Slide 12.

Chapter 12

Human resource
management strategy

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.2

Introduction
• International human resource management
(IHRM)
– the process of selecting, training, developing and
compensating personnel in overseas positions.
• Three basic sources of personnel talent that
MNEs can tap for these positions:
– home-country nationals (expatriates)
– host-country nationals
– third-country nationals.

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.3

Figure 12.1 The management of multinational enterprises

Source: Reprinted from Columbia Journal of World Business, Summer 1973, Lawrence G. Franko, “Who Manages Multinational Enterprises?” page 33, Copyright 1973, with permission
from Elsevier Science

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.4

Selection and repatriation

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.5

International screening
criteria and selection procedures
• International screening criteria:
– adaptability
– self-reliance
– age, experience and education
– health and family status
– motivation and leadership
• Selection procedures:
– interviews (often including spouse)
– tests.

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.6

Repatriation of expatriates
• Reasons for repatriation:
– The predetermined time assignment is completed.
– Expatriates’ desire to have their children educated
in the home country.
– Expatriate might be unhappy overseas.
– Expatriate might have performed poorly.

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.7

Readjusting
• Expatriates might find it difficult to adjust back to
the home environment. A number of reasons can
be cited:
– The home office job lacks the high degree of
authority and responsibility that expatriates had in
their overseas job.
– A feeling that the company does not value
international experience.
– They may no longer be well known among people
at headquarters.
– Their old job may have been eliminated or
drastically changed.
– Technological advances at headquarters may have
rendered their existing skills and knowledge
obsolete.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.8

Adjustment strategies
• Transition strategies are designed to help
smooth the move from foreign to domestic
assignments.
– The repatriation agreement, which spells out how
long a person will be posted overseas and sets
forth the type of job the person will be given upon
returning.
– To rent or maintain the expatriate’s home during
the overseas tour.
– To assign a senior executive as a sponsor for each
manager who is posted abroad.
– To maintain ongoing communications with
expatriate managers, thereby ensuring that they
are aware of what is happening in the home office.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.9

Training and development

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.10

Training and development

• Training: the process of altering employee
behaviour and attitudes in a way that increases
the probability of goal attainment.
• Managerial development: the process by which
managers obtain the necessary skills,
experiences and attitudes they need to become
or remain successful leaders.

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.11

Training programs
• Types of training:
– Standardized training programs: generic
programs that can be used with managers
anywhere in the world.
– Tailor-made training programs: designed to meet
the specific needs of the participants and typically
include a large amount of culturally based input.

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.12

Training programs (Continued)

• Research shows that the following six types of
programs are most popular:
– Environmental briefings used to provide information about
such things as geography, climate, housing and schools.
– Cultural orientation designed to familiarize the individual with
cultural institutions and value systems of the host country.
– Cultural assimilators using programmed learning approaches
designed to provide the participants with intercultural
encounters.
– Language training.
– Sensitivity training designed to develop attitudinal flexibility.
– Field experience, which sends the participant to the country
of assignment to undergo some of the emotional stress of
living and working with people from a different culture.

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.13

Compensation

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.14

International compensation package

• Common elements in an international
compensation package
– Base salary: the amount of cash compensation
that an individual receives in the home country.
– Benefits
– Allowances
• Cost-of-living allowance: payment to compensate
for differences in expenditures between the home
country and the foreign location.
• Hardship allowance: is a special payment made to
individuals who are posted to areas that are
regarded as less desirable.
– Tax protection and/or tax equalization.

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.15

Current compensation trends

• Owing to the high costs of expatriates, MNEs are:
– Not sending expatriates to overseas positions
unless there is a need for their specific services.
– Increasingly replacing permanent relocation and
long-term assignment with as-needed short trips
that typically last less than a year.
– A growing number of MNEs are now dropping
bonuses or premiums for overseas assignments
and replacing them with lump-sum premiums.
– Many companies are beginning to phase out
incentive premiums.

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.16

Figure 12.2 Cost of expatriate managers

Source: C. Reynolds, “Compensation of Overseas Personnel,” in J. J. Famularo (ed.), Handbook of Human Resource Administration, 2nd ed. (New York: McGraw-Hill, 1986), p. 51.
Reproduced with permission of The McGraw-Hill Companies

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.17

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.18

Labour relations

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.19

Labour unions worldwide, 1995 (percentage of labour force that is

Figure 12.3
unionized)
Source: International Labor Organization, World Labour Report, November 1997
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.20

Labour relations practices

• Labour unions have been traditionally strong in
Germany.
– Unions set the pay scale for around 90 percent of
the country’s workers, with wages determined by
job classifications.
– Union membership is voluntary, but there is only
one union in each major industry.
• In Japan, union–management relationships are
extremely cooperative.
– Social custom dictates non-confrontational
behavior.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.21

Industrial democracy
• Industrial democracy: the legally mandated right of employees to
participate in significant management decisions.
• Forms of industrial democracy.
– Codetermination: a legal system that requires workers and their
managers to discuss major strategic decisions before companies
implement the decisions.
• Popular in Europe: legally mandated in Austria, Denmark, the Netherlands, and
Sweden
– Work councils: groups that consist of both worker and manager
representatives and are charged with dealing with matters such as
improving company performance, working conditions, and job
security.
• Most powerful in Germany, the Netherlands, and Italy, although popular
throughout Europe
– Shop floor participation: giving workers an opportunity to make
their voices heard
• Most popular in Scandinavian countries, and has spread to other EU nations
and the US

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.22

Industrial democracy in action

• In Germany, industrial democracy and
codetermination are both very strong, especially
in the steel and auto industries.
• In Denmark, industrial democracy gives workers
the right to participate in management on both a
direct and an indirect basis.
• Japan’s use of industrial democracy concepts are
not tied to political philosophy, as in Europe, but
more oriented toward Japanese culture and the
belief in group harmony.

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.23

Cultural assimilators
• A cultural assimilator is a programmed learning
technique that is designed to expose members of
one culture to some of the basic concepts,
attitudes, role perceptions, customs, and values
of another culture.
– Cultural assimilators are developed for pairs of
cultures, such as to familiarize managers from the
US with the culture in Germany.

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.24

Five Specially Designed HRM Programs

• Structural empowerment
• Accelerated resource development
• Employee welfare
• An efficiency emphasis
• An emphasis on long-term results

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 12.25

Table 12.4 HRM practices in select countries

Source: Adapted from Journal of World Business, Vol. 32, No. 3, 1997, Paul R. Sparrow and Pawan S. Budhwar, “Competition and Change: Mapping the Indiana HRM Recipe Against World-
Wide Patterns,” p. 233, Copyright © 1997 with permission from Elsevier Science

Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009