Internationalization of Human Resource

Management
Learning Objectives
Understand the impact of internationalization
on various sub functions of HR.

Learn the difference nuances of recruitment
and selection, training, compensation,
performance management and employee
engagement in a internationalized context.
Context
There are broadly three frameworks or perspectives which are used while
discussing international human resources management. They are:
The Universalist Perspective assumes that although human resource
management might be in different stages of evolution in different
countries, at the end all would rise to develop into a set of standard
human resource practices across the world.
The Culturalist Perspective is in disagreement with the universalist
perspective and it argues that there are inherent differences between
nations and states and that these differences are enduring and therefore
have to be recognized.

Contd
Context
The Institutionalist Perspective recognizes the
difference between societies but does not agree with
the prescriptive approach of the culturalist perspective.
It believes that the differences in HR practices between
countries owe more to the institutional forces which
shape society than to any supposed national culture.
Defining International HRM
Definition of Countries
The nations or states where the operations of
the firm are located. They may be:
Host countrywhere the firms subsidiary is
located.
Home countrywhere the firms headquarters
are located.
Other countries which may serve as the source of
talent, finance and other inputs.
Type of Employees
There are three category of employees of an
international firm
Host Country Nationals (HCN): Employees who are
nationals of the country where the subsidiary has its
operations.
Parent Country Nationals (PCN): Employees who are
nationals of the home country of the firm

Third Country Nationals (TCN): Employees who are
neither from the home nor the host country.
Difference Between Domestic and
International HR
More HR activities.

The need for a broader perspective.

More involvement in employees personal
lives.

Changes in emphasis as the workforce mix of
expatriates and local varies.

Risk exposure.

Broader external influences.
Place of HR in the Organization
The place that the HR function has within an
international organization depends on three
factors:

Mode of operation and the stage of development of
the transnational organization.

Organization structure of the business.

Kind of control the headquarters want to exercise.

Mode of Entry in a New Market
Stages of Development of a Transnational
Organization
Approaches to Staffing
Ethnocentric
Ethnocentricity (ethnocentrism) is a belief in the superiority of one's
own ethnic group. The firm basically believes that parent-country
nationals are better qualified and more trustworthy than host country
nationals.
Polycentric
Polycentricity (polycentrism) is a belief that local people know the local
environment better than outsiders.
Geocentric
Geocentricity (geocentrism) is the notion that the best people should be
employed, regardless of their nationality.
Regiocentric
Regiocentricity is the variation of staffing policy to suit particular
geographic areas.
Types of International Assignments
Commuter assignments
Employee commutes from home country on a weekly or a bi-weekly
basis to the place of work in another country.
Rotational assignments
Employee commutes from home country to a place of work in another
country for a short set period, comes back to home location before
proceeding on to another place of work.
Contractual assignments
Employees are sent on an assignment for a fixed time period, usually 6-
12 months.
Virtual assignments
Employees do not relocate to the host location but manage, from the
home-base, international responsibilities.
Issues in Employee Selection
Myth # 1: A universal approach to management
works.

Myth # 2: It is possible to acquire multicultural
adaptability and behaviours in a short time.

Myth # 3: All successful international managers
are of one kind.

Myth # 4: Mobility is unquestionable
Factors Moderating Performance of an
Expatriate
Phases of Adaptation
Best Practices Helping with Coping Change
Inter-company networking

Job hunting assistance

Intra-company employment for partner/spouse

On-assignment career support
Selection Criteria
Technical ability: These are the functional or technical skills required for the
job and which should be assessed in the person before selection.
Cross-cultural suitability: These would include cultural empathy,
adaptability, diplomacy, language abilities, positive attitude and emotional
stability and maturity.
Family requirement: While the employee works it is usually the spouse who
has to ensure the adjustment of the family in the foreign location.
Country/cultural requirement: The host country might not issue a work
permit or a work visa until and unless it is convinced that the skills required
are not available locally.
Firms requirements: At times the firm has its own imperatives whether it
wants to hire PCNs, TCNs or HCNs for a given position.
Language skills of the employee.
Training and Development
Preparation and training for international
assignment.

Developing employees through international
assignments.
Preparation and Training for International
Assignments
Goals
Knowledge about cultural, political, economic,
business, legal and social factors of the host country.

Awareness of needs and expectations of the different
parties interested in international operations.

Awareness of the problems of family relationships in
the host country.
Areas of Training
Area studies: Factual knowledge of the historical, political and economic
environment of the host country.

Practical information: Knowledge and skills necessary to function
effectively in a country, including housing, healthcare, education, and daily
living. These would include reviewing understanding of terms and
conditions of assignment, increasing knowledge of host country, imparting
working knowledge of the foreign language. All this can also be achieved
with the help of a look and see trip.

Cross-cultural awareness: Ability to interact effectively and appropriately
with people from different language and cultural backgrounds to increase
cultural awareness.
Components of International
Compensation
Base salary
Going Rate Approach
Balance Sheet Approach

Allowances: There are different kind of allowances which are given as a part
of expatriate compensation. Some of them are :
COLA (Cost of Living Allowance)
Housing allowance
Home leave allowance (also known as leave passage)
Education allowance
Relocation allowance

Contd
Components of International
Compensation
Benefits
The complexity inherent in international benefits
often brings more difficulties than when dealing
with other elements of the compensation.

Taxation
Tax equalization
Tax protection
Base Salary
Going Rate Approach: According to this the salary is
based on the local market rates. This rate is determined
by surveying local nationals (HCNs), expatriates of same
nationality, as well as expatriates of all nationalities.

Balance Sheet Approach: Commonly used by
multinational corporations, the basic objective of the
balance sheet approach is maintenance of home
country living standard plus a financial inducement. The
home country pay and benefits form the foundation of
the approach.
Allowances
There are different kind of allowances which are given as a part of expatriate
compensation. Some of them are
COLA (Cost of Living Allowance): This is given to compensate for the
differences in expenditure between home and host country.
Housing allowance: The endeavor is to help the expat maintain the
standard of housing from his home country.
Home leave allowance (also known as leave passage)
Education allowance: This allowance for the education of the children is a
standard part of expat compensation. This is usually in the form of
reimbursement of tuition fee for the childrens education, reimbursement
of expenses towards uniform, books and transportation to and from
school.
Contd
Allowances
Relocation allowance: This covers moving, shipping
and storage charges, temporary living expenses,
down payments for housing lease, expenses for a
look and see trip etc. Allowances regarding
perquisites (car, club membership, domestic help,
nannies for the children) are also considered at
times. But that would depend entirely on case to
case basis.
Benefits
The complexity inherent in international benefits often brings more
difficulties than when dealing with other elements of the compensation. It
is very difficult to deal with insurances (personal accident, medical), social
security (provident fund, superannuation, gratuity) etc. because none of
these are transportable across borders.

Various decisions that the organization has to take are whether to continue
the home-country programs or enroll fresh in the host country (if it is
allowed) or give a combination of both.

Mostly corporations tend to continue the social security programs at the
home locations and treat the others same as someone on a short/long term
contract at the host location.
Taxation
Taxation is a big issue in compensation for expatriates. Often the
expatriate has to file their taxes in the home and host country and this can
be a burdensome task. If the tax liability to the employee is very high, it
can make the pay and benefits not look very attractive. Corporations
adopt two kinds of approaches to handle the taxation problem:
Tax equalization: The organization withholds an amount equal to the
home-country tax obligation of the PCN and pay all taxes in the host
country.
Tax protection: The employee pays up the amount of taxes they would
pay on compensation in the home country. In such a situation, the
employee is entitled to any windfall received if the total taxes are less
in the foreign country than in the home country.

Challenges in International Performance
Management
Whole versus part

Non-comparable data

Volatility of the global environment

Separation by time

Variable levels of maturity
Variables Affecting Expatriate Performance
Compensation package

Task

Headquarters support

Host environment

Cultural adjustment
Repatriation
Individual reaction to re-entry

Job-related factors

Social factors

Organizational response to re-entry

Talent availability

Return on investment

Knowledge transfer
The Repatriation Process
Preparation: This would mean developing plan for the future including
finding out the role about the new position. The organization can help the
employee with a checklist of items to be considered before returning home.
Physical relocation: This refers to the removing of personal effects, breaking
ties with colleagues and friends and travelling to the next posting (in the
case of repatriation) to the home country.
Transition: This refers to the period spent in temporary accommodation
while making permanent arrangements for school, housing, banking etc.
Readjustment: This involves coping with the such aspects as company
changes, reverse culture shock and renewed and different social demands.
Interpreting Cultures
Subconscious cultural blinders.

Assumptions about other cultures depending on
stereotypes and limited information.

Lack of cultural self-awareness.

Lack of awareness about why we behave the way we
behave.

Projected similarity and parochialism.

Assumption that people are more similar to you than
they actually are, or that a situation is more similar to
yours when in fact it is not.
Hofstede & Halls Model of Culture
Power Distance Index (PDI)

Individualism (IDV)

Masculinity (MAS)

Uncertainty Avoidance Index (UAI)

Long-Term Orientation (LTO)

Context (High context Low context)

Time (Monochronic Polychronic)