Understanding the Global Employee

Week 14
What is International Human Resource
Management (IHRM)
Managing human resources in global companies

Managing expatriate employees

Comparing human resource practices in different

countries
Dates Developments in Practice – People Focus Theory
International Business
1960s- Focus on expatriation, Personnel starts to pay attention to the managerial Systems thinking about
1970s matrix structures and staff population as well as workers. Managers expect careers, not organizations
bureaucracies just jobs. Succession planning and expatriation policies are
developed. HRM becomes the umbrella for flourishing
people management initiatives
1980s US faces stronger Greater attention to talent development, and increasing Strategic HRM
competition from Japan and attention to HR implications of international alliances. HRM – organization culture
Europe. Rationalization and Corporate restructuring with handling of layoffs,
consolidation outplacement.
1990s Globalization Greater localization. Growing awareness of the role of HRM Resource-based view of the
in providing corporate cohesion. Global leadership firm (Barney);
development becomes vital. Attention to cross-boundary transnational concept
merger integration. Focus on developing human capital leads
in turn to a focus on ‘social capital’ underlying innovation and
knowledge management
2000s Beyond Globalization Competitive advantage comes from speed and adaptation. Tension,
Differentiation rather than imitation. Increasing emphasis on Paradox, and duality
global knowledge management. Internet-based solutions in
decision making. Social architecture becomes the frontier
knowledge for HRM.
 Why do we use international employees?
Tactical Reasons
Fulfilling a Specific Need To fulfill the insufficient The Development of International assignments
for Personnel and Know- technical and managerial Managers and their constitute a proven
how competencies in certain Implication Toward the method for developing
countries where the market Organization. global managers.
structure is often characterized
by a shortage
Sharing and transferring To better understand a Organizations that use
knowledge. subsidiary’s activities in a expatriation to improve
particular context, to share their managers’
knowledge regarding a new competencies, either
type of formally or not, associate
equipment/expertise, or to expatriation with
communicate elements of promotions
its organizational culture,
processes, or competencies.
Rapid and efficient transfer Waxin, 2007
of know-how
Why do we use international employees?
Strategic Reasons
Control of activities In the early phase of the internalization process,
in order to control the subsidiaries’ activities.

Coordination of activities International assignments are aimed at

reinforcing the integration of individual and
organizational dynamics which contribute to the
cohesion of the firm
HRM Goes International
Labor Relations
Legal and Safety 9%
10%

Inter-country Dif-
ferences influenc-
ing international
HR Practices

Political and
Economic
23%
Cultural
59%
 Key Concepts in Global HRM

• Understanding inter - country differences that shape HRM practices

• Transnational – When an organization goes global and local at the same time
- “Act local, think global”
- Local responsiveness as well as global integration
• The MNC concepts
• Competitive advantage of MNCs (Porter, Barney, Evans & Puck)
 What is a multi-national corporation?

• Conform to parent • Neither dependent on parent nor

company ways regardless Polycentric independent
of local conditions
• Local subsidiaries must
orientation • But parts of a whole whose focus is in
worldwide objectives and local
comply • Decentralized objectives
• Strategic decisions are • Control of HQ is weak • Make unique contributions with its
made by HQ, expatriation • Subsidiaries can develop unique competences
occurs • Skills counts more than passport or
with minimal interference,
locals manage operations nationality
Ethnocentric • Expatriation no longer
orientation necessary Geocentric
orientation
Tortuous process of transition from
one phase to another
Perlmutter, H.V. (1969). The tortuous evolution in the multin-national corporation. Columbia Journal of World Business, 4: p. 9- 18
Integrative
framework of
international
human resources
management in
MNEs. Adapted
from R.S. Schuler,
P. Dowling, and
H. DeCieri (1993,
2002) An
integrative
framework of
strategic
international
human resource
management
 TRANSNATIONAL THEORIES AND
HRM IMPLICATIONS
Michael Porter – Fit Theory
Emphasizes the “fit” point of view that all of the firm’s activities must be tailored to
or fit its strategy, by ensuring that the firm’s functional strategies support its corporate and competitive
strategies
Barney’s Resource – Based View of the Firm (1991, 1996)

V - Valuable – It must be valuable in the sense that it provides opportunities or neutralizes threats to the organization's
environment;

R - Rare - It must be rare among an organization's current and potential competitors;

I - it must be imperfectly imitable;

N - it must be non-substitutable – there cannot be a strategic equivalent substitute for the resource that is valuable but neither
rare nor imperfectly imitable.
Duality/Paradox Theory (Evans, Pucik & Barsoux, 2002)
• Otherwise known as ‘competing values’ , ‘dilemmas’ ‘dialectics
• These are not ‘either / or’ choices
• The appropriate use of the choice depends on a particular context
• These dualities must be reconciled or dynamically balanced
• In global HR environments, organizations to be effective, must possess attributes that
are simultaneously contradictory, even mutually exclusive.
Examples of Dualities in Organizations
Satisfying customer needs Being ahead of the customer
Short term Long term
Exploitation Exploration
Competition Partnership
Low cost operations High value added
Low context communication High context communication
Decentralization Centralization
Masculinity Feminity
Individual accountability Team responsibility
Open to Change Prefers Continuity, Status Quo
Grab opportunities Longer planning
Entrepreneurship Control/accountability
Flexibility Efficiency
Speed of responsiveness Cautious, wanting to please others
Taking risks Avoiding failures
Task orientation People orientation
From Taiwanese Fisherman to Global Market Opportunity

A story often told at Nokia, the Finnish mobile phone manufacturer, communicates clearly the
transnational spirit and what it means to be both global and local.

When product penetration of mobile phones was fairly low, a sales manager of the company, on
holiday in Taiwan, noticed that the local fishermen all carried mobile phones. It dawned on him that
this might be a clue to a neglected market. Perhaps the greater potential for the firm’s products was not
the so-called “sophisticated urbanites” who live in the city, as the central marketing people thought, but
rather people in remote areas where the cost of laying a network of telephone cables was prohibitive
(or impossible, in the case of fishermen).

The Taiwanese fishermen themselves did not represent much of a marketing opportunity. The strategy
only makes sense on a larger scale, if the company focuses on clusters of users with similar needs
scattered internationally. It is therefore a good example of the international challenge. The company
has to be sensitive to local needs in order to spot such opportunities in the first place; but then it needs
to be global in order to exploit the opportunity across all sorts of different markets.
 The Advantages and Disadvantages of the Various Categories of International Managers
Type of International Manager Advantages Disadvantages
Parent Country Nationals (PCNs) • Control over the subsidiaries • Lack of knowledge regarding country’s
• Share a common culture and economic development, culture, legal
educational background system and political process
• Facilitate communication and • Very expensive to both relocate and
coordination with corporate maintain (expatriates – people working and
headquarters residing in their non native countries )
• Legal restrictions imposed by many
countries as to the number of foreign
employees that can be employed
Host Country National (HCNs) • Understand and know local • Cultural difficulties hindering recruitment
laws, culture and economic and training activities
conditions • Lack of knowledge concerning the
• Cost is much lower organization, its products and its services
• Opportunity for development Communication problems with the head
and source of motivation office
• Legal regulation of employment • May not be as familiar with the business
culture and practices
• Control and coordination of headquarters
may be impeded
Six Issues Related to Expatriation
Six issues seem relevant to discuss the 4. Knowledge of the local environment
respective advantages and disadvantages of
these three categories of international 5. Attitude of the foreign government
employees. 6. Promotability of local employees
1. Cost
2. Knowledge of the organization (products,
organizational culture)
3. Cultural proximity
 How are Expatriate Employees Commonly Paid

Home Based Plans Host-Based Plans

 Follows host country salary structure
 Follows the Expat’s home country’s salary  Plus Cost of Living
 Plus Cost of Living - Housing
- Housing - Car and driver
- Car and driver - Schooling costs
- Schooling costs - Relocation cost back to home country
- Relocation cost back to home country - Other perks (hardship allowance,
- Other perks (hardship allowances, SOS, vacation, SOS)
etc.  Usually longer-term assignments (1-5
 Usually short-term assignments (3-6 years)
months)  Most MNCs in Indonesia apply this policy if
 Most MNCs in Indonesia apply this policy they need to ensure their operations are
if they have to send their people to fix maintained and sustainable
immediate issues and problems  Expat lecturers in universities often have
this plan (1 year contract)
 Understanding the Challenges Facing
Expatriate Employees
Adjustment

Defined as an individual’s degree of comfort, familiarity and

ease with several aspects of a new cultural environment
(Black and Stephens 1989), is thus considered to play a
central role in expatriation success.

Female expatriates’ experiences and thus adjustment may

strongly vary depending on the location, its cultural values
and on host-country nationals’ attitudes towards them. W omen
potentially facing additional barriers and various forms of
discrimination in the work and non-work contexts.
 Understanding the Challenges Facing
Expatriate Employees
Disruption of Normal Confusion with Family Support
Life Settlement Matters
• In fact, in a meta-analytic review of 12
• Disruption and interruption • Medical, immigration, predictors of adjustment for expatriates,
of social ties and routines moving/relocation processes, the spouse's adjustment was the most
housing salient (Bhaskar-Shrinivas et al. 2005).
• Loneliness
• Enrolling children in • The spouse is the most likeliest person to
• Isolation suffer as a consequence of an international
international schools
• Social roles modification assignment, especially if he/she gave up
• Tasks are performed in an his/her work to follow the assignee and is
• Loss of identity unknown environment without not reemployed in the new location.
• Loss of self-esteem knowing and understanding
the language
 Helping Expatriate Employees Cope
• Black, Mendenhall, and Oddou (1991) – introduced the
concept of ‘anticipation’ in the cross-cultural adjustment
model.
• Anticipation underlines the importance of the anticipated
adjustment phase, which takes place before the adjustment
phase in the host country.
• Among the components of this anticipated adjustment
phase, the previous international experience and the cross-
cultural training or the preparation for the expatriation play
a major part in explaining adjustment in the host country.
 Helping Expatriate Employees Cope
Support Systems for There are three major categories of variables influencing expatriates´
Expatriates adjustment following expatriation: organizational, individual, and contextual
variables (Waxin, 2000. 2006; Campoy et al, 200
Organizational Antecedents Job related factors and role clarity, organizational social support, logistical support,
intercultural training, organizational similarity
Individual antecedents Technical competencies, social orientation, willingness to communicate,
substitution capacity, cultural openness, and stress resistance; prior experience

Contextual antecedents • Partner’s social support - Partner’s social support reduces the stress generated by
the new work environment and thus facilitates expatriates’ adjustment.
• Length of time spent in host country – the longer the better adjustment it will be
• Culture of origin - Research suggests that the more different the host culture is
from the home culture, the more demanding the adjustment will be
 Language/Education Support for the Family
Support
On-going Support • The organization should also
provide a support for the spouses
• Should be provided for the
• The host company should design a who want to work in the country of
spouses during the assignment, assignment.
local coach to whom the expatriate can
turn whenever he/she experiences since they will have frequent
• Finally, the children’s adjustment
sudden difficulties. contacts with the local population
and education are critical issues in
• The home company could also when accomplishing the basic the mind of most expatriated
formally or informally appoint the tasks of household, going
expatriate sponsor/mentor based in the parents. The company must make
home organization, to be responsible shopping, or dealing with the sure that the children will be able to
in informing the expatriate about the school. attend a school providing a good
important issues and changes. teaching