INTERNATIONAL HRM

WEEK 3
BENEFITS OF THIS
COURSE

PREPARE FOR YOUR LEADERSHIP JOURNEY

“Fortune favors the prepared mind”

– Louis Pasteur.

REFLECT ON YOUR INTERNATIONAL

EXPERIENCES
“The unreflected life is not worth living”
- Socrates.
Being Exposed to a New Culture
Challenges Lessons

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 Case Illustration
1. Jack is the technical expert

2. Jack sets up a meeting with the Peter Chang (COO) and

his delegation of direct reports. He is supposed to visit
the production facility on Day 2.

3. He uses a translator for the meeting and starts by

saying “It’s a very important deal for my company and I
really want to make it work’

4. He delivers a professional presentation and asks for

any questions but there are none.

5. He is happy he has nailed the presentation. But next

day he learns from his translator that the Chinese
partner was actually very displeased with how the first
GOAL: Finalize the Deal day went.
 Exercise: What mistakes did Jack make?

DID NOT RECOGNIZE NO RELATIONSHIP TONE OF ASKING QUESTIONS

SENIORITY GAP BUILDING MOMENTS PRESENTATION
How does your culture shape your
Identity?

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 THE WHAT
Language, Dress, Traditions, Food

THE WHY: Beliefs, Values, Assumptions

FOCUS AREAS

Globalization of Business

Approaches to Global HR

International Cultural Differences

Managing Global Employment

Moving towards a
GLOCalized World…….

• Interconnected
• Driven by Trade, Investment,
Technology and Finance
• Impacts our choices, well being,
political alliances, environment,
distribution of wealth across the
world

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Cold War – A polarized World

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Arbitrage Drives Globalization

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Global HR Structures

• Born Global
• Off-shoring
• Outsourcing

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Ousourcing
Case : India

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 Problem

Implication

Y2K Bug

Closer ties with US

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John Hopkins famously said,
“ Y2K must be called India`s second Independence Day, because it
gave them the opportunity to collaborate with the western world and
gave them some real freedom of choice in how, for whom and where
they worked.”

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Offshoring - 11th December, 2001

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China`s Ambitions

Sold to Made In Designed Dreamt

China China in China in China

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China`s Advantages

Economies of Scale Infrastructure

Domestic Competition Engineers growing manifold

12 hours workday Entrepreneurial Zeal

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HOW IS
INTERNATIONAL HRM
DIFFERENT FROM
DOMESTIC HRM?
SOME CHALLENGES OF IHRM

 Manage the complexities of employing people globally

 Managing across Cultures

 Encouraging Feedback

 Getting the HR Function Structure right

 Maintaining a Sense of Brand Identity and Loyalty

WHAT IS THE STRATEGIC ROLE OF HRM IN INTERNATIONAL FIRMS?

Structure

Incentives
Processes People and
Control

Culture
HR is responsible for which
of these aspects of
Organization Architecture?
Reflection
Exercise :
Working in groups, outline an
expatriation plan for Professor Dia,
who your Institute is sending to
Australia to teach HR for the next 3
years

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Personal Factors
➢ Look-See-Decide (LSD) Trip
➢ Allowances in Lieu of Benefits
➢ Accommodation Schooling.
➢ Arrival in Host Country
➢ Transportation in Host Country
➢ Home Flights
➢ Storage of Personal Effects in Home Country and Home Country Accommodation
➢ Medical Testing, Insurance, and Evacuation Plans
➢ Language and Cultural Training

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What are the principle reasons for global talent
mobility?

Reasons for International Mobility

Reasons Sub-Division
Career development of expatriate
1. Development
Pre-planned next assignment as part of global succession planning
Transfer expatriate’s skills and knowledge to host location
2. Transfer of Skills and Knowledge
Train local nationals
Execute a project of defined duration
3. Project
(This approach is common in construction and petroleum industries and
also IT service organizations.)
Employees are often young, highly mobile, inexperienced.
4. Interested and Willing Assignment often at the request of the individual (compassionate/personal
reasons)
Managing a major business. This tactic is frequently adopted to give the
5. Senior Management executive some international experience before major promotion.
International mobile talent pool – typically, these employees are rotated
6.Career Expatriate/ International Cadre through a series of international assignments and regularly moved across
multiple countries.
Mobile within the geographic region, but not globally
7. Regional
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Types of International Employment
1. Business Trip: These are usually short-duration trips of 1-30 days and unaccompanied by the family.
Business trips do not change the tax position for an employee. The expenses for most business trips align
with the travel policy guidelines.
2. Project Assignment: These usually range from 30 days up to a year. The payroll and benefits reside in the
home country, and the family does not accompany the employee. In most instances, the employee is
given a fixed per diem, which the cost of living index (COLI) and benchmark studies determine. Some
organizations may include lodging costs in the per diem. In other instances, organizations may have tied
up with hotels/guest houses for accommodation, where the per diem charges cover only the boarding
costs. This model is usually referred to as the “home + host” model. The per diem may be paid through
the host country payroll or paid as a lump sum in the home country. Usually, there is no change in the tax
position. The organization bears individual tax liability in the host country.
3. Fly-in, Fly-out Assignment: With a regular home in a foreign location, employment patterns require long-
duration stays at home and host countries. The practice is to have the family stationed in the home
country. This also follows the “home + host” model of compensation and allowance payment. However,
this type of assignment involves a change in tax position for the employee.
4. International Assignment: These assignments range from 6 months to 3 years in the host location. In
most instances, the employee is accompanied by the family. For stints longer than a year, the payroll and
benefits move to the host country, and there is a change in the employee’s tax position
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Approaches to Global HR

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Approaches to Global HR

• Ethnocentric
• Polycentric
• Geocentric

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Ethnocentric Approach
• All Key Management Positions are filled by parent country nationals. Historically in many
Japanese, South Korean and Dutch companies, the management positions would be held by
those nationals.

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Ethnocentric Approach – Why?
• Firms may believe that the host country lacks qualified individuals to fill senior management
positions

• They may see it as the best way to maintain a unified corporate culture

• Firm is trying to create value by transferring a core competencies to a foreign operation

and they believe the best way to do this by transferring someone with existing knowledge
of that competency.

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Ethnocentric Approach
Some countries try to avoid this approach

• It limits advancement opportunities for host country nationals

• It can lead to cultural myopia

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It’s a Peach, Not a
Stork!
How P&G
Recovered from
Pampers Fail in
Japan
Polycentric Approach
• Requires host country nationals to manage foreign subsidiaries where as parent country
nationals occupy key positions in headquarters.

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Polycentric Company Host country nationals
drawbacks
have limited opportunities
to grow beyond their own
country

Another drawback is that

a large gap can form
between host country
and parent country

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 ADVANTAGES
Geocentric • Enables the firm to make the best use
Approach of its Human Resources
• Enables the Firm to build a cadre of
The geocentric approach is an
international recruiting method
international executives who feel at
whereby multinational companies, home working in a number of cultures
regardless of nationality, hire the most
suitable person for the position.

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Designing an International Remunearion
Package

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Four Approaches
1. Build-up Method: This is also referred to as the “balance sheet approach.” This approach uses the home
base salary minus the hypothetical tax and adds an international premium, cost of living index, and
exchange rate to arrive at the net assignment package . This approach is used when it is important to
maintain internal equity with the host country employee compensations and to equalize the host country
tax impact.
2. Local Market Approach: In this approach, the principle is to offer whichever compensation is better – local
market rate or the build-up method. For instance, if the local market rate is $100,000 and the build-up
method is $90,000, then the compensation offered is $100,000. However, if the build-up method suggests a
compensation of $110,000, then this is offered. This is usually practiced where strong local talent markets
exist, and the build-up method delivers lesser remuneration than the local market. Typically, this approach is
considered when assignees move from developing or low-cost countries to high-cost countries such as the
United States, Europe, etc.
3. International Expatriate Compensation: This is usually used for large global MNCs, where permanent
expatriates are regularly moved between countries and assignments. This approach equalizes all benefits
and costs of the expatriates, regardless of country of origin, last home base salary, or local market
considerations.
4. Permanent transfer: This involves an indefinite international change in the place of work. In all these
instances, the employee is accompanied by the family, and there is a change in tax position.
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The American Factory on Netflix

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THE AMERICAN FACTORY

 AMERICAN FACTORY 美国工𠂆, the new film from Academy Award®-nominated directors Steven Bognar and Julia
Reichert, documents the revitalization of one long-shuttered factory in Dayton, Ohio while providing a startling
glimpse into an economic overhaul playing out in towns and cities across the country — and the world.
 The film does not promote an ideology or political agenda, but instead tells a powerful, personal story about how
globalization and the loss of industrial jobs affects workers, communities, and the future of work.
Group Discussion
Was there an individual in the film that you found inspirational or that you related to
the most? What feelings did that person inspire in you?

What were the overarching messages of the film?

What were the cross-cultural issues that you were able to spot in the film?

If you were a manager at Fuyao, what would you do?

How can this film and discussion deepen your competence as a Global Manager?

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THE VIEW FROM BOTH SIDES
Cultural Differences

Hofstede Cultural Dimensions

• Power Distance
• Uncertainty Avoidance
• Individualism vs Collectivism
• Masculinity vs Feminity
• Time orientation

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 POWER DISTANCE

“The extent to which the less powerful

members of organizations accept and
expect that power is distributed
unequally.”- Hofstede
When working in a Hierarchical Society

• Communicate with the person at your level. If .you are the boss, go through the
boss with equivalent status, or get explicit permission to hop from one level to
another.
• If you do e-mail someone at a lower hierarchical level than your own, copy the
boss.
• If you need to approach your boss’s boss or your subordinate’s subordinate, get
permission from the person at the level in between first.
• When e-mailing, address the recipient by the last name unless they have
indicated otherwise—for example, by signing their e-mail to you with their first
name only.

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When Working in an Egalitarian Society
• Go directly to the source. No need to bother the boss.

• Think twice before copying the boss. Doing so could suggest to the recipient that
you don’t trust them or are trying to get them in trouble.
• Skipping hierarchical levels probably won’t be a problem.
• In Scandinavia, the Netherlands, and Australia, use first names when writing e-
mails. This is also largely true for the United States and the United Kingdom,
although regional and circumstantial differences may arise

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