Chapter 11

Global Management of Human

Resources

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Learning Objectives (1 of 2)
11-1 Profile international human resource management.
11-2 Distinguish the perspective of the expatriate.
11-3 Differentiate the staffing frameworks used by MNEs.
11-4 Describe expatriate selection.
11-5 Appraise expatriate preparation.
11-6 Summarize expatriate compensation.
11-7 Profile expatriate repatriation.
11-8 Describe expatriate failure.

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 International Human Resources
• Expanding business operations beyond national
boundaries while continuing commitment to local markets
requires more complex business structures.
• One of the most critical determinants of an organization's
success in global ventures is the effective management of
its Human Resources.

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 IHRM (International Human Resource
Management)
• What is IHRM?
▪ It is the term used for organizations that manage their human
resources activities at an international level.
▪ IHRM is a set of activities involved in hiring, managing
performance, compensation, training and relations with
employees hired to manage internal operations of a
company, with a view to ensure the success of their
international business and strategies.
▪ IHRM is concerned with the human resource problems of
multinational firms in foreign subsidiaries (such as expatriate
management).

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 IHRM (International Human Resource
Management)
• IHRM organizes people within the MNE, developing policies
and systems that improve individual productivity and
collective performance.
• Opening and operating a business, whether a small-scale
micronational or a vast multinational, requires finding people
to implement the strategy, motivating them to perform well,
upgrading their skills so they can move on to bigger
challenges and, ultimately, retaining them.
• IHRM is a performance driver, identifying, developing,
staffing, compensating, and retaining the executives that
command the requisite skills and outlooks to direct the MNE.

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IHRM
What are the responsibilities of IHRM?
• Recruiting the right people for the right job.
• Maintaining a safe environment.
• Employer-employee relations.
• Compensation and benefits.
• Labor law compliance.
• Training and development.
• Expatriates
[Link]

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MANAGING MANAGERS
Sources for Management Staffing (Recruitment):
– Local or expatriate.
An expatriate, or ex-pat, is an individual living and/or working in a
country other than his or her country of citizenship, often temporarily
and for work reasons.

The choice process between expatriates and locals is

driven by:
(1) The availability and quality of the talent pool;
(2) Corporate policies and their cost;
(3) Environmental constraints on the legal, cultural or economic
front.

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Types of Expatriates
• Home-country National (parent country national): A
citizen of the country where the firm is headquartered (i.e., a Brazilian
national sent to the Argentinean subsidiary of her Brazilian MNE).

• Third-Country National: Neither a citizen of the home nor the

host country.

• Inpatriate: If the third-country national executive is transferred to the

MNE’s headquarters.

• Transpatriate: Work an ongoing series of international

assignments, plans never to return to headquarters, and intend to work
in several countries over time. That is, a manager who has no true
corporate “home”.

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International Staffing Decision
• The international human resource manager must not only select
people with skills, but also employees who can adapt with the
organisation's culture.
• So the manager wants to hire employees whose styles, beliefs,
and value systems are consistent with those of the firm.

• Approaches of Staffing
International businesses are said to adopt three approaches to
staffing:

(1) Ethnocentric
(2) Polycentric
(3) Geocentric
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 International Staffing Decision
1) Ethnocentric Approach
➢ In this approach, all key management positions are held by parent-country
nationals.
2) Polycentric Approach
➢ The polycentric staffing policy requires host-country nationals to be hired to
manage subsidiaries, while parent-country nationals occupy key positions
at corporate headquarters. Although top management positions are filled
by home-country personnel.
3) The Geocentric Approach
➢ This staffing philosophy seeks the best people for key jobs throughout the
organization, regardless of nationality. Seeking the best person for the job,
irrespective of nationality is most consistent with the underlying philosophy
of a global corporation.
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 Ethnocentric Approach
• Advantages
• The expatriate's technical and business expertise.
• Ability to transfer the headquarters' culture to the foreign
operation.
• Parent-Country Nationals are familiar with company goals,
products, technology, policies, and procedures.
• Effective communication between headquarters and the
subsidiary.
• Disadvantages
• Expatriate managers may not overcome cultural barriers or
understand the needs of their local employees or customers.
• The private life of expatriates is severely affected.
• Relocating managers from the home country is expensive.
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Polycentric Approach
Advantages
• Language barriers.
• Less expensive.
• Enhances the moral and career opportunities of local staff.
• Supported by host country governments.

Disadvantages
• Difficulty of achieving effective communication with
headquarters.
• Difficulties in exercising effective control over the
subsidiaries.
• Difficulty of coordinating the activities between headquarters
and subsidiaries.
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 Geocentric Approach
• Advantages
– Help company develop global managers who can adjust easily to
any business environment (particularly to cultural differences).
– Make your business easy to be competitive.
– Creating ways of doing business that are sensitive to different
style of communication
– Allows you to use all of your talent where it's most needed
• Disadvantages
– Finding capable managers fitting and adapt to different cultures
and styles can be costly (training, relocation, visas...)
– Finding them not easy (immigration procedures' complexity) and
sometimes not available

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 Expatriate Selection Considerations
• Successful expats usually have the following skills and abilities.
• Technical job competence as indicated by past job performance,
and his understanding of how to transfer it to the foreign unit.

• Self-orientation An expatriate assignment is marked by

ambiguity, uncertainty, and risk. An expat’s effectiveness depends
upon developing new knowledge, skills, and abilities.

• Establishing a selection board of expatriates

• Resourcefulness: Refers to the ability to interpret the immediate

environment, develop workplace relationship, and maintain
situation flexibility

• Global mindset reflects awareness of differences across

countries coupled with a capacity to distract overlapping principles.
• Emphasizing cultural sensitivity as a selection criteria.
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Successful Expats
Figure 20.4 Key Competencies of successful Expatriates

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 Expat Preparation and Development
• Pre-departure Programs: A universal method is
education about the way things work in the host country.
Topics include politics, laws, economics, workplace
practices, business etiquette, logistics options, and social
situations. ‫آداب العمل‬

• In-country Development Programs: Through

mentorship programs, virtual meetings, and executive
coaching, support the expatriate.
• Family Matters: Assistance with family matters (e.g.
education concerns, lifestyle adjustments) can make an
assignment more successful.

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Here are some steps for companies to guarantee a
successful expatriation assignment:
1) Provide cultural training: Before the assignment, an expatriate must
understand the cultural values, norms, beliefs and behavioural patterns of
the host country.
2) Bring expats & local employees closer: Expats are more likely to adjust
when they receive social support, friendship and job assistance from local
colleagues. The company could for example appoint someone of the local
staff as the expatriate’s mentor.
3) Offer rewards: There is no simple solution to solve homesickness and for
some people it will take some time. The company could help here a little,
however, by offering rewards, not only in the form of financial benefits, but
in the form of home leave.
4) Include the whole family: It is important that companies support every
family member during the expatriation process.

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Compensation Considerations
1) IHRM’s mission is setting compensation so that working
abroad does not impose additional costs that diminish
one’s standard of living.

2) IHRM devises packages that convince an executive and

family to go abroad, reflect the responsibility of the
foreign assignment, and ensure that their after-tax
income will not fall because of the foreign assignment.

3) IHRM sets plans that preserve pay equity among peers,

promote parity among expatriates, and ensure
compensation competes with packages offered by rivals

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 Compensation Considerations

4) IHRM delivers compensation packages that align

parent- and host-country financial, legal, and
customary practices.

5) IHRM devises efficiently administered

compensation systems and policies. These tasks
are difficult and expand in line with the scale and
scope of the international operations.

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Compensation Plans
• Home-Based Method: It bases expatriate compensation on the
salary of a comparable job in the expat’s hometown, thereby
preserving equity with home-country colleagues as well as
simplifying their eventual return.
• Headquarters-Based Method: This method sets the expatriate’s
salary in the terms of a comparable job in the city where the MNE
has its headquarters.
• Host-Based Method: This method bases expatriate
compensation on the prevailing pay scales in the foreign locale.
IHRM starts by setting the expatriate’s salary in terms of a local
executive with similar responsibilities.
• Global Market Method: Argues that international assignment awarded
to an expatriate should be continuous and all the staff assigned should be
given an equivalent salary regardless of the country they are assigned to.
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Components of Expat Compensation
Figure 20.2 Factors Influencing IHRM in IB

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 Repatriation
• Repatriation is the process of reintegrating an
expatriate into the home company upon completion
of her foreign assignment, intact, and in good spirits.
– Challenges with Repatriation:
• Career progression: The principal cause of repatriation frustrations is
finding the right job for the returning executive.
• Changes in personal finance: Returning home significantly alters the
expat’s finances. Many enjoy rich benefits during an international
assignment, living in exclusive neighborhoods, sending children to
prestigious schools, employing domestic help, socializing with elites,
and still saving a good amount. Returning home to a reasonable
compensation plan with far fewer privileges can prove demoralizing
• Personal readjustment: Return challenges repatriates to readjust to
home life. Problems emerge as they, and their families, experience
reverse culture shock
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 Expatriate Failure
‫العودة المبكرة‬
• It refers to a manager’s premature return home due
to poor operational performance.

• Costs associated with failure

o operationally costly,
‫ضار مهنيا‬
o professionally detrimental, and
o personally stressful.

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Copyright © 2018 Pearson Education Limited. All Rights Reserved.