INTERNATIONAL HUMAN

RESOURCE MANAGEMENT
INE3023

INTRODUCTION
Mai Anh
Lecturer, International School-VNU
[email protected]
LEARNING RESOURCES

Dowling, P.J., Festing, M., and Engle, A. (2013).

International Human Resource Management,
6th edition. Cengage Learning, London

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SESSION 1 - INTRODUCTION
OVERVIEW
• Define International Human Resource
Management (IHRM) and key terms
• Introduce & review expatriate assignment
management.
• Outline differences between domestic &
IHRM
• Discover complexity & increasing challenges
to existing IHRM practices and models

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ACRONYMS USED IN TODAY’S SEMINAR
HCNs – Host Country Nationals
HRM – Human Resources Management
HR – Human Resource
HQs – Headquarters
IB – International Business
IHR – International Human Resource
IHRM – International Human Resource Management
IR – Industrial Relations
MNEs – Multinational Enterprises
PCNs – Parent Country Nationals
TCNs – Third-Country Nationals
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FIGURE 1.1 - INTER-RELATIONSHIPS
BETWEEN APPROACHES TO THE FIELD

1st 2nd
3rd

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WHAT IS HRM?
OVERVIEW
1. Human resource planning
2. Staffing (recruitment, selection &
placement)
3. Performance management
4. Training & development
5. Compensation (remuneration) & benefits
6. Industrial relations

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QUESTION:

WHICH ACTIVITIES CHANGE

WHEN HRM GOES
INTERNATIONAL?

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WHEN HRM GOES INTERNATIONAL
FIGURE 1.2 - MORGAN’S ‘3-D’ DEFINITION OF IHRM
1. The HR activities of procurement, allocation and
utilization.
2. The countries where IHRM occurs:
• Host Country where subsidiary may be located
• Parent Country where firm is headquartered
• Other Countries that may be source of labour, finance and other
inputs.
3. The employees of an international firm (categories):
• Host Country Nationals (HCNs)
US Multinational
• Parent Country Nationals (PCNs)
Example
• Third-Country National (TCNs)

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 FIGURE 1.2
International assignments create expatriates

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 STAHL-BJÖRKMAN-MORRIS DEF. OF IHRM

The field of IHRM covers

All issues related to firm outcomes
A wide range of HR issues facing MNEs in different parts of
their organizations

This definition includes comparative analyses of HRM in

different countries.

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WHEN HRM GOES INTERNATIONAL
EXPANSION INTO OVERSEAS MARKETS
Multicultural workforces require innovative HRM practices.

Three sources of MNE managers are parent country

(expats), host country (local) or third country nationals.
1. Parent country nationals: talent available within company; greater
control; company experience; mobility; experience provided to
corporate executives.
2. Host country nationals: less cost; preference of host country
governments; intimate knowledge of environment; language facility
3. Third country nationals: broad experience; international outlook;
multilingualism.

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EXPANSION INTO OVERSEAS MARKETS
EXPATRIATION AND REPATRIATION
An expatriate (international assignee) is a person temporarily or permanently
residing in a country other than that of the person's upbringing.
o PCNs are always expatriates, but it is often overlooked that TCNs are
also, as are HCNs who are transferred into a parent country operations
outside their own home country.
o Extremely expensive (preparation, flights, benefits, packages…)
o Expatriate failure rates between 10 and 50%. Failure rates are
particularly high in developing countries with tough cultural and living
conditions

Repatriation is the process of returning a person to their place of origin or

citizenship.
o Repatriation must be thoroughly carried out as well.

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WHEN HRM GOES INTERNATIONAL
DRIVERS OF GLOBALISATION

o Increased travel and migration

o Rapid and extensive global communication
o Rapid development and transfer of new technology
o Improving education
o Trade agreements
o Search for new markets and reduced costs
o Homogenization of cultures and consumer demands
o E-commerce

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ACTIVITY 1 – WHERE HAVE YOU BEEN?

(see class handout)

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WHEN HRM GOES INTERNATIONAL
HRM CHALLENGES IN GOING GLOBAL

o Developing a global mindset inside HR

o Self-Orientation
o Others-Orientation
o Perceptual ability
o Cultural toughness
o Aligning core HR processes and activities
o Enhancing global competencies and capabilities of HR

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WHEN HRM GOES INTERNATIONAL
THE GROWTH & SPREAD OF INTERNATIONAL
BUSINESS

We must consider the:

o Definition of globalization
o Rate of globalization
o Scope of global commerce (environment for
business)
o Both MNE and SMEs as global players

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QUESTION:
WHAT ARE THE MAIN DIFFERENCES BETWEEN
DOMESTIC AND INTERNATIONAL HRM?

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QUESTION:
WHAT ARE THE MAIN DIFFERENCES BETWEEN
DOMESTIC AND INTERNATIONAL HRM?

o Domestic HRM involves employees working within only one

national boundary.
oIHRM includes aspects pertaining to the national or country
categories such as Host Country Nationals, Parent Country
Nationals & Third-Country Nationals.
oIn IHRM, staff are moved across national boundaries into
various roles within the international firm’s foreign operations.
oThe complexity of operating in different countries is a key
variable that distinguishes domestic and international firms.
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INTERNATIONAL VS. DOMESTIC HRM
COMPLEXITY OF IHRM

Attributed to 6 main factors:

1. More HR functions and activities. For example:

o International taxation
o International relocation and orientation
o Administrative services for expatriates
o Host-government regulations
o Language translation services

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 INTERNATIONAL RELOCATION INVOLVES:
■ Arranging for pre-departure training
■ Providing immigration & travel details
■ Providing housing, shopping, medical care,
recreation & schooling information
■ Finalizing compensation details such as:
 Delivery of salary overseas
 Determination of overseas allowances
 Taxation treatment

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INTERNATIONAL VS. DOMESTIC HRM
COMPLEXITY OF IHRM
6 main factors continued:

2. A need for broader perspective and expertise

3. More involvement in employees’ personal lives
4. Changes in emphasis as the workforce mix of
PCNs and HCNs varies
5. Risk exposure
6. More external influences

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 FOUR MORE MODERATORS
IN ADDITION TO IHRM COMPLEXITY

1. The cultural environment

2. The industry(ies) with which the MNE is

primarily involved

3. The extent to which the MNE relies on

its HC domestic market

4. The attitudes of senior management

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INTERNATIONAL VS. DOMESTIC HRM
VARIABLES THAT MODERATE THE DIFFERENCES

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 CULTURE MATTERS
■ Culture shock
■ Emic ≠ etic
■ Convergence hypothesis research
tends to focus on macro level
■ Divergence hypothesis research
tends to focus on micro level
■ The international HR manager must be
aware of cultural differences

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 THE MNE INDUSTRY TYPE CONTINUUM
An MNE performs somewhere in this range:
Multidomestic Industries Global Industries

Examples
retailing, distribution, insurance airlines, semiconductors, copiers

International strategy
Collapses to a Must integrate activities on a
series of domestic strategies. worldwide basis.

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 LAURENT’S STEPS FOR TRUE IHRM:
1. Parent org. recognizes that its HRM reflects
some assumptions & values of own home culture.
2. Parent org. recognizes that its own peculiar ways are
neither universally better nor worse than others –
just different & likely to exhibit strengths & weaknesses,
particularly abroad.
3. Parent org. recognizes that its foreign subsidiaries may prefer
other ways to manage people – ways that are neither intrinsically
better nor worse, but possibly more effective locally.
4. Headquarters is willing to acknowledge cultural differences & take
steps to make them discussable & therefore usable.
5. All parties build belief that cross-cultural learning invites
more creative & effective ways of managing people.

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 EXTENT OF MNE RELIANCE ON HC
MARKET

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 TABLE 1.1
The world’s top 10 non-financial TNC, ranked by TNI, 2008a

Chapter 2
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 SENIOR MANAGEMENT ATTITUDES

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 WHAT DOES SENIOR MGMT. THINK?

Some of the changes required to truly

internationalize HR

have more to do with a global mindset

than with behaviors.

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 APPLYING A STRATEGIC VIEW OF
IHRM

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 FIGURE 1.4
A framework of strategic HRM in MNEs

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 ASYMMETRIC EVENTS TEND TO BE
■ Unmatched in our capabilities & plans
■ Highly leveraged against our particular assets
■ Designed to
1. Secure leverage against our assets
2. Work around,
Offset, &
negate what in other contexts are our strengths

3. Be difficult to respond to in a
discriminate & proportionate manner

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INTERNATIONAL VS. DOMESTIC HRM VARIABLES
SENIOR MANAGEMENT ATTITUDE TO
INTERNATIONAL OPERATIONS
Central strategic issue:
The degree to which the MNE headquarters
dominates over the subsidiary management and HR
practices.

Headquarters orientation helps determine the level of autonomy

that subsidiaries enjoy in their management and HR practices.

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SENIOR MANAGEMENT ATTITUDE TO
INTERNATIONAL OPERATIONS
KEY TERM: ETHNOCENTRISM
o Based on home-country standard (judging of other
culture)
o Centralized decision-making
o High control over international operations
o Maintaining control from home-country and parent-firm
HQs
o Replicating home-country systems and procedures and
structures abroad
o In early development of an International Business (IB),
e.g., first stage of internationalization
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SENIOR MANAGEMENT ATTITUDE TO
INTERNATIONAL OPERATIONS
KEY TERM: POLY-CENTRISM OR REGIO-CENTRISM
o Usually existing in multinational or multi-domestic IB
strategies emphasizing decentralization and autonomy
o Communication and coordination within a region are
high but less between regions.
o Localized HR practices in subsidiaries (including
leadership and power)
o Host-country cultures and traditions are used in IB
operations
o Host-country standards and practices become more
evident in IB operations

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SENIOR MANAGEMENT ATTITUDE TO
INTERNATIONAL OPERATIONS
KEY TERM: GEO-CENTRISM

o A global approach – worldwide integration.

o View that each part of the organisation makes a unique
contribution.
o Nationality is ignored in favour of ability:
o Best person for the job
o Colour of passport does not matter when it comes to rewards,
promotion and development.
o Borrowing best practices from around the world without
preferences to parent-firm HQs or local practices

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ACTIVITY 2 – ADVANTAGES AND
DISADVANTAGES IHRM ORIENTATIONS
With respect to IHRM, what are some of the advantages
and disadvantages of:
o Ethnocentrism
o Poly-centrism or Regio-centrism
o Geo-centrism

(To be completed in groups)

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ACTIVITY
SOME OF THE ADVANTAGES AND
DISADVANTAGES OF THE IHRM ORIENTATIONS
ETHNOCENTRISM POLY-CENTRISM CEO-CENTRISM
OR
REGIOCENTRISM
Advantages • Ensure new subsidiary • Employment of HCN's • Allows the firms to draw
complies with overall limits language barrier. on an international
corporate objectives and • Employment of HCN's is perspective.
policies. less expensive. • Support and encourage
• Has required levels of • Lower turnover of key resource sharing across
competence managers. all units.
• Provide some sensitivity
to local conditions.
Disadvantages • Limits the promotion • Difficult to bridge the gap • Host government may
opportunities of HCN's. between HCN subsidiary use immigration controls
• Longer time for PCN's to managers and PCN in order to increase
adapt to host countries. managers at HQ. HCN's employment.
• Higher costs. • HCN managers have • Expensive to implement
• Higher income gap. limited experience due to high training and
outside own country. relocation costs.

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WHEN HRM GOES INTERNATIONAL
DEVELOPMENT OF THE IHRM FUNCTION
Alignment and adoption of best practices/guidelines
set out by:
o Society for Human Resource Management
www.shrm.org (SHRM) & Chartered Institute of
Personnel & Development http://www.cipd.co.uk/
(CIPD)
o IHR service providers
o Professional Human Resource (PHR) Certification
o HR as strategic partners in internationalization
efforts
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WHEN HRM GOES INTERNATIONAL
DEVELOPING AND IHR STRATEGY
Considerations must be given to:
o Country selection
o Global staffing
o Recruitment & selection
o Compensation
o Standardization or adaptation
o Local & international cultures
o Managerial practices
o Organisation's lifecycle
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WHEN HRM GOES INTERNATIONAL
FIGURE 1.4 - A FRAMEWORK OF STRATEGIC HRM
IN MNES

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WHEN HRM GOES INTERNATIONAL - MNES
DILEMMAS OF CENTRALIZATION & LOCALIZATION

o MNE, on the one hand, needs to strive for coordination

and centralization for worldwide consistency of managing
resources (including people);

o On the other hand, MNE also needs to adapt

decentralization and localization to retain responsiveness
to customers and employees of different cultures and
societies.

Stemming from this dilemma, IHRM faces an important task

of striking a balance between the forces for centralization
and localization.

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WHEN HRM GOES INTERNATIONAL - MNES
KEY IHRM CHALLENGES TO RESOLVING THE DILEMMA OF
CENTRALIZATION & LOCALIZATION
o How does HRM fit into and contribute an international
strategy?
o Which HRM practices should be designed at HQs? Which
locally? By whom? When are IHR teams to be used?
o How does the firm reach agreement on company objectives
while allowing variable paths to achieving them?
o How much consistency in HRM policies should be insisted on?
Which policies should be global and which local? If global,
whose laws and cultural practices take precedence? What
the benefits to consistency versus decentralisation?

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WHEN HRM GOES INTERNATIONAL - MNES
KEY IHRM CHALLENGES TO RESOLVING THE DILEMMA OF
CENTRALIZATION & LOCALIZATION CONTINUED
o Which nationalities should be represented by key managers
at HQs and in main subsidiaries?

o How much and which expatriation should be used? Parent

country/foreign subsidiary/third-country nationals? How
should the whole process of expatriation be managed?

o How are management potential and performance are judged

when criteria differ from country to country?

o How should the management of careers be managed

internationally?

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WHEN HRM GOES INTERNATIONAL - MNES
LAURENT’S STEPS FOR TRUE IHRM
1.Parent organisation (org.) recognizes that its HRM reflects some
assumptions & values of own home culture.

2.Parent org. recognizes that its own peculiar ways are neither
universally better nor worse than others – just different & likely to
exhibit strengths & weaknesses, particularly abroad.

3.Parent org. recognizes that its foreign subsidiaries may prefer other
ways to manage people – ways that are neither intrinsically better nor
worse, but possibly more effective locally.

4.Headquarters is willing to acknowledge cultural differences & take

steps to make them discussable & therefore usable.

5.All parties build belief that cross-cultural learning invites more creative &
effective ways of managing people.

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ACTIVITY 3 – DISCUSSION QUESTIONS
1. What forces have been driving the increased
internationalization of business?
2. Explain the different orientations to international
business that can be found among executives.
3. What are the various situations in which an HR manager
might be involved with various aspects of
internationalization?
4. What are the major differences between domestic and
international HR?
5. How is HR changing in order to support an MNE’s
strategic decision to “go international”?
(To be completed in groups)
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CONCLUSION OF SEMINAR 1

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