Chapter 3

IHRM: Sustaining International

Business Operations

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Chapter Objectives
The previous two chapters have concentrated on the global
environment and organizational contexts. We now focus on
the ‘managing people’ aspect. The aim is to establish the
role of HRM in sustaining international business operations
and growth. We will cover the following:
 Issues
Issuesrelated
relatedto
tovarious
variousapproaches
approachesto
tostaffing
staffing
foreign
foreignoperations;
operations;
 Reasons
Reasonsfor forusing
usinginternational
internationalassignments:
assignments:
position
positionfilling,
filling, management
managementdevelopment
developmentand
and
organizational
organizationaldevelopment;
development;
(cont.)
(cont.)
IBUS 618 Dr. Yang 2
Chapter Objectives (cont.)
 Various
 Various types
types ofof international
international assignments:
assignments:
 Standard assignments: Short-term, extended, and
Standard assignments: Short-term, extended, and
longer-term;
longer-term;
 Non-standard arrangements: Commuter, rotator,
Non-standard arrangements: Commuter, rotator,
contractual,
contractual, and
andvirtual.
virtual.
 The
 The role
role of
of expatriates
expatriates and and non-expatriates
non-expatriates
(international
(international business
business travellers)
travellers) in
in
supporting
supporting international
international business
business activities
activities
 The
 The role
role of
of the
the corporate
corporate HR
HR functions
functions

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Approaches to Staffing
 Factors affecting approaches to staffing
 General staffing policy on key positions at
headquarters and subsidiaries
 Constraints placed by host government
 Staff availability
Ethnocentric
Polycentric
Geocentric
Regiocentric

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Ethnocentric
 Strategic decisions are made at
headquarters;
 Limited subsidiary autonomy;
 Key positions in domestic and foreign
operations are held by headquarters’
personnel;
 PCNs manage subsidiaries.

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Polycentric
 Each subsidiary is a distinct national
entity with some decision-making
autonomy;
 HCNs manage subsidiaries who are
seldom promoted to HQ positions;
 PCNs rarely transferred to subsidiary
positions.

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Geocentric
 A global approach - worldwide integration;
 View that each part of the organization
makes a unique contribution;
 Nationality is ignored in favor of ability:
 Best person for the job;
 Color of passport does not matter when it
comes to rewards, promotion and
development.

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Geocentric Staffing Requirements

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Regiocentric
 Reflects a regional strategy and structure;
 Regional autonomy in decision making;
 Staff move within the designated region,
rather than globally;
 Staff transfers between regions are rare.

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Ethnocentric Approach
Advantages: Disadvantages:
 To ensure new subsidiary Limits the promotion opportunities
complies with overall of HCNs, leading to reduced
corporate objectives and productivity and increased
policies turnover among the HCNs
 Has the required level of Longer time for PCNs to adapt to
competence host countries, leading to errors
 Assignments as control and poor decisions being made
High cost
Considerable income gap, high
authority, and increased standard
of living may relate to lack of
sensitivity
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Polycentric Approach
Advantages:
Employment of HCNs eliminates language
barriers, avoids adaptation of PCNs, reduces
the need for cultural awareness training
programs
Employment of HCNs allows a multinational
company to take a lower profile in sensitive
political situations
Employment of HCNs is less expensive
Employment of HCNs gives continuity to the
management of foreign subsidiaries (lower
turnover of key managers)

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Polycentric Approach
Disadvantages:
Difficult to bridge the gap between HCN
subsidiary managers and PCN managers at
headquarters ( language barriers, conflicting
national loyalties, cultural differences)
HCN managers have limited opportunities to
gain experience outside their own country
PCN managers have limited opportunities to
gain international experience
Resource allocation and strategic decision
making will be constrained when headquarter
is filled only by PCNs who have limited
exposure to international assignment

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Geocentric Approach
Advantages: Disadvantage:
 Ability of the firm to Host government may use
develop an immigration controls in
international executive order to increase HCNs
team employment
 Overcomes the Expensive to implement
federation drawback of due to increased training
the polycentric and relocation costs
approach Large numbers of PCNs,
 Support cooperation HCNs, and TCNs need to
and resource sharing be sent across borders
across units Reduced independence of
subsidiary management
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Regiocentric Approach
 Advantages:
Allow interaction between
executives transferred to
regional headquarters from
subsidiaries in the region
and PCNs posted to the
regional headquarters
Provide some sensitivity to
local conditions
Help the firm to move from
a purely ethnocentric or
polycentric approach to a
geocentric approach
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 Disadvantages:
Produce federalism at a
regional rather than a
country basis and
constrain the firm from
taking a global stance
Staff’s career
advancement still limited
to regional
headquarters, not the
parent country
headquarters
14
Parent-Country Nationals
Advantages
Advantages Disadvantages
Disadvantages
 Organizational
Organizationalcontrol
controland
and  Promotional
Promotionalopportunities
opportunities
coordination
coordinationisismaintained.
maintained. of
ofHCNs
HCNsare
arelimited.
limited.
 Rising
Risingstars
starsare
aregiven
given  Time
Timeand
andperformance
performance
international
internationalexperience.
experience. costs
costsassociated
associatedwith
with
PCNs adaptation
adaptationto
tothe
thehost
 PCNsmaymaybe bethe
thebest
best host
people country.
peoplefor
forthe
thespecific
specificjob
job country.
due
duetotospecial
specialskills
skillsand
and  PCNs
PCNsmay
mayimpose
imposean an
experience.
experience. inappropriate
inappropriateHQHQstyle.
style.
 An
Anassurance
assurancethat
thatthe
the  Compensation
Compensationfor forPCNs
PCNs
subsidiary
subsidiarywill
willcomply
complywith
with and
andHCNs
HCNsmaymaydiffer.
differ.
company
companyobjectives
objectives&&
policies.
policies.

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Host-Country Nationals
Advantages
Advantages Disadvantages
Disadvantages
 Language
Languageand
andother
otherbarrier
barrier  Hiring
Hiringof
ofHCNs
HCNsmay
may
eliminated
eliminated encourage
encourageaafederation
federationofof
Reduced national
nationalrather
ratherthan
thanglobal
 Reducedhiring
hiringcosts
costs global
Continuity units
units
 Continuityofofmanagement
management
Government
 HCNs
HCNshavehavelimited
limitedcareer
career
 Governmentpolicy
policymay
may opportunity
require
requirehiring
hiringHCNs
HCNs opportunityoutside
outsidethe
the
subsidiary
subsidiary
 Possible
Possibleincreased
increasedmorale
morale  Control
Controland
andcoordination
coordinationof of
because
becauseof ofincreased
increased
career HQ
HQmay
maybe beimpeded
impeded
careerpotential
potential
 Hiring
HiringHCNs
HCNslimits
limits
opportunities
opportunitiesfor forPCNs
PCNstoto
gain
gainforeign
foreignexperience
experience
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Third-Country Nationals

Advantages
Advantages Disadvantages
Disadvantages
 Salary
Salaryand
andbenefit
benefit  Transfers
Transfersmust
must consider
consider
requirements
requirementsmay
maybebe national
nationalanimosities.
animosities.
lower
lowerthan
thanfor
forPCNs.
PCNs.  Host
Hostgovernment
governmentmay may
 TCNs
TCNsmaymaybe
bebetter
better resent
resenthiring
hiringTCNs.
TCNs.
informed
informedthan
thanPCNs
PCNs  TCNs
TCNsmaymaynotnotwant
wantto
to
about
abouthost-country
host-country return
returnto
totheir
their own
own
environment.
environment. countries
countriesafter
after
assignment.
assignment.

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Determinants of IHRM Approaches
and Activities

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Reasons for International
Assignments
 Position filling, e.g.
 Skills gap, launch of new endeavor,
technology transfer
 Management development
 Training and development purposes, assisting
in developing common corporate values
 Organizational development
 Need for control, transfer of knowledge,
competence, procedures and practices
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Types of International Assignments
 Short term: up to 3 months
 Troubleshooting
 Project supervision
 A stopgap until a permanent arrangement is found
 Extended: up to 1 year
 May involve similar activities as short-term
assignments
 Long term
 Varies from 1 to 5 years
 The traditional expatriate assignment
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Non-standard Assignments
Commuter assignments
Rotational assignments
Contractual assignments
Virtual assignments

Some
Some ofof these
these arrangements
arrangements assist
assist in
in overcoming
overcoming
the
the high
high cost
cost of
of international
international assignments
assignments but but are
are
not
not always
always effective
effective substitutes
substitutes for
for the
the traditional
traditional
expatriate
expatriate assignment.
assignment.
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Factors Influencing Virtual Assignments

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Roles of an Expatriate
A Simple Management Network
 Agent of direct control
 Agent of socialization
G E
 Network builder B
 Boundary spanner C D
 Language node
 Transfer of competence
A F
and knowledge
Informal
Informalcontacts
contactsbetween
between
managers
managerswithin
withinaaMNE
MNE

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The Role of Non-expatriates
 People who travel internationally yet are
not considered expatriates as they do not
relocate to another country
 Road warriors, globetrotters, frequent fliers
 Much of international business involves
visits to foreign locations, e.g.
 Sales staff attending trade fairs
 Periodic visits to foreign operations

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A Glamorous Life
 International business travelers cite the
positives as:
 Excitement and thrills of conducting business
deals in foreign locations
 Life style (top hotels, duty-free shopping,
business class travel)
 General exotic nature

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But a High Level of Stress!
 Home and family issues
 Frequent absences
 Work arrangements
 Domestic side of position still has to be
attended to
 Travel logistics
 waiting in airports, etc.
 Health concerns
 Poor diet, lack of sleep, etc.
 Host culture issues
 Limited cultural training
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 Various Roles of Corporate HR
Centralized HR Decentralized HR Transition HR
Companies Companies Companies
 Large well-resourced  Small HR  Medium-sized HR
HR departments departments departments
 Key role: Managing all  Key role: Managing  Key role: Management
high-grade management elite corporate and development of senior
positions worldwide managers managers and expatriates
 Key activities:  Key activities:
 Key activities:
Planning international Influencing operating
Persuading divisional
assignments and units to support
managers to release key
performance international
staff using informal and
management globally, assignments,
subtle methods, strategic
identifying high-potential supporting
staffing.
staff decentralized HR
Source: Based on H. Scullion and K. Starkey, in Search of the Changing Role of the Corporate Human Resource Function in the
International Firms, International Journal of Human Resource Management, V 11, N 6 (2000) pp. 1061-1081.

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The Role of the Corporate HR
Function
 Can we manage our people like a global
product, e.g., the feasibility of:
 The concept of a global internal labor
market
 Standardization of work practices and
HR activities
 What HR matters require central control
and what can be decentralized?

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Chapter Summary
This chapter has expanded on the role of IHRM in
sustaining international business operations. We have:
 Looked
Lookedat
atthe
thevarious
variousapproaches
approachesto
tostaffing
staffing
international
internationaloperations
operations––ethnocentric,
ethnocentric,polycentric,
polycentric,
geocentric
geocentricand
andregiocentric
regiocentric––examining
examiningtheir
their
advantages
advantagesandanddisadvantages
disadvantagesand andfactors
factorsthat
thatmay
may
determine
determinethe
thechoice
choice of
of these
these options.
options.
 Considered
Consideredthethereasons
reasonsfor forusing
usinginternational
international
assignments:
assignments:position
positionfilling,
filling,management
management
development
developmentand andorganization
organizationdevelopment.
development.
(cont.)
(cont.)
IBUS 618 Dr. Yang 29
Chapter Summary (cont.)
 Discussed
Discussedthe
thevarious
varioustypes
typesof
ofinternational
internationalassignments:
assignments:
short,
short,extended
extendedand andlong-term
long-term(traditional);
(traditional);and
andnon-
non-
standard
standardforms
formssuch
suchas ascommuter,
commuter,rotational,
rotational,contractual
contractual
and
andvirtual
virtualassignments.
assignments.
 Examined
Examinedthe thevarious
variousroles
rolesofofthe
theexpatriate:
expatriate:as asan
anagent
agent
for
fordirect
directcontrol,
control,as
asananagent
agentforforsocialization,
socialization,asasnetwork
network
builders,
builders,as
asboundary
boundaryspanners
spannersand andasaslanguage
languagenodes.
nodes.
These
Thesevarious
variousroles
rolesofofthe
theexpatriate
expatriatehelp helpto
toexplain
explainwhy
why
expatriates
expatriatesareareutilized
utilizedand
andillustrates
illustrateswhy whyinternational
international
assignments
assignmentscontinue
continueto tobebean
animportant
importantaspect
aspectof of
international
internationalbusiness
businessfrom
fromthe
theorganization’s
organization’sperspective.
perspective.
(cont.)
(cont.)

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Chapter Summary (cont.)
 Recognized
Recognizedthat
that non-expatriates
non-expatriates are
arealso
alsocritical
criticalto
to
international
internationalbusiness
business operations.
operations. International
International
business
businesstravellers
travellerspresent
presenttheir
their own
ownchallenges,
challenges,
such
suchas asthe
theeffect
effectofof frequent
frequent absences
absenceson onfamily
familyand
and
home
homelife,
life,the
thepossible
possiblenegative
negativehealth
healtheffects
effectsand
and
other
otherstress
stressfactors.
factors.TheThemanagement
management of ofsuch
such
individuals,
individuals,however,
however,does doesnot
not appear
appearto tofall
fallwithin
within
the
thedomain
domainof of the
theHRHRdepartment.
department.
 Looked
Lookedat atthe
the role
roleof
ofthethecorporate
corporateHRHRfunction
function as
as
the
thefirm
firm grows
growsinternationally,
internationally,building
buildingon
onsections
sections
from
fromChapters
Chapters11and and2. 2.
IBUS 618 Dr. Yang 31