Introduction to IHRMLecture 1Dr Subhash Gupta

What is IHRM?The second approach to IHRM is the study of industrial relations and labour management practices and policies in different countries. Study of industrial relations in a country is reflective of its state of society, historical evolution, power relationships between groups, class struggle, political framework, prevailing labour laws and national approach to labour management. This is a very wide field and encompasses different approaches.

Differences between International and Domestic HRM• Being responsible for a greater number of functions and activities, such as the selection, training and management of international assignees.• Having to expand one’s area of expertise to include a much broader knowledge of foreign country employment laws and global organization designs.• Being involved with a greatly expanded and constantly changing mix of employees (from the host country and foreign locales), adding considerable diversity and complexity to the HR tasks.• Management of differential compensation due to variety of allowances and adjustments.

Differences between International and Domestic HRM

• Diversity management, like managing people from different cultural and political backgrounds and gender differences.• More coordination and travel to assess performance of expatriates and solve problems.• More public relations work to enhance the multinationals image and deal with human rights and other NGOs and interest groups operating in different

countries.

Differences between domestic and international HRM

• More HR activities

• The need for a broader perspective

• More involvement in employees’ personal lives

• Changes in emphasis as the workforce mix of expatriates and locals varies

• Risk exposure

• Broader external influences

Developing International HR Strategies• Increasing the extent and scope of managerial talent in the organization.• Identifying the depth of managerial talent in the organization.• Developing global and local approaches to training and development.• Ensuring management succession.• Sustaining and improving performance at all levels in all areas of the company.• Establishing a total quality culture, and changing people’s attitudes to quality.• Linking HRM to strategic objectives.

Forces for change

• Global competition

• Growth in mergers, acquisitions and alliances

• Organization restructuring

• Advances in technology and telecommunicationImpacts on multinational management

• Need for flexibility

• Local responsiveness

• Knowledge sharing

• Transfer of competence

Managerial responses

• Developing a global ‘mindset’

• More weighting on informal control mechanisms

• Fostering horizontal communication

• Using cross-border and virtual teams

• Using international assignments

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Organizational Context of IHRM

Deciding How to Enter the MarketPatterns of Internationalization

Strategies for International Organizations

• balance international strategy with local conditions and needs

• balance between differentiation and integrationThe level of strategic control needed in an international operation is depicted

along three axes: the type of subsidiary operating in each country; the type of international business strategy employed; and the type of ownership.

Management and organizations in Europe• There is no national identity across the European Community as there is in Japan and the USA; for example there is no equivalent of the ‘American Dream’. • There is no common language or culture.• Change is more complex than in American or Japan, particularly with the further integration of Eastern and Central European countries

Management and organizations in Europe• There is increasing cross-border activity through mergers and acquisitions, joint ventures and direct investment situations requiring approaches to management such as project management and networking.• There is increasing emphasis on the use of technology as a means of competing (such as e-commerce or extensive use of Intranet systems.• There is continuing demand for linguistic skills, in addition to more traditional management skills.

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IHRM: Sustaining International Business OperationsObjectivesApproaches 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 RegiocentricTypes of Staffing PolicyEthnocentric Strategic decisions are made at headquarters; Limited subsidiary autonomy; Key positions in domestic and foreign operations are held by headquarters’ personnel; PCNs manage subsidiaries.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.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.

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.Ethnocentric ApproachAdvantages: To ensure new subsidiary complies with overall corporate objectives and policies Has the required level of competence Assignments as controlDisadvantages: Limits the promotion opportunities of HCNs, leading to reduced productivity and increased turnover among the HCNs

Longer time for PCNs to adapt to host countries, leading to errors and poor decisions being made High cost Considerable income gap, high authority, and increased standard of living may relate to lack of sensitivityPolycentric ApproachAdvantages: 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)Polycentric ApproachDisadvantages: 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 assignmentGeocentric ApproachAdvantages: Ability of the firm to develop an international executive team Overcomes the federation drawback of the polycentric approach Support cooperation and resource sharing across unitsDisadvantage: Host government may use immigration controls in order to increase HCNs employment Expensive to implement due to increased training and relocation costs Large numbers of PCNs, HCNs, and TCNs need to be sent across borders Reduced independence of subsidiary managementRegiocentric 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 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

Parent-Country NationalsAdvantages Organizational control and coordination is maintained. Rising stars are given international experience. PCNs may be the best people for the specific job due to special skills and experience. An assurance that the subsidiary will comply with company objectives & policies.Disadvantages Promotional opportunities of HCNs are limited. Time and performance costs associated with adaptation to the host country. PCNs may impose an inappropriate HQ style. Compensation for PCNs and HCNs may differ.Host-Country NationalsAdvantages Language and other barrier eliminated Reduced hiring costs Continuity of management Government policy may require hiring HCNs Possible increased morale because of increased career potentialDisadvantages Hiring of HCNs may encourage a federation of national rather than global units HCNs have limited career opportunity outside the subsidiary Control and coordination of HQ may be impeded Hiring HCNs limits opportunities for PCNs to gain foreign experienceThird-Country NationalsAdvantages Salary and benefit requirements may be lower than for PCNs. TCNs may be better informed than PCNs about host-country environment.Disadvantages Transfers must consider national animosities. Host government may resent hiring TCNs. TCNs may not want to return to their own countries after assignment.

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 practicesTypes 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 assignmentNon-standard Assignments Commuter assignments Rotational assignments Contractual assignments Virtual assignments

Roles of an Expatriate Agent of direct control Agent of socialization Network builder Boundary spanner Language node Transfer of competence and knowledgeExpatriate Selection Self-orientation: Strengthen self-esteem, self-confidence and mental well-being. Others-orientation: Enhance ability to interact with host-country nationals. Perceptual ability: The ability to empathize - understand why people in host-country behave the way they do. Cultural toughness: How well an expatriate adjusts to a particular posting tends to be related to the country of assignment.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 operationsA 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 natureBut 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 trainingThe Expatriate Problem Citizens of one country working in another. Inpatriates: expatriates who are citizens of a foreign country working in the home country of their multinational employer. Expatriate failure: Premature return of the expatriate manager to his/her home country. Cost of failure is high: Estimate = 3X the expatriate’s annual salary plus the cost of relocation (impacted by currency exchange rates and assignment location).

Various Roles of Corporate HRThe 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? ConclusionConclusion(cont.)Conclusion(cont.)

Recruiting and Selecting Staff for International AssignmentsObjectives We will address the following issues: The myth of the global manager The debate surrounding expatriate failure Factors moderating intent to stay or leave the international assignment Selection criteria for international assignments Dual-career couples Gender issuesWhy international staffing? Motives behind international staffing are of two types: Company motives Fill- positions Management development Organizational development

Individual motives To gain new job experience.

Better compensation. Sense of obligation to company. Possibility of advancement upon return. Improved life style abroad. Exposure to new culture. To shoulder greater professional responsibility. Desire to escape from personal problems at home. Restricted career possibilities within parent companyInternational recruitment: Some issues Stereotypes, ignorance, assumptions and general lack of cross-cultural competencies can mean that the right people may not always be given the opportunities they deserve. Equipping staff with the skills to be able to identify and manage cross- cultural differences in interviews is vital. Cross cultural differences in areas such as body language, communication, self-presentation, gender, eye contact, questioning and privacy can influence an intercultural interview

International recruitment: Some issues Cross-cultural factors play a significant role while recruiting abroad. Hiring the right people is a tough task, particularly when they are located thousands of miles away. Selectors need to be trained in and sensitized to the candidates’ culture. The cultural differences must be taken into account while recruiting an individual. Otherwise, good candidates may be rejected only because of an unaware interviewer and hiring managers, and lack of effective communication between the interviewer and interviewee

Recruitment & Selection US favors open form of recruitments and selection based on open and public advertisements, hiring is generally based on competence and qualifications More traditional societies rely on social status, family background and ties, wealth, education, race, religion, or connections to military or ruling elite

– Need to understand these factors Collectivist societies also place emphasis on background factors such as family, school attended etc.

– The major rationale is to find someone who will be loyal and fit the organization

Some Country Examples

Korea – backdoor recruitment – role of high school and university Japan – graduates from the two major public and private universities dominate business and public leadership Malaysia – favor Malays over Chinese and Indian population – bumiputra policy – sons of the soil

Research Evidence for Recruitment

More socialist countries (France, Norway, Spain, Slovenia etc.) – when looking for jobs, people prefer to use methods such as: registering with public agencies, asking friends or relatives More capitalist/individualist societies (US, Australia, Japan) – people prefer open advertisements and applying directly for jobs

Selection criteria and techniques Tung (1981) has identified the following criteria that contribute to success or failure of an expatriate and thus, need to be considered while selecting them: Technical competency Personal attributes Ability to cope with environmental variables Family situation

Apart from the above-mentioned criteria, certain other criteria also need to be considered in selection of expatriates: Country- specific requirements Company-specific requirement Language

Mendenhall and Oddou’s Model Self-oriented dimension

Perceptual dimension

Others-oriented dimension

Cultural-toughness dimension

Using Traits and Personality Tests to Predict Expatriate Success Although some tests may be useful in suggesting potential problems, there may be little correlation between test scores and performance Most of the tests have been devised in the United States, thus culture-bound In some countries, there is controversy about the use of psychological tests ( different pattern of usage across countries) Use of personality traits to predict intercultural competence is complicated by the fact that personality traits are not defined and evaluated in similar way in different culturesThe global managerMyth 1: There is a universal approach to management.Myth 2: People can acquire multicultural adaptability and behaviors.Myth 3: There are common characteristics shared by successful international

managers.Myth 4: There are no impediments to mobility. The Employment Relationship The nature of the employment relationship Relational: broad, open-ended and long-term obligations Transactional: specific short-term monetized obligations

The condition of the relationship Intact: when employee considers there has been fair treatment, reciprocal trust Violated: provoked by belief organization has not fulfilled its obligations

Organizational Commitment Affective component Employee’s attachment to, identification with and involvement in, the organization Continuance component Based on assessed costs associated with exiting the organization Normative component Employee’s feelings of obligation to remain

Why consider the psychological contract? Nature, location and duration of an international assignment may provoke intense, individual reactions to perceived violations Expatriates tend to have broad, elaborate, employment relationships with greater emphasis on relational nature Expectations and promises underpin this relationshipCurrent Expatriate ProfileExpatriate Failure Definition: Premature return of an expatriate Under-performance during an international assignment Retention upon completion

Costs of Expatriate Failure Direct costs: Airfares Associated relocation expenses Salary and benefits Training and development Averaged $250,000 per early return Costs vary according to: Level of position Country of destination Exchange rates Whether ‘failed’ manager is replaced by another expatriateIndirect Cost of Expatriate Failure Damaged relationships with key stakeholders in the foreign location Negative effects on local staff Poor labor relations Negative effects on expatriate concerned Family relationships may be affected Loss of market share

Expatriate failure: Expatriates’ families and spouses face isolation, loneliness and boredom in the new country and suffer from emotional and physical problems. Reward package is not sufficient to survive and maintain life style. In host countries, expatriates have to face uncertainties, relate with people with different culture, values and beliefs. Conflicting goals between the parent company, subsidiary or the joint venture company result in to role conflict. Culture shock Inadequate career support and repatriation plan. Lack of support from headquarters.

The Phases of Adjustment The U-Curve is not normative The time period involved varies between individuals The U-Curve does not explain how and why people move through the various phases It may be more cyclical than a U-Curve Needs to consider repatriationFactors Moderating Expatriate Performance Inability to adjust to the foreign culture Length of assignment Willingness to move Work-related factors Psychological contract/employment relationship

Transfer archetypes

Free agents: 41% expatriates fall in this type Allegiance to host country firm is low Allegiance to parent firm is low Flexible, innovative and adventurous

This type of expatriates can be further divided into two sub-categories Hired gun free agent Plateaued-career free agent

Heart at home 12% expatriates fall in this type Allegiance to host country firm is low Allegiance to parent firm is high Committed towards the company

Determined to achieve the target

Going native 15% expatriates fall in this type Allegiance to host country firm is high Allegiance to parent firm is low Empathetic towards host country culture Willing to communicate and mix with local people

Dual citizens 32% expatriates fall in this type Allegiance to host country firm is high Allegiance to parent firm is high Open-minded and goal-oriented

The above-mentioned typology clearly indicates the following:

Dual citizens are most effective and committed. They are most effective in balancing the job demands with role clarity. An expatriate, over-committed to home organization (heart at home), will have difficulty to adopt the host country practices and will not be able to manage host country managers, effectively. If an expatriate is over-committed to the host country organization (going native), overall integration, coordination and control becomes difficult within the MNC. The largest group of expatriates falls into the category of free agents, who have low commitment for both the host and home country organizations.Solutions to the Dual-career Challenge Alternative assignment arrangements Short-term Commuter Other (e.g. unaccompanied, business travel, virtual assignments) Family-friendly policies Inter-company networking Job-hunting assistance Intra-company employment On-assignment career support

SummarySummary (cont.)Summary (cont.)Summary It is also apparent that staff selection remains critical. Finding the right people to fill positions, particularly key managers – whether PCN, TCN or HCN – can determine international expansion. However, effective recruitment and selection are only the first step.

We will explore in the next chapter that maintaining and retaining productive staff are equally important.

Summary (cont.)

Training and Development

Dr Subhash GuptaObjectives Training aims to improve employees’ current work skills and behavior, whereas development aims to increase abilities in relation to some future position or job. In this lecture, we examine how the international assignment is a vehicle for both training and development, as reflected in the reasons why international assignments continue to play a strategic role in international business operations. The role of training in preparing and supporting personnel on international assignments is also considered. We examine the following issues: (cont.)Objectives (cont.) The role of training in supporting expatriate adjustment and on-assignment performance. Components of effective pre-departure training programs such as cultural awareness, preliminary visits and language skills. Relocation assistance and training for trainers are also addressed. The effectiveness of pre-departure training. The developmental aspect of international assignments and its relation to international career paths. Training and developing international management teams. (cont.)BACKDROP OF INTERNATIONAL TRAININGThe key people who need to be trained are: Expatriates Spouses Children

Requirements and goals of expatriate training: To maximize the cultural sensitivity of relocating employees, in preparing them to conduct business with colleagues from other cultures. To learn how to avoid misunderstandings based on cultural differences. To learn how to communicate verbally and non-verbally with colleagues in other cultures. To understand the role of learning and communication styles in work, everyday living, and telling situations, and how to work effectively with people with differing styles.

To understand the historical, political, educational, and economic background of the host country well enough to interpret current news events and economic policies and social problems. To learn to anticipate the factors leading to culture shock and how to manage it, for oneself and one's family. Role-based training inputs for ensuring due performance of the jobs and achievement of business goals in line with the company’s expectations.

CURRENT SCENARIO OF TRAINING & DEVELOPMENT OF INTERNATIONAL STAFF International expertise can be learned only by personal experience abroad. Cultural factors are not so important in gaining success in the international assignments. The pre-placement time period for the expatriates is very short and in-depth training cannot be provided. The HR personnel of the parent country may analyze the international assignment’s requirements incorrectly. The assignments are short term in nature and many organizations, therefore, feel spending money on training is an undue expenditure.

Some problem which may arise due to lack of effective preparation before taking up of a foreign assignment are: The manager may be incompetent to shoulder the responsibilities of the assignment. The unwillingness to work abroad. The personality and the emotional maturity of the manager may

prove inadequate. The manager may find it very difficult to adapt to the new environment (as the cultural differences can be very high) There can be family-related issues (as the spouse would find it very inconvenient to adapt to the new culture)International Assignments as a Training and Development Tool Expatriates are trainers Expatriates show how systems and procedures work, ensure adoption, and monitor performance of HCNs International assignments are a form of job rotation to gain a broader perspective – management development, and to assist in developing a pool of capable global operators.

Components of Effective Pre-departure Training Cultural awareness programs Preliminary visits Language training Practical assistance Training for the training role TCN and HCN expatriate training Non-traditional assignments and training

TRAINING RIGOR The extent of effort by trainees and trainers required to prepare the trainees for expatriate positions LOW RIGOR TRAINING Short time period Lectures Videos on local culture Briefings on company operations company operations HIGH RIGOR TRAINING Lasts over a month Experiential learning Extensive language training Often includes interactions with host country nationals

Levels of training: First Level: Learning about the host country – Their culture, language, politics, business, geography, religious values and history. (Through seminars, videos, meeting with citizens of the country before assignment begins.) Second Level: Understanding the requirements of the assignment – technical skills, managerial knowledge. Third Level: Preparation for the new job: preparing for the new job at the new location. Fourth Level: Providing assistance –to adjust and adapt to the new environment. Fifth Level: Re-entry – contact with family, visit to home during vacations.

Language Training The role of English as the language of world business Host country-language skills and adjustment Knowledge of the corporate language

Practical Assistance Information that assists relocation Assistance in finding suitable accommodation and schooling Further language training Makes an important contribution to adaptation of expatriate and accompanying family members to the host locationEffectiveness of Pre-departure Training Limited data on how effective such training is and what components are considered most essential:

Use of mixture of methods makes evaluation of which method is most effective difficult to isolate Large diversity of cultures involved What works for one may not work for another Complex jobs in multiple cultural contexts Integrated cross-cultural training exhibited cultural proficiency earlier and appeared to have greater job satisfaction than those with lesser training.Developing Staff through International Assignments Management Development Individuals gain international experience which assists career progression Multinational gains through having a pool of experienced operators on which to draw for future international assignmentsDeveloping Staff through International Assignments Organizational Development Accumulating a stock of knowledge, skills and abilities Developing a global mindset Expatriates as agents of direct control and socialization in the transfer of knowledge and competence.

How international teams benefit the multinational Fosters innovation, organizational learning and transfer of knowledge Assists breaking down of functional and national boundaries Encourages diverse inputs Assists in developing broader perspectives Develops shared values

SummarySummary (cont.)Summary (cont.) GLOBAL EXPATRIATE WEBSITES Expat Communities, www.expatcommunities.com, is a worldwide directory with listings of useful resources, online forums, organizations, etc. for the expatriate. Expat Exchange, www.expatexchange.com, is one of the most extensive expatriate sites online, providing a wealth of resources and articles for expatriates worldwide. Expat Expert, www.expatexpert.com, provides useful articles and information for the expatriate, resources about going and living abroad, as well as information for returning home. Expat Focus, www.expatfocus.com, provides news, information, and advice for the expatriate; also maintains an online community through forums and blogs. Maintains the Yahoo discussion group “Expat Focus,” groups.yahoo.com/group/ExpatFocus.