IBUS 618 Dr. Yang1 Chapter 3 IHRM: Sustaining International Business Operations

IBUS 618 Dr. Yang 1

Chapter 3

IHRM: Sustaining International Business Operations

IBUS 618 Dr. Yang 2

Chapter Objectives

Issues related to various approaches to staffing foreign operations;

Reasons for using international assignments: position filling, management development and organizational development;

(cont.)

Issues related to various approaches to staffing foreign operations;

Reasons for using international assignments: position filling, management development and organizational development;

(cont.)

The previous two chapters have concentrated on the global environment and organizational contexts. We now focus on the ‘managing people’ aspect. The aim is to establish the role of HRM in sustaining international business operations and growth. We will cover the following:

IBUS 618 Dr. Yang 3

Chapter Objectives (cont.)

Various types of international assignments: Standard assignments: Short-term, extended, and

longer-term; Non-standard arrangements: Commuter, rotator,

contractual, and virtual.

The role of expatriates and non-expatriates (international business travellers) in supporting international business activities

The role of the corporate HR functions

Various types of international assignments: Standard assignments: Short-term, extended, and

longer-term; Non-standard arrangements: Commuter, rotator,

contractual, and virtual.

The role of expatriates and non-expatriates (international business travellers) in supporting international business activities

The role of the corporate HR functions

IBUS 618 Dr. Yang 4

Approaches to Staffing

Factors affecting approaches to staffing General staffing policy on key positions at

headquarters and subsidiaries Constraints placed by host government Staff availability

Ethnocentric

Polycentric

Geocentric

Regiocentric

IBUS 618 Dr. Yang 5

Ethnocentric

Strategic decisions are made at headquarters;

Limited subsidiary autonomy; Key positions in domestic and foreign

operations are held by headquarters’ personnel;

PCNs manage subsidiaries.

IBUS 618 Dr. Yang 6

Polycentric

Each subsidiary is a distinct national entity with some decision-making autonomy;

HCNs manage subsidiaries who are seldom promoted to HQ positions;

PCNs rarely transferred to subsidiary positions.

IBUS 618 Dr. Yang 7

Geocentric

A global approach - worldwide integration; View that each part of the organization

makes a unique contribution; Nationality is ignored in favor of ability:

Best person for the job; Color of passport does not matter when it

comes to rewards, promotion and development.

IBUS 618 Dr. Yang 8

Geocentric Staffing Requirements

IBUS 618 Dr. Yang 9

Regiocentric

Reflects a regional strategy and structure; Regional autonomy in decision making; Staff move within the designated region,

rather than globally; Staff transfers between regions are rare.

IBUS 618 Dr. Yang 10

Ethnocentric Approach

Advantages: To ensure new subsidiary

complies with overall corporate objectives and policies

Has the required level of competence

Assignments as control

Disadvantages:Limits the promotion opportunities of HCNs, leading to reduced productivity and increased turnover among the HCNs

Longer time for PCNs to adapt to host countries, leading to errors and poor decisions being made

High cost

Considerable income gap, high authority, and increased standard of living may relate to lack of sensitivity


Polycentric Approach

Advantages:Employment of HCNs eliminates language barriers, avoids adaptation of PCNs, reduces the need for cultural awareness training programs

Employment of HCNs allows a multinational company to take a lower profile in sensitive political situations

Employment of HCNs is less expensive

Employment of HCNs gives continuity to the management of foreign subsidiaries (lower turnover of key managers)


Polycentric Approach

Disadvantages:Difficult to bridge the gap between HCN subsidiary managers and PCN managers at headquarters ( language barriers, conflicting national loyalties, cultural differences)

HCN managers have limited opportunities to gain experience outside their own country

PCN managers have limited opportunities to gain international experience

Resource allocation and strategic decision making will be constrained when headquarter is filled only by PCNs who have limited exposure to international assignment


Geocentric Approach

Advantages: Ability of the firm to

develop an international executive team

Overcomes the federation drawback of the polycentric approach

Support cooperation and resource sharing across units

Disadvantage:Host government may use immigration controls in order to increase HCNs employmentExpensive to implement due to increased training and relocation costsLarge numbers of PCNs, HCNs, and TCNs need to be sent across bordersReduced independence of subsidiary management


Regiocentric Approach

Advantages:Allow interaction between executives transferred to regional headquarters from subsidiaries in the region and PCNs posted to the regional headquartersProvide some sensitivity to local conditionsHelp the firm to move from a purely ethnocentric or polycentric approach to a geocentric approach

Disadvantages:Produce federalism at a regional rather than a country basis and constrain the firm from taking a global stanceStaff’s career advancement still limited to regional headquarters, not the parent country headquarters


Parent-Country Nationals

Advantages Organizational control and

coordination is maintained. Rising stars are given

international experience. PCNs may be the best

people for the specific job due to special skills and experience.

An assurance that the subsidiary will comply with company objectives & policies.

Advantages Organizational control and

coordination is maintained. Rising stars are given

international experience. PCNs may be the best

people for the specific job due to special skills and experience.

An assurance that the subsidiary will comply with company objectives & policies.

Disadvantages Promotional opportunities

of HCNs are limited. Time and performance

costs associated with adaptation to the host country.

PCNs may impose an inappropriate HQ style.

Compensation for PCNs and HCNs may differ.

Disadvantages Promotional opportunities

of HCNs are limited. Time and performance

costs associated with adaptation to the host country.

PCNs may impose an inappropriate HQ style.

Compensation for PCNs and HCNs may differ.


Host-Country Nationals

Advantages Language and other barrier

eliminated Reduced hiring costs Continuity of management Government policy may

require hiring HCNs Possible increased morale

because of increased career potential

Advantages Language and other barrier

eliminated Reduced hiring costs Continuity of management Government policy may

require hiring HCNs Possible increased morale

because of increased career potential

Disadvantages Hiring of HCNs may

encourage a federation of national rather than global units

HCNs have limited career opportunity outside the subsidiary

Control and coordination of HQ may be impeded

Hiring HCNs limits opportunities for PCNs to gain foreign experience

Disadvantages Hiring of HCNs may

encourage a federation of national rather than global units

HCNs have limited career opportunity outside the subsidiary

Control and coordination of HQ may be impeded

Hiring HCNs limits opportunities for PCNs to gain foreign experience


Third-Country Nationals

Advantages Salary and benefit

requirements may be lower than for PCNs.

TCNs may be better informed than PCNs about host-country environment.

Advantages Salary and benefit

requirements may be lower than for PCNs.

TCNs may be better informed than PCNs about host-country environment.

Disadvantages Transfers must consider

national animosities. Host government may

resent hiring TCNs. TCNs may not want to

return to their own countries after assignment.

Disadvantages Transfers must consider

national animosities. Host government may

resent hiring TCNs. TCNs may not want to

return to their own countries after assignment.


Determinants of IHRM Approaches and Activities


Reasons for International Assignments

Position filling, e.g. Skills gap, launch of new endeavor,

technology transfer Management development

Training and development purposes, assisting in developing common corporate values

Organizational development Need for control, transfer of knowledge,

competence, procedures and practices


Types of International Assignments

Short term: up to 3 months Troubleshooting Project supervision A stopgap until a permanent arrangement is found

Extended: up to 1 year May involve similar activities as short-term

assignments

Long term Varies from 1 to 5 years The traditional expatriate assignment


Non-standard Assignments

Commuter assignments

Rotational assignments

Contractual assignments

Virtual assignments

Some of these arrangements assist in overcoming the high cost of international assignments but are not always effective substitutes for the traditional expatriate assignment.

Some of these arrangements assist in overcoming the high cost of international assignments but are not always effective substitutes for the traditional expatriate assignment.


Factors Influencing Virtual Assignments


Roles of an Expatriate

Agent of direct control Agent of socialization Network builder Boundary spanner Language node Transfer of competence

and knowledge

A Simple Management Network

GB

C D

A F

E

Informal contacts between managers within a MNE

Informal contacts between managers within a MNE


The Role of Non-expatriates

People who travel internationally yet are not considered expatriates as they do not relocate to another country Road warriors, globetrotters, frequent fliers

Much of international business involves visits to foreign locations, e.g. Sales staff attending trade fairs Periodic visits to foreign operations


A Glamorous Life

International business travelers cite the positives as: Excitement and thrills of conducting business

deals in foreign locations Life style (top hotels, duty-free shopping,

business class travel) General exotic nature


But a High Level of Stress!

Home and family issues Frequent absences

Work arrangements Domestic side of position still has to be

attended to Travel logistics

waiting in airports, etc. Health concerns

Poor diet, lack of sleep, etc. Host culture issues

Limited cultural training


Centralized HR Companies

Decentralized HR Companies

Transition HR Companies

Large well-resourced HR departments

Small HR departments

Medium-sized HR departments

Key role: Managing all high-grade management positions worldwide

Key role: Managing elite corporate managers

Key role: Management and development of senior managers and expatriates

Key activities: Planning international assignments and performance management globally, identifying high-potential staff

Key activities: Influencing operating units to support international assignments, supporting decentralized HR

Key activities: Persuading divisional managers to release key staff using informal and subtle methods, strategic staffing.

Source: Based on H. Scullion and K. Starkey, in Search of the Changing Role of the Corporate Human Resource Function in the International Firms, International Journal of Human Resource Management, V 11, N 6 (2000) pp. 1061-1081.

Various Roles of Corporate HR


The Role of the Corporate HR Function

Can we manage our people like a global product, e.g., the feasibility of: The concept of a global internal labor

market Standardization of work practices and

HR activities What HR matters require central control

and what can be decentralized?


Chapter Summary

Looked at the various approaches to staffing international operations – ethnocentric, polycentric, geocentric and regiocentric – examining their advantages and disadvantages and factors that may determine the choice of these options.

Considered the reasons for using international assignments: position filling, management development and organization development.(cont.)

Looked at the various approaches to staffing international operations – ethnocentric, polycentric, geocentric and regiocentric – examining their advantages and disadvantages and factors that may determine the choice of these options.

Considered the reasons for using international assignments: position filling, management development and organization development.(cont.)

This chapter has expanded on the role of IHRM in sustaining international business operations. We have:


Chapter Summary (cont.)

Discussed the various types of international assignments: short, extended and long-term (traditional); and non-standard forms such as commuter, rotational, contractual and virtual assignments.

Examined the various roles of the expatriate: as an agent for direct control, as an agent for socialization, as network builders, as boundary spanners and as language nodes. These various roles of the expatriate help to explain why expatriates are utilized and illustrates why international assignments continue to be an important aspect of international business from the organization’s perspective. (cont.)

Discussed the various types of international assignments: short, extended and long-term (traditional); and non-standard forms such as commuter, rotational, contractual and virtual assignments.

Examined the various roles of the expatriate: as an agent for direct control, as an agent for socialization, as network builders, as boundary spanners and as language nodes. These various roles of the expatriate help to explain why expatriates are utilized and illustrates why international assignments continue to be an important aspect of international business from the organization’s perspective. (cont.)


Chapter Summary (cont.)

Recognized that non-expatriates are also critical to international business operations. International business travellers present their own challenges, such as the effect of frequent absences on family and home life, the possible negative health effects and other stress factors. The management of such individuals, however, does not appear to fall within the domain of the HR department.

Looked at the role of the corporate HR function as the firm grows internationally, building on sections from Chapters 1 and 2.

Recognized that non-expatriates are also critical to international business operations. International business travellers present their own challenges, such as the effect of frequent absences on family and home life, the possible negative health effects and other stress factors. The management of such individuals, however, does not appear to fall within the domain of the HR department.

Looked at the role of the corporate HR function as the firm grows internationally, building on sections from Chapters 1 and 2.

Documents

IBUS 618 Dr. Yang1 Chapter 3 IHRM: Sustaining International Business Operations