ISSUES IN INTERNATIONAL HUMAN RESOURCES MANAGEMENT (IHRM)

- in IHRM managing employees are HR activities, you are mainly focusing at national and international
level (what are those activities? Recruiting, selecting, training, developing, evaluating, and compensation
employees and in forming good relationships with them.

-when you go abroad you actually drop all the stereotypes and the ideas you have on different cultures.
You meet people from Japan, China, Korea, and even from America. And you will work with them, so
you will start already entering the intercultural environment. And it is beneficial for your work.

In the field of International Human Resources Management (IHRM), there are several important issues
that organizations face when managing their global workforce. Let's discuss each issue in simple terms:

1. Deployment: In IHRM, deployment refers to the strategic assignment of employees to different

locations worldwide. This issue arises in IHRM because it involves identifying the right individuals
with the necessary skills, cultural adaptability, and knowledge to work effectively in diverse
environments. Deployment becomes an issue when organizations struggle to find employees
who possess the specific expertise needed for a particular location or when employees
encounter challenges in adapting to a new work environment. For example, a technology
company may face difficulty in finding employees with the required language skills and technical
knowledge to support its operations in a foreign market.
2. Knowledge and Innovation Dissemination and Transfer: In a global context, IHRM faces the
challenge of effectively disseminating and transferring knowledge and innovation across
different locations. This issue arises because organizations need to ensure that valuable
knowledge and innovative ideas are shared and utilized throughout the organization. It becomes
an issue when there are barriers to knowledge sharing, such as language barriers, cultural
differences, or lack of communication channels. For example, a multinational company may
struggle to transfer best practices in product development from its headquarters to its
subsidiaries due to differences in work cultures and communication styles.
3. Talent Identification and Development: Talent identification and development is a crucial issue
in IHRM as organizations need to identify and nurture high-potential employees across borders.
This becomes an issue when organizations struggle to effectively identify talented individuals in
different cultural contexts or when there are limited development opportunities available. For
example, a company expanding its operations to a new country may face challenges in
recognizing local talent with the desired skills and potential for growth.
4. Managing International Assignments: International assignments are a significant aspect of
IHRM, and managing them poses various challenges. This issue arises because organizations
need to support and guide employees who are temporarily relocated to work in a foreign
country. It becomes an issue when organizations encounter difficulties in addressing logistical
and administrative aspects of the assignment, providing adequate cultural orientation and
support, or ensuring the well-being and productivity of the assignees. For instance, employees
on international assignments may face challenges in adapting to a different work culture,
language barriers, or experiencing homesickness.
5. Employee and Family Adjustment: When employees are assigned to work in foreign countries,
IHRM must address the challenges related to employee and family adjustment. This issue arises
because employees and their families may face difficulties in adapting to a new culture,
 language, and lifestyle. It becomes an issue when organizations fail to provide adequate support
and resources to assist employees and their families in the adjustment process. For example,
employees' spouses may struggle to find employment opportunities or children may face
challenges in adapting to a new educational system.
6. Selecting the Right Person for a Foreign Assignment: Selecting the right person for a foreign
assignment is a critical issue in IHRM. This issue arises because organizations need to carefully
assess and choose individuals who possess not only the necessary technical skills but also
cultural adaptability and interpersonal capabilities. It becomes an issue when organizations
struggle to accurately evaluate candidates' suitability for a particular cultural context or when
there is a lack of standardized selection criteria. For example, selecting a person with limited
cross-cultural experience for a challenging international assignment may lead to difficulties in
adaptation and performance.
7. Culture Differences, Language, and Communication Challenges: Culture differences, language
barriers, and communication challenges are common issues in IHRM. This issue arises because
organizations operate in diverse cultural contexts, and effective communication is crucial for
collaboration and productivity. It becomes an issue when organizations face difficulties in
navigating cultural differences, managing language barriers, or ensuring effective communication
across different cultural backgrounds. For example, misinterpretations or misunderstandings can
occur during cross-cultural negotiations, team meetings, or project discussions, impacting
productivity and relationships.
8. Worldwide Environment Variation: IHRM needs to consider the variations in legal, economic,
and social environments across different countries or regions. This issue arises because
organizations must understand and comply with local labor laws, regulations, and business
practices while maintaining consistency with their global standards. It becomes an issue when
organizations face challenges in adapting their HR policies and practices to comply with local
regulations or when there are significant differences in labor market conditions. For example,
different countries may have varying regulations regarding working hours, employee benefits, or
employment contracts, requiring organizations to navigate these variations while ensuring
fairness and compliance.

Strategic Issues and Approaches in IHRM:

When managing a geographically dispersed workforce, multinational enterprises (MNEs) encounter

various strategic issues that require careful consideration. These issues include finding the right balance
between differentiation and integration, determining the level of autonomy for local units, coordinating
and controlling operations, and establishing effective internal control mechanisms. To address these
challenges, MNEs utilize different approaches that involve managing the level of global integration and
local responsiveness.

There are three types of IHRM strategies: autonomous, receptive, and active. Each strategy is
characterized by a specific combination of global integration (GI) and local responsiveness (LR), which in
turn aligns with the overall business strategy of the firm.

1. Autonomous IHRM strategy: This strategy involves a low level of global integration but a high
degree of local responsiveness. It is suitable for MNEs pursuing a multi-domestic business
 strategy, where each subsidiary operates relatively independently and adapts to the local market
conditions. In this approach, local HR departments have more autonomy to make decisions
regarding HR practices and policies that best suit the local context. For example, a multinational
retail company may allow its subsidiaries in different countries to have significant control over
recruitment, compensation, and training practices to cater to specific local labor market
dynamics and cultural preferences.
2. Receptive IHRM strategy: This strategy emphasizes a high level of global integration while
maintaining a relatively low degree of local responsiveness. It is suitable for MNEs pursuing a
global business strategy, where there is a need for standardized HR practices and policies across
different locations. In this approach, the parent company exerts more control over HR decisions
and implements global HR practices that are consistent across all subsidiaries. For instance, a
multinational technology company may have a centralized HR department that establishes
uniform performance appraisal systems, career development programs, and compensation
structures across its global operations.
3. Active IHRM strategy: This strategy involves a high degree of both global integration and local
responsiveness. It is effective for MNEs with a transnational business strategy, where there is a
need to balance global coordination and local adaptation. In this approach, HR practices and
policies are designed to strike a balance between leveraging global synergies and addressing
local needs. The parent company collaborates closely with local subsidiaries to develop HR
strategies that align with both global and local requirements. For example, a multinational
pharmaceutical company may have a global competency framework for talent development
while allowing flexibility for subsidiaries to adapt specific training programs to address local
regulatory requirements or cultural preferences.

These IHRM strategies play a crucial role in aligning HR practices with the overall business strategy of the
MNE. By carefully managing the level of global integration and local responsiveness, organizations can
effectively address the strategic challenges of managing a geographically dispersed workforce and
achieve their business objectives in different markets.

International Staffing

International staffing, or global staffing, is the process of strategically and operationally addressing the
challenges of hiring and placing employees from different countries within Multinational Enterprises
(MNEs). These employees can be Parent-Country Nationals (PCNs), Host-Country Nationals (HCNs), or
Third-Country Nationals (TCNs), and they play a crucial role in filling key positions in both the MNE's
headquarters and subsidiary operations. The composition of the international workforce has a significant
impact on the MNE's ability to achieve strategic objectives, such as driving innovation and achieving
desired performance outcomes.

Categories of Employees Involved:

International Human Resource Management (IHRM) activities involve various country categories,
including the host country where a subsidiary is located, the home country where the MNE is
headquartered, and "other" countries that serve as sources of labor, finance, and other inputs. Within
these categories, there are three main types of employees involved in international staffing:
 1. Host-Country Nationals (HCNs): These individuals are citizens of the country in which the foreign
subsidiary is located. MNEs often hire HCNs to fill positions that require local knowledge,
language proficiency, and an understanding of the local business environment. For example, a
multinational hotel chain operating in China may hire Chinese nationals as front desk staff,
marketing managers, and other roles that require an in-depth understanding of the local culture,
language, and customer preferences.
2. Parent-Country Nationals (PCNs): PCNs are employees who are citizens of the MNE's home
country. They are often selected to work in key positions in foreign subsidiaries to ensure the
transfer of the parent company's values, knowledge, and expertise. PCNs may be sent abroad to
maintain control over operations, implement global strategies, and ensure the subsidiary aligns
with the parent company's standards. For instance, a German automotive company may send
German engineers to oversee the setup and operation of a new manufacturing plant in Mexico
to ensure compliance with quality standards and production processes.
3. Third-Country Nationals (TCNs): TCNs are employees who are citizens of a country other than
the MNE's home country or the host country. They are typically hired for their specialized skills,
global experience, or cost advantages. TCNs often bridge the gap between the headquarters and
subsidiaries by bringing diverse perspectives and knowledge gained from working in different
countries. For example, a technology company based in the United States may hire software
developers from India to work in its European subsidiary, leveraging their expertise and cultural
understanding to develop products tailored to the European market.

The strategic selection and deployment of PCNs, HCNs, and TCNs are critical for MNEs to effectively
manage their international workforce and achieve their global business objectives. By considering the
unique strengths and capabilities of each category, organizations can build a diverse and talented global
workforce that contributes to their success in the global marketplace.

APPROACHES TO STAFFING

The way companies choose their staff in Multinational Corporations (MNCs) is important for how well
they work. There are four main ways that companies do this, as described by Perlmutter in 1969:
ethnocentric, polycentric, geocentric, and regiocentric.

1. Ethnocentric Orientation: In this approach, the company hires people from its own country to
work in important positions in other countries. They think that their own people are better than
the locals. This can help when there aren't enough qualified people in the host country, and it
allows the company to control all its parts. But it can be a problem because it takes time for the
foreign workers to adjust, and it can limit the opportunities for local managers to get promoted.

Example: An American company starts a branch in China and puts American managers in charge because
they know the company well.

2. Polycentric Approach: In this approach, the company hires local people from the country where
the branch is located to be in charge. They think that local people understand the country better.
This can make communication easier and save money by not needing to bring in foreign workers.
It also gives local employees more chances to grow in their careers. But it can be hard to keep all
the branches working together because they might have different ways of doing things, and the
local and foreign workers might not have much experience working internationally.
Example: A German company opens an office in Brazil and hires Brazilian managers to run it because
they know the local market well.

3. Geocentric Approach: In this approach, the company hires the best people for the job, no
matter where they come from. They want to create a team that works well together and values
everyone's contributions. This can help the company have a diverse team and develop talented
managers. But it can be challenging because there might be laws about who can work in certain
countries, and it can be expensive to train and move people around.

Example: A Japanese company hires executives from different countries based on their skills and
experience to build a strong and diverse leadership team.

4. Regiocentric Approach: In this approach, the company hires people from specific regions to work
in those areas. The branches are connected, and regional managers are in charge of them. They
focus on having people who know the specific area well. This can help the company understand
local markets and rules better. But it can limit the chances for regional managers to move up to
higher positions in the company.

Example: A European company sets up a regional office in Asia and hires managers from different Asian
countries to manage operations in that region.

Each of these approaches has advantages and disadvantages. They affect how well the company
performs overall. When companies choose how to staff their branches in different countries, they need
to think about what they want to achieve, who is available to work, the different cultures, and how the
company works.

2.13 INTERNATIONAL RECRUITMENT AND SELECTION

When it comes to recruiting and selecting employees for international assignments, certain factors are
crucial for success. The selection criteria have a significant impact on employee satisfaction and overall
organizational outcomes. According to Ward (2004), an effective recruitment and selection process is
essential.

The selection process for expatriates, or employees working abroad, involves assessing practical skills
and cross-cultural competencies. These include social understanding, flexibility, language proficiency,
and a positive attitude. Additionally, specific characteristics contribute to the success of expatriates.
These include eagerness and motivation to work abroad, theoretical knowledge, adaptability to new
work environments, and strong interpersonal and communication skills.

Now, let's discuss the key characteristics of an ideal candidate for an overseas assignment:

1. Managerial Competence: The candidate should possess technical skills, leadership abilities, and
specialized knowledge related to the company's operations. This ensures they can effectively
manage the tasks and responsibilities associated with the position.

Example: If a multinational company is opening a new branch in a foreign country, they would look for a
candidate with experience in managing similar operations and relevant industry knowledge.
 2. Training: It is important for the candidate to either have or be open to receiving training on the
language and culture of the host country. This helps them communicate effectively and navigate
cultural differences.

Example: If an American company is sending an employee to work in Japan, they would prefer a
candidate who has studied Japanese or is willing to undergo language training to facilitate
communication with local employees and stakeholders.

3. Adaptability: The ideal candidate should demonstrate the ability to handle new, uncomfortable,
or unfamiliar situations and be open to adapting to the culture of the assigned location. This
flexibility is crucial for adjusting to the local work environment and building positive
relationships.

Example: If a British company is sending an employee to work in a Middle Eastern country with a
different cultural and social environment, they would prioritize a candidate who has shown adaptability
in previous international experiences.

By considering these key characteristics in the selection process, organizations can increase the
likelihood of finding suitable candidates for international assignments. These individuals will possess the
necessary skills, cultural understanding, and adaptability to succeed in their roles and contribute to the
organization's global objectives.

Costs Associated with the Failure of an Expatriate or Third-Country National

When an expatriate or third-country national fails in their international assignment, there are several
costs and negative consequences that can arise. Let's discuss these costs in a clear and easy-to-
understand manner:

1. Damage to host-country relationships: When an expatriate or third-country national fails, it can

harm the relationships between the host country and the multinational company. This failure
may create a negative perception of the company's capabilities and reliability, leading to strained
business partnerships and potential loss of future opportunities.

Example: If an American expatriate fails to understand and adapt to the local business customs and
etiquette in a Middle Eastern country, it can cause misunderstandings and strained relationships with
local partners, affecting the company's reputation and potential business growth in that region.

2. Altered motivation of host-country staff: The failure of an expatriate or third-country national

can also impact the motivation and morale of the local employees in the host country. If they
witness failed assignments or perceive a lack of support from the company, their motivation and
loyalty may decrease, affecting overall productivity and teamwork.

Example: If a German multinational company repeatedly sends expatriates to manage its operations in
China who fail to understand the local work culture and do not effectively collaborate with Chinese
employees, it can lead to demoralization and decreased motivation among the local staff, hindering the
company's performance.

3. Costs associated with recruitment and relocation: When an expatriate or third-country national
fails, the company incurs costs related to recruitment and relocation. These costs include
 expenses associated with finding and hiring a replacement, arranging for their relocation,
providing training, and ensuring a smooth transition.

Example: If a French multinational company invests time and resources in recruiting and relocating an
expatriate to work in Brazil, but the assignment fails due to a lack of cultural adaptation and
communication issues, the company will have to bear the costs of finding and relocating a new candidate
to fill the position, including recruitment fees, travel expenses, and training costs.

4. Possible loss of the employee upon return: If an expatriate or third-country national fails in
their assignment, they may choose to leave the company upon their return. This loss of the
employee can result in additional costs, such as losing their specialized knowledge and
experience, and the need to search for and train a replacement.

Example: If a Japanese employee fails to adapt to the work culture and fails to achieve the expected
results during an assignment in the United States, they may become disillusioned and decide not to
continue working for the company upon their return to Japan. The company would then have to find a
replacement for that position, incurring recruitment and training costs.

5. Missed opportunities for further market development: When an expatriate or third-country

national fails in their assignment, it can lead to missed opportunities for market development
and growth in the host country. The failure may prevent the company from establishing strong
relationships, understanding local market dynamics, and effectively seizing market opportunities.

Example: If an Indian multinational company sends an expatriate to expand its operations in Australia
but the assignment fails due to a lack of understanding of the local market and customer preferences,
the company may miss out on potential growth opportunities, market share, and revenue generation.

Considering these costs associated with the failure of an expatriate or third-country national, it becomes
crucial for multinational companies to carefully select and support individuals for international
assignments to mitigate these risks and maximize their chances of success in global markets.

When it comes to selecting employees for overseas assignments, the process differs from domestic
hiring due to the unique factors that contribute to success in an international context. Let's discuss this
in simple terms:

1. Experience working internationally: Having prior experience working in an international setting

is an important competency for success in overseas assignments. Candidates who have exposure
to different cultures, business practices, and work environments are better equipped to navigate
the challenges of working abroad.

Example: An employee who has previously worked on cross-border projects or has been assigned to
international teams has experience working internationally.

2. Extroversion: Extroversion, or being outgoing and sociable, is a valuable trait for employees
working in overseas assignments. It helps individuals build relationships, network, and effectively
communicate with colleagues and stakeholders from different cultural backgrounds.

Example: An employee who is comfortable initiating conversations, engaging with new people, and
building rapport easily demonstrates extroversion.
 3. Stress tolerance: Working in an overseas assignment often involves facing unfamiliar situations,
cultural differences, and challenging work environments. Candidates with high stress tolerance
can adapt and perform well under pressure, ensuring successful outcomes.

Example: An employee who has previously demonstrated resilience in demanding work conditions or has
successfully managed stressful projects shows stress tolerance.

4. Language skills: Proficiency in the local language of the host country is a critical competency for
overseas assignments. Effective communication in the local language facilitates understanding,
collaboration, and integration into the local work environment.

Example: An employee who is fluent in Mandarin Chinese would possess language skills suitable for an
overseas assignment in China.

5. Cultural experiences: Having diverse cultural experiences and an understanding of different

customs, traditions, and social norms is advantageous for employees in overseas assignments. It
helps them adapt to new cultural contexts and effectively interact with local colleagues and
stakeholders.

Example: An employee who has traveled extensively, lived in different countries, or participated in cross-
cultural programs demonstrates cultural experiences.

To develop a pool of internal candidates with the necessary competencies for successful overseas
assignments, certain strategies can be implemented. These include incorporating career development
questions in performance reviews to gauge employee interest in international assignments. By
identifying individuals interested in working abroad, organizations can maintain records of their skills,
language proficiency, cultural experiences, and abilities. This information can then be utilized to identify
suitable candidates when overseas assignments become available.

Example: During an annual performance review, employees are asked about their interest in
international assignments, and their responses are recorded in their employee profiles for future
consideration.

By adopting these strategies, organizations can proactively identify and prepare employees who possess
the essential competencies for overseas assignments, ensuring a higher likelihood of success when
opportunities arise.