Assignment 83

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13: International Human Resource Management

Dr. Mirna Safi

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Introduction

IHRM is a relatively new field, emerging largely due to the pressures of globalisation and growth of companies operating internationally.

The focus here is on HRM within multinational companies (MNCs).

Traditionally the field of study of IHRM largely focused on the issue of expatriation, concentrating on the management of expatriates on international assignments. It now encompasses a greater variety of HR issues.

A commonly used definition identifies IHRM as “the HRM issues and problems arising from the internationalisation of business and the HRM strategies, policies and practices which firms pursue in response to the internationalisation process” (Scullion, 1995:352).

Introduction

IHRM involves the interaction of three dimensions (Morgan,1986):

The first dimension is the three broad HR activities of procurement(agreeing to terms), allocation and utilization.

The second dimension is the three national or country categories that are involved in HRM tasks.

The third dimension is the three categories of employees that exist in MNCs – host country nationals (HCNs), parent country nationals (PCNs) and third country nationals (TCNs).

International human resource management

How IHRM differs to domestic HRM:

More HR activities

A need for a broader perspective

Greater involvement in employees’ lives

The need to manage different categories of employees and how this changes as the mix of these categories – PCNs, TCNs, and HCNs – varies

Risk exposure

Broader external influences.

International human resource management

Globalization and IHRM

Globalization generally refers ‘to the ever-increasing interaction, interconnectedness, and integration of people, companies and cultures and countries’.

MNCs are seen as the key drivers of globalization.

Globalization has had an impact on HRM.

One area where globalisation impacts on HRM is in relation to the debate about the convergence or divergence of management practice.

The evidence to date regarding this debate is largely inconclusive in terms of support for either side (Katz and Darbishire, 2000; Brewster et al., 2004, 2008; Pudelko and Harzing, 2007).

The transfer of HRM practices in MNCs

A key strategic HRM question for MNCs is whether to attempt to standardize or localize HRM practices in their foreign subsidiaries.

MNCs have the ability to transfer practices to all or some of their operations globally meaning that HRM practices developed in operations in one country may be transferred to operations in other countries.

This transfer of practices can be contested or disrupted by foreign operations.

Managing employees on international assignments

A major function within IHRM is the management of people undertaking international assignments – expatriation.

Edstrom and Galbraith (1977) identify three primary reasons for relocating employees across operations:

To fill a position. A particular job may require specific skills, competencies or experiences, which are not available locally, and therefore a MNC will send an expatriate to carry out the job.

Management development. The use of expatriates is seen as having a positive impact on the development of both an employee and the MNC. Employees can gain valuable international experience which can assist them in their own career development.

Organisational development. Expatriates can help facilitate knowledge transfer, and the control and coordination of foreign subsidiaries. Expatriates are a useful means of achieving this.

Managing employees on international assignments

Managing the expatriation process is quite complex and there are many issues that need to be considered, such as:

How to recruit and select people to undertake an international assignment.

How to prepare people for the assignment.

How to reward and manage their performance.

How to bring these people back when their assignment is finished.

Recruitment and selection

There are many issues that are important when recruiting and selecting a candidate to undertake an international assignment. They include:

Job suitability

Language skills

Ability to adapt to the foreign culture

An awareness of issues in international management

Previous international experience

The family situation

Desire for international assignment.

Preparation

Once selected the next stage in the process is preparing the employee to undertake the assignment.

In preparing an individual to undertake the international assignment a number of methods can be used.

Cross-cultural awareness training

Preliminary visits

Language training

Practical matters.

Adjustment

A key concern for all involved in the process is the successful adjustment of the employee, and also their family if applicable, to the local environment.

Adjustment is often broken down into three different dimensions:

Work adjustment

Interaction adjustment

General adjustment.

Adjustment

There are a number of factors that can influence adjustment:

Individual factors - such as interpersonal skills and self-confidence, cultural empathy, emotional stability, language ability and previous international experience.

Non-work factors - such as family situation and cultural distance.

Organizational factors - such as organisational culture novelty, social support and logistical help.

Job factors - such as role novelty, role clarity, role discretion, role conflict and role overload.

Compensation

What do you pay an employee on an international assignment?

Do they receive the same payment as they receive at home?

Do you pay the employee the local rate?

International compensation packages may include all or some elements of the following:

Base salary

Foreign service inducement/hardship premium

Allowances

Other benefits.

The balance sheet approach tends to be the most popular approach to compensating expatriates. It is designed to maintain expatriates’ living standards irrespective of their assignment location.

Performance management

Managing and effectively conducting performance management for expatriates is a very difficult and complex task.

What should be evaluated?

Who should do the evaluation?

Identifying the criterion is problematic as there may be differences between expectations held at the parent company and expectations at the local level.

Performance management

Performance criterion for evaluating expatriate performance (Briscoe et al., 2012: 356).

Qualifications

Training, experience, technical skills, social and language skills and education.

Targets

Derived from the parent company’s objectives, the subsidiary objectives, local objectives and targets individually dictated.

Attitudes

Flexibility, interpersonal understanding and communication skills, dealing with stress, openness to change.

Job performance

Results, development of locals, communication and decision making, individual growth and development, application of new expertise.

Repatriation

Repatriation refers to the process that involves bringing the expatriate back to their home country after completing their international assignment.

Many MNCs do not provide post-assignment guarantees and managing to successfully bring employees back to their original location is an important activity as a major problem for MNCs is employees leaving the company upon their return.

Reasons for resignation on return include:

No position available in the company

Loss of status

Loss of autonomy

Loss of career direction

A feeling of being undervalued

Loss of income

Lifestyle

Family readjustment .

Repatriation

Briscoe et al. (2012) note that MNCs can provide support for repatriation at different stages.

Before the assignment - provide the expatriate with career planning prior to the assignment.

During the assignment - provide clear, constant and regular communication with the expatriate, regular travel trips home, a mentor in the home country, and any intra-office communication should include the expatriate.

After the assignment - be aware that the expatriate and their family may experience re-adjustment problems and therefore plans may need to be put in place to reintegrate them back into the home country.

Expatriate failure

Some of the main reasons for failure:

Inability of the expatriate and/or the expatriate’s family to adjust.

Mistake in selecting the expatriate to undertake the assignment.

The international assignment did not live up to expectations.

Expatriate’s personality traits.

Expatriate not able to match expectations of the assignment.

Expatriate’s lack of technical competence.

Expatriate’s lack of motivation for the assignment.

Dissatisfaction with the quality of life in the foreign location.

Dissatisfaction with compensation and benefits.

Inadequate pre-departure training.

Inadequate support for the expatriate and family whilst on the assignment.

Thank you for listening!