INTERNATIONAL HUMAN RESOURCES

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INTERNATIONAL HUMAN RESOURCES MANAGEMENT Yonatan
Reshef Strategic Management and
Organization Faculty of Business University of
Alberta Based on Peter J. Dowling, Denice
E. Welch, and Randall S. Schuler. 1999 (3rd ed.).
International Human Resource Management.
South-Western College Publishing.
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Acronyms

• HCNs HOST-COUNTRY NATIONALS
• PCNs PARENT-COUNTRY NATIONALS
• TCNs THIRD-COUNTRY NATIONALS

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• INTERNATIONAL VERSUS DOMESTIC HRM
• More functions to perform (taxation, culture
  orientation,
• relocation, admin services for expats)
• Broader perspective (cater to needs of
  Parent-Country Nationals,
• Host-Country Nationals, Third-Country Nationals)
• Greater involvement in the personal lives of
  employees
• Greater risk exposure (expat failure, family
  problems, terrorism)
• More external influences (government
  regulations, local ways
• of doing business, code of conduct)

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APPROACHES TO INTERNATIONAL HUMAN RESOURCE
MANAGEMENT ETHNOCENTRIC Highly centralized, HQ
control, PCNs dominate. POLYCENTRIC Decen
tralized. Each subsidiary has some degree of
decision making autonomy, HCNs manage
subsidiaries. GEOCENTRIC Ignores nationality
in favor of ability. The color of ones
passport does not matter when it comes to
rewards, promotion, and development. REG
IOCENTRIC Personnel may move outside their
countries but only within a particular
geographic region.
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• EXPAT MANAGERS
• Why send expatriates?
• Why host country nationals (HCNs) or
• third country nationals (TCNs) are not good
  enough?
• Advantages and limitations of PCN, HCN and TCN
  expats.

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PARENT-COUNTRY NATIONALS

• Advantages
• Control and co-ordination by HQ is maintained.
• Promising managers get international experience.
• PCNs are the best people for the job.
• Assurance that the subsidiary will comply with
  company objectives, policies, etc.

• Disadvantages
• HCNs promotion opportunities are limited.
• Adaptation to host country may take a long time.
• PCNs may impose an inappropriate HQ style.
• Compensation differences between PCNs and HCNs
  may cause problems.

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HOST-COUNTRY NATIONALS

• Advantages
• No problems with language and culture.
• Reduced hiring costs.
• No work permits required.
• Continuity of management improves, since HCNs
  stay longer in positions.
• Govt. policy may force hiring of HCNs.
• Promotional opportunities not limited - so higher
  morale among HCNs.

• Disadvantages
• HQ may have less control over operations.
• HCNs may still have limited career opportunities
  outside the subsidiary and their country.
• Hiring HCNs limits opportunities for PCNs to gain
  overseas experience.
• Hiring HCNs may encourage a federation of
  disintegrated national units rather than one
  integrated global unit.

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THIRD-COUNTRY NATIONALS

• Advantages
• Salary and compensation may be lower than for
  PCNs.
• May be more familiar with host country than the
  PCNs.

• Disadvantages
• Transfers must consider national animosities.
• Host government may resent TCNs as much as PCNs.
• TCNs may not comply with HQ style of management.
• TCNs may not want to return after assignment.

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REASONS FOR EXPAT FAILURE (In descending order of
importance)
AMERICAN MNCs 1. spousal adjustment problems 2.
managers inability to adjust 3. other family
reasons 4. managers emotional or personal
maturity 5. unable to cope with larger overseas
responsibility
JAPANESE MNCs 1. unable to cope with larger
overseas responsibility 2. new environment
problems 3. personal or emotional problems 4.
lack of technical competence 5. spousal
adjustment problems.
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Costs of Expatriate Failure

• DIRECT
• Airfare and associated relocation expenses
• INDIRECT
• Damage to employee moral
• Loss of market share
• DIRECT EFFECT ON THE EXPATRIATE
• Self-esteem self-confidence prestige among
  peers
• Promotion opportunities Motivation
• Family

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• COMPENSATION
• If compensation is raised, then problems may be
  encountered on return to head office.
• If compensation is not adequately raised, then
  there may be no incentive to go for the
  international assignment, given the hardships
  that are usually involved in doing so.

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Going Rate Approach

• Based on local market rates the base salary is
  linked to the salary structure in the host
  country.
• Relies on local survey comparisons of
• Local nationals (HCNs)
• Expats of same nationality (all Canadians
  working in Japan)
• Expats of all nationalities
• Base pay and benefits may be supplemented by
  additional payments for low-pay countries

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Advantages and Disadvantages of the Going Rate
Approach

• Advantages
• Equality with local nationals
• Simplicity
• Identification with the host country
• Equity among different nationalities

• Disadvantages
• Variation between assignments for same employees
• Variation between expats of same nationality in
  different countries
• Potential re-entry problems

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The Balance Sheet Approach

• Basic objective is maintenance of home-country
  living standard, plus financial inducement
• Home-country pay and benefits are the
  foundations of this approach
• Adjustments to home package to balance
  additional expenditure in host country
• Financial incentives (expat/hardship premium)
  added to make the package attractive
• Most common system in usage by multinationals
  firms

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THE BALANCE SHEET APPROACH(II)

• FOUR MAJOR CATEGORIES TO CONSIDER
• GOODS AND SERVICES FOOD, PERSONAL CARE,
  CLOTHING, HOUSEHOLD FURNISHING, RECREATION
• HOUSING
• INCOME TAXES
• RESERVE CONTRIBUTIONS TO SAVINGS, PAYMENTS FOR
  BENEFITS, PENSION CONTRIBUTIONS, INVESTMENTS,
  EDUCATION EXPENSES, SOCIAL SECURITY TAXES

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Advantages and Disadvantages of the Balance Sheet
Approach

• Advantages
• Equity
• between assignments
• between expats of the same nationality
• Facilitates expat re-entry
• Easy to communicate to employees

• Disadvantages
• Can result in great disparities
• between expats of different nationalities
• between expats and local nationals
• Can be quite complex to administer

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• PREPARING THE MANAGER AND THE FAMILY
• Some issues
• Spouse training - how much control the company
• can exert over the spouse
• Childrens education - frequent changes in
  schools or
• distance from parents
• Selection criteria Age a factor.

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• MNCs AND THE ISSUE OF SPOUSES IN
• THE SELECTION PROCESS
• Reluctance to intrude into personal matters,
  issues of
• civil liberties may arise.
• Some MNCs resort to informal methods such as
  dinners with
• the family or putting the family in contact with
  another who
• once lived abroad.
• Work permit issues - granted to the employees
  only, not to
• their spouses.

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REPATRIATION REVERSE CULTURE-SHOCK
SOCIAL FACTORS
JOB RELATED FACTORS
Out of sight, out of mind
Expat assignment - different type of social
interaction (going from a very close expat
community to where everyone is very busy with
their own lives)
International experience devalued
Problems of spouse returning to the workforce
Loss of status and pay, relatively speaking
Lack of peer support for teenagers
Changes in the HQ
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Topics Covered by a Repatriation Program

• Preparation, physical relocation, and transition
  information (what the company will help with)
• Financial and tax assistance (including benefit
  and tax changes, loss of overseas allowance)
• Re-entry position and career path assistance
• Reverse culture shock (including family
  disorientation)
• School systems and childrens education
• Workplace changes (corporate culture, structure)
• Stress management
• Help in finding new social contacts