30-1 EXCEL BOOKS

Chapter

30

INTERNATIONAL
HUMAN
RESOURCE
MANAGEMENT
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ANNOTATED OUTLINE

INTRODUCTION
In recent times, the trade barriers between nations have almost
disappeared. Communication links have become faster and
cheaper. There is convergence of consumer tastes also. The scarce
resources of the nations have been moving around freely. In this
scenario, companies have realised the importance of expanding their
reach throughout the globe, integrating their production, finance,
marketing and research activities in a careful way. In a way, this
would mean sending and more and more employees overseas on
temporary assignments. When sent abroad on such assignments,
expatriates face unique problems

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The world is full of stateless

corporations
 Nestlé (Switzerland): Nestlé personifies the stateless corporation with 98 per cent
of sales and 96 per cent of employees outside the home country. Nestlé’s previous
Global CEO was German born H. Maucher, and half of the company's general
managers are non-Swiss. Maucher put strong emphasis on hiring local managers
who are native to the region and know the local culture. The combination of strong
brands and autonomous regional managers has made Nestlé the largest branded
food company in Mexico, Chile, Brazil, Thailand, Vietnam & China. The present CEO,
Austrian Peter Brabeck - Letmathe, has held important positions all over the world
and is leading a totally globalised review and revamp of Nestlé's worldwide
operations.
 Cola Cola: Is a multinational corporation that obtains over 80 per cent of its
operating income from outside the United States. It operates in 185 markets, has more
than 6,50,000 employees, and serves more than 5 billion customers. One of the
company's core values is to 'think globally, but act locally.'·
 Other Companies: For example, Colgate-Palmolive Company sells Colgate
toothpaste in more than 50 countries. McDonald's sells its burgers in 73 countries.
Gilette, Johnson & Johnson earn well over 50 per cent of their profits overseas. Asea
Brown Boveri (ABB) has operations throughout the world, having sought or taken
minority positions in over 60 firms.

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Complexities in global operations

International operations have:

 More functions
 More heterogeneous functions
 More involvement in the employee's personal life
 Different approaches to management, since the population of expatriates
and locals varies
 More complex external influences, such as from societies and
governments
 More cultural differences (with completely different languages, foods,
values, beliefs and ways of doing things).

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International Human Resource

Management
In the new millennium, of course, the traditionally conceived and
practiced leadership skills do not seem to produce results. The
leadership skills that are required for the newly emerging global
economy seem to be somewhat different.

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Competencies needed by a
transnational managers
Transnational Skills Transnationally competent managers Traditional international managers
Global perspective Understand worldwide business Focus on a single foreign country and on
environment from a global perspective managing relationships between headquarters
and that country
Local responsiveness Learn about many cultures Become an expert in one culture
Synergistic learning  Work with and learn from people  Work with and coach people in each foreign
from many cultures simultaneously culture separately or sequentially

 Create a culturally synergistic Integrate foreigners into headquarters’

organisational environment national organisational culture
Transition and Adapt to living in many foreign cultures Adapt to living in a foreign culture
adaptation
Cross-cultural Use cross -cultural interaction skills on a Use cross cultural interaction skills primarily on
interaction daily basis throughout one’s career foreign assignments
Collaboration Interact with foreign colleagues as equals Interact within clearly defined hierarchies of
structural and cultural dominance
Foreign experience Transportation for career and organisation Expatriation or impartation primarily to get the job
development done.

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International Human Resource
Management
It is the process of procuring, allocating and effectively utilising
human resources in a multinational corporation. Generally speaking,
there are three sources of employees for an international
assignment: parent country nationals, host country nationals and
third country nationals. When compared to domestic HRM, the
scope of IHRM is very wide as it has to take care of a number of
constituencies

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Model of International HRM

H R A C T IV IT IE S

u re
r oc a te lis e
he
r
P
Al lo c U ti Ot
m e
Ho
H o s t C o u n tr y N a tio n a ls (C N s )
s t
P a r e n t C o u n tr y N a tio n a ls (P C N s ) Ho

T h ir d C o u n tr y N a tio n a ls ( T C N s )

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Cultural Differences And HRM

Expatriate managers, generally, face a kind of culture shock when

they begin their operations in a different cultural setting. The list of
barriers that confront them seem to be unending

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Puzzles confronting the expatriate

manager
The following questions must be looked into carefully before sending managers on a
foreign assignment:
 What is the host country's business culture like? What is the management style?
Do I have the skills I will need to handle relationships with my employees?
 Will this assignment be good for my long-term career growth? Can I expect to be
promoted when I return? How will I be treated if I do not succeed in my overseas job?
 What is the country like? What are the customs? Will I be able to adjust to the
culture?
 Will my family be able to adjust to the new situation? Will my spouse be able to find
suitable employment? Will my children be able to adjust to going to school in another
country? How good is the educational system there?
 How will we learn enough of the new language to communicate effectively?
 Where will we live? How will the new housing arrangements compare to our current
home? What will happen to our current home when we leave for the new assignment?
 What are the tax and other financial issues I will have to address as an expatriate?
Who will advise me on these topics? Will the Company pay me in a way that protects
my income from high foreign tax rates?
 How will our medical needs be taken care of?
L. Grant, "That overseas job could derail your career," Fortune, 14.4.97; S. Taylor R.N. Nappier, "Working in
Japan", Sloan Management Review, Spring 1996)

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Cultural Differences And HRM

 Sense of self and space

 Language
 Dress and appearance
 Food, eating habits and perceptual problems
 Time and time consciousness
 Relationships
 Values and norms
 Beliefs and attitudes
 Mental processes and learning
 Work habits and practices
Understanding the problems brought by the above complicating factors is
very important for an expatriate manager, because a small mistake could
lead to grave personal insult and jeopardise important business dealings.
Fortunately cultural sensitivity can be learned through various techniques.

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Cross cultural training techniques for

expatriate managers
(a) Documentary programmes: Trainees read about a foreign country's history,
culture, institutions, geography, and economics. Videotaped presentations are often
used.
(b) Culture assimilation: Cultural familiarity is achieved through exposure to a
series of simulated intercultural incidents, or typical problem situations. This technique
has been used to quickly train those who are given short notice of a foreign
assignment.
(c) Language instruction: Conversational language skills are taught through a
variety of methods. In most multinational companies, executives learn various
languages in a routine way, so that they can be useful to the company in case of
short-term foreign assignments.
(d) Sensitivity training: Experiential exercises teach awareness of the impact of
one's actions on others.
(e) Field experience: Firsthand exposure to ethnic subcultures in one’s own country
or to foreign cultures heightens awareness.
(f) Business basics: This covers negotiating cross-culturally, working with various
types of clients, making presentations etc.
(S. Oden Wald, "A Guide for Global Training", Training and Development, July 93.)

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Economic Factors And HR Practices

Differences in economic systems among countries also translate into

inter country differences in HR practices. In free enterprise systems,
companies focus on cost cutting, enhancing shareholder value,
productivity etc. in socialist systems, the focus shifts to prevention of
unemployment, even at the expense of efficiency. In labour surplus
and capital hungry economies like India, upholding labour laws,
respecting political ideologies, and offering jobs to economically poor
and underprivileged sections may occupy the centre stage. These
inter-country differences in cultures, economic systems, labour
policies, thus, complicate the task of selecting, training and managing
employees abroad.

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Economic Factors And HR Practices

 International Recruitment
While hiring executives, global companies are guided by three
things; ethnocentrism, polycentrism and geocentrism
a. Ethnocentrism: it is a cultural attitude marked by the
tendency to regard one's own culture as superior to others
b. Polycentrism: In the polycentric corporation there is a
conscious belief that only host country managers can ever
really understand the culture and behaviour of the host
country market, therefore, the foreign subsidiary should be
managed by local people.
c. Geocentrism: it assumes that management candidates must
be searched on a global basis, without favouring anyone.

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Reasons for expatriate failures

 Transfer anxieties: Foreign assignments might have been pushed ahead

without adequate preparation and advance planning. The expat might, as result,
find the task insurmountable, feel the pressure unbearable and return empty-
handed.
 Career problems: A foreign posting creates, for the expatriate a number of
career problems (i) being 'out of sight, out of mind' and being bypassed for
promotions (ii) the danger of coming home a stranger with few familiar faces to
greet his/her arrival (iii) the likelihood of being tempted by the foreign life style and
losing the desire to return.
 Personal problems: As Negandhi reported, expatriates may encounter
serious adjust problems such as: personal discomfort and uncomfortable living
conditions, homesickness; education, medical, health problems of family
members; social aloofness, cultural mismatch.
 Other concerns: These include: (i) the foreign posting might be looked at as
a short term obligation (ii) the expats performance might be evaluated against
a short-term criteria, (iii) the expat may begin to feel the pinch due to lack of
continuity in plans empowering him to conduct the show for a reasonable
period (iv) business environment of the host country might be too restrictive,
unfriendly and even unbearable.

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Economic Factors And HR Practices

 International selection
While selecting executives for international postings, the following
things could be kept in mind
i. General and technical criteria
ii. Language skills
iii. Cross cultural suitability
iv. Motivation for foreign assignment
v. Family situation

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Expatriate managers : success and

failure
T h e f ir s t k e y t o f i n d in g a s u c c e s s f u l e x p a t r ia t e i s a s e le c t i o n p r o c e s s t h a t a c c u r a t e l y d e t e r m i n e s w h o is c u l t u r a l ly f l e x ib le
a n d a d a p t a b le , h a s a s u p p o r t iv e f a m ily s it u a t io n , a n d is m o t iv a t e d t o a c c e p t t h e o v e r s e a s a s s ig n m e n t .

C h a r a c te r is tic s o f th e e x p a tr ia te m a n a g e r

S t r o n g t e c h n ic a l s k ills U n c e r ta in te c h n ic a l c o m p e t e n c y
G o o d la n g u a g e s k i ll s W e a k la n g u a g e s k il ls
S tr o n g d e s ir e to w o rk o v e rs e a s U n s u re a b o u t g o in g o v e r s e a s
S p e c if ic k n o w le d g e o f o v e r s e a s c u lt u r e F a m ily p r o b le m s
W e ll- a d ju s t e d f a m ily s it u a t i o n L o w s p o u s e s u p p o rt
C o m p le te s u p p o r t o f s p o u s e B e h a v io u r a l r ig id ity
B e h a v io u r a l f le x i b i lit y U n a d a p t a b ili t y - c lo s e d t o n e w i d e a s
A d a p t a b ilit y a n d o p e n - m in d e d n e s s P o o r r e la t io n a l a b i lit y
G o o d r e la t io n a l a b ili t y W e a k s t r e s s m a n a g e m e n t s k ills
G o o d s t r e s s m a n a g e m e n t s k i lls
H i g h p r o b a b ilit y f o r s u c c e s s L o w p ro b a b ility fo r s u c c e s s

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Economic Factors And HR Practices

In selecting the individual who gets an overseas assignment,

organisations must not only consider their ability to do the job but, in
addition, must consider their ability to work in a new culture and
emotionally handle the stress associated with a new set of cultural
concerns
 International training and development
Careful selection is only one side of the coin. To ensure success,
expatriates require proper orientation, cross cultural training, career
counselling etc.
i. Orientation
1. cultural briefing
2. assignment briefing
3. shipping requirements
ii. cross cultural training
iii. career development and counselling
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Economic Factors And HR Practices

 International compensation
Compensation practices for international employees are much more
complex than tose for domestic employees because many more
factors must be considered
i. Income that the expatriate was getting at HRM
ii. Additional incentives to be paid on global assignment
iii. The income of local employees reporting to the expatriate

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Economic Factors And HR Practices

 International labour relations

Labour management relations in international companies depend on
the peculiar customs, traditions, laws and practices followed in
respective countries. Global companies must pay adequate attention
to the health, safety and security of their employees also.
1. The role of unions
2. Collective bargaining
3. Labour participation
4. Employee health
5. Employee safety
 Repatriation
1. logistics
2. readjustment and integration into the community for the
employee and his or her family
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