Human Resource Management (MGT302)

Dr Silvia Pirrioni

Sunday, February 19

1
Learning outcomes
• Explain how international human resources management (IHRM)
differs from traditional domestic HRM
• Understand the different IHRM strategies
• Describe the trends relating to international job assignments.

2
International Human Resource Management
• Increasing globalization of the world economy and global competition
• Organizations can operate globally using different structures and activities:
- exporting, licensing (e.g. Coca Cola), franchising (e.g. McDonalds’), join ventures,
foreign direct investments (FDI)
- Creation of offshore professional and operations centers

Why expand globally?

• Access to additional resources (including skilled workers)
• Lower costs
• Economies of scale
• Favorable regulations and tax systems
• Direct access to new and growing markets
• Ability to customize products to local tastes and styles

3
International Human Resource Management
• IHRM concerns the strategies, structures, policies and processes used
to manage people in organisations that operate in more than one
country (Schuler and Jackson, 2005)
• higher complexity of organisations operating in diverse national
settings
• having to cope with greater issues of distance, communication,
control and coordination.
(Dickmann, 2017)

4
International Human Resource Management
Factors that differentiate domestic HR from international HR
• Different national governments
• Different legal systems
• Different economic conditions
• People of diverse cultures and values
• Suppliers and customers over vast geographical distances
(Bernardin & Russel, 2013)

5
International Human Resource Management
Factors that affect the level of difficulty involved in operating HR on
an international basis
• Legal complexity
• Degree of cultural difference (Geert Hofstede)
• Individualism/collectivism
• Power distance
• Uncertainty avoidance
• Masculinity/femininity
• Long term vs. short term orientations
• Attitude of senior management toward international operations
• Failure to recognize differences between domestic and international operations
frequently creates problems in foreign business units
(Bernardin & Russell, 2013)

6
International Human Resource Management
4 general international HR strategies:
1. Ethnocentric approach: one size fits all and head office knows best
• senior leaders are persuaded that their products and services are attractive both in
domestic and foreign markets
• they believe in their superior capabilities which lead to an export of their unadjusted
corporate approaches; (E.g. the computer hardware industry).
• Foreign subsidiaries are set up by trusted and experienced expatriates
• shared company culture and integrated IHRM strategies, structures, policies and
practices.
• foreign subsidiaries have little autonomy, operations are typically centralized, and major
decisions are made at the corporate headquarters
• Key positions in management held by parent company nationals (PCNs)

7
International Human Resource Management
2. Polycentric approach: foreign markets work differently and locals know best

• Head office’s top management believes that markets around the world for their
products and services vary substantially (e. g. food industry)
• Product and services are locally attuned; highly responsive to local context
• be as locally responsive as possible; decision-making powers are locally
distributed.
• Each foreign operating unit is treated as a distinct national entity with some level
of decision-making authority
• PCNs fill key upper-level management for a time
• Host country nationals (HCNs) fill middle- and lower-level positions, but
eventually move up to take over for PCNs

8
International Human Resource Management
3. Geocentric managerial approach: Worldwide approach where each part has unique
contribution, ability not nationality counts
• worldwide approach that leaves local autonomy to adapt where it is necessary and
coordinates policies where it is beneficial
• The geocentric recognises that each operating unit makes a unique contribution. This
means that hierarchical structures are less important
• ability is more important than nationality: the ‘best talents’ are sourced from wherever
inside and outside the corporation
• strives to integrate headquarters and foreign subsidiaries through a global workforce
• Third country nationals are residents of a country different than either the parent
country or the host county
• Find best person to fill the position, whether or not they are a PCN, HCN, or third-
country national (TCN)

9
International Human Resource Management
4. Regiocentric managerial approach: Geographical regions are different, professionals
from diverse parts of the specific region know best; within region economies of scale are
possible.

• develop diverse management approaches in response to regional variations – it reflects

the geographic structure and strategy of the globally operating entity
• Within regions (e.g. North America, Europe, Asia-Pacific, Africa) it is possible to find
similar products and services so that some economies of scale are reaped
• Talent is seen predominantly in regional confines, which may lead to expatriation to
countries within the same region but not across to other regions.
• Some degree of regional autonomy
• Rarely talent moves between regions  
(Bernardin & Russel, 2013; Dickmann, 2017)

10
International Human Resource Management
• What Influences the choice of IHRM strategy?
• General environment
• The industry environment
• Firm’s internal strengths and weaknesses
• Firm’s strategy
Cost pressures: polycentric strategy may not be economically feasible due to
duplication of functions and services
HR considerations: supply and demand of labor, labor cost and skill levels
E. g. a polycentric strategy needs to rely on supply of local talent (if not
available it may switch to regiocentric, geocentric, ethnocentric strategy)

11
International Business Assignments
• International businesses need international expertise
• Expatriates: employees who are placed in an assignment outside their home
country
• Impatriates: individuals from a host country or a third county who are assigned
to work in the headquarters office
• Goals of International Business Assignments
• Key element in developing management teams that are globally focused & globally
competent
• Expatriate assignments encourage high levels of coordination and control among business
units
• Requires high levels of international communication, both information sharing and
information exchange, because of geographical distances, cultural diversity, complex supply
& demand conditions, and other similar pressures
International Business Assignments
Challenges of International Business Assignments
• Assignment failure (spouse/partner dissatisfaction; inability to adapt;
family concerns; poor candidate selection)
• International compensation: understand cost of living differences impact
on setting competitive wages
Balance sheet approach (maintaining same standard of living as home country with
financial, social and family benefits)
Going rate approach (converting expatriates to local standards; the local wage)
Cafeteria-style benefit package
Regional system
Trailing spouse benefits
International Business Assignments
• Cross-cultural training for expatriate and family
1. Factual information (geography, climate, housing, schools)
2. Cultural orientation and assimilation (culture and value system)
3. Language training
4. Sensitivity training (developing attitudinal sensibility)
5. Field experience

Training should take place prior to departure and during the assignment
• Repatriation
• Difficulty retaining expatriates/ high turnover
• Reverse culture shock
• Frustration with perceived career opportunities; failure to be able to leverage their
international experience, and knowledge
Tips on managing expats
1. Send people for the right reasons: what are you trying to achieve?
- Response to immediate business demands
- Generating new knowledge
- Developing global capabilities
- Some combination of the above

2. Send the right people: technical skills are needed, plus

- Communication skills
- Cultural flexibility
- Broad social skills
- ‘cosmopolitan orientation’
- Collaborative negotiation style
Tips on managing expats
3. Finish the assignment the right way: create straightforward processes to smooth transition
- Start planning early
- Involve the expat in reentry planning
- Find suitable job – focus on direct application of new knowledge and skills
- Prepare expat for social adjustment realities:
• Family readjustment
• Mentors may be gone, reassigned
• Transition from ‘in-charge leader’ to ‘fitting back in’ or ‘starting over again’ in new international assignment

See Bernardin and Russell, page 53

International Business Assignments
Recent Trends in Overseas Assignments:
Four types of expatriate assignments
• Short-term assignments
• Developmental assignments
• Strategic assignments
• Long-term assignment
• More international assignments for women
• Push for reducing expenses leads to reliance on shorter term assignments and
localization
Group discussion
Consider the scenario of a foreign company starting business in Iraq:
• What are the advantages and disadvantages of using home-country,
host-country, and third-country nationals?
• Under what specific circumstances might an organization choose to
utilize third-country nationals?
• Can you think of examples?
References
Bernardin, H.J. & Russell, J.E.A. 2013. Human resource management, 6th
int’l ed. New York: McGraw-Hill.
Dickmann, M. 2017. International Human Resource Management –
Historical Developments, Models, Policies and Practices in MNCs. In:
Wilkinson, A., Redman, T., Dundon, T. ed Contemporary Human
Resource Management, 5th ed. Harlow, Pearson, pp. 258-292.
Schuler, R.S. and Jackson, S.E. 2005. A quarter-century review of human
resource management in the US: the growth in importance of the
international perspective, Management Revue, Vol.11, 35.