify under a corporate culture identity: While respecting the local culture and
contextualising is important, organisations still need a cultural identity that unites
employees throughout each location. At Hudson, despite our multiple locations
across Asia Pacific, one of many factors that bring us together is that we have a
culture of celebrating each other‘s success. Each quarter we hold an internal awards
ceremony where we are able to nominate and cheer on our team members. The
winners of these awards also go on to the annual ceremony (where we fly our
NOTES
winners). This helps us not only celebrate high performers, but creates a culture
where we encourage our nominees and award winners to meet and get to know one
another. Having a corporate culture of ‗the way we do things around here‘ can help
to alleviate tensions with different country cultures.
For example, in Chinese culture, a senior manager may be reluctant to approach a

junior staff member for a casual conversation, whereas in Australian culture this is
far more accepted. If the company culture is one of transparency and openness
among all levels of staff, that can help people avoid ‗walking on egg shells‘ for fear of
misunderstanding the cultural differences.
I know that doing these things are not always easy. It takes time and consistency to
build trust. It‘s not always simple to understand cultural differences, or to unite
those differences under a single organisational culture. However, as leaders, it‘s
essential that we make the effort to try — rather than make excuses — so we can
improve our Connection skills and ultimately give our teams the best opportunities
to work together effectively and achieve our goals.
To have a successful career, the expatriate must perform satisfactorily on the job. The
performance appraisal system provides a means of evaluating how well the
individual achieves the assigned goals of the organization. It also identifies the
individual's skills and behaviours. Performance management is an integral part of
the workplace as it provides a platform for supervisors and managers to measure
employee performance and determine whether employees are meeting the
company's expectations.
The method of performance measurement varies according to the work environment,

type of business and, to some extent, the employee's occupation. Employee
performance measurements can determine an employee's compensation,
employment status or opportunities for advancement. For these reasons,
performance management programs must consist of methods that enable fair and
accurate assessments of employee performance. To assist with measuring employee

performance, employers first establish performance standards. Performance
standards define what it takes for employees to meet or exceed the company's
performance expectations. NOTES
Management by Objectives: Management by objectives, or MBOs, are useful for
measuring the performance of employees in supervisory or managerial positions.
MBOs start with identifying employee goals, and from that point the employee and
her manager list the resources necessary to achieve those goals. The next section of
MBOs consists of the timelines for achieving each goal. Throughout the evaluation
period, the employee and her manager meet periodically - quarterly is best - to
discuss the employee's progress and to reset goals for which the employee needs
additional time or resources to complete. The employee‘s performance is measured
by how many of her goals she accomplished within the designated time frame.
Performance Appraisal Methods
Ranking Method: The ranking system requires the ratter to rank his subordinates on
overall performance. This consists in simply putting a man in a rank order. Under
this method, the ranking of an employee in a work group is done against that of
another employee. The relative position of each employee is tested in terms of his
numerical rank. It may also be done by ranking a person on his job performance
against another member of the competitive group.
Advantages of Ranking Method: Employees are ranked according to their

performance levels. It is easier to rank the best and the worst employee. Limitations
of Ranking Method: The ―whole man‖ is compared with another ―whole man‖ in
this method. In practice, it is very difficult to compare individuals possessing various
individual traits. This method speaks only of the position where an employee stands
in his group. It does not test anything about how much better or how much worse an
employee is when compared to another employee. When a large number of
employees are working, ranking of individuals become a difficult issue. There is no
systematic procedure for ranking individuals in the organization. The ranking
system does not eliminate the possibility of snap judgements.
NOTES
Rating Scale: Rating scales consists of several numerical scales representing job
related performance criterions such as dependability, initiative, output, attendance,
attitude etc. Each scale ranges from excellent to poor. The total numerical scores are
computed and final conclusions are derived. Advantages – Adaptability, easy to use,
low cost, every type of job can be evaluated, large number of employees covered, no
formal training required.
Checklist Method: Under this method, checklist of statements of traits of employee

in the form of Yes or No based questions is prepared. Here the ratter only does the
reporting or checking and HR department does the actual evaluation. Advantages –
economy, ease of administration, limited training required, standardization.
Disadvantages – Raters biases, use of improper weighs by HR, does not allow ratter
to give relative ratings

Critical Incidents Method: The approach is focused on certain critical behaviours of
employee that makes all the difference in the performance. Supervisors as and when
they occur record such incidents. Advantages – Evaluations are based on actual job NOTES
behaviour‘s, ratings are supported by descriptions, feedback is easy, reduces recency
biases, chances of subordinate improvement are high. Disadvantages – Negative
incidents can be prioritized, forgetting incidents, overly close supervision; feedback
may be too much and may appear to be punishment.
Essay Method: In this method the ratter writes down the employee description in
detail within a number of broad categories like, overall impression of performance,
promotability of employee, existing capabilities and qualifications of performing
jobs, strengths and weaknesses and training needs of the employee. Advantage – It
is extremely useful in filing information gaps about the employees that often occur in
a better-structured checklist. Disadvantages – It its highly dependent upon the
writing skills of rater and most of them are not good writers.
They may get confused success depends on the memory power of ratters.
Behaviourally Anchored Rating Scales: statements of effective and ineffective

behaviours determine the points. They are said to be behaviourally anchored. The
ratter is supposed to say, which behaviour describes the employee performance.
Advantages – helps overcome rating errors. Disadvantages – Suffers from distortions
inherent in most rating techniques.
NOTES
3.4.3 Third and Host Country Employees
Host country nationals are local employees that work for a foreign subsidiary. Third-
country nationals are employees from one country that work for a foreign subsidiary
in a second country that is headquartered in a third country.
A third-country national (TCN) is an individual who meets the following criteria. (1)
Is neither a citizen of the United States nor of the country to which assigned for duty.
(2) If employed, is eligible for return travel to the TCN's home country or country
from which recruited at U.S. Government expense.
A host-country national (HCN) is an employee who is a citizen of a country in which

an organization's branch or plant is located, but the organization is headquartered in
another country. An impediment to hiring HCNs is that such employees may not
understand the parent company's culture.
The benefit of benefit of using a third-country national instead of an expatriate is that

with the use of a third-country national, they do not have the citizenship of the home
country, there is a benefit of capital accumulation advantage and this means that the
third-country national is able to facilitate.
When hiring globally, it is necessary to understand the differences in these terms:
Local Nationals: Also known as host-country nationals, these employees are hired
for jobs in their own country. For example, a United Kingdom citizen who is
employed at Coca Cola‘s U.K. subsidiary is a local national.
Expatriates: U.S. companies have historically defined expatriates as employees who

are asked to work outside their home countries for a period of time with the intent of

eventually returning to their home countries. Expatriates who are from the country
where the company is headquartered are referred to as headquarters expatriates. An
expatriate may also be referred to as a parent-country national. NOTES
Third-Country Nationals (TCNs: These employees are not from the home country or
the host country. TCNs have traditionally been technical or professional employees
hired for short-term employment and are often considered as international freelance
employees.
Inpatriates: These foreign national employees have been transferred to work in the
home country of an international organization on a temporary or permanent basis.
MODULE IV
NOTES Structure
4.0 Introduction
4.3.2 International Compensation Composition
4.0 Introduction
Performance management is an ongoing process of communication between a

supervisor and an employee that occurs throughout the year, in support of
accomplishing the strategic objectives of the organization. Effective performance
management is essential to run the businesses through both formal and informal
processes, it helps them to align their employees, resources, and systems to meet the
organizations strategic objectives. Organizations that get performance management
right become formidable competitive for the other similar kind of organizations in
the existing market.
Performance management is the process a business uses to assess its employees and
to determine the efficiency of its activities in achieving its objectives. Performance
management tasks include planning new business actions, monitoring the progress
of those actions and examining which of those actions are bringing the business
closer to its goals. Numerous issues between company leaders and employees can
interfere with how quickly a firm reaches those goals.

Lack of Credibility: A strong performance management system relies on a trusting
relationship between employees and supervisors. When the employees doubt the
credibility of the supervisors, they also will distrust the results of any performance NOTES
management metrics those supervisors produce. The lack of credibility may come
from inexperienced management, poor communication skills or general
incompetence. The lack of credibility from supervisors can lead to employees
"checking out" of the job, either by leaving or by marking time without putting forth
any effort.
Lack of Consistency: Poor performance management results can also stem from
supervisors delivering inconsistent feedback. Mixed messages can cause confusion
and resentment among employees, leading them to distrust the performance
management reports. Small businesses are highly prone to the damage that mixed
messages can cause, as the small number of employees are more likely to
communicate those mixed messages to each other. Business owners must maintain
consistent tone and content in their feedback to workers if they want to ensure
implementation of any performance management recommendations.
Lack of Established Goals: Business owners must have clear goals they wish to meet
to keep the business alive. If they have not established specific goals, the employees
will have no idea whether or not they've accomplished their tasks. Entrepreneurs
must also clearly communicate those goals to the workers for the performance
management processes to be effective. A goal of "more sales" is not specific enough,
but a goal of "20 percent increase in sales in the next 90 days" gives employees a goal
they can reach.
Lack of Clear Strategy: Just as a lack of clear goals can interfere with performance
management assessments, so can a lack of a clear strategy on how to achieve those
goals. Small business owners‘ function as leaders for their employees. Leaders must
provide guidance and plans for their subordinates to follow. A clear strategy also
gives the business owner "milestones" to measure the company's progress toward its
goals and alternative tactics if the current actions are ineffective.
As a result of an increase in the number and influence of multinational enterprises

(MNEs), since the early 1990s there has been a growing interest in international
human resource management (IHRM), reflecting the growing recognition that the
effective management of human resources internationally is a major determinant of
success in international business (Dowling et al., 1994; Scullion, 1994; Edwards et al.,
NOTES
1996; Scullion and Starkey, 2000). In the international arena, the quality of
management seems to be even more critical than in domestic operations (Tung,
1984). However, as Adler and Bartholomew (1992) have suggested, organizational
strategy (the what) is becoming more international faster than the implementation
(the how) and much faster than the development of international managers (the
who). There is still relatively little empirical research, documenting the IHRM
strategies and practices of multinationals. The shortage of international managers is a
significant constraint on the successful implementation of global strategies (Hamill,
1989; Scullion, 1994, 1995) and many companies underestimate the complex nature of
HRM problems involved in international operations (Dowling et al., 1999).
Moreover, there is much less research into international training and management
development of MNEs, and especially, into IHRM of MNEs originating from
economies other than Western market ones (Siu and Darby, 1999; Shen and Darby,
2004). This study explores a selection of issues of international training and
management development and their implementation in MNEs, e.g. what are effective
international training and management development approaches? The methodology
of this paper is to employ a literature review and discuss the author‘s own empirical
research conducted in 2001 on Chinese MNEs. It starts with international training
and then turns to international management development.
Importance of international training and development: International training and

management development are always closely associated in the management
literature. Gregersonetal. (1998) proposed four strategies for developing global
managers: international travel; the formation of diversified teams; international
assignments and training. These four strategies relate to expatriation management,
particularly integrating international training and management development.
Training aims to improve current work skills and behaviour, whereas development
aims to increase abilities in relation to some future position or job, usually a
managerial one. A truly global manager needs a set of context-specific abilities, such
as industry-specific knowledge, and a core of certain characteristics, such as cultural
sensitivity, ability to handle responsibility, ability to develop subordinates and

ability to exhibit and demonstrate (Baumgarten, 1992). These characteristics and
skills are considered as important international competencies and all can be
developed through effective international training and management development. NOTES
International training refers to training for international assignments. There are three
broad types of international trainings in MNEs. They are:
Preparatory training for expatriates: once a person has been appointed for an
international assignment, pre-departure training is normally used to ensure the
candidate has adequate skills and knowledge that are necessary for working abroad
effectively.
Post-arrival training for expatriates: after an expatriate has gone abroad, further on-
site training is often used to familiarize the expatriate with the local working
environment and procedures.
Training for host-country nationals (HCNs) and Third-Country Nationals (TCNs):

Training should be provided to HCNs and TCNs to facilitate understanding of
corporate strategy, corporate culture and socialization.
Preparatory training for expatriates has received most attention in the international
literature as expatriate failure (i.e. the premature return of an expatriate manager
before the period of assignment is completed) is always regarded as due to a lack of
adequate training for expatriates and their spouses. The expatriate failure rate is an
important indicator for measuring the effectiveness of expatriation management. The
costs of expatriate failure are high and involve both direct and indirect elements. In
the case of expatriate recalls, the direct costs include salary, training costs and travel
and relocation expenses. The complex and ever-changing global environment
requires flexibility. The organization‘s ability to devise strategic responses, however,
may be constrained by a lack of suitably trained, internationally oriented personnel.
(https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.476.3631&rep=rep1&t
ype=pdf)
International compensation refers to all forms of financial returns and tangible

benefits that employees of an international organization receive from their employer
in exchange for providing their labour and commitment.
Managing compensation internationally is a tricky area and international HR
managers have to think beyond the set theories and be highly aware of the trends
and conditions all over the world. For Example: Japanese electronics giant Panasonic
NOTES
has announced plans to pay expat workers in China a wage premium to compensate
for dangerous air pollution. The employer is thinking beyond the traditional expat
package and giving an allowance that shows a high amount of care and the
employee is bound to feel valued. The objective of managing compensation is to
ensure that an organization has an edge in terms of having the right talent at the
right place and the right time. If compensation is not managed proactively,
managing expatriates can prove to be a big challenge. The economic trends in the
world keep swinging between economic prosperity and cost cutting. In such an
environment, many corporates react with sudden withdrawal of benefits without
considering what impact it may have on employees. Compensation is a tool used by
management for a variety of purposes to further the existence of the company.
Compensation may be adjusted according to the business needs, goals, and available
resources.
Compensation may be used to:
 Recruit and retain qualified employees.

 Increase or maintain morale/satisfaction.
 Reward and encourage peak performance.
 Achieve internal and external equity.
 Reduce turnover and encourage company loyalty.
Compensation is based on:
 Market research about the worth of similar jobs in the marketplace,

 Employee contributions and accomplishments,
 The availability of employees with like skills in the marketplace,
 The desire of the employer to attract and retain a particular employee for the
value they are perceived to add to the employment relationship, and
 The profitability of the company or the funds available in a non-profit or
public sector setting, and thus, the ability of an employer to pay market-rate
compensation.

Compensation: Outline and Definitions. Compensation is a systematic approach to

NOTES
providing monetary value to employees in exchange for work performed.
Compensation may achieve several purposes assisting in recruitment, job
performance, and job satisfaction. It going rate approach is also known as
‗localization‘, ‗destination‘ or ‗host country-based approach‘. The core of this
approach lies in linking the expatriate compensation to the salary structure of the
host country, taking into account local market and compensation levels of local
employees. The going rate method aims to treat the expatriate employee as a citizen
of host country.
Advantages of Approaches:
 Equality with local nationals

 Simplicity
 Identification with host country
 Equity amongst deferent nationalities
Disadvantages of Approaches
 Variation between assignment for same employee

 Variation between expatriates of same nationality in deferent countries
 Potential re-entry problems
The balance sheet approach - provides international employees with a

compensation package that equalizes cost differences between the international
assignment and the same assignment in the home country of the individual or the
organization. The balance sheet approach is based on some key assumptions and is
designed to protect expatriations from cost differences between their home and host
countries. BALANCE SHEET APPROACH
Advantages of balance sheet approach
 Equity between deferent assignments and between assignees of the same

nationality.
 Facilitates assignee re- entry.
 Easy to communicate to employees.
Disadvantages of balance sheet approach
 Can lead to disparities between assignees of the deferent nationalities in the

NOTES same host country, and between assignees and local nationals.
 Administration can be complex.
International Citizens Approach is to provide compensation for the expatriate and

in an international basket of goods is used for all expatriates, regardless of country of
origin. The basket of goods includes food, clothing, housing. However, expatriates
are not provided salary adjustments that would allow them to purchase exactly the
same items in the host country as in the home country. Rather, they receive
adjustments that would allow them to purchase a comparable local product of the
same nature.
Lumpsum Approach involves giving expatriate a predetermined salary and letting

the individual decide about how to spend it. Finally, there is the regional system,
under which the MNC sets a compensation system for all expatriates who are
assigned to a particular region.
4.3.2 International Compensation Composition:
Human Resource Management includes conducting job analyses, planning personnel

needs, recruiting the right people for the job, orienting and training, managing wages
and salaries, providing benefits and incentives, evaluating performance, resolving
disputes, and communicating with all employees at all levels. International Human
Resource Management (IHRM) has for many years been established as an important
area in management studies, and one which is critical for organizations. Currently,
firms take part in a process of globalization or internationalization that obliges them
to be competitive in a world market. To maintain competitiveness, firms must
innovate and develop a greater capacity for reaction than that of their competitors. In
this sense, appropriate people management can endow firms with the indispensable
capacities needed to achieve survival and differentiate themselves from their
competitors A company‘s internationalization means having to adopt an
international orientation in all the functional activities of the company, such as
finance, marketing, production or human resource practices. As an example, in the
Human Resource (HR) department, HR managers will have to ask themselves
questions such as:

 If the company goes international, what type of employees do they need to
hire? Employees from the home country (expatriates), or local employees?
How will we choose whether to send expatriate-ates or use local employees? NOTES
 How can we know how HR practices are conducted in other countries? Is the
recruitment and selection process the same in the country or countries the
company wants to operate in?
 How do we manage knowledge across geographical and cultural distances?
etc.
Knowing how to manage and deal in an effective way with all the issues involved in
IHRM is critical to the success of the company. This chapter will cover key issues in
IHRM, and after reading this chapter, the reader should know about differences
between domestic and international HRM, the impact of culture in IHRM,
alternatives for international staffing, and issues related to expatriation and
repatriation. The treatment of ―international‖ in the management of employees in an
organization gives it a certain degree of complexity which makes studying it very
relevant.
A good repatriation program helps employees adjust to the ―reverse‖ culture shock
of returning home by reducing emotional turmoil, for one. When expatriates return
from international assignments, there is a re-entry culture shock that occurs.
Repatriation is the process of returning an asset, an item of symbolic value, or a

person—voluntarily or forcibly—to its owner or their place of origin or citizenship.
For refugees, asylum seekers and illegal migrants, repatriation can mean either
voluntary return or deportation.
Repatriation is a process of returning back from an international assignment to a

home country after completing the assignment or some other issues. The term may
also refer to the process of converting a foreign currency into the currency of one's
own country.
Repatriation can be more difficult than expatriation. However, unrealistic

expectations about home and a lack of preparedness for the reality can in fact make
repatriation more difficult than expatriation. Some of the challenges of returning
home are the same as those experienced when moving abroad in the first place.
NOTES Effects of repatriation symptoms of repatriation reaction can include fluctuations in

mood, changes in sleep habits (insomnia, sleeping too much, etc.), changes in libido,
and changes in alcohol and/or tobacco consumption.
Repatriation purpose refers to converting any foreign currency into one's local
currency. Repatriation sometimes becomes necessary due to business transactions,
foreign investments, or international travel.
Repatriation vs Expatriation As nouns the difference between expatriation and

repatriation. is that expatriation is voluntary migration from one's native land to
another while repatriation is the process of returning of a person to their country of
origin or citizenship.
Repatriation Issues Repatriation is the process of returning of a person back to one‘s

place of origin or citizenship. It is likely that problems of repatriation and reverse
culture shock will affect the employee for some time. Reverse culture shock is quite
similar in effect to a cultural shock that the employee experiences as the employee
gradually gets used to living abroad. The various phases include the honeymoon
phase, where the employee is happy to return to what he/she perceives as home;
followed by an inevitable rejection and persistent nostalgia for the expatriate
lifestyle. While this should ideally lead to an adaptation to the ―new old‖ home, the
process is long and gradually, often taking up over two years to resolve.
Expatriates tend to focus on practical issues that go hand in hand with returning to
the home country – paying off bills, flight tickets, freight issues etc. unfortunately,
intellectual and emotional preparations required to deal with the change in
environment are generally neglected in this process, causing the onset of severe
repatriation problems. Generally, the repatriate is surprised to find himself
experiencing an intense re-entry cycle; that parallels the one he experienced abroad.
Stages of this process include a feeling of shock and homesickness and gradual
acceptance and re-integration into the society. Re-entry is capable of on-setting the
same restlessness and vague dissatisfaction with life that is often triggered by initial
culture shock.

International compensation refers to all forms of financial returns and tangible
benefits that employees of an international organization receive from their employer
in exchange for providing their labour and commitment. NOTES
Global compensation is the sum of your direct and indirect compensation. Direct
compensation includes your salary and any bonus your employer might pay you.
Indirect compensation is the range of employee benefits that your employer offers in
addition to your salary.
Components of global compensation:
Pension plan - If you have a voluntary pension plan, for example, and you
contribute $2,000 per year and your employer matches, you will obviously not see
this amount in your salary at the end of the year. Nevertheless, it‘s important to take
it into account, because when you retire, these additional yearly amounts could make
all the difference. After 10 years, it adds up to an additional $20,000 plus interest for
your retirement thanks to your employer‘s share.
Group insurance plan - To be entitled to your work‘s group insurance plan, you
must, for example, pay $20 per paycheque for this benefit, and the employer pays
$30. So, you pay $240 per year while the employer pays $360 to protect you from the
unexpected and provide you access to many health services. In other words, over
half of your group insurance cost is paid for by the company, a key benefit for many
employees.
Personal (flex) days - Once again, this is a monetary benefit that is not offered at all
companies, and it could make the difference. You can use these leave days at your
discretion and avoid using your vacation days if you‘re sick or have an appointment.
Vacation - The government provides for a minimum of 2 to 3 weeks of vacation per

year, depending on your number of years at the company. Some companies provide
a more generous holiday schedule—an added financial value. You receive the same
yearly salary and can spend more free time on hobbies, vacation and family.
Share purchase plan - If you work for a large-scale company listed on the stock
exchange, you may have the option of buying its shares. If you were to contribute
$30 per pay period, the employer could provide additional share value for each
contribution you make. If it matches 50% of your contribution, or $15 per pay period,
you would end up with $390 of additional shares per year. Over the years, when the
shares appreciate in value, you could cash out this amount and benefit from this
portion paid by your employer.
NOTES
Benefits at iA - Our employees are fortunate to enjoy all the benefits mentioned
above, and in addition, they also have access to a company-subsidized cafeteria and
parking. Great benefits that save them from having to bring in lunches or look for
parking at exorbitant prices every day. In some offices, our employees also have free
gym access, which saves around $1,000 per year, and given that it‘s onsite, also
provides better work-life balance. And as an insurance company, all our employees
have access to discounted life, auto and home insurance and savings products. These
discounts can also go a long way.
Compensation plan of an organization is more important for you to consider the

financial value of the entire benefits package provided by your employer. If you have
two job offers on the table, for example, one at $60,000 without benefits, and another
at $55,000 with a wide variety of benefits, take the time to consider the global
compensation. In the end, the highest salary is not always the most beneficial overall.
Feel free to question the recruitment advisor about this during the interview or after.
You can also request brochures on the company‘s benefits to learn more about them.
And if you're job hunting, we have a number of open positions.
A diverse workforce simply means a company has built a workforce that includes
many different types of people. It can mean people of different ethnicities, sexual
orientations, socioeconomic status, ages, genders, religions and other ways in which
humans innately differ.

NOTES
Variety of different perspectives - Diversity in the workplace ensures a variety of

different perspectives. Since diversity in the workplace means that employees will
have different characteristics and backgrounds, they are also more likely to have a
variety of different skills and experiences. Consequently, employees in a company
with higher workplace diversity will have access to a variety of different
perspectives, which is highly beneficial when it comes to planning and executing a
business strategy.
Increased creativity - Diversity in the workplace leads to increased creativity. People

with different backgrounds tend to have different experiences and thus different
perspectives. Exposure to a variety of different perspectives and views leads to
higher creativity. When you put together people who see the same thing in different
ways, you are more likely to get a melting pot of fresh, new ideas, thus improving
the creativity of your workforce.
Higher innovation - Diversity in the workplace leads to higher innovation rate.

According to Josh Bersin's research, inclusive companies are 1.7 times more likely to
be innovation leaders in their market. In a diverse workplace, employees are exposed
to multiple perspectives and worldviews. When these various perspectives combine,
they often come together in novel ways, opening doors to innovation.
Faster problem-solving - Companies with higher workplace diversity solve

problems faster. Harvard Business Review found diverse teams are able to solve
problems faster than cognitively similar people. Employees from diverse
backgrounds have different experiences and views, which is why they are able to
will bring diverse solutions to the table. Thus, the best solution can be chosen sooner,
which leads to faster problem-solving.
NOTES Better decision making - Workplace diversity leads to better decision-making

results. A white paper from the online decision-making platform Clover pop has
found a direct link between workplace diversity and decision-making. Researchers
found that when diverse teams made a business decision, they outperformed
individual decision-makers up to 87% of the time. When employees with different
backgrounds and perspectives come together, they come up with more solutions,
which leads to the more informed and improved decision-making processes and
results.
Increased profits - Companies with greater workplace diversity achieve greater

profits. McKinsey & Company, a global management consulting firm, conducted
research that included 180 companies in France, Germany, the United Kingdom, and
the United States. hey found out that companies with more diverse top teams were
also top financial performers. Companies with a diverse workforce make better
decisions faster, which gives them a serious advantage over their competitors. As a
result, companies with diversity in the workplace achieve better business results and
reap more profit.
Higher employee engagement - Workplace diversity leads to higher employee

engagement. Deloitte conducted research that captured the views and experiences of
1,550 employees in three large Australian businesses operating in manufacturing,
retail and healthcare. This research showed that engagement is an outcome of
diversity and inclusion. The link between workplace diversity and employee
engagement is pretty straightforward - when employees feel included, they are more
engaged.
Reduced employee turnover - Workplace diversity is beneficial for employee

retention. Companies with a diverse workforce are generally more inclusive of
different individual characteristics and perspectives. Diversity and inclusion in the
workplace cause all employees to feel accepted and valued. When employees feel
accepted and valued, they are also happier in their workplace and stay longer with a
company. As a result, companies with greater diversity in the workplace have lower
turnover rates.

Better company reputation - Workplace diversity boosts the company‘s reputation
and brand. Companies that are dedicated to building and promoting diversity in the
workplace are seen as good, more human and socially responsible organizations. NOTES
Workplace diversity also makes your company look more interesting. Finally, if you
present a diverse workforce, you will make it easier for many different people to
relate to your company and your brand, opening doors to new markets, customers
and business partners.
Improved hiring results - Workplace diversity leads to better hiring results.

Diversity in the workplace boosts a company‘s employer brand and presents a
company as a more desirable place to work. Workplace diversity is an especially
beneficial asset for attracting top talent from diverse talent pools. According to a
survey conducted by Glassdoor, 67% of job seekers said a diverse workforce is
important when considering job offers. Workplace-diversity-benefit-attracting-top-
talent
International Labour standard system was founded in 1919, in the wake of a

destructive war, to pursue a vision based on the premise that universal, lasting peace
can be established only if it is based on social justice. The ILO became the first
specialized agency of the UN in 1946.
International labour standards refer to conventions agreed upon by international

actors, resulting from a series of value judgments, set forth to protect basic worker
rights, enhance workers' job security, and improve their terms of employment on a
global scale. Standards are adopted by a two-thirds majority vote of ILO constituents
and are therefore an expression of universally acknowledged principles. At the same
time, they reflect the fact that countries have diverse cultural and historical
backgrounds, legal systems and levels of economic development.
International labour standards are primarily tools for governments which, in

consultation with employers and workers, are seeking to draft and implement labour
law and social policy in conformity with internationally accepted standards.
The core labour standards are a set of four fundamental, universal and indivisible
human rights: Freedom from forced labour
• Freedom from child labour
• Freedom from discrimination at work

NOTES
• Freedom to form and join a union, and to bargain collectively
International Labour standards created by using the standards that are adopted by a
two-thirds majority vote of ILO constituents and are therefore an expression of
universally acknowledged principles. At the same time, they reflect the fact that
countries have diverse cultural and historical backgrounds, legal systems and levels
of economic development.
International labour relations are important because it brings together access to

productive and suitably remunerated work, safety at the workplace and social
protection for families, better prospects for personal development and social
integration, freedom for individuals to set out their claims, to organize and to
participate in decisions that affect their lives.
The benefits of International Labour Standards: The challenges of globalization

have made international labour standards more relevant than ever. What benefits do
they provide today?
A path to full and productive employment and decent work for all: The 2030 goals
of International labour standards are first and foremost about the development of
people as human beings. In the Declaration of Philadelphia (1944), the international
community recognized that ―labour is not a commodity‖. Labour is not an inanimate
product, like an apple or a television set, that can be negotiated for the highest profit
or the lowest price. Work is part of everyone‘s daily life and is crucial to a person‘s
dignity, well-being and development as a human being. Economic development
should include the creation of jobs and working conditions in which people can work
in freedom, safety and dignity. In short, economic development is not undertaken for
its own sake, but to improve the lives of human beings. International labour
standards are there to ensure that it remains focused on improving the life and
dignity of men and women.
Decent work resumes the aspirations of humans in relation to work. It brings

together access to productive and suitably remunerated work, safety at the
workplace and social protection for families, better prospects for personal

development and social integration, freedom for individuals to set out their claims,
to organize and to participate in decisions that affect their lives, and equality of
opportunity and treatment for all men and women. NOTES
Decent work is not merely an objective, it is a means of achieving the specific targets
of the new international programme of sustainable development. At the United
Nations General Assembly in September 2015, decent work and the four pillars of the
Decent Work Agenda – employment creation, social protection, rights at work and
social dialogue – became the central elements of the new Sustainable Development
Agenda 2030. Goal 8 of the 2030 Agenda calls for the promotion of sustained,
inclusive and sustainable economic growth, full and productive employment and
decent work for all. Moreover, the principal elements of decent work are broadly
incorporated into the targets of a large number of the 16 Goals of the United Nations
new vision of development.
An international legal framework for fair and stable globalization : Achieving the
goal of decent work in the globalized economy requires action at the international
level. The world community is responding to this challenge in part by developing
international legal instruments on trade, finance, the environment, human rights and
labour. The ILO contributes to this legal framework by elaborating and promoting
international labour standards aimed at making sure that economic growth and
development go hand-in-hand with the creation of decent work. The ILO‘s unique
tripartite structure ensures that these standards are backed by governments,
employers and workers alike. International labour standards therefore lay down the
basic minimum social standards agreed upon by all the players in the global
economy.
A level playing field: An international legal framework on social standards ensures

a level playing field in the global economy. It helps governments and employers to
avoid the temptation of lowering labour standards in the hope that this could give
them a greater comparative advantage in international trade. In the long run, such
practices do not benefit anyone. Lowering labour standards can encourage the
spread of low-wage, low-skill and high-turnover industries and prevent a country
from developing more stable high-skilled employment, while at the same time
slowing the economic growth of trade partners. Because international labour
standards are minimum standards adopted by governments and the social partners,
it is in everyone‘s interest to see these rules applied across the board, so that those
who do not put them into practice do not undermine the efforts of those who do.
NOTES A means of improving economic performance: International labour standards have

been sometimes perceived as being costly and therefore hindering economic
development. However, a growing body of research has indicated that compliance
with international labour standards is often accompanied by improvements in
productivity and economic performance.
Minimum wage and working-time standards, and respect for equality, can translate
into greater satisfaction and improved performance for workers and reduced staff
turnover. Investment in vocational training can result in a better trained workforce
and higher employment levels. Safety standards can reduce costly accidents and
expenditure on health care. Employment protection can encourage workers to take
risks and to innovate. Social protection, such as unemployment schemes, and active
labour market policies can facilitate labour market flexibility, and make economic
liberalization and privatization sustainable and more acceptable to the public.
Freedom of association and collective bargaining can lead to better labour–
management consultation and cooperation, thereby improving working conditions,
reducing the number of costly labour conflicts and enhancing social stability.
The beneficial effects of labour standards do not go unnoticed by foreign investors.

Studies have shown that in their criteria for choosing countries in which to invest,
foreign investors rank workforce quality and political and social stability above low
labour costs. At the same time, there is little evidence that countries which do not
respect labour standards are more competitive in the global economy. International
labour standards not only respond to changes in the world of work for the protection
of workers, but also take into account the needs of sustainable enterprises.
A safety net in times of economic crisis: Even fast-growing economies with high-
skilled workers can experience unforeseen economic downturns. The Asian financial
crisis of 1997, the 2000 dot-com bubble burst and the 2008 financial and economic
crisis showed how decades of economic growth can be undone by dramatic currency
devaluations or falling market prices. For instance, during the 1997 Asian crisis, as
well as the 2008 crisis, unemployment increased significantly in many of the
countries affected. The disastrous effects of these crises on workers were

compounded by the fact that in many of these countries social protection systems,
notably unemployment and health insurance, active labour market policies and
social dialogue were barely developed. NOTES
The adoption of an approach that balances macroeconomic and employment goals,

while at the same time taking social impacts into account, can help to address these
challenges.
A strategy for reducing poverty: Economic development has always depended on

the acceptance of rules. Legislation and functioning legal institutions ensure property
rights, the enforcement of contracts, respect for procedure and protection from crime
– all legal elements of good governance without which no economy can operate. A
market governed by a fair set of rules and institutions is more efficient and brings
benefit to everyone. The labour market is no different. Fair labour practices set out in
international labour standards and applied through a national legal system ensure an
efficient and stable labour market for workers and employers alike.
In many developing and transition economies, a large part of the workforce is
engaged in the informal economy. Moreover, such countries often lack the capacity
to provide effective social justice. Yet international labour standards can also be
effective tools in these situations. Most ILO standards apply to all workers, not just
those working under formal employment arrangements. Some standards, such as
those dealing with homeworkers, migrant and rural workers, and indigenous and
tribal peoples, deal specifically with certain areas of the informal economy. The
reinforcement of freedom of association, the extension of social protection, the
improvement of occupational safety and health, the development of vocational
training, and other measures required by international labour standards have proved
to be effective strategies in reducing poverty and bringing workers into the formal
economy. Furthermore, international labour standards call for the creation of
institutions and mechanisms which can enforce labour rights. In combination with a
set of defined rights and rules, functioning legal institutions can help formalize the
economy and create a climate of trust and order which is essential for economic
growth and development.
The sum of international experience and knowledge: International labour

standards are the result of discussions among governments, employers and workers,
in consultation with experts from around the world. They represent the international
consensus on how a particular labour problem could be addressed at the global level
and reflect knowledge and experience from all corners of the world. Governments,
NOTES
employers‘ and workers‘ organizations, international institutions, multinational
enterprises and non-governmental organizations can benefit from this knowledge by
incorporating the standards in their policies, operational objectives and day-to-day
action. The legal nature of the standards means that they can be used in legal systems
and administrations at the national level, and as part of the corpus of international
law which can bring about greater integration of the international community.

MODULE V
NOTES
Structure
5.0 Introduction
5.2 Emerging Issues
5.6 Global Unions
5.9 HR/IR issues in MNCs and Corporate Social Responsibility5.0 Introduction
5.0Introduction
Industrial relations or employment relations encompasses the interrelations between

employers and employees, labour/trade unions, employer organizations and the
state/ government. International industrial relations deals with the complex
relationships among employers employing foreign national, employees of different
nationalities, home and host country governments and trade unions of the
organizations operating in various countries and their national & international
federations.
A system of federally funded services and payments to help support the needy, the
aged, and the temporarily unemployed as well as providing support for needy,
dependent, disabled, or neglected children, rehabilitation for the disabled, and a host
of other social services.
The English expression of "social security" is also relatively new. It began to be

utilized in the 20th century. The expression appeared for the first time in a law in the
Social Security Act of the United States that was enacted in 1935. At that time, the
New Deal was implemented as countermeasures against the Great Depression, and it
was urgently required to create economic security systems for the unemployed, etc.
In European countries, on the other hand, social insurance systems had already been
created and managed including unemployment insurance and medical insurance. In
the United States, an old-age pension insurance system, an unemployment insurance
system, and a public assistance system for the elderly and the needy with
NOTES
independent children were created for the first time based on the Law. The law was
initially called "Economic Security Bill" when it was laid before the Federal Congress.
It is said that because "economic security" had a narrow range of meaning and its
concept was different from "social insurance" promoted in Europe, the expression of
"economic security" was changed to "social security," which was created by
combining "society" and "security."
Subsequently in 1938, a social security law was enacted also in New Zealand. In 1942,
the International Labour Organization (ILO) published a report on the path to social
security. In the report the Organization described the history of social security
systems of different countries and the specific services or benefits provided under
such systems, and introduced New Zealand's social security system as a new social
security model. In the process, the expression of "social security" was generally
accepted. Besides it is said that the expression was widely spread to the world by the
incorporation of the proposals on "social security" in the Atlantic Charter. The
Charter was announced after the maritime meeting held in August 1941 between Sir
Winston Churchill, Prime Minister of the United Kingdom and F. D. Roosevelt,
President of the United States.
The English word "security" originates from the Latin word "se-curus." "Se" means
"liberation" and "curus" means "uneasiness." That is, "security" originally meant
liberation from uneasiness, or a peaceful situation without any risks or threats. The
English word "security" has a wide range of meaning including "to feel safe," and "to
be protected" and is used to describe a situation without any risks or worries. The
Japanese word "hosho" is comprised of two Chinese characters. The first character
"ho" means a small castle, and the second character "sho" means a fort. According to
the "Kojien" dictionary, the word "hosho" has following meanings: 1) a castle and a
fort; 2) to support for prevention; 3) to ensure that there will be no obstacles; and 4)
to protect from damages or from destruction. Both the English word "social security"
and the Japanese word "shakaihosho" mean "protection from risks through social
systems."

Advisory Council on Social Security: The concept of social security appears in
Article 25 of the Constitution of Japan. Article 25 stipulates as follows. ―All people
shall have the right to maintain the minimum standards of wholesome and cultured NOTES
living. In all spheres of life, the State shall use its endeavours for the promotion and
extension of social welfare and security, and of public health." The provision thus
ensures people's rights to live and provides the legal basis for social security systems.
The concept of social security expressed in the provision is somewhat similar to that
adopted in the United Kingdom or in the United States. The concept, however, is not
clearly defined. (Refer to the "Column.")
The definition of "social security systems" that has been most widely accepted in
Japan up to present is that made by the Advisory Council on Social Security in its
report of 1950. In the report, the Council defined the systems as follows.
"Social security systems mean the systems to enable every citizen to lead a worthy
life as a member of cultured society. Social security systems provide
countermeasures against the causes for needy circumstances including illness, injury,
childbirth, disablement, death, old age, unemployment and having a lot of children
by implementing economic security measures through insurance or by direct public
spending.
Social security systems ensure the minimum level of living to the needy by public
assistance, and they also promote public health and social welfare."
According to the definition, social security systems play the following three roles.
First, the systems deal with the factors that may cause needy circumstances such as
illness, injury, childbirth, old age, disablement, and unemployment by providing
economic security through insurance (social insurance) or by direct public spending
(social assistance). Second, the systems ensure the minimum level of living to the
needy by implementing public assistance programs. Third, in line with the
aforementioned measures, the systems promote public health and social welfare.
"Social Security" mean in the United States and in Europe: Each country has its
own "social security systems," which have been formed based on its nationality and
values and reflect the social systems, economic situation and political conditions of
the country. There are therefore a lot of differences in the mechanisms of and in
services or benefits provided under the systems among countries. For example,
public pension systems differ with countries in terms of financial resources, the
premium level, ages at which the benefits begin to be provided, benefit levels, and
requirements for receiving benefits. International comparisons of the social security
NOTES
systems should be made based on the recognition that there are diversified
differences in the systems of each country. If made without such recognition, it might
lead to misunderstanding.
In the first place, each country has its own definition of social security - For
example, in the United Kingdom, social security means income security such as
pensions and child allowances, while Japan's definition of social security systems
includes those called "social policy" or "social services" in the United Kingdom. The
"social policy" or "social services" have a wide range of meaning: income security,
medical care (called "national health service" in the United Kingdom), personal social
services, housing policies, education and employment.
Also, in the United States, "social security" is often defined as income security such as
pensions. The welfare services provided in Japan are called "human services." In the
United States, "welfare" usually points to services that are funded by tax revenues
and provided after the status inquiry, especially to the temporary assistance to needy
families (TANF). The U.S. Social Security Act, however, is a comprehensive law,
which provides for unemployment insurance, health services for fatherless families,
human services for people with disabilities, medical services for the elderly and
medical assistance in addition to pension insurance for ensuring income.
In France, social security ("Securite Sociale" in French) means social insurance such as
sickness insurance and old-age insurance. In addition to Social insurance, social
assistance (provision of cash and services to the ill, people with disabilities or to the
elderly who have cleared the income criteria), social services (other social welfare
services provided without an income limit) and the minimum income level security
system for independence are collectively called "Protection Social."
In Germany, social security ("Soziale Sicherheit" in German) includes social

insurance, social compensation (for the war victims, etc.), and social support (social
assistance or support to students). German people, however, do not often use the
expression "Soziale Wohlfahrt" (social welfare).

Recent Changes in the Definition of Social Security: As outlined in Section 1 of
Chapter 1, Japan's social security systems have been greatly changed in terms of the
scope, services or benefits provided under the systems, and the targets. At the same NOTES
time, the systems have been expanding: the benefit levels have been improved the
expansion of scale; new methods introduced; and the number of service providers
increased.
For example, around 1950, when the Advisory Council made recommendations, the
center of Japan's social security systems was the public assistance programs. The
targets of the social security systems, however, have been expanded to include
people other than those belonging to the low-income class. The establishment of the
universal medical care insurance and pension programs, increase of the demands for
medical and welfare services, and generalization of their use have promoted the
expansion of the targets.
The benefit levels have also been improved from security of the minimum level of
living. Employees' pension programs provide pensions taking into considerations
the income of each employee before retirement. In the field of medical insurance,
even the costs for advanced medical treatments are covered by insurance. The
benefits levels of each social security system have exceeded the level of minimum
security.
For the scale of social security, the social security benefit expenditure amounts to
about \65 trillion on an annual basis, which is almost equal to the government's
general account budget.
As an example of the introduction of new methods, a public long-term care

insurance system will be established. In the system the services will be provided
based on the contracts concluded between users and service providers, and the users,
who have their independence respected will be given options on the services.
Traditionally the long-term care services for the elderly have been provided as
administrative measures within the framework of the welfare system for the elderly.
For the expansion of service providers, not only the administrative organs including
the national and local governments but also private companies and non-profit
organizations are participating in the field of welfare services.
In accordance with the diversified changes made in the social security systems for
half of a century after the end of World War II, there have been changes also in the
definition of social security.
NOTES
In the "Welfare Vision for the 21st Century" (report made at the meeting to discuss
the vision about the aging society in April 1994) showing the direction of important
social security measures for the 21st century, social security is defined as follows.
"Social security is a mechanism basically created for income redistribution and
mutual assistance based on the idea of individual independence and support by the
social solidarity of people."The "Welfare Vision for the 21st Century" proposes to
build a regional welfare system comprised of multiple layers of "self-support,"
"mutual support" and "public support" for the entire society to support welfare
including families, regional organizations, companies, and the national and local
governments based on the independence of each citizen.
In 1991, the Advisory Council on Social Security began to discuss at its newly created
committee on the future of social security the basic social security requirements for
the 21st century and the specific revision of each social security system. The
committee made its first report in 1993 and defined social security as "provision of
benefits at public responsibility to support people in danger of losing stability in
their lives and to enable them to lead healthy lives without worries." The following
Table 1-2-1 shows the outline of the social security systems and the related systems
based on the definition given by the committee.
Table 1-2-1. Social Security Systems and the Related Systems
Provision of benefits at public responsibility to support people in

Social security danger of losing stability in their lives and to enable them to lead
(benefits) healthy lives without worries. (Specifically, in the form of social
insurance and social assistance, benefits are provided for income
security, medical services and social welfare)
1. Qualification systems for medical and welfare services,
securing of human resources; improvement of facilities;
Systems founding diversified regulations etc.,
the social security 2. Public health, environmental health, pollution prevention,
basis etc.,

If ‗benefits‘ are not a requisite to be defined as social
security, these systems can also be regarded as social
security. Those listed in 1 and 2 can be collectively called NOTES
‗social security in a wider sense‘
Systems playing
roles similar to Tax exemption to support people‘s lives (regarding public
social security pensions or for people with disabilities)
Systems required General employment policies and general housing policies.
for social security Among such policies, those to give support to the unemployed,
to work the elderly and to people with disabilities should be paid much
attention as comprising social security systems.
5.2 Emerging Issues
Social Security has a long-known basic math problem: more money will be going out
than coming in. Roughly 10,000 baby boomers are retiring each day, with insufficient
numbers of younger people entering the work force to pay into the system and
support them. And life expectancy is increasing.
Social Security's 5 Biggest Problems (and 1 Silver Lining)
Social Security's few biggest issues.
 The ongoing retirement of baby boomers

 Increased longevity
 Income inequality
 An extended period of monetary easing
 Congress' inability to get virtually anything done
 A silver lining
This report, Ten Global Challenges for Social Security 2019 – Developments and
Innovation, brings to a conclusion the global research project launched by the
International Social Security Association (ISSA) in 2016. Across this triennium,
regional follow-up reports focused on Africa, the Americas, Asia and the Pacific, and
Europe have provided important feedback from ISSA member institutions. ISSA
member institutions were surveyed to identify the most significant internal and
external challenges they face in respect of the ten global challenges, with a special
focus on the emerging digital economy. The survey responses confirm not only the
need to ensure effective access to sustainable social security protection across the life
NOTES
course but underline the expectation that this should be achieved through modern,
user centric administration.
Framed by the international objectives of the United Nations Sustainable

Development Goals for 2030, and despite improvements in legal coverage in a great
many countries, some population groups still do not have effective access to
adequate coverage. The needs of young workers in the transition from education to
the world of work is a difficult challenge. Responses require coordination across
labour market institutions, education and vocational training bodies, as well as social
security institutions. Continuous skills development and the need for gendered
responses should be considered, and to deal with the needs of formal migrant
workers, social security systems have different unilateral, bilateral and multilateral
responses at their disposal. Globally, the heightened risk of external shocks and
extreme events is leading social security systems to adjust to consider risk more
broadly.
The Impacts of The Digital Economy on Social Security
ISSA member institutions provided survey responses concerning the impacts of the
digital economy on their social security systems. The new forms of work clearly
generate opportunities, but concerns related to a weakening of coverage and
decreased levels of contributions are specific issues to be addressed. While new
professions and job tasks will be created, others will be lost. Overall, this may lead to
a weakening of collective workers‘ rights, occupational safety and health regulations
and contributory social security programmes. Of necessity, greater attention will
have to be given to the complementarity of tax-financed universal schemes and
contributory schemes. The important shift associated with the emerging digital
economy, alongside concurrent global demographic changes and concerns about
inequalities and social cohesion, create a degree of urgency about realizing the
international goal of universal social security protection.
The portability of social security has emerged as perhaps the most important
strategic enabler to provide life-long, dynamic, innovative and cost-effective social

security to all while satisfying public expectations for service quality. To that end,
improved coordination amongst institutions and governments is of critical
importance, supported by new technology, the standardized exchange of NOTES
information and enhanced data protection.
Innovation is what is needed to make this a reality. Yet innovating is risky. Its
pursuit requires an intelligent mix of leadership, human capital and technology. The
ISSA is committed to support the drive to innovate and to disseminate innovations
and best practices. This global report is part of that effort along with the practical
tools, knowledge and services provided to members of our Association. Each chapter
of this report addresses one challenge only, allowing the reader to quickly access the
information of interest. All chapters are structured to first present the broader
context, to then explain the nature of the challenge for social security systems, to
offer concrete good practice examples of how ISSA member institutions are
innovatively responding to the challenge and to conclude with key messages. Each
chapter is supported by data infographics.
https://ww1.issa.int/sites/default/files/documents/publications/2-10-challenges-Global-2019-
WEB-263629.pdf
Executive summary for social security:
Social Security is increasingly seen as an integral part of the development process. It

helps to create a more positive attitude not just to structural and technological
change but also the challenge of globalisation and to its potential benefits in terms of
greater efficiency and higher productivity.
In the last five decades, considerable progress in extension of social security cover at
both State and Central level has been made. However, a universal social security
programme for the country remains a distant goal. Improved health care and
resultant increase in longevity call for redoubled effort to plan for and put in place
appropriate institutional mechanisms and programmes to cover a much wider
population base.
The logical starting point is to begin with the segment which contributes most
significantly to the country‘s GDP i.e., the labour force. Provisioning for social
assistance to this group will enhance their ability to contribute to the nation.
Providing the necessary material and emotional security will enhance efficiency and
productivity. The cover will enable workers to tide over periods of unemployment,
sickness, accident or death while in employment coupled with the promise of an
assured monthly income to them and their family in old age.
NOTES
The work-force in the country stands close to 400 million. The existing arrangements
for social security cover only 35 million. A prime concern is the challenge of closing
the existing coverage gap. This is about 90% of the workforce. The obvious strategy
for the Tenth Five Year Plan will have to be built around the goal of closing the
coverage gap to a significant extent.
The impact of globalisation and the national economic reform agenda have
accelerated and forced the pace of change in the methods of production and
distribution. A clearly visible trend is contractualisation and casualisation of labour.
Relocating manufacturing bases, out-sourcing, non-core components of businesses
have radically changed the way businesses have traditionally been run.
The development and implementation of an adequate response designed to mitigate

hardship for the working class in the context of the radical changes is an overriding
national imperative. Currently, social security policy makers and administrators are
engaged in a global debate to redress similar problems in both the developed and
developing countries.
This debate also has thrown up an argument of publicly managed social security
schemes as opposed to privately managed schemes. There is strong argument
advanced for both sides. However, there is no standard blue print that can be
adopted universally. Each country has to find an appropriate model in their
respective national context. In the Indian context a privately managed scheme cannot
be the primary vehicle for providing social security. It can at best be considered as a
supplementary scheme or the second pillar after a first pillar mandatory scheme or
schemes. In the context of no social security provisioning being available for an
overwhelming majority of the work-force, this has to be the way forward in India.
An approach to the challenge of closing the coverage gap in social security

provisions has to be developed at two levels. The first level is the re-tooling of the
existing institutional arrangements for the organised sector in order to remove
existing inefficiencies, redundancies and for greatly improving service turnaround
times and responsiveness to customer needs the expectations. This can be achieved

by introducing re-engineering and radical change in business processes i.e., to
improve functions of contribution collection, record-keeping and benefit delivery.
Induction of existing and emerging Information and Communication technologies NOTES
can improve handling capacity and revive delivery geometrically.
The second level is to create a legislative and administrative framework for

significant penetration of social security cover in the unorganised sector. This issue
can be addressed by partly using the existing institutional and delivery mechanism
for social security after introducing appropriate flexibility in the legal and
administrative framework and mainly through introduction of means tested schemes
which are area specific, occupation specific or industry specific.
In the context of the globalisation and its impact on the labour force, it is necessary to
put in place a National Policy on Social Security for all sectors.
During the Tenth Five Year Plan, the strategy should be focused on medical care,
accident benefits and old age pension.
International labour relations practices are diverse. Labour unions, organizations,

and collective bargaining practices are as varied as nations. ... Given the historical
patterns of unionization in industrialized countries, it is generally expected that
union membership will rise in these countries.
Key Issues in International Industrial Relations
We have seen a growing curiosity about the issue of internationalization and best
practices adoption and its impacts on the convergence of employment relations.
Before we discuss about the key issues in international industrial relations, we
should know what is IR and IIR.
Industrial relations refers to a set of phenomena, both inside and outside the
workplace, worried about identifying and managing the employment relationship.
International Industrial Relations (IIR) handles the complicated associations between
employers employing foreign nationals, employees of various nationalities, home
and host country governing bodies and trade unions of the organizations functioning
in different nations around the world in addition to their national & international
federations.
Globalization and international trade have put stress on organizations to standardize
NOTES practices and policies. Globalization‘s influences on Human Resource Management
come through the opening and penetration of economic systems to outside forces.
This is certainly a two-way procedure, with both local organizations and
multinational corporations embrace one another‘s HRM practice.
What are the Key Issues in International Industrial Relations (IIR)?
Issue 1: Who should handle Labour Relations – Headquarter or the subsidiary in

the concerned country
The national dissimilarities in economics, political, and legal systems create diverse
labour-relations system across countries, MNCs HQs typically delegate the control
over labour relations to their foreign subsidiaries. Having said that, the participation
of the MNC headquarters in host-country labour relations is impacted by 4 key
elements:
1. In case there is a high level of inter-subsidiary production integration, the labour

relations function is centralised and is coordinated by the head quarter.
2. The nationality of ownership of the subsidiary has an influence on who should

take care of employee relations.
3. Furthermore, subsidiary character has a bearing on who should deal with

employee relations.
4. Finally, where a subsidiary is dependent more on its parent company for

resources, you will see a greater corporate involvement in labour relations.
Issue 2: Trade Union Tactics
Trade Unions make use of a number of tactics to deal with international business:
1. The most common one is ‗strike‘. A strike is a concerted and temporary suspension
of work, intended to put pressure. Unions should be cautions prior to resorting to a
strike in international scenario because the bargaining power of a union could
possibly be threatened or weakened by the financial resources of an MNC. This is
especially evident where a multinational firm uses transnational sourcing and cross
subsidization of its products or parts across different international locations.

2. Form International Trade Secretariats (ITSs): There are Fifteen ITSs who help the
exchange of information. Main objective of ITSs is to accomplish transactional
bargaining with the MNCs. NOTES
3. Lobbing for limited national legislations – Trade unions have for several years
lobbied for restrictive national legislation in the U.S. and Europe. Trade unions
pursue restrictive national legislation to avoid the export of jobs via multinational
investment policies.
4. Intervention from the global body like ILO, UNCTAD, EU, OECD: ILO has issued
guidelines which cover disclosure of information, competition, financing,
employment, industrial relations, taxation, science and technology.
Issue 3: Political
There is little doubt that national industrial relations (IR) systems continue to be
greatly different. There are 3 faces of industrial relations which the international
union movement encounters in the international environment, specifically social
democracy, neo-liberal and authoritarian. The dissimilarities in national industrial
relations systems are also mirrored in the structure, power and status of individual
actors in the system. For example, trade unions maintain a comparatively strong
position within the Scandinavian IR model while their role is a lot more limited in
the US context. The international labour movement is usually prohibited direct
access to robust intergovernmental establishments like the WTO. So, they have to
depend on national government to represent their interests to these institutions.
Significantly, the interests of government might not always be directly in-line with
the union movement.
Issue 4: Social and Identity
A key problem with the international labour movement and specifically international
collective bargaining is the absence of identity that individual workers have with
their international associates. Additionally, they see these peak associations to be a
lot more conservative than activists at the local level. Associated with this point,
there is a common lack of solidarity between actors at a national level. Additionally,
there are endemic cultural, social and language differences among individuals in
different countries resulting in lowering the degree of a shared identity between
workers on an international level.
NOTES
Issue 5: Power and knowledge
While labour‘s power continues to be local in scope, capital has grown to become
more global in nature and decisions effecting workers are increasingly being made at
a supra-national level. The locus of Multinationals decision making stretches beyond
national borders and key facts are seldom transparent or accessible to trade unions.
Additionally, the well-rehearsed point that multinational organizations can counter
the strength of local unions by threatening to move manufacturing to another place
so that they can outmanoeuvre trade unions or following threats of industrial action
is significant.
Human resource management has become an important issue as more and more
firms operating internationally are in need to develop an understanding on how to
operate competitively in an international business environment.
As the global playing field has become more competitive, international companies
are forced to adopt efficient HRM and give more focus to their international than
their domestic operations. Due to the sensitivity of the issue, the concerned HR must
address the key issues such as the impact of globalization, environmental influences,
cultural differences, the domestic HRM policies in different countries and the global
workforce involved in the action.
The aim of this essay is to provide a clear overview of the main similarities and
differences between domestic and international Human resource management. The
essay will to some extent discuss the practice of Human resource management at
domestic level and the factors that increase its complexity at international level.
Finally, a conclusion will be drawn with an analysis of the research findings.
Definitions of Domestic and International Human Resource Management
The gradual development of management activity from administration of personnel

to strategic planning of human resource, has given a competitive advantage to
international companies.

Personnel management focused more on administrative functions and how to
control the employee rather than commit the employee to the organization strategic
planning process. But the present Human resource management system is structured NOTES
more on the commitment of the staff and involves the employee in the strategic
planning and development process of the organization. It also stress that
organizations should consider their employees as assets than variable costs.
It is not quite easy to provide a precise and exact definition of Human resource
management due to the varying and different activities it refers to. One attempt
made by Storey (1995) is ―HRM is a distinctive approach to employment and
management which seeks to achieve competitive advantage through the strategic
development of a highly committed and capable workforce using an array of
cultural, structural and personal techniques.‖ On the other hand, Human resource
management is also defined as representing two activities. One is the generic term
concerned with the key objectives of human activity, which are the staffing,
performance, change management and administrative objectives, and the other
activity is the Human resource approach to carry out the activities stated above
under the generic term one.
In order to clearly see the commonalities and differences shared by Domestic and
International human resource management, identifying the activities which change
or evolve when HR goes International is a vital point. To this effect, a module
developed by Morgan (1986) is helpful. The module presents three dimensions of
International Human resource management with various categories of HR activities,
countries involved and employees in International activities. The first-dimension
deals with the tasks of Human resource management; the procurement, allocation
and utilization of HR which goes further down to detailed activities mentioned
earlier in this paper under the ‗generic term‘ explanation for HRM. The second-
dimension deals with three country categories; the host country where the subsidiary
is located, home country of the company‘s headquarter, other countries which are
source of manpower, finance and other inputs. The third dimension is concerned
with three categories of employees; Host-country nationals, Parent-country nationals
and Third-country nationals. Thence, according to Morgan (1986), the‖ … interplay
between these three dimensions is what define international Human resource
management‖.
At this point, it shows that the elements or issues related to International HRM
practice are complex, higher in number and have broader scope than those found in
Domestic HRM practice. One sensitive issue is the staffing policy at international
NOTES
level. There are three types of international managers, depending on their
nationalities, local (parent country nationals, PCN), Host country nationals (HCN),
third country nationals (TCN) and international companies would hire
managers/employees choosing from one or mixing from the groups depending on
the company‘s business plan, technical competence required for the position,
availability of candidates or the company‘s staffing policy.
Mostly international companies have three staffing policies/strategies.
Ethnocentric strategy- This approach is when companies use parent company

nationals in high management areas. Nowadays this approach is not much in
practice as it is seen to limit the opportunity of other nationalities.
Polycentric strategy- This approach demands the use of host country nationals at the
subsidiaries, while at headquarter level parent company nationals hold the high
posts. Companies with Ethnocentric strategy may change to Polycentric strategy
when faced with shortcomings of qualified managers.
Geocentric strategy- This approach has an open-door policy, inviting competent

managers regardless of their nationality. Companies using this strategy have the
advantage of wide selection and at the same time create a sense of diversity and
unity among employees (David & Hugh, 2007, Beardwell & Claydon, 2010).
In the below section, we will discuss if the HR practices at the domestic level can be
implemented at international level and would try to identify the factors that may
facilitate or hamper this process in general.
The Practice of Human Resource Management at International and Domestic

Level
The increasing business activity at international level has shown the importance of
understanding how Multinational companies can operate efficiently and effectively
in the global dimension. In general, International Human resource management
involves the internationalizing company in different practices such as diverse

HR activities than found in the home country, greater involvement in employees‘
private lives, greater risk of exposure to the human and finance involved, more
external influence from the host country and greater complexity than found at NOTES
Domestic HRM level (Dowling & Welch, 2005). An International HR manager also
needs to address the challenges due to cross cultural differences, global competition,
language and political differences when posted at international level. Apart from the
different intensity level of HR activities and strategic coordination of different
business units, both Domestic and International HRM share same major activities of
HRM. In addition, an International Human resource manager also needs to
understand the degree of ‗soft or hard‘ HRM present in the home base and foreign
subsidiaries.
Companies with Hard HRM policy are more business focused and apply cost
minimization systems while companies that engage the employee in participation
have Soft HRM policy (Storey, 2007). In a more detail and supported by a diagram
Cavusgil et al. (2008,) explain the challenges an international manger is to ensure that
the right person is in the right position at the right location with the right pay.‖ The
factors that makes this activity more challenging is its complexity in dealing with
various aspects at international level. The diagram below details the different factors
to this effect.
New human resource responsibility- Broader and diverse activities like International
tax regulation, international relocation and orientation services for expatriates and
language translation services are some of the activities at international level. Need
for broader international perspective in compensation policy- with a different mix of
international staff exercising a fair compensation policy is one of the challenges to be
experienced.
Greater involvement in the employee‘s personal lives- The company would have to
deal with the personal wellbeing of the expatriate or inpatriate serving out of their
home country. Their housing arrangement, children education, security,
compensation, recreation and so other needs needed to be followed up and arranged.
Managing the mix of expatriates versus locals- According to company‘s policy,

subsidiaries may be staffed with a mix of different nationalities and managing the
balance based on the required skill and availability of manpower is another big task
in the international employment area. Greater risk exposure- International staffs are
exposed to political upheavals, kidnapping, terrorism at foreign station and may
demand compensation packages and security arrangement. This would challenge
NOTES
companies financially and also in administration level.
External influence of the government and national culture- Local employment rules,
religious and cultural circumstances of the host country are also some factors needed
to be considered. In another dimension, Dowling & Welch (2005) identified some
factors that moderate the difference between International and domestic Human
resource management. According to Dowling, these variables are cultural
environment, the industry with which the Multinational is primarily involved, the
extent of reliance of the multinationals on its home country or domestic market and
the attitudes of senior management in international operation. Let us discuss to what
extent these variables would act as moderators between Domestic and International
HRM practices.
Industry Type: One important variable that moderates International and Domestic
Human resource management is the type of industry an MNC is involved in and the
international competition it faces. Putting the business playing field in one straight
line, let us say we have at one end of the continuum a multi-domestic industry and
the other end a global industry. The multi-domestic end designates an industry
operating in various countries but the completion in that industry type is specific to
the country. While at the other end, the global industry group is about an industry
that operates in different countries but interlinked with other industries in the same
group.
Industries that fall under the multi-domestic structure have a free reign and are not
strictly controlled by the Headquarter of the MNC. They exhibit a highly
decentralized HR structure and play a passive role in the transfer of HR practices
outside their boarder. Examples for this category can be distribution agents and
insurance companies. The global industry represents a model whereby HR
management transfers management practices abroad and these practices are
replicated and put in use by the subsidiaries. Example for this group includes
commercial aircraft companies and computer manufacturing companies.

Culture: The other influential factor in the moderating International and domestic
Human resource management is culture. Armstrong (2009) define organization
culture as ―the patterns of values, norms, beliefs, attitudes and assumption that may NOTES
not have been articulated but shape the way in which the people in the organization
behave and get things done.‖ (Armstrong, 2009, p384). Hofstede in his part put
culture as ―the collective programming of the mind which distinguishes the
members of one group or category of people from another‖. Other authors also have
tried to define culture in different ways but in general it is expressed as a process
present in a social environment which holds the rules and regulations and the
accepted norms on how people are expected to behave. According to Hofstede (2001)
there are five independent dimensions of culture that explain the major difference
between national groups. The first is power distance. It is the degree to which
members of an organization below the leadership rank accept and expect the
unequal distribution of power. High power distance shows an autocratic leadership
while low power distance denotes a democratic practice. Uncertainty avoidance
refers to the degree in which the people in a society feel uncomfortable for lack of
structure and avoid ambiguity. High uncertainty avoidance exists in countries
having a strong rules and job scrutiny as they try to avoid uncertainties and low
uncertainty avoidance is registered in countries promoting more lax and flexible
social rules and regulations. Hofstede third dimension is the individualism versus
collectivism point. This dimension is concerned with the tendency of people‘s
response to identifying themselves either in larger groups or more to themselves.
High individualism is scored in countries like the USA where people mostly identify
themselves in small family groups while in low individualistic countries people
prefer to co-habit together and form large social groups. Masculinity or femininity is
the fourth dimension which refers to emotional roles attributed to both genders. It
balances the ‗tough‘ masculine virtue of assertion and aggressiveness with the softer
‗feminine‘ virtue of emotion and caring. Japan scores high on this regard while
Norway is the lowest. The fifth dimension is the long term versus short term
orientation. This dimension deals with the recognition of status in a society and
perseverance.
In general, understanding the cultural norms of a foreign country and adapting to

the environment would benefit a company in an international level and more
importantly the HR policies of an organization are mostly influenced by the cultural
practice surrounding the organization. Human resource activities like hiring of staff,
promoting, rewarding and dismissal of employees are determined and affected by
NOTES
the cultural practice of the host country. There is a school of thought that stresses the
concept of Etics and Emics as an important aspect to understanding culture in
different settings. The Etic concept refers to the culture-common aspect while the
Emic approach deals with culture-specific concepts of behaviour. Understanding the
difference between the two concepts is helpful in cross-cultural business
communication. To this effect identifying which Human resource activity falls under
Etic and which falls under Emic is also crucial as it have an effect on the performance
of companies outside their home country (Dowling & Welch, 2005).
As noted earlier Emic refers to practices specific to one culture and are not
transferrable across cultures and Etic refers to the common practices found in
different cultures and are transferrable across cultures. Other dimensions of culture
that may affect Human resource practices are the political condition of the country
where MNC operate, its economic rank and development and its legal position. The
Multinational companies need to be careful in countries with strong religious views
as they may have both civil and religious laws in use (Dowling & Welch, 2005).
Reliance of The MNC On Its Home Country Domestic Market:
The status of the organization‘s home domestic market is another moderator

differentiating International Human resource management and Domestic Human
resource management. One major factor pushing companies to go outside their home
market is the small market demand in their home country but also the international
market may not be their target market for big companies as they have high demand
in their home country. Hence, when analysing company performance, focusing only
on the international market activity may not give the true stand or rank of an
international company. Some international companies originate from small countries
with small domestic demand or saturated domestic market and play a big role in the
international business activity. As an example, ABB Company from Switzerland,
INTERBREW from Belgium and we can also mention PHILIPS Electronics
originating from The Netherlands. United Nations Conference on Trade and
Development (UNCTAD) made an annual survey on foreign direct investment and
with some detailed analysis made, it published a list and it reveals that Coca cola and

McDonalds are ranked 27th and 39th respectively. As stated earlier the main reason
for this situation is, these big Multinational companies have high domestic demand
in their home country; the USA. This may influence to some extent on their NOTES
international business practice as well as deprive their managers an international
management experience (Dowling & Welch, 2004).
Management Orientation:
The last moderator presented by Dowling & Welch, (2004) is the level of orientation
of senior management. Managers from different cultures have different perceptions
towards the overall management system of a company. Lack of knowledge of
competitive management skill on an international level would lead to failure as it
may fail to identify and address the issue differently from the domestic management
issue.
Beardwell and Claydon (2000) also observe the significance role Multinational
companies play in the world economy and with regard to the interrelation and
restructuring of management issue at international versus the national level wrote
‗Management style, Strategies and policies are shaped by home business system -the
financial, institutional, legal and political framework – in which they developed as
domestic firms. Thus, there is a persistent ‗country of origin‘ effect in the behaviour
of MNCs whereby the country the MNC originates from, exerts a distinctive effect on
the management style, particularly the management of Human resource. ‗(Beardwell
and Claydon, 2010, p19).
On the other hand, Taylor et al (1996) presents the exportive, adaptive and
integrative models and explain why the international companies adopt different
form of Strategic International Human resource management. The adoptive models
reflect that Human resource policies are designed to match the local environment of
the subsidiary. There would be less transfer of Human resource practices from the
parent company and use differentiation as a priority point. In the explorative
orientation the subsidiary copies Human resource management policies from the
parent company. This upholds the integration of global management system and is
ethnocentric in nature. The integrative orientation model is the selection of ‗best HR
practice‘ across the world and is more liberal and flexible in allowing the subsidiary
adopts local HR practices (Beardwell and Claydon, 2010). But each orientation
requires different consideration in line with the HR policies practiced by the parent
organization.
NOTES Expatriates
One important point in International Human resource management is the movement

of employees across national boundaries to foreign country assignments. These
employees are termed as Expatriates while Employees transferred from subsidiary
branch into Headquarters are referred as Inpatriates (Dowling & Welch, 2005). As the
global business activity of International companies increased, it demanded high
controlling system and follow up of the subsidiaries business performance. To this
effect, MNC have chosen the use of Expatriates, Parent company nationals, as a
controlling mechanism by assigning them in key management positions in the
subsidiary branches of the parent company (Bartlett & Ghoshal, 1989).
The efficiency of the deployed expatriate may also depend on the adaptability the
expatriate on his/her foreign assignment. A study conducted by Mark Mendenhall
and Gary Oddor in 1985 suggests that expatriate success and adjustment depend on
several dimensions. The first is self- oriented dimension, which deals with the expat
personal competence and adaptability to the foreign environment. The second
dimension is the others-oriented dimension, which consist of relationship
development and willingness to communicate in reference to the reluctance to
assimilate and learn the language of the foreign land. The Third dimension is the
perceptual dimension, which is concerned with the ability of expatriates to
comprehend the behaviour of foreign nationals and the fourth dimension is cultural
toughness and this is to gauge how quickly an expatriate adapts to a harsh
environment (Brewster & Harris1999).
Apart from parent country nationals, Nationals from host country and third country
are also considered as expatriates. But this paper will focus only on expatriates from
parent country nationals to discuss the main reasons as to why an MNC send an
employee on a foreign assignment. Expatriates are assigned in a foreign country as,
An agent of direct control- The assigned expatriate is used to control the activities of
the subsidiary and ensure its compliance through supervision (Dowling & Welch,
2005, Bartlett & Ghoshal, 1989)

An agent of socialization- The expatriate in question understands the company‘s
values and beliefs and acts as a medium to transfer these qualities of the parent
company to the subsidiaries (Dowling & Welch, 2005) As network builder- An NOTES
expatriate having a knowledge pertinent to his/her job qualification will in due
course bond with people in different key positions and together build a network of
interdependence (Dowling & Welch, 2005)
As boundary spanner- This refers to activities performed by the expatriate, such as

gathering information that bridge internal and external organizational context. It
would be the expatriates‘ duty to promote the company profile as well as gather
information that may be of use to the betterment of the company (Dowling & Welch,
2005)
As language nodes- Expatriates with foreign language background would eventually

become an asset especially when they repatriate to their home country (Dowling &
Welch, 2005). The advantages of using expatriates are mainly to maintain
organizational control, international work experience and follow up the fulfilment of
the company‘s‘ objective by the subsidiary. Whereas the disadvantage points are the
problem with the adaptability of expatriates to the foreign environment and the high
cost incurred by the parent company to the selection and training of expatriates
(Dowling & Welch, 2005). The process of selecting the right person to the right
position is crucial to the success of the oversees mission and it is to noted that an
expatriate‘s success in one environment does not imply that the same expatriate will
fill gaps in all circumstances (Brewster & Harris, 1999).
To this end, In order to select an expatriate for an international assignment, Dowling

& Welch (2005) have set six basic factors which may assist managers in the process.
As an individual Factors they have set Technical ability, cross cultural suitability and
family requirements are listed essential while in as situational factors country or
cultural requirements, language and MNE requirements need to be analysed and
considered in the selection process. In another perspective Schneider and Barsoux
(1997) list nine point they believe are important for the selection process. They are
interpersonal skill, linguistic ability, ability to tolerance and cope up with
uncertainty, motivation to work and live abroad, flexibility, patience and respect,
cultural empathy, strong sense of self and sense of humour. (Dowling & Welch, 2005)
In general the extent of the selection criteria is wide and companies need to identify
and consider the most important and points pertinent to the position to be filled.
NOTES Various factors are discussed that differentiate International Human resource
management from Domestic human resource management. The complexity of
international Human resource management lies in the additional knowledge and
responsibilities needed for operating at international level, and this is reflected in all
the activities such as staffing, training and development, Human resource planning
and compensation and benefits. As the global market competition increases
International companies are expected to be responsive, flexible and creative of a
suitable company strategy and Human resource management system in order to
survive the competition.
The Globalization of world economies has forced international companies to adjust

and continuously change their company strategy and Human management systems
in order to survive the competition. To this, the function of Human resource
management has become an important subject as it has proved to be a vital point to
the success of International as well as Domestic companies. In this paper various
perspectives towards International Human resource management are discussed
briefly. Authors in the field are also quoted on how the present and future shape of
Human resource management is and would be. In summary, the paper has tried to
identify the main differences and similarities between domestic and international
Human resource management. From the literature review presented, different
internal and external factors are discussed to the complexity of International human
resource management, presented the various interpretation of HRM and have tried
to show how management and the market would dictate the shape of Human
resource management in general.
Comparative employment relations may involve describing and systematically

analysing institutions, processes and outcomes in two or more countries.
Theoretical perspectives: The three views are generally known as unitarism,

pluralism, and the radical or critical school. Each offers a particular perception of
workplace relations and will, therefore, interpret such events as workplace conflict,
the role of unions and job regulation differently.

Comparative Industrial-Relations - The Contribution of The Ethnographic
Tradition
NOTES
The shopfloor is receiving renewed attention within the field of comparative
industrial relations. This interest reflects academic concerns, notably a wish to
understand how new managerial techniques actually function, but also
developments in the real world, particularly the competitive challenge of Japan and
the perception that it is in the regulation of labour within the workplace that a large
part of Japan's success lies. An important but neglected mode of workplace inquiry,
the ethnographic tradition, has a major part to play in understanding the shopfloor
in comparative perspective. The paper sets out its approach, considers issues of
validity and generalization, illustrates its contribution to comparative analysis, and
outlines a research agenda for the future.
The approach has three key components. The first is its theorstical perspective on the
nature of work relations. Conflict is the central principle underlying the organization
of work because workers are exploited by employers. This "structured antagonism"
underlies day-to-day relations. At this level, cooperation becomes significant.
Conflict is not separate from co-operation. The two are intertwined, and the
analytical task is to understand how in a particular workplace they are organized
and expressed. Second, therefors, the object of inquiry is the regulation of work: the
rules, procedures, customs and understandings that regulate how workers' capacity
to labour is translated into actual effort. Third, research methods place particular
weight on intensive observation, though studies that use relatively casual
observation still adopt an ethnographic orientation to the extent that they focus on
day-to-day behaviour and the processes by which conflict and consent are organized.
Several problems with the approach are commonly identified. One is a tendency to
descend into mere description of the drudger; of working lives. A second is that
studies of individual workplaces can offer no wider generalizations. The former is a
weakness of certain studies, and to develop its potential the approach needs a tightly
disciplined consideration of analytical issues. There are five ways in which it can
thereby offer generalizations:
 The excavation of activities that. would otherwise lie hidden, together with
the demonstration that they question certain theories about organizational
functioning
NOTES
 The indication of mechanisms linking different phenomena together
 The analysis of single "critical cases' which are able to throw light on wider
developments
 The use of comparisons of workplaces
 The development of a research programme which permits cumulative
knowledge to be generated
International comparisons using ethnographic methods are as yet rare, but four
approaches illustrate the potential. The first is simply to explore a country in the light
of existing assumptions. For example, the small number of shopfloor studies of Japan
help to explode myths about the nature and origins of workers' consent. Second, one
country is studied using the perspectives of another. This can ask about processes
which tend to be taken for granted within a country and can begin to explain how
processes of labour regulation differ, for example what role the strike plays in
different national regimes. Third, studies from different countries can be set
alongside each other. Where these studies were conducted in similar types of
technology and product markets, the distinctive effects of national systems are
revealed. For example, studies of Britain and North America reveal the distinctive
roles played by the state in the development of factory regimes. Finally, direct
comparison between workplaces can test out and develop ideas derived from more
indirect comparisons.
Such studies help to explain what remains obscure within existing comparative
analyses. For example, the "political economy" tradition tries to explain patterns of
labour regulation in terms of the incorporation of labour within national political
systems, and it uses strike statistics as a major index of industrial behaviour. An
ethnographic approach goes much deeper than such statistics, and it relates national-
level developments to the site where cooperation is actually generated, namely, the
workplace. It can thus resolve certain puzzles within existing accounts.
There are several ways in which the perspective can develop its comparative
contribution. An obvious one is to explore changes in manufacturing industry,
looking for example at quality circles in two or more countries and exploring their

connections with existing systems of regulation. There is also a need to extend the
approach to little-studied groups such as white-collar workers. The range of
countries can also be extended, from the advanced capitalist nations which have NOTES
generally been the focus, to newly industrializing economies.
5.6 Global Unions
Standing together for rights of workers. The Council of Global Unions (CGU) held its
inaugural meeting in Brussels, 9–10 January 2007. All GUFs, with the exception of the
International Metalworkers' Federation, as well as TUAC, became members of the
Council and signed the agreement.
The CGU was created to encourage closer co-operation among global unions in order
to act more effectively at the international level to build a more favourable, enabling
environment for organising and collective bargaining. Although its work has policy
implications, it was not established to make policy. That is the responsibility of the
organisations that constitute the CGU.
The Global Unions group is made up of the International Trade Union Confederation
(ITUC), which has 175 million members in 151 countries; the global union
federations, which represent their respective sectors at the international trade union
level (BWI, EI, IAEA, ICEM, IFJ, IMF, ITF, ITGLWF, IUF, PSI and UNI); and the
Trade Union Advisory Committee (TUAC) to the OECD. Global Unions is the
partnership between the International Trade Union Confederation, Global Union
Federations and the Trade Union Advisory Committee to the OECD.
Who are Global Unions ?
Global Unions are international trade union organisations working together with a
shared commitment to the ideals and principles of the trade union movement. They
share a common determination to organize, to defend human rights and labour
standards everywhere, and to promote the growth of trade unions for the benefit of
all working men and women and their families."
Global Union Federations (GUFs) seek to build international cooperation, joint
action, and global solidarity among trade unions in different countries that share
common employers. There is a growing global trade union recognition by
multinational enterprises of GUFs at the headquarter levels, and beyond, and of the
work that they do, as well as an important increase in social dialogue. In some cases,
this interaction has resulted in the negotiation of International Framework
NOTES
Agreements (IFAs), also known as Global Framework Agreements (GFAs).
 International workers Federation Indian Unions

 Indian National Metalworkers‘ Federation
 Indian National Mineworkers‘ Federation
 Steel, Metal & Engineering workers‘ Federation of India
 Simpson & Group Companies Workers and Staff Union
 Working People Trade Union Council
 SKF Bearing India Employees‘ Union
 Sandvik Asia Employees‘ Union
 Philips & B.C. Components Employees‘ Union
 Atlas Copco Employees‘ Federation
Contents of a framework agreement with ThyssenKrupp
 According to the agreement, ThyssenKrupp is obliged to comply with the

principles of the International Labour Organization (ILO), among other
international standards, at all its subsidiaries worldwide. These include
particularly ILO conventions nos. 29, 87, 98, 100,105, 111 ,138and 182. Under
the newly signed GFA ThyssenKrupp undertakes to respect the following
principles:
 Equal opportunity and equal treatment
 Maximum working hours as regulated by a respective legislation or a
collective bargaining agreement or other agreement within the specific
country
 Right to a reasonable remuneration for all employees
 Health and safety of employees a key issue, obliging ThyssenKrupp to adhere
to local laws with regard to a safe, hygienic working environment
 All employees have the right to establish trade unions and employees‘
representative bodies, and to engage in collective bargaining
 All forms of child and forced labour are prohibited

 The GFA has also strong provisions for implementation and monitoring
through an International Committee with the participation of various
management and workers‘ representatives. NOTES
Regional Economic Integration: Refers to agreements among countries in a

geographic region to reduce, and ultimately remove, tariff and non-tariff barriers to
the free flow of goods, services and factors of production between each other.
Levels of Economic Integration
 Political Union
 Economic Union
 Common Market
 Customs Union
 Free Trade Area
• Free Trade Area: all barriers to the trade of goods and services among member
countries are removed.
Customs Union: eliminates trade barriers between member countries and adopts a
common external trade policy.
Common Market: Has no barriers to trade between member countries, includes a

common external trade policy, and allows factors of production to move freely
between members. Economic Union: Involves free flow of products and factors of
production between member countries and adoption of a common external trade
policy. It also requires common currency, harmonization of members‘ tax rates, and a
common monetary and fiscal policy.
Political Union: Moving toward economic union, raises questions of how to

coordinate bureaucracy accountable to the citizens of member nations. Political
union in which a central political apparatus coordinates the economic, social, and
foreign policy of the member states is the answer.
Regional Unions
 European Union
 NAFTA: USA, Canada, Mexico
 Andean Pact: Bolivia, Chile, Ecuador, Colombia and Peru (now operates as a
customs union including Venezuela but minus Chile)
 MERCOSUR – originated with Brazil and Argentina includes Paraguay and
NOTES
Uruguay. • ASEAN: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar,
Philippines, Singapore, Thailand, Vietnam
 SAARC South Asian Association for Regional Cooperation
 BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic
Cooperation) Bangladesh, India, Myanmar, Sri Lanka, Thailand, Bhutan and
Nepal
Regional Integration is a process in which neighbouring states enter into an

agreement in order to upgrade cooperation through common institutions and rules.
The objectives of the agreement could range from economic to political to
environmental, although it has typically taken the form of a political economy
initiative where commercial interests are the focus for achieving broader socio-
political and security objectives, as defined by national governments. Regional
integration has been organized either via supranational institutional structures or
through intergovernmental decision-making, or a combination of both.
Past efforts at regional integration have often focused on removing barriers to free
trade in the region, increasing the free movement of people, labour, goods, and
capital across national borders, reducing the possibility of regional armed conflict
(for example, through Confidence and Security-Building Measures), and adopting
cohesive regional stances on policy issues, such as the environment, climate change
and migration.
Intra-regional trade refers to trade which focuses on economic exchange primarily

between countries of the same region or economic zone. In recent years countries
within economic-trade regimes such as ASEAN in Southeast Asia for example have
increased the level of trade and commodity exchange between themselves which
reduces the inflation and tariff barriers associated with foreign markets resulting in
growing prosperity.
Regional integration has been defined as the process through which independent
national states ―voluntarily mingle, merge and mix with their neighbours so as to

lose the factual attributes of sovereignty while acquiring new techniques for
resolving conflicts among themselves.‖ De Lombaerde and Van Langenhove
describe it as a worldwide phenomenon of territorial systems that increases the NOTES
interactions between their components and creates new forms of organization, co-
existing with traditional forms of state-led organization at the national level. Some
scholars see regional integration simply as the process by which states within a
particular region increase their level interaction with regard to economic, security,
political, or social and cultural issues.
In short, regional integration is the joining of individual states within a region into a
larger whole. The degree of integration depends upon the willingness and
commitment of independent sovereign states to share their sovereignty. The deep
integration that focuses on regulating the business environment in a more general
sense is faced with many difficulties.
Regional integration initiatives, according to Van Langenhove, should fulfill at least

eight important functions:
 The strengthening of trade integration in the region

 The creation of an appropriate enabling environment for private sector
development
 The development of infrastructure programmes in support of economic
growth and regional integration
 The development of strong public sector institutions and good governance
 The reduction of social exclusion and the development of an inclusive civil
society contribution to peace and security in the region
 The building of environment programmes at the regional level
 The strengthening of the region‘s interaction with other regions of the world.
The crisis of the post-war order led to the emergence of a new global political
structure. This new global political structure made obsolete the classical
Westphalian concept of a system of sovereign states to conceptualize world politics.
The concept of sovereignty became looser and the old legal definitions of the
ultimate and fully autonomous power of a nation-state are no longer meaningful.
Sovereignty, which gained meaning as an affirmation of cultural identity, has lost
meaning as power over the economy. All regional integration projects during the
Cold War were built on the Westphalian state system and were designed to serve
economic growth as well as security motives in their assistance to state building
goals. Regional integration and globalization are two phenomena that have
NOTES
challenged the pre-existing global order based upon sovereign states since the
beginning of the twenty-first century. The two processes deeply affect the stability of
the Westphalian state system, thus contributing to both disorder and a new global
order.
Regional integration agreements
Regional integration agreements (RIAs) have led to major developments in

international relations between and among many countries, specifically increases in
international trade and investment and in the formation of regional trading blocs. As
fundamental to the multi-faceted process of globalization, regional integration has
been a major development in the international relations of recent years. As such,
Regional Integration Agreements has gained high importance. Not only are almost
all the industrial nations part of such agreements, but also a huge number of
developing nations too are a part of at least one, and in cases, more than one such
agreement.
The amount of trade that takes place within the scope of such agreements is about
35%, which accounts to more than one-third of the trade in the world. The main
objective of these agreements is to reduce trade barriers among those nations
concerned, but the structure may vary from one agreement to another. The removal
of the trade barriers or liberalization of many economies has had multiple impacts, in
some cases increasing Gross domestic product (GDP), but also resulting in greater
global inequality, concentration of wealth and an increasing frequency and intensity
of economic crises.
The number of agreements agreed under the rules of the GATT and the WTO and
signed in each year has dramatically increased since the 1990s. There were 194
agreements ratified in 1999 and it contained 94 agreements form the early 1990s.
The last few years have experienced huge qualitative as well as quantitative changes
in the agreements related to the Regional Integration Scheme. The top three major
changes were the following:

 Deep Integration Recognition
 Closed regionalism to open model
 Advent of trade blocs NOTES
Recent regional integration
Regional integration in Europe was consolidated in the Treaty on the European

Union (the Maastricht Treaty), which came into force in November 1993 and
established the European Union. The European Free Trade Association is a free trade
bloc of four countries (Iceland, Liechtenstein, Switzerland and Norway) which
operates in parallel and is linked to the European Union. In January 1994, the North
American Free Trade Agreement was formed when Mexico acceded to a prior-
existing bilateral free trade agreement between the US and Canada. In the Pacific
there was the ASEAN Free Trade Area (AFTA) in 1993 which looked into reducing
the tariffs. The AFTA started in full swing in 2000.
Alternative Regional Integration
In the last decade regional integration has accelerated and deepened around the
world, in Latin America and North America, Europe, Africa, and Asia, with the
formation of new alliances and trading blocks. However, critics of the forms this
integration has taken have consistently pointed out that the forms of regional
integration promoted have often been neoliberal in character, in line with the
motives and values of the World Trade Organization, the International Monetary
Fund and the World Bank – promoting financial deregulation, the removal of
barriers to capital and global corporations, their owners and investors; focusing on
industrialisation, boosting global trade volumes and increasing GDP. This has been
accompanied by a stark increase in global inequality, growing environmental
problems as a result of industrial development, the displacement of formerly rural
communities, ever-expanding urban slums, rising unemployment and the
dismantling of social and environmental protections. Global financial deregulation
has also contributed to the increasing frequency and severity of economic crises,
while Governments have increasingly lost the sovereignty to take action to protect
and foster weakened economies, as they are held to the rules of free trade
implemented by the WTO and IMF.
Advocates of alternative regional integration argue strongly that the solutions to
global crises (financial, economic, environmental, climate, energy, health, food,
social, etc.) must involve regional solutions and regional integration, since they
NOTES
transcend national borders and territories, and require the cooperation of different
peoples across geography. However, they propose alternatives to the dominant
forms of neoliberal integration, which attends primarily to the needs of transnational
corporations and investors. Renowned economist, Harvard professor, former senior
vice president and chief economist of the World Bank, Joseph Stiglitz has also argued
strongly against neoliberal globalisation. Stiglitz argues that the deregulation, free
trade, and social spending cuts or austerity policies of neoliberal economics have
actually created and worsened global crises. In his 2002 book Globalization and Its
Discontents he explains how the industrialized economies of the US, Europe, Japan,
South Korea and Taiwan developed not with the neoliberal policies promoted in
developing countries and the global South by the WTO, IMF and World Bank, but
rather with a careful mix of protection, regulation, social support and intervention
from national governments in the market.
Global Unions
Global Union Federations (GUFs) seek to build international co-operation, joint

action, and global solidarity among trade unions in different countries that share
common employers. There is a growing global trade union recognition by
multinational enterprises of GUFs at the headquarter levels, and beyond, and of the
work that they do, as well as an important increase in social dialogue. In some cases,
this interaction has resulted in the negotiation of International Framework
Agreements (IFAs), also known as Global Framework Agreements (GFAs).
Who are Global Unions? Global Unions are international trade union organisations
working together with a shared commitment to the ideals and principles of the trade
union movement. They share a common determination to organize, to defend human
rights and labour standards everywhere, and to promote the growth of trade unions
for the benefit of all working men and women and their families."
International Strategic Human Resource Management
Broadly speaking, strategic international human resource management (SIHRM) is

about the management of human resources consistent with the strategic direction of

the multinational enterprise in a dynamic, interconnected, and highly competitive
global environment
NOTES
Need for SIHRM:
Rather than focusing on internal issues of HR, SHRM focus on addressing and
solving problems what effect people management related issues in the long run
globally. So the main importance of strategic human resources is to increase
employee skills by focusing on business problems that happens outside of human
resources
Aim of SIHRM
The aim of strategic human resource management is to: Advance flexibility,

innovation, competitive advantage. Develop a fit for purpose organizational culture.
Improve business performance
Role of SIHRM
Reaching ultimate business goals requires leadership. Strategic human resource

management encompasses the traditional human resources functions of recruiting,
screening, interviewing, and hiring employees, but also works with the overall
organizational strategy to achieve success.
Emerging trends in Employee Relations and Employee involvement. In the

decentralized model, employee relations issues are managed within specific
functions or verticals by ER and HR professionals. A recent survey by HR Acuity
suggests a shift towards the centralization of the ER function. Some of the employee
relations issues are conflicts, sexual harassment, annual leave disputes, bullying and
other employee relations issues can negatively impact your organization. As a
business owner or HR manager, it's your responsibility to prevent and address these
problems before they escalate.
The HR trends to watch in 2020
 Holistic HR. HR is moving to a more holistic approach

 Less focus on process improvement
 Be kind
 More appreciation of complexity
NOTES  Adaptive systems

 From People Analytics to Analytics for the people
 Learning in the flow of work
 A tougher approach to diversity and equal opportunities
Framework for Analysing Impact of Globalization on Industrial Relations

The employers' strategy in the area of employment relations must focus on
achieving:
NOTES
 Appropriate attitudinal and behavioural changes, not only at enterprise, but
at other, levels;
 A modern policy, legislative and institutional framework which ensures an
effective industrial relations system;
 Compensation systems linked to enterprise performance;
 A more literate, skilled and adaptable workforce, which is capable of
experimentation and innovation;
 More flexible forms of work organization and management; and
 Culturally-sensitive management strategies, as firms invest within and
beyond the region
MNC’s and Unions: aspects concerning IR needing changes in approach
1. Multinationals should delegate the management of labour relations to their

subsidiaries. Subsidiary managers should maintain the peaceful interactions
between the employer and the employees in the context of host country‘s
rules & regulations.
2. Multinational managers should set up international human resource
management approaches according to the national conditions of each
subsidiary.
3. Multinational managers should have some prior experience in labour
relations. Specially to deal with labour unions at industry level rather than at
firm‘s level. For Europe the opposite is more typical for U.S. firms where
firm-based labour relations policies are norms.
4. Multinational management attitudes or ideology concerning unions must
play an important role in international labour relations.
5. International human resource managers should understand international
regulations and applying those to labour relations such as those developed by
EC, ILO, and OECD, and they should have versatile knowledge about the
global environment and the international labour regulations
6. Multinational human resource managers should analyse labour relations
issues that are common to all countries. They should conduct an analysis of
the labour relations and practices in each of the counties within which the
MNC operates and develop a standard policy which is applicable irrespective
of all countries throughout the world.
NOTES Trends in Employee Relations: For the last 25 years, lots of changes have been
observed in the arena of employee relationship in the UK. Almost all the norms
which were considered to be major in the industries of England have been done
away with. This has occurred as the kind of work people do has changed, also the
kind of workplace that the people are in has changed over the years. The changes in
structure have also brought about a change in the culture. The attitude of employers
towards their employees and vice versa has changed tremendously over the years.
On course of this book, you will come across lots of changes that have affected the
different areas of the workplace. All areas of HRM activities have changed
henceforth. However the most astounding of changes have occurred in employee
relations. You can say that the different changes have progressed at different speeds
in the various fields. You will find lots of workplaces in the public sectors, where
even today the traditional models of employee relations are followed. The
governments have come and gone trying to undermine these things. Hence as a
result of this, in the present times, there exists, a lot of variety in approaches in
different sectors of industry than it was in the past.
Trade Union Decline: The most striking of changes that has been seen, is the
lessening in the number of people who join the trade unions. Even if these people
join, they do not take part in the activities of these unions. In the United Kingdom,
the number of memberships had reached its pinnacle in the year 1979. It was seen
that more than 13 million people, which is roughly 58% of all employees had opted
for being member of the unions for trade. In the years that follow, there has been a
decrease in the numbers continuously for every year. The older members of the
unions have retired, and new people have not substituted them. In the year 2002, the
membership was seen to be standing at just 7.3 million. In the most recent times,
there has been some decrease in the deterioration of numbers. Some unions have also
claimed that they have seen some increase in membership. This has happened as a
greater number of people has become a part of the workforce. However, the density
of the trade union has kept decreasing for the past two and half decades now.
number of people started in the year 1979 itself when Margaret Thatcher had been
elected as the Prime Minister of England. The different actions taken by her and her

government has often been cited as the main reason behind the decline of the trade
unions in the country. During the period of 1980s many number of menacing laws
were passed and that did not at all helped with the decline in the different unions. NOTES
The legal attacks on the unions as they tried to recruit more members came when
different regulations were made. As a result of this, it was impossible to keep up
with any kind of secret arrangements. Becoming member of a particular trade union
was actually made compulsory in some places in order to get employment there.
This was a major step and millions of people were affected by it, especially those
who worked behind closed doors. This however did not cause direct resignations
from the union on a large scale. The decrease in the number of members may have
happened because of the laws passed in 1980s as well as early part of the 90s. This
was done to bring down the number of strikes happening in the company. Therefore,
the union itself found it difficult to bring forward its issues via industrial action. Not
much evidence though remains to support this kind of claim. Hence it can rightly be
said that anti-union laws are not to be blamed for bringing a lessening in the number
of members in the United Kingdom. This is more ascertained by the fact that the
number of members are still in the decline in the present times.
The primary cause of the decline of the trade unions is not because of the policies
taken up by the government, but rather because of restructuring of the various
industries that has taken place across the world. All the different already established
industries, in which the presence of the unions was a regular feature is no more so
today. These industries include that of mining, shipyard etc. The jobs which have
gone away from these sectors have gone to the sector of servicing. The service sector,
do not have too much of unions. The sizes of the places of work have become less too
and that has impacted the tendency of the different employees to join various unions.
The number of factories having big assembly lines and employing lots of people has
decreased. Instead of this, different small-scale offices have come up which engage in
lots of technology-based sectors. The style of management in various workplaces,
even if large scale in nature is a little personal in nature and it‘s like going with the
flow. Different kinds of problems and disputes even protests for bringing a rise in
the salary are discussed face to face and in an informal manner and no involvement
of trade unions are required.
In the different private sectors, lots of small-scale workplaces are present and hence
many alternate forms of employment would be available too. The qualified people
will therefore never be out of jobs. When various receptionists or executives are not
NOTES
satisfied with their present job or their place of work or boss, they can readily quit
the job and look for another one. They do not really require making too much of an
effort to find the job. The economic condition present now also guarantees that the
amount of money that he or she was earning did not lessen. Hence the people are not
too much concerned with the job; they are obviously less concerned about
maintaining a particular job unlike their predecessors working in the mines or other
such industries, where one person would be providing with all the employment. To
tell it in short, presently there are many other ways to solving problems and saying
goodbye to unhappiness at workplace.
In the year 1998, it was shown in a study that 47% of the total number of companies
in the USA, did not take in people who were members of the unions. There were
thousands of companies, which had no significant presence of the unions. In the
present times, most of the people prefer working in an office which had no influence
from the unions. Hence the relationship of the employees is needed to be studied
more elaborately as different kinds of relationships exist. All the traditional kind of
approach taken previously does not really work anymore.
There is a distinct kind of spilt observed in the public sector. The public sector was
actually the place where the different kinds of age-old methods could be applied
with ease. Some adaptations would be made of course. In stark contrast, private
sectors are usually large in size and without the presence of a defined union body.
There is no presence of any union and management is what drives things forward.
The fact whether the decline of the trade union is a continuous process and will go
on forever, is highly debatable. Lots of views are present regarding it. From the view
of the trade unions themselves, there is of course the prevalence of a sense of
pessimism. This is because; even after years of propaganda and effort to recruit new
members the efforts have proved to be futile. The numbers of people, who wish to
join these unions, have decreased in a dramatic fashion. This suggests that they do
not anymore see that joining a union is a lucrative business. Back in the year 1991, it
was seen that 37% of the members of the workforce in the age group of 25-34,
belonged to the unions. After a decade of this, the number of people belonging to the

union and below 30 years of age reduced to 16%. The growth of the industries had
been phenomenal during that period. These new industries were not used to the idea
of unions and did away from them anyway. This can be made really clear from the NOTES
fact that other than few jobs of the public sectors, most other does not have any
unions anymore. Engineers, consultants, nurses, hair dressers in salons can come
unde4r this category.
An alternative explanation regarding this is that the trade unions had faced such
declines previously too, but they had always recovered before, but things turned out
to be different this time around. The proof of this has been provided by Kelly who
told that in the 20s and 30s, the densities in the unions were as low as 22%. This
obviously got recovered later on. He had a theory of ‗long waves‘ to prove his claims.
He says that the different workers would be putting up with the tortures and
exploitations before going on to fight against the employers again in a united
fashion. People actually get courage from the fact that different people belonging to
the class where unions do not exist, do not support them at all and will not ever be
wishing to join them, including young people. In polls conducted in 2001, it was seen
that 50% of the people said that they were likely to join a union if it was present in
their place of work. These figures put the battle in a 50-50 position. Hence it has
become clear that the use of the unions would be able to create a kind of revolution
themselves if they are marketed as well as organized in a proper fashion, even in
private sectors.
Window on Practice: The trade unions mainly face problems in getting members
from places which are also called dispersed sectors. Here actually the different
employees lay scattered in small places of work throughout the entire country. The
people are seen working in quite small teams which can even include less than six
people. Hence the traditional approach of unions which included communicating
from a higher authority to people such as stewards from shops is not quite practical.
Hence different new methods and technologies are required to be used such as SMSs
sent from phones and alerting these people.
In spite of different difficulties, the big unions have enjoyed some successes over the
years. This has been done by setting up of special sectors for people who work in
dispersed environments. The IRS will provide you with lots of good examples
regarding this matter. The union of GMB has actually started looking for
professional sportsperson as well as drivers and sex workers. The Union for
transports as well as workers in general have also set up unions and enrolled more
than 2000 people working in small nurseries. You can say that the most famous
NOTES
success story was seen in the case of clergy and church workers of Amicus. This
union has got 2500 members for now and has also succeeded in ensuring that the
right of the Clergyman would not be dismissed off in any manner.
Collective Bargaining and Industrial Action: One of the major effects which was felt
after the decline in number of members in the union, was a continued decrease in the
number of people whose terms and conditions for a particular job was set according
to collective bargaining. In this particular segment too lots of lots of changes have
occurred. In the present times, it has been observed that people have moved on from
a position where many members worked in companies having proper trade unions
to places where most people were not working in them anymore. In the year 1970, it
was seen that more than 80% of the people belonging to the general workforce in the
UK, belonged to jobs determined by collective agreements. In the year 2003, the
percentage stood at 35.6.
Employee Involvement
Even if the employees are not directly involved in the decision-making process of the
company, there always exist the window for participation as individuals. There has
been a rise in interest in these areas recently. This has been caused due to
involvement of the government as well as by the sharp eyes of the employees who
have seen that by this manner more commitment is observed from the employers.
The initiatives of this type, is quite useful in conditions where unions are not present.
This kind of absence ensures that the managers are able to feel the nerve of the
employee organization.
The direct involvement of the employee for running the company is not at all
discordant with formation of associations such as trade unions. These things are
however mostly taken up by the employers firstly. The very critical writers often see
these things as the process by which the growth of the trade union is stunted. The
suggestion that these writers provide is that if the employees desire to participate
directly, then that can be satisfied by use of the initiatives of people. It is very much
evident from some surveys, that few employers specially take up the initiative to

accommodate employees in management and discourage the formation of the unions
for trade. Some other reasons are given below:
NOTES
 The employees of the company like being involved in the process and greatly
support the initiatives.
 The commitment of the organization increases owing to involvement of the
employees.
 The employees henceforth accept things quite easily here.
 The involvement of the people ensures that the turnover of the staffs is at a
low level.
Theoretically speaking, the involvement of the employees ensures that the

involvement of the employees causes a great deal of improving of the performance of
the organization. There are of course some evidences to support this kind of claim.
The limitations of methods to continue with this kind of research, is provided by
Marchington. It can be said with a certain degree of certainty that the employees
obviously are fond of involvement of people. They prefer organizations which
believe in participation rather than being autocratic in nature. This kind of evidence
is not strong enough to be provided in cases of justifications regarding improvement
in performance of the organizations. The claims made however are quite persuasive
in nature and will be able to provide explanations regarding growth in places of
direct involvement with the organization.
extent to which your performance would suffer when individual employees are
present in your office? What kind of commitment level will you have towards your
company?
The mostly used types of straightforward involvement present in the UK, is seen in
briefing of teams, the printing of the news sheets of the company over web as well as
different schemes of suggestions provided. The concept of team work, is not quite
common, however it has been able to garner a lot of interest among the different
research fellows as individuals are involved. The colleagues of yours would also be
involved in the process; hence you will have a lot of control over your work. Hence
this is a really potent form of individual involvement.
Team Briefing: On course of the briefings of the teams, lots of things are attempted
to be done at the same time. This will ensure that information from a position of
authority is getting circulated regularly. Hence the people will have a fair idea
NOTES
regarding the happenings of the place. The information can obviously be used to
reach the targets of production and other objectives of the organization. Everything
is provided on the face so that there remains ground for different clarifications to
take place. The role that the supervisors as well as managers will play, will provide
with loads of information.
The team briefings are often used for flow of information or different messages from
the managerial department. The different teams can be found clustering round a
particular area of service. This is not specific to a particular occupation and instead
consists of a dozen of people. The person acting as leader is actually the manager or
supervisor. This person must have the required skills and briefings. The different
meetings would not be continuing for more than half an hour. A time slot is also
required to be allotted for the various employees to ask questions. The meetings
must be arranged from before and is required to be held periodically.
If some discipline and goodwill is instilled in the services, then the briefings of the
teams can be extremely valuable in getting involvement of the different employees.
Here dealings regarding information take place. In a traditional setup, there exists a
managerial view where people working, are not at all interested in anything different
from immediate or short term stuffs. The status of the manager is actually
determined by coming to know about things that the other people involved are not
aware of. It is because of this that the different managers present in the chain of
communication have to remain committed in order to make the event a really grand
success. The process of team briefing, actually gets to be easy in nature, once it has
got the recognition of being a regular affair. It is really important to ensure that the
enthusiasm showed by the management does not die down as soon enough the
employees would be getting very much used to the process.
During times of recession, the process of team briefing actually gets a big boost. This
is because of the fact that the managements break bad news to the people during that
time. When time as well as money gets lost, there is usually a lot of explaining to be

done to the workforce as to how bad the situation really is. If this is not done, then
these people may even end up asking for raises during that period. Irrespective of
the economy, the team briefings are important. NOTES
Quality Circles: The concept of quality circles actually had their origin in different
Japanese firms. Here you will find small number of employees clustered in groups.
These people meet up regularly to discuss how they would bring about
improvement in the products. The people from the group can also be sued as
individuals who would help in solving of problems. The opinion of the employee in
transmitted to the management hierarchy in this fashion. There exist some quality
circles, where the staffs work together as a team and perform different functions in
the organization. Some people are involved in functions involving different
departments of the company. These people can hence become a part of management
of quality as observed in cases of the 11th chapter.
Lots of objectives are supposed to be achieved by these practices. These people

definitely bring about an increase in the number of ideas that a particular company
holds. The cooperative kind of relationship at the workplace is also appreciated out
here. The practices are based on the guess that the employees may be considered to
be providing some kind of advantage of competitive nature to the different
organizations.
It can hence definitely be concluded that the quality circles provide with invaluable
ideas for the company as well as save costs. The thoughts and experiences of the
people are also can be used up here. Hence the overall impact would be positive in
nature.
News Sheets: The employees also get quite involved, when different journals are
published on a regular basis from the company in paper or electrical form. From one
point it will be seen that information is being provided by the mangers to the
employees regarding subjects of finance as well as policy making for the company.
This kind of involvement of the employee can be termed as limited which does not
serve any good purpose. The employees just have an idea regarding what is going on
in the company and are not involved in anything. If direct involvement of the
employees is needed to occur, then the news sheet is also required to be interactive in
nature. This sheet can be termed as a way by which the employees are asked about
new things. A platform is created where the complaints can be lodged.
NOTES Attitude Surveys: The opinion of the employee is required to be known by the
employer quite regularly. This is needed to be done especially, if no unions exist in
the company to provide the management a picture of what is going on in the
company. The responses got are often of the anonymous type. The people may
simply be naming the department where they work hence comparison between the
departments will be taking place easily. When surveys are carried out, it is wise to
ask those same old questions and repeat them as differences in answers will be
tracked in this fashion.
The serious problems which are related to the attitude surveys, are regarding
situations where these problems are not given due importance. This can well lead to
angry people in the workforce. The climate in employee relation would hence be as
poor as when no survey had taken place. Similar things happen when suggestions
are taken from the employees and then ignored, resulting in outrage.
Team Working: The concept of teamwork can be referred to as a predecessor to the

various independent working groups. Two famous incidents come to memory when
this is discussed. One incident was in a Volvo plant and another certain vague
movement called QWL. At Volvo, two different aims were observed which wished to
improve upon the quality that was observed in people of the worker class and thus
causing an increase in the productivity.
By team work, focus is brought on the activities of people working in small groups of
half a dozen or dozen people. These people support each other very much and also
have the ability to work without much supervision. The management would be
allocating certain targets for these people. The people would be consulted before a
task is given and the entire team would decide the manner in which the task would
be completed. It is seen that the team would be organizing all its activities by itself
and prepare about the process too. A leader is also chosen who decides upon the
modus operandi. Hence by team work there exists a certain degree of control over
the workers. The managers do not come every day for supervision but of course can
be approached to get some advices. The task of imparting some discipline to the
employees is carried on by the managers. By the use of teamwork, different teams

from a particular region actually compete with one another to emerge superior. The
remuneration received is then divided proportionally.
NOTES
5.9 HR/IR issues in MNCs and Corporate Social Responsibility
HR/IR Issues in MNC
Conflict Management: Conflict can happen in any environment, and the work place
is certainly no different. Disputes between employees or a direct disagreement
between an employee and business owner are situation that can occur frequently. An
effective way of managing conflict is vital to the continued health of your company.
One of the biggest issues is how two parties talk to each other, or whether they talk
at all. If there is not an easy way for the two parties to communicate and have their
issues heard, the conflict can turn in to something much worse. This can result in
poor company morale or the termination of a team member.
Consider using a system that allows for consistent, efficient communication between
team members and insist that this is the way they must communicate if a conflict
arises. When you make this a policy, you can avoid gossip and misunderstandings.
You can also ensure that employees always feel that their issues are heard.
NOTES Hour and Wage Issues: A majority of wage and hour violations involve overtime
compensation or employers wrongly classifying their employees as independent
contractors. Other wage issues involve forcing or coercing workers into working
hours they do not claim, such as working from home
All Wage and hour compliance continues to be challenging for even the most
sophisticated companies. Multimillion-dollar settlements and verdicts are announced
daily. Despite the notoriety around wage and hour lawsuits, most companies are
unaware of a compliance issue until a lawsuit arrives on their doorsteps.
Don't get me wrong--compliance is difficult. And it has been made even more
difficult with ever-changing laws, regulations, and guidance, particularly on the state
and local levels. Modern technology has further complicated the analysis as the
workplace continues to evolve.
Adequate Safety in the Workplace: Workplace safety refers to the working

environment at a company and encompasses all factors that impact the safety, health,
and well-being of employees. This can include environmental hazards, unsafe
working conditions or processes, drug and alcohol abuse, and workplace violence.
Workplace safety is monitored at the national level by the Occupational Safety and
Health Administration (OSHA). OSHA has three stated goals that serve as the
cornerstones of its policies and regulations:
 Improve the safety and health for all workers, as evidenced by fewer hazards,
reduced exposures, and fewer injuries, illnesses, and fatalities;
 Change workplace culture to increase employer and worker awareness of,
commitment to, and involvement in safety and health;
 Secure public confidence through excellence in the development and delivery
of OSHA's programs and services.
The federal guidelines imposed by this agency are complemented by state

regulations that are often tougher than those proposed by OSHA
Annual Leave Disputes: Do your employee know that the company‘s leave policy
is? Are you sure your policy is in accordance with state and federal laws? If your

answer is no to either of these questions and you are not currently using leave
Management software, you could open the door to annual leave disputes.
NOTES
Consider leave management software that helps you create a legal and transparent
leave policy that leaves no room for dispute. Provide every employee with easy
access to this policy. This type of software can also help your employees talk with
HR manager about leave and adjustments.
Timekeeping and Attendance Issues: Do you require your employees to come into
the home office and clock in or out every day? Do you find that many of them
become lax on the issues, or that they have their co-workers buddy punch them in
when they‘re running late?
Timekeeping and attendance issues are common, and you can eliminate many of
them by utilizing employee self service software. Allowing employees to keep track
of their time and communicate about attendance issues right from their smart
devices reduces the conflict and provide them a handy benefit.
Having an effective employee relations plan in place will help you in numerous
ways. You can avoid federal wage and hour violations, promote safety in the
workplace, assist with schedule management and give team members an easy way to
communicate. This is an excellent way to ensure you promote an effective and
engaging work environment for your employees.
Corporate Social Responsibility: Corporate Social Responsibility is a management

concept whereby companies integrate social and environmental concerns in their
business operations and interactions with their stakeholders. Corporate social
responsibility (CSR) is a self-regulating business model that helps a company be
socially accountable—to itself, its stakeholders, and the public. By practicing
corporate social responsibility, also called corporate citizenship, companies can be
conscious of the kind of impact they are having on all aspects of society, including
economic, social, and environmental. To engage in CSR means that, in the ordinary
course of business, a company is operating in ways that enhance society and the
environment, instead of contributing negatively to them.
Why should a company implement CSR?

Many companies view CSR as an integral part of their brand image, believing that
customers will be more likely to do business with brands that they perceive to be
more ethical. In this sense, CSR activities can be an important component of
NOTES
corporate public relations. At the same time, some company founders are also
motivated to engage in CSR due to their personal convictions.
What is the impact of CSR?
The movement toward CSR has had an impact in several domains. For example,
many companies have taken steps to improve the environmental sustainability of
their operations, through measures such as installing renewable energy sources or
purchasing carbon offsets. In managing supply chains, efforts have also been taken
to eliminate reliance on unethical labour practices, such as child labour and slavery.
Although CSR programs have generally been most common among large
corporations, small businesses also participate in CSR through smaller-scale
programs such as donating to local charities and sponsoring local events.
Understanding Corporate Social Responsibility (CSR): Corporate social

responsibility is a broad concept that can take many forms depending on the
company and industry. Through CSR programs, philanthropy, and volunteer efforts,
businesses can benefit society while boosting their brands. As important as CSR is for
the community, it is equally valuable for a company. CSR activities can help forge a
stronger bond between employees and corporations, boost morale and help both
employees and employers feel more connected with the world around them.
Key Takeaways
 Corporate social responsibility is important to both consumers and

companies.
 Starbucks is a leader in creating corporate social responsibility programs in
many aspects of its business.
 Corporate responsibility programs are a great way to raise morale in the
workplace.
For a company to be socially responsible, it first needs to be accountable to itself and

its shareholders. Often, companies that adopt CSR programs have grown their
business to the point where they can give back to society. Thus, CSR is primarily a
strategy of large corporations. Also, the more visible and successful a corporation is,

the more responsibility it has to set standards of ethical behaviour for its peers,
competition, and industry.
NOTES
Example of Corporate Social Responsibility: Starbucks has long been known for its
keen sense of corporate social responsibility and commitment to sustainability and
community welfare. According to the company, Starbucks has achieved many of its
CSR milestones since it opened its doors. According to its 2019 Global Social Impact
Report, these milestones include reaching 99% of ethically sourced coffee, creating a
global network of farmers, pioneering green building throughout its stores,
contributing millions of hours of community service, and creating a ground breaking
college program for its partner/employees.
Starbucks goals for 2020 and beyond include hiring 10,000 refugees, reducing the
environmental impact of its cups, and engaging its employees in environmental
leadership. Today there are many socially responsible companies whose brands are
known for their CSR programs, such as Ben & Jerry's ice cream and Ever lane, a
clothing retailer.
Four Types of Corporate Social Responsibility
All businesses must do more than seek strong profit margins for success; being
socially responsible is part of business survival in today's economy. Companies
should take a stance on important social issues to build a brand that consumers trust
and respect. As a business leader, consider these four types of corporate social
responsibility and how you can implement programs that are good for the
community and good for your company.
Tip: The four types of Corporate Social Responsibility are philanthropy,

environment conservation, diversity and labour practices, and volunteerism.
Philanthropic Efforts: The largest companies in the world are aligned with
philanthropic efforts. Microsoft works closely with the Bill and Melinda Gates
Foundation to bring technology to communities around the world. The company
understands that its success requires not just continued innovation, but building a
next generation capable of understanding, using and improving technology.
Even small companies benefit from aligning with philanthropic causes. A local car
wash might offer schools a platform to host fundraisers for sports teams. Restaurants
have fundraising nights when proceeds benefit a local school or charity. Supporting
these causes happens to also be good marketing, because the community is invited
into the business, has a good experience and sees the company in a positive light.
NOTES
Environmental Conservation: Environmental concerns regularly make the
headlines, whether a long-term problem like global climate change or a more local
issue such as a toxic chemical spill. Companies that align themselves in these efforts
help minimize environmental problems by taking steps such as reducing their
overall carbon footprint. Although major corporations get most of the attention for
their environmental commitments — General Mills has committed to a 28 percent
reduction in greenhouse gas emissions, for example — there are plenty of
opportunities for small and mid-sized business as well.
Does your business have an active recycling program on site? Have you considered
using alternative energy sources like solar and wind to help power your operations?
There are plenty of "green cleaning" alternatives that can help reduce your use of
harsh toxic cleaning chemicals. All these steps can make a small but significant
contribution to improving the environment. You can also ask your suppliers to do
the same, letting them know that their environmental measures will be a factor in
your purchasing decisions. By doing so, your environmental commitments are
multiplied along the supply chain.
Company Diversity and Labour Practices: Business leaders realize that diversity in
the workplace is beneficial when everyone is getting along and working as a team.
However, labour policies must apply to all employees, even those at the highest
levels of the company. The scandals with Harvey Weinstein and Steve Wynn show
that no company is impervious to the ramifications of sexual harassment. This
movement has also given rise to other diversity issues in the workplace that need
attention and consistent action. As a business leader, review your own diversity
policies and protocol to address any complaints and violations. This is not only good
for your company image; it also helps build a positive company culture with good
morale and high productivity.
Supporting Volunteer Efforts: Local communities and charities always need help.
Smart business leaders know that being involved in the community in a productive
way is good for the company too. Give employees the opportunity to help a local

school plant trees or work with the city council on addressing homelessness in the
area. Business leaders have the opportunity to choose where to spend volunteer
efforts to best help the local area along with the company. The important thing for NOTES
businesses is to choose a cause and contribute time.
Some Problems that a Business Face in Social Responsibility
Name the biggest social issue facing businesses today. Perhaps you said global
warming, safe workplace practices, preventing child labour, or protecting vanishing
ecosystems. The fact is, there are numerous social responsibility issues in today's
business world. Each company must identify the concerns that are relevant to its
operations, based on the priorities of managers and staff, as well as issues that your
customer base is concerned with and the communities in which your business
operates. Awareness of these priorities is the first step in addressing social issues in
business management.
Global Climate Change: Human activities are dumping billions of tons of carbon
dioxide and other greenhouse gases into the atmosphere. This pollution is altering
the earth's climate in significant ways, a process sometimes referred to as global
warming. Businesses are a major source of such pollution, both directly by burning
fuels and emitting other greenhouse gases, and indirectly by using and producing
products that also contribute to climate change. Petroleum refiners, for example, not
only release greenhouse gases from their operations, they also sell gasoline and
heating fuel, which makes an additional contribution when burned in cars, trucks,
homes and office buildings.
Other Environmental Concerns: There are many other types of pollution that
originate from businesses, in addition to greenhouse gases. Almost every business,
large or small, uses toxic chemicals of some sort, even if they're nothing more exotic
than bleach to clean countertops or lye (sodium hydroxide) to clear clogged drains.
Cleaning solvents, metal shavings, fats, oils, grease and other materials all contribute
to business waste streams and can have a negative impact on the environment.
Business operations also effect ecosystems. A new factory, for example, might be
built on cleared forest land or a wetland that has been drained to recover usable
property. Your businesses raw materials also impact ecosystems, often indirectly. A
food manufacturer may use palm oil that was grown by slash-and-burn agricultural
practices that destroy native forests, eliminate habitats for endangered species and
create enormous amounts of air and water pollution.
NOTES Worker Health and Safety: Your own business facility may be a model of safe
workplace practices. But that is not necessarily true for the workplaces that are in
your supply chain. You've certainly heard news stories of common products made in
sweatshops, unsafe factories with blocked fire exits, or small children doing
dangerous jobs that endanger their health and even their lives. Abusive workplace
practices are considered by many to be one of the most serious categories of social
problems in business, and are a major challenge to businesses that want to conduct
themselves with greater social responsibility.
The Challenge and Promise of Corporate Social Responsibility: Recognizing social

responsibility issues in business has led many firms to adopt corporate social
responsibility (CSR) policies and practices. Some companies focus on specific issues
such as climate change, while others embrace a more comprehensive approach that
seeks to minimize undesirable societal impacts across the board. For example,
companies may choose to utilize wind and solar power as an alternative to fossil
fuels as a means of lowering their carbon footprint. Firms may require suppliers to
document working conditions at their facilities, and may even actively conduct site
audits to ensure compliance with local laws as well as with corporate policies.

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Master of Business Administration

STREAM III – HUMAN RESOURCE MANAGEMENT (FUNCTIONAL ELECTIVE)

DIRECTORATE OF DISTANCE EDUCATION

S.N NAME DESIGNATION ORGANISATION

Course Writer(s) Dr.Jawahar P

DIRECTORATE OF DISTANCE EDUCATION

UNIT I – International HRM

MBHD 1935 INTERNATIONAL HRM

International Human Resource Management (IHRM) is the term used for

NOTES Cross-cultural management

 Examine human behavior within organizations from an international

Comparative HRM and Industrial Relations

 Seeks to describe, compare and analyze HRM systems and IR in different

HRM in multinational firms

 Explore how HRM is practiced in multinationals

Interrelationships between Approaches of IHRM

Diversity as an Organizational and HR Challenge in MNE

2 SRMIST DDE Self InstructionalMaterial

Challenges in global labour market

• Lack of access to the formal labour market. ...

• Lack of recognition of skills and education. ...

• Lack established work and social networks. ...

• Women and girls are the most vulnerable. ...

• Asylum policies. ...

• Engaging employers and other stakeholders. ...

• Language and vocational skills training.

Human resource Management in International Expansion

In today‘s global environment when expanding a business in to another country

IHRM is concern with staffing policies, recruitment and selection, remuneration,

Due to the development of technologies such as telecommunication, satellite and

4 SRMIST DDE Self InstructionalMaterial

When an organization do business internationally, understanding the cultural

According to the Hofsted’s there are 5 cultural damnations.

In an individualistic country people would priorities them self (USA) whereas

Masculine- tough value dominant Eg; success, money, satiates, competition

 The goodness called goodness of speech

1.4 HUMAN RESOURCES IN A COMPARATIVE PERSPECTIVE

And organization could implement a different structure such as global product

6 SRMIST DDE Self InstructionalMaterial

Future more political stability, country infrastructure, technology and resources

Localization would be the recruitments, holidays, leave procedures and etc.

Developing staff members investing in human capital, career development, good

Organizations use expatriate for international assignment as position filling,

Non-expatriates are people who travel internationally, yet no concede as expatriate

When recruiting a expatriate for a international assignment organizations has to be

Expatriate failure could be defined as premature return or under performance during

8 SRMIST DDE Self InstructionalMaterial

Tourist – everything is new and enjoyable

Training and development of expatriates is essential for the success of a intentional

Effective pre-departure training should include cultural awareness programmes,

Multinational organizations would face lots of performance management issues and

Expatriate performance would be evaluated on how well he/she achieve

Re-entry of expatriate after completion of foreign assignment would also have to be

Eg- decrease of living standards, children schooling issues and etc.

For a multinational organization to be successful they should have a good

To determine the compensation package awarded to the expectorates going rate

When an organization do business with another country to make this transaction

10 SRMIST DDE Self InstructionalMaterial

1. Break all the "local national" glass ceilings

Ethnocentric companies tend to be xenophobic -- they put the most confidence in

12 SRMIST DDE Self InstructionalMaterial

2. Trace your lifeline