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Key HRM Issues in International Business

The document discusses key HRM issues in international business, focusing on recruitment, selection, training, performance evaluation, and expatriate management. It outlines different staffing approaches (ethnocentric, polycentric, geocentric) and highlights the importance of cross-cultural training for expatriates to reduce failure rates. Additionally, it addresses the challenges of performance evaluation across diverse cultural backgrounds and the factors influencing expatriate remuneration.

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16 views2 pages

Key HRM Issues in International Business

The document discusses key HRM issues in international business, focusing on recruitment, selection, training, performance evaluation, and expatriate management. It outlines different staffing approaches (ethnocentric, polycentric, geocentric) and highlights the importance of cross-cultural training for expatriates to reduce failure rates. Additionally, it addresses the challenges of performance evaluation across diverse cultural backgrounds and the factors influencing expatriate remuneration.

Uploaded by

swathi ece
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

HRM ISSUES

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Recruitment and Selection


Recruitment is a process of attracting a pool of qualified applicants. Selection is choosing
applicants from this pool whose qualifications match the job requirements most closely.
Traditionally, there are three types of employees −

Parent Country National − The employee’s citizenship is same with the organization.

Host Country National − The employee is local for the subsidiary.

Third Country National − The employee is from a different country, i.e., not where the
organization is registered / based and also where the subsidiary of the organization is not
located.

Staffing and managing approaches strongly affect the type of employee the company looks for. In
Ethnocentric approach, the parent country nationals are chosen for headquarters and
subsidiaries. In polycentric approach, host country nationals work in the subsidiaries, while
parent country nationals are chosen for headquarters. An organization with a geocentric
approach chooses employees purely based on talent, regardless of their origin type.

A balance between internal organizational consistency and local labor practices policy is a goal
during recruitment. People in achievement-oriented nations consider skills, knowledge, and talents
while hiring a new employee.

Development & Training


The overall aim of the development function is to provide adequately trained personnel in a
company as well as to contribute to better performance and growth with their work. At the
international level, human resource development function manages −

Training and development for global employees


Special training to prepare expatriates for international jobs
Development of globally efficient managers

Creation and transfer of international human resource development programs may be carried out
in two ways −

In centralized approach, headquarters develop trainings and trainers travel to subsidiaries,


often adapting to local situations. This fits mostly with the ethnocentric model. A geocentric
approach is also centralized, but the training inputs come from both headquarters and
subsidiaries staff.

In decentralized approach, training is carried out on a local basis, which follows a


polycentric model. In decentralized training, the cultural backgrounds of employees and
corporate trainers are same. Training material and techniques are usually local and for use
in their own area.

Performance Evaluation
In companies, performance evaluation is most frequently carried out for administration or
development purpose.

For administration purposes, performance evaluation is done when the decisions on work
conditions of employees, promotions, rewards and/or layoffs are in question. Development
intention is oriented to the betterment of work performance of employees, as well as to the
enhancement of their abilities. It is also a way for advising employees regarding corporate
behavior.

Performance evaluation can be quite challenging, especially when it carried out at an international
level. The international organization must evaluate the employees from different countries.
Consistency across subsidiaries for performance comparisons with contrasting cultural
background makes the evaluation meaningful. As with other functions, the approach to
performance evaluation depends on the organization’s overall human resource management
strategy.

Management of Expatriates
Expatriates management is one of the most important issues in international business. The most
important issues related to Management of Expatriates are the following −

The Reasons for Expatriate Failure


In international companies, the high failure rate of expatriates can be contributed to six factors −
career blockage, culture shock, lack of cross-cultural training, an overemphasis on technical
qualifications, using international assignments to get rid of problematic employees, and family
problems.

Cross-Cultural Adjustment
Expatriates and their families need time to become familiar with their new environment. The
culture shock occurs when after some time, the expatriates find new job conditions unattractive.
It usually takes three to six months after arrival, to get out of the culture shock.

Expatriate Re-Entry
After the expatriate completes his assignment and returns home, the work, people, and general
environment becomes unfamiliar. The expatriate is generally unprepared to deal with reverse
culture shock.

Selection of Expatriates
The choice of employee for an international assignment is a critical decision. To choose the best
employee for the job, the management should −

Make cultural sensitivity a selection criterion


Have expatriates in selection board
Look for international experience
Hire foreign-born employees as “expatriates” in future
Screen spouses and families too

Expatriate Training
Expatriates when trained to prepare for work abroad are more successful. Lack of training can
lead to expatriate failure. Cross-cultural training CCT is very important. It prepares to live and
work in a different culture because coping with a brand new environment can be challenging.

Expatriate Evaluation and Remuneration


There are three common aspects that determine the remuneration of expatriates. In a home-
based policy, employees’ remuneration is according to their home countries. The host-based
policy sets salaries according to the norms of the host country. Finally, region also effects in
determining the remunerations.

Remuneration for foreign employees depends on their relocation − whether it is within their home
region or in another region. With this approach, closer to home withintheregion jobs fetch lower
remuneration than the away outsidetheregion jobs.
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Reverse culture shock occurs when expatriates return home and find the work, people, and general environment unfamiliar, which can be attributed to changes that occurred in their absence and personal growth during the assignment. Measures to alleviate this issue include pre-departure orientation about changes they might expect on returning, continuous communication with the home office, and facilitating reintegration through career counseling and post-assignment debriefing sessions .

Cultural sensitivity in expatriate selection is crucial as it determines an individual's ability to adapt and work effectively in a new cultural environment. Selecting individuals with high cultural sensitivity reduces the risk of culture shock and enhances the success of international assignments by promoting effective cross-cultural communication and smoother integration into the host country . This leads to improved performance and a higher probability of assignment completion .

Home-based remuneration policies compensate expatriates according to their home country's salary standards, maintaining parity with fellow nationals . Host-based policies set expatriates' salaries according to the host country's standards, reflecting local living conditions . Region-based policies adjust remuneration based on the expatriate's regional employment location, offering higher pay for assignments further afield. These policies affect global staffing by influencing the attractiveness of assignments and ensuring competitiveness in talent acquisition across different markets .

A centralized approach in training and development, often fitting with ethnocentric and geocentric models, involves headquarters developing training programs with trainers traveling to subsidiaries, adapting to local conditions. This can ensure consistency and leverage a company's global resources . In contrast, a decentralized approach aligns with the polycentric model, with training carried out locally, accommodating local cultures and practices. This can enhance relevance and acceptance but may limit the potential for standardization and global cohesion .

Cross-cultural adjustment of expatriate family members is crucial as their dissatisfaction and adjustment problems can lead to premature repatriation and failure of the international assignment. Their ability to adapt significantly affects the expatriate's focus and performance. Providing support through cross-cultural training and integration programs can enhance family well-being and, consequently, the success of the expatriate assignment . Organizations can mitigate risks by including family considerations in selection processes and providing resources for smoother transitions .

Third-country nationals are employees from countries that are neither the host nor the parent country of an organization . Their role in international recruitment includes bridging cultural and operational gaps, bringing diverse perspectives, and enhancing the organization's global presence. Employing third-country nationals benefits global organizations by offering flexibility in staffing, tapping into a wider talent pool, and promoting cultural diversity, which can lead to innovative problem-solving and improved international relations .

Key training considerations for developing effective multinational managers include cross-cultural competence, global leadership skills, adaptability, and strategic thinking. Corporate HR can integrate these by designing comprehensive training programs that focus on experiential learning, simulations, and international assignments. Providing mentorship and encouraging cultural immersion can further enhance skill development. Aligning training with organizational goals and ensuring consistent feedback loops can help maintain the effectiveness of such programs .

International companies face several challenges in managing expatriate employees, including career blockage, culture shock, lack of cross-cultural training, overemphasis on technical qualifications, misuse of international assignments, and family-related issues . These challenges can be addressed by incorporating cultural sensitivity in selection criteria, having expatriates on selection boards, hiring foreign-born employees, and screening spouses and families. Additionally, providing comprehensive cross-cultural training (CCT) prepares expatriates to adapt to new environments, thereby reducing the likelihood of expatriate failure .

Performance evaluation in international contexts involves greater complexity due to cultural differences and diverse operational frameworks across countries . In multinational companies, consistency in evaluation ensures that employees across various locations are assessed uniformly, promoting fairness and comparability. This is important to align local practices with global standards, thereby fostering organizational cohesion and facilitating objective decision-making regarding promotions, rewards, and development .

Under an ethnocentric approach, parent country nationals are selected for both headquarters and subsidiaries. In a polycentric approach, host country nationals are chosen to work in subsidiaries, while headquarters employ parent country nationals. A geocentric approach selects employees solely based on their talent and qualifications, irrespective of their national origin. This approach supports the creation of a globally integrated, diverse workforce .

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