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CHAPTER - 14 Staffing in International context

Compiled By – Richa Goel Neha Siwach

International human resource management focuses on the management of human resources on a global basis. An organization‟s strategy on globalization strongly affects the approach it takes to international human resource management. The approach to international human resource management in turn influences the implementation of the major international human resource management functions of recruitment and selection, development and training, performance evaluation, remuneration and benefits, and labor relations. Companies taking an ethnocentric approach attempt to impose their home country methods on their subsidiaries. The polycentric approach follows local practices. Finally, a geocentric or global approach develops practices for world-wide use.

Staffing in International context
14.1 Definition of IHRM
Is defined as human resource management issues, function and policies and practices that result from the strategic activities of multinational enterprise and impact of international concerns and goals of that enterprise.

14.2 Major differences between Domestic HRM and IHRM.
 Business activities e.g. taxation, international relocation, expatriate remuneration, performance appraisals, cross-cultural training and repatriation.  Increased complexities e.g. currency fluctuations, foreign HR policies and practices, different labour laws.  Increased involvement in employee‟s personal life e.g. personal taxation, voter registration, housing, children‟s education, health, recreation and spouse employment.  Complex employee mix – cultural, political, religious, ethical, educational and legal background.  Increased risks e.g. emergency exits for serious illness, personal security, kidnapping and terrorism

14.3 Main challenges in IHRM
 High failure rates of expatriation and repatriation  Deployment – Getting the right mix of skills in the organization regardless of geographical location

 Knowledge and innovation dissemination – Managing critical knowledge and speed of information flow  Talent identification and development – Identify capable people who are able to function effectively  Barriers to women in IHRM  International ethics & Language (e.Function of HRM is designed to develop uniform salary systems and other forms of remuneration. . written. and sick pay 4. Also.g. management of expatriate workers 14. most companies have a combination of both home and host country managers. Labor relations . pension funds. Recruitment and selection – Recruitment is the process of attracting a pool of qualified applicants for available positions & selection is the process of choosing qualified applicants from the available candidates and ensuring that the skills. Since most companies do not fall at one extreme or the other. such as health insurance. vacation.Function is designed to assist managers and workers determine their relationships within the workplace 6.4 Major IHRM Functions 1. Training and development -Function involves planning for effective learning processes.5 Staffing Needs Firms that centralize decision making at headquarters typically favor home-country managers. body language) 14. Compensation and benefits. knowledge. and career development 5. spoken. while Firms that decentralize decision making to the subsidiary level often employ host country nationals. and abilities of the selected employees match the requirements of the positions 2. organizational development. Performance evaluation – Is the process of appraising employees‟ job performance 3.

Control and co-ordination by HQ is maintained.1 Advantages 1.14. . No problems with language and culture. 3. Host country national (HCN): The employee‟s nationality is the same as that of the subsidiary 3. Adaptation to host country may take a long time. 3. No work permits required. 4. 14. PCNs may impose an inappropriate HQ style. Assurance that the subsidiary will comply with company objectives policies etc Disadvantages 1. 2. 2. Compensation differences between PCNs and HCNs may cause problems. Third country national (TCN): The employee‟s nationality is neither that of the headquarters or of the local subsidiary 14.6 TYPES OF GLOBAL EMPLOYEES. 2. 3.2 Host-country Nationals Advantages 1. 1. 4. Promising managers get international experience. Continuity of management improves since HCNs stay longer in positions.7.7 Parent country Nationals 14. Reduced hiring costs. PCNs may be the best people for the job. HCNs promotion opportunities are limited.7. Parent country national (PCN): The nationality of the employee is the same as that of the headquarters of the global organization 2.

Hiring HCNs may encourage a federation of disintegrated national units rather than one integrated global unit. policy may force hiring of HCNs.8 Types of International Staffing Policy. Host government may resent TCNs as much as PCNs.  Consistent with international strategy  Disadvantage: cultural myopia . 2. 2.5. May be more familiar with host country than the PCNs. Govt.1 Ethnocentric  All key managerial positions are filled by parent-country nationals. 3.3 Third-country Nationals Advantages higher morale among HCNs Disadvantages 1. TCNs may not want to return after assignment 14. 14. HQ may have less control over operations.8. HCNs may still have limited career opportunities outside the subsidiary. 6. Promotional opportunities not limited . Transfers must consider national animosities. 4. Hiring HCNs limits opportunities for PCNs to gain overseas experience. 2.7. 3. TCNs may not comply with HQ style of management. 14. Disadvantages 1. Salary and compensation may be lower than for PCNs.

transpatriates.4 Regiocentric  Recruiting on a regional basis. Exxon appoint home country nationals to lead the foreign subsidiary.S.9. The cultural differences & environmental differences will be huge and expatriates may not be able to cope up with. Thus resulting in costly management mistakes. a U.Korean MNC's Hyundai. Infosys. Europe. host and subsidiary) Example: US MNC's P&G. These people constitute a mobile base of managers who are used in a variety of facilities as the need arises..S. some U. For example. Indian MNCs Ranbaxy appoint a host country executive along with a home country executive to support or viceversa (polycentric approach) 14. TCN‟s – used by European MNC‟s. Pepsi. 14. Indian MNC's TCS.9.2 Polycentric     Key positions are filled with HCN‟s Host country nationals manage subsidiaries Consistent with multidomestic strategy Disadvantage: Create a gap between home and host operations( This gap is created due to cultural differences between the two countries(i..3 Geocentric or global  Best managers are recruited from within or outside the company regardless of nationality. Procter & Gamble – Associate with higher incidence of IHRM problems Example . .g.8. Heinz. (Ethnocentric approach) 14. Citi corp. Wipro. based firm could create three regions. Coca cola. Samsung. IBM) Help build an informal management network Disadvantage: May be subject to the immigration policies   Electrolux (the vacuum cleaner company) has for many years attempted to recruit and develop a group of international managers from diverse countries. e. US MNC's GE. companies (Philips. and Asia-pacific.e. Unilever. the Americas.

Advantages and disadvantages of using expatriate employees to staff international subsidiaries Advantages  Disadvantages Creates problems of adaptability to foreign environment and culture Cultural similarity with parent company  ensures transfer of business/management practices . a French national to Belgium.2. costly.1 Advantages and disadvantages of using local employees to staff international subsidiaries Advantages      Lower labor costs Demonstrates trust in local citizenry Increases acceptance of the company by the local community Maximizes the number of options available in the local environment Leads to recognition of the company  as a legitimate participant in the local economy  Disadvantages   Makes it difficult to balance local demands and global priorities Leads to postponement of difficult local decisions until they are unavoidable.9.9. when they are more difficult. and a German to Spain). Figure 14. and painful than they would have been if implemented earlier May make it difficult to recruit qualified personnel May reduce the amount of control exercised by headquarters  Effectively represents local considerations and constraints in the decision-making process Figure 14.European staff would be transferred throughout the European region (say a Briton to Germany. Eg: Ford Motor Company.  Disadvantage: produce federalism at a regional rather than a country basis and constrain the organization from taking a global stance.

the market for executive talent is also globalizing. 14. Top management teams are increasingly diverse in their members.1 .10 Staffing For International Assignment • • Today.11 Factors in Expatriate Selection Diagram 14. While most MNCs do not hire new college graduates to take foreign positions immediately.11.    Permits closer control and coordination of international subsidiaries  Gives employees a multinational orientation through experience at parent company  Establishes a pool experienced executives of internationally  Increases the subsidiary »foreigness« of the May involve high transfer and salary costs May result in personal and family problems Leads to high failure rate 14. many hire graduates with the intention of sending them abroad in the future. as businesses globalize.

 This includes: cultural empathy.11. language ability. diplomacy. positive attitude. emotional stability and maturity. 14.  Some regions and countries are considered "hardship postings”.11.that is PCN:TCN:HCN Other situational factors are:  The mode of operation involved – input from local partner in selecting staff  The duration of the assignment – essential if family is accompanying the manager .2 Family requirements  Adjustment of the spouse can be positively correlated with the adjustment of the expatriate manager. adaptability.3 Country/ Cultural Requirement  The host country may be an important determinant.  Inclusion of the family members especially spouse essential in the selection process.  This also affect the selection ratio .4 MNE Requirements  Situational factors have an influence on the selection decision.11. or war-torn regions with high physical risk.remote areas away from major cities or modern facilities. Effectiveness skills are defined as the ability to successfully translate the managerial or technical skills into the foreign environment 14. Reluctance of the company to delve in to the private lives of their employees can become a constraint in selecting the right couple Cross cultural Suitability  Expatriates require cross-cultural abilities that enable the person to operate in a new environment.

2. Development of a special group of globally minded managers. Specialized training to prepare expatriates for assignments abroad.1 Training At the international level. human resource development professionals are responsible for: 1.5 Language  The ability to speak a second language is an aspect often linked with crosscultural ability. Training and development of employees located in subsidiaries around the world.  Language problems were largely viewed as mechanical and manageable problems that could be solved individually.11.The amount of knowledge transfer inherent in the expatriate‟s job in the foreign operation – the nature of the job and the essential skills required to do that job 14.  Differences in language are recognized as a major barrier to effective cross cultural communication.  Communication skills rather than specific language skills was an important selection criteria for the top subsidiary management position.  Another component to language as a situation factor in the selection decision. but lesser in others. and 3.  Language skills may be regarded as of critical importance for some expatriate positions.12 . . 14.

12. Explain the history. including customs. Provides a written set of situations that the trainee might encounter in living or working in the host country.2 Cross Cultural training 14. traditions.14. Portray a real life situation in business or personal life to illustrate some aspect of living or working in the host culture. Area Briefings Cases Role Playing Culture Assimilator . politics and other general information about the host country and region. Allows the trainee to act out a situation that he or she might face in living or working in the host country.12.3 Methods of Cross Cultural Training Cultural Briefings Explain the major aspects of the host country culture. geography. everyday behaviors. economy.

12. preconceptions.Field Experiences Provide an opportunity for the trainee to go to the host country or another unfamiliar culture to experience living and working there for a short time. i. Encourage Confidence: Cross cultural training promotes self-confidence in individuals and teams through empowering them with a sense of control over previously difficult challenges in the workplace.e.4 Advantages of CCT People Learn About Themselves: Through cross cultural training. mutual understanding ensues. Build Trust: When people‟s barriers are lowered. those who undertake cross cultural training begin to deal with people with a sensitivity and understanding that may have previously been lacking. mentalities and worldviews that they may otherwise not have contemplated. Motivate: One of the outcomes of cross cultural training is that people begin to see their roles within the workplace more clearly. 14. Develop Interpersonal Skills: Through cross cultural training participants develop great „people skills‟ that can be applied in all walks of life. Break Down Barriers: All of us have certain barriers such as preconceptions. By learning about the influence of culture. Its innovative. Through learning about other cultures. . Cross cultural training helps people learn more about themselves through learning about others. Once trust is established altruistic tendencies naturally manifest allowing for greater co-operation and a more productive workplace. barriers are slowly chipped away thus allowing for more open relationships and dialogue. Cross cultural training demystifies other cultures through presenting them under an objective light. Through self-analysis people begin to recognise areas in which they need to improve and become motivated to develop and progress. Open Horizons: Cross cultural training addresses problems in the workplace at a very different angle to traditional methods. prejudices and stereotypes that obstruct our understanding of other people. the hidden factors upon people‟s behaviours. people are exposed to facts and information about their own cultures. alternative and motivating way of analysing and resolving problems helps people to adopt a similarly creative strategy when approaching challenges in their work or personal lives. which results in greater trust.

13. people naturally become good communicators. People Use Common Ground: In the workplace people have a tendency to focus on differences. boredom. 14. . Cross cultural training assists in developing a sense of mutual understanding between people by highlighting common ground. When cross cultural communication problems arise the natural inclination is to withdraw to opposing sides and to highlight the negative aspects of the other.They faces isolation. Career Development: Cross cultural training enhances people‟s skills and therefore future employment opportunities. Having cross cultural awareness gives people a competitive edge over others especially when applying for positions in international companies with a large multi-cultural staff base. 14. Cross cultural training helps people to understand how to listen.13. what to listen for and how to interpret what they hear within a much broader framework of understanding.Develop Listening Skills: Listening is an integral element of effective and productive communication. Expatriate failure is the early return of an expatriate manager to his or her country because of an inability to perform in the overseas assignment.2 Causes of expatriate assignment failure:  Spouses in 90% of cases come back early . Once spaces of mutual understanding are established. By becoming good listeners.1 Expatriate Failure:   The selection process in international firms is particularly important because of the high cost of expatriate failure. loneliness. people begin to use them to overcome culturally challenging situations.

Lack of inability to adapt. training and orientation prior to assignment. and disorientation 14. Example's family overseas in Japan may face such a situation.13. cost in foreign country may be higher. Managers sent on foreign assignments may experience culture shock. Inadequate preparation. In host country they have to face uncertainties .3 Costs of Expatriate Failure:  Direct costs:     Airfares Associated relocation expenses Salary and benefits Training and development Costs vary according to:     Level of position Country of destination Exchange rates Whether „failed‟ manager is replaced by another expatriate Indirect Cost of Expatriate Failure:  Damaged relationships with key stakeholders in the foreign location  Negative effects on local staff  Poor labor relations . Lack of support from HQ. this happens when no training is given on cultural nuances Poor programmers for career support and repatriation. helplessness. irritability.       Financial package.relate with people with different values and beliefs. a psychological phenomenon that may lead to feelings of fear.

13.5 Compensation to Expatriate Manager: Compensating expatriate managers can be a complex process because factors such as differences in currency valuation. standards of living. Special benefits packages that may be provided to expatriate managers include housing. and so forth must be taken into consideration    A cost-of-living allowance may be given to managers to offset differences in the cost-of-living in the home and host countries. A hardship premium (also known as a foreign service premium) may be paid to mangers who accept assignments in relatively unattractive locations. They have a mentor in the parent firm who will look out for their careers There is a clear link between the foreign assignment and the manager‟s long-term career path. Individuals that successfully adapted to the foreign environment may experience culture shock upon returning to their own country Regarding “non-cultural” issues leading to success or failure overseas.13. managers tend to be more successful in foreign assignments when 5 conditions are met: They can freely decide whether or not to accept a foreign assignment They have a realistic understanding of the new job and assignment They have a realistic expectation of a repatriation assignment. and club memberships .4 Steps for reducing Expatriate Failure:    Firms are now beginning to pay more attention to repatriation-bringing a manager back home after a foreign assignment has been completed. medical treatment. travel to the home country. lifestyle norms.      14. education. Negative effects on expatriate concerned  Family relationships may be affected Loss of market share 14.

1 REPATRIATION: Virtually all repatriated personnel experienced some personal difficulty in reintegrating on return home.different type of social interaction (going from a very close expat community to where everyone is very busy with their own lives)  Problems of spouse returning to the workforce Lack of peer support for teenagers 14.3 Making most of repatriate’s KSAs  Serving as trainer or mentor for CCT programs. Co-workers may not be interested in hearing his experience.2 Repatriation: Reverse Culture-shock JOB RELATED FACTORS  “Out of sight out of mind”  International experience devalued  Loss of status and pay relatively peaking  Changes in the HQ SOCIAL FACTORS  Expat assignment .14. The main complaints were loss of status loss of autonomy lack of recognition of the value of the experience and lack of career direction Means PNCs. or even HCNs finish their overseas assignment & come back to their home headquarters & which leads to reverse cultural shock. Effects   Anxious. TCNs. Repatriate‟s job may not make as much use of internationally acquired KSAs as it could 14. .14.14.14. Dissatisfied.

 Home country based: In this case base salary is kept as that of home country but other expenses according to host country. The method for the performance evaluation should be bars and anchor rating scale which measure behavior approach. INTERNATIONAL COMPENSATION: in case of an expatriate assignment it is necessary to give compensation keeping various in consideration like:      Cost of living Taxes Savings Travelling allowance Education By keeping in mind all these factors there are three methods employed by organizations like:  Host country based: In this case base salary is kept as that in host country and other expenses according to home country. .  Acting as long distance supervisor to other expatriates. Join the pool of international managers 14.15 Other issues in strategic HRM: INTERNATIONAL PERFORMANCE APPRAISAL: Performance appraisal in an expatriate assignment depends upon various things like:     Scope of communication in job Accounting system of host country Mode of communication and infrastructure of that country Cost of labor in that country.  Region based: In this case people working away from their home country or in a different region are paid more.

16 Important lessons for global firms      The need to manage change The need to respect local cultures The need to understand a corporation‟s culture The need to be flexible The need to learn .INTERNATIONAL LABOR RELATIONS: In this it is necessary for an organization going global to know about types of unions and rate of unionization in that country. 14.

.17.2 Cross cultural training.17.1 Staffing in IHRM Staffing Philosophy Ethnocentric  Key overseas International positions staffed by home managers Polycentric Multidomestic  Strategy Fit Pros     Cons     Puts qualified managers in place Creates global culture Transfer of core competences Local manager resentment Cultural myopia Immigration barriers Costly Limits career mobility Isolates HQ from overseas subs Costly Immigration barriers Key overseas  positions staffed by local managers Geocentric Global and   Transnational  Best for job gets it Alleviates cultural  myopia Inexpensive to  implement Uses HR efficiently  Builds strong global  culture and informal management network 14. Employee should remain on rotation long enough to attain a level of proficiency that enhance knowledge & efficacy.14. 17 Summary Expatriates – Employees who are assigned to work overseas on temporary basis. 14. CCT prepares an expatriate to live and work in a different culture because coping with a new environment is much more challenging than dealing with a new job To treat the international assignment as merely one step in overall career development one should take care of issues & policies of job rotation.

Upper level managers often evaluated on basis of subsidiary bottom line result Volatility of foreign labour market Telecommunication & transportation infrastructure.17. International compensation – covers 3 policies Home based policy. Problem occur when expatriate is been bouncing from subsidiary to subsidiary over many years and no longer identifies himself as a birth country national Host based – links base salary to salary structure of host country but retains the home country salary structure for other international supplements.creates equity with home country colleagues Can be cheaper when home country has lower wage than host country.links expatriate‟s salary to salary structure of relevant home country.3 Other issues in strategic HRM International performance appraisal – in international context along with job objective several other factors become criteria for PA like – • • • • Extent of interaction position requires. Region based – compensates expatriates working in their home regions at somewhat lower levels than those who are working in region far from home. Adv. International hr manager must devise strategies to improve best fit between labour relation activities & external environment . International labour relations.14.

14.18 Questions Q1) Discuss the issues need to be considered for recruitment in the context of IHRM? Q2) Discuss the causes of expatriate failure? Q3) What is repatriation and how can one make most of expatriates knowledge? .

.References • • • Strategic HRP Research Paper : Expatriation: the cross cultural issues and design of training for coping by Amit Pande (IIM) HUMAN RESOURCE MANAGEMENT IN INTERNATIONAL ORGANIZATIONS by Sonja Treven.