Expat

© 2005 Prentice-Hall, Inc. 8-1

International Human ResourceManagement


The management of human resources in global corporations

The management of expatriate employees

The comparison of human resource management (HRM) practices in a variety of different countries

IHRM


Approaches to Managing and Staffing Subsidiaries Ethnocentric

Home country approach

Polycentric

Local approach

Regiocentric

Regional approach

Geocentric/Global

Global approach

6-4

:International Orientations

TheEthnocentricFirm

ThePolycentricFirm

The GeocentricFirm


Classifying Employees

Parent Country National (PCN) Host Country National (HCN) Third Country National (TCN)

Definitions of International AssignmentsExpatriates - Managers from headquarters sent

abroad

Inpatriates - Host country managers sent to headquarters

Transpatriates - Managers from different countries sent to any other country

International assignments do not come cheap: on average, expatriates cost a company two or three times what they would cost in equivalent positions back home.

Business Strategy & Nature of Global Assignments

Domestic Multi domestic Multinational Global

Global Assignment

None Expatriates Expatriates &

Inpatriates

E, I, & T

Who sent No One Average performers

Good performers

High potential managers & top executives

Purpose --- To get a job done abroad

Project & career development

Project, career, organizational development

Career Impact --- Negative for domestic career

Good for global career

Essential for executive suite

Professional Reentry

--- Extremely difficult

Somewhat difficult

Easy

Global Organizational Learning

None None Limited Extensive

Adler (2002), p. 260


The Influence of Managing and Staffing Approaches

Ethnocentric approach PCN’s usually staff important positions at headquarters

and subsidiaries Polycentric approach

HCN’s generally work in foreign subsidiaries PCN’s manage headquarters positions

Regiocentric approach PCN’s and managers from the region-either HCN’s or

TCN’s-staff regional headquarters positions HCN's primarily staff local subsidiaries

Geocentric approach Chooses the most suitable person for a position

9

Staffing MNC’sStaffing MNC’sStaffing

orientation

Orientation Approach Advantages Disadvantages

Ethnocentricism

Parent company/ country nationals PCNs are employed at all senior and key positions.Local employees fill only lower level and supporting jobs

Transfer of parent company goals, objectives and know how /technologyEnsures control and coordination with HQ

Lack of localization of response to host country demands and needsLack of knowledge of local culture and work methods

Polycentricism Host country nationals HCNs are employed to staff all positions

Familiarity with business practices, socio-economic, political and legal environmentLower cost of staffingEffective localization of the subsidiary's operations

Communication challenges in dealing with parent country personnelChallenges in effective control and coordination over sub’s operationsLack of parent company nationals to gain international and cross cultural exposure

10

Staffing MNC’sStaffing MNC’sStaffing

orientation

Orientation

Approach Advantages Disadvantages

Geocentricism

The multinationals TCNs runs the subsidiary as a independent entity. Focus building a center of excellence at a global level. Hiring the best person for the job….. could be a third country national

Globally competent personnelExposure to global best practices

Lack of sensitivity to all culturesTendency to run the subsidiary as a independent unit

11

Issues in staffing global businessesIssues in staffing global businesses

Staffing MNC’s

Staffing orientation

Linkage between

staffing and growth of

MNC

Managing expatriates

Female expatriates

12

Staffing MNC’sStaffing MNC’sLinkage between


MNC

Stage in Host Unit’s life cycle

Staffing impetus Hiring headcounts

Staffing Approach

Role of Parent MNC

Setting up the host unit (0 to 9-12months)

• Extremely critical phase in the subsidiary’s evolution• time consuming, multiple interviewing round• expensive as it might involve travel to parent country for final interview and discussions

•Focused Staffing challenges

• Top and Senior management positions is the focus

• Pace is slow, and micromanaged closely by the parent company,

• Usually work with a retainer-ship arrangement with a international staffing company

• Key positions could be out rightly assigned to parent company personnel

Normally 5-20

Usually an ethnocentric or a geocentric approach

Closely and carefully monitored by the parent MNC, literally handpicked

13



MNC


Staffing impetus

Hiring headcounts

Staffing Approach

Role of Parent MNC

Establishing the technology team to begin core operations activities (6months – 1.5 years)

• Apply stringent hiring techniques, • building a preferred employer brand, • offering high-end compensation to attract the desired talent, • careful screening to ensure top quality hires

•Unit staffing challenges are stepped up. • Selection criteria focus on very high quality technical competency levels

• Common vendor linkages with Placement Consultants and RPOs.

20-200 •Poly centric approach is preferred as the unit sets up its own operational unit

• Processes emulate from local market to get access to local talent

Role of Parent unit is somewhat reduced as the responsibility of the newly structured unit takes place.

14



MNC


Staffing impetus Hiring headcounts

Staffing Approach

Role of Parent MNC

Full blown operations of the host unit with significant role in establishing global objectives and targets

(1.5 -3yrs)

• Using multiple sourcing vendors and methods,

• Moderated compensation,

• Creating a branding on vocational campuses

• Increased staffing challenges as hiring targets get aggressive,

• Numbers become a critical success determinant for recruitment

• Competencies receive reduces focus as in house skill development initiatives are established.

• Newer linkages& with third party like Colleges, vocational Institutes and training Institutions and fresher hiring

Varies between 200- 1000

Depending upon nature of the business.

Polycentric approach as achievement of unit objectives becomes significantly self contained.

• Role of parent country is minimal.

• Focus on Global Framework for hiring using global selection tests• Leaving rest to the unit Mangers.

15



MNC


Staffing impetus

Hiring headcounts

Staffing Approach

Role of Parent MNC

Strong Operational leadership at the unit level while globally consolidating with Parent

• Move to Volume hiring as units global contributions are clear.• Referral hiring• Establishing long term liaisons with educational training institutions

Hiring head count are steeper between 200- 1000 depending upon nature of the business.

• Distinctly polycentric approach,

• Could get in to geocentric approach as labor costs provide the competitive advantage for the achievement of global objectives.

Role of Parent unit is at a strategic level, taking decisions to optimize global operating costs.

16

Staffing MNC’sStaffing MNC’sManaging

expatriates

An expatriate is an individual who works anywhere but not in his or her own country of origin.

With increasing globalization more and more employees work overseas and have expats on their payroll.

Recruiting expats success depends on identifying potential expats:

Willingness and passion for working on overseas

assignment

Explore multiculturist, multilinguist, mulitfucntionalist,

background, citizens of the world and not of one country

Possess appropriate (technical/technological) skills for

the position overseas

Family background

Local laws of host country that determine expats posting

Cost differentials vs. benefits of a expat vs. a HCN

Expats in India

Market leaders like Nokia, LG, Suzuki, IBM and Samsung have seen the number of expats in their Indian subsidiaries swell.

Nokia has nearly 100 Finns at key positions in India.

Samsung has 25 Koreans LG has 30 Koreans Maruti has 15 Japanese Huawie has approx.125 Chinese

working at their offices in India.

18

Selection criteria for international staffingSelection criteria for international staffingManaging

expatriates

1. Technical Competencies : ability to work independently

with minimal dependence on parent company for day to

day activities

2. Relational Skills : ability to interact effectively with peers,

superiors, team members and clients/customers in a third

country with its nationals as well as with the parent

company nationals.

3. Ability to cope with Environmental variables :

awareness and ability to cope with the demands of the

political-legal, cultural, technological and economic factors.

Knowledgeable about the host country nationals attitudes,

beliefs, rules and norms, customs and social as well as

corporate etiquette

4. Family situation : ability of the family to cope with

relocation and living in a new country with its social and

cultural differences

Regional Selection Criteria: Some Realities*

Asia Pacific Europe & the Middle East

The Americans

Japan

Most Important Criteria

Skills or Competencies



Job Performance

II Most Important Criteria

Job Performance

Job Performance

Job Performance

Job Level

Least Important Criteria

Marital Status Marital Status Marital Status Projected assignment cost for the Individual

II Least Important Criteria

Language ability

Projected assignment cost for the Individual

Language ability

Marital Status

* ORC Worldwide 2002 , Worldwide survey of International Assignment Policies and Practices

20

Mendenhall and Oddou Four Dimensional Mendenhall and Oddou Four Dimensional Framework for expat selection :Framework for expat selection :


Self Orientation •Self confidence•Self esteem•Mental hygiene

Others Orientations•Expats ability to interact with host citizens•Build close relationships•Acculturate more easily in over

Perceptual Dimension•Ability to understand and appreciate why foreign nationals behave the way they do•Ability to make correct attributions about the reasons or causes of host nationals behavior

Cultural Toughness Dimension

•How culturally different is the host country from the expat’s own country determines the degree of cultural toughness•The lesser the difference the lower is the cultural toughness

21

Romen’s Model on five predictors for a Romen’s Model on five predictors for a successful international assignment :successful international assignment :


Job Factors Relational Dimension

Motivational State

Family Situation

Language Skills

Technical Skills Tolerance for Ambiguity

Belief in the mission

Willingness of spouse to live abroad

Host country language

Familiarity with host country and HQ operations

Behavioral flexibility

Congruence with career path

Adaptive and supportive spouse

Non-verbal communication

Managerial skills Non-judgementalism

Interest in overseas experience

Stable marriage

Administrative competency

Cultural empathy and low ethocentricism

Interest in specific host country culture

Interpersonal skills

Willingness to acquire new patterns of behavior and attitudes

Reasons Young Managers Would Accept International Assignments

Percent of MBAs citing reason (N 1129):52 Cross-cultural experience and personal

growth53 Job54 Money55 Career Advancement56 Good Location57 Satisfying Life58 Spouse and Family59 Short Term; Other

Reasons Young Managers Would Reject International Assignments

Percent of MBAs citing reason (N 1129):Location

35 Job and Career36 Spouse and Family37 Money38 Unpleasant Life Abroad39 Disruption of Home Country Life6 Contract Too Long; Other

Expatriate Failure &Causes for Causes for Expatriate failureExpatriate failure

It means that the assignee returns to the home country or resigns from the job before the international assignment is completed.

Globally, the expat failure rate varies between 25% and 40% and differs from country to country.

Many of the US based MNCs, have 10% to 40% failure rates.

Its less than 5% in Japanese and European organisations.

Reasons for Expatriate Failureby Tung, California Management Review

US Multinationals1. Inability of spouse to adjust

2. Manager’s inability to adjust

3. Other family problems

4. Manager’s personal or emotional maturity

5. Inability to cope with larger overseas responsibilities

Japanese Firms1. Inability to cope with larger

overseas responsibilities2. Difficulties with the new

environment3. Personal or emotional

problems4. Lack of technical competence5. Inability of spouse to adjust

European Firms – Only one consistent reason: Inability of manager’s spouse to adapt to new environment

26

Causes for Expatriate failureCauses for Expatriate failureManaging

expatriates

EFR : Expat Failure Rate

The three stages of expat adjustment on a new international

assignment:

The Culture Shock Cycle

Low

High

Months in a new culture

Mood

Tourist/ Honeymoon Stage

Disillusionment Stage

Adapting or

Adjustment Stage

The Right Way to Manage ExpatsBlack & Gregersen (1999) Harvard Business Review

Three General Practices from successful companies:

1. When they send people abroad, the goal is not just to put out fires. Once expats have doused the flames, they are expected to generate new knowledge for the organization or to acquire skills that will help them become leaders.

2. They assign overseas posts to people whose technical skills are matched or exceeded by their cross-cultural skills.

3. They recognize that repatriation is a time of upheaval for most expats, and they use a variety of programs to help their people readjust.

Hofstede’s Model

Differences across countries in work-related values.

Sampled over 100,000 IBM employees across 40 countries.

Four dimensions: POWER DISTANCE INDIVIDUALISM VERSUS COLLECTIVISM UNCERTAINTY AVOIDANCE MASCULINITY VERSUS FEMININITY

Power distance: Focuses on how a society deals with the

fact that people are unequal in physical and intellectual capabilities.

High power distance cultures are countries that let inequalities grow over time into inequalities of power and wealth (e.g. China). Low power distance cultures are societies that tried to play down such inequalities as much as possible (e.g. Denmark).

Individualism vs. Collectivism:

Focuses on the relationship btw the individual and his or her fellows.

In individualistic societies, the ties btw individuals were loose and individual achievement and freedom were highly valued (e.g. U.S. & Australia). In collectivist societies, the ties btw individuals were tight and the collective interests is above the individual interest (e.g. China, Japan, Turkey, Indonesia)

Uncertainty Avoidance: Measures the extent to which different cultures accept

ambiguous situations and tolerate uncertainty. High uncertainty avoidance cultures place a premium on

job security, internal career patterns, retirement benefits, and so on. They also have a strong need for rules and regulations; managers are expected to issue clear instructions, and subordinate initiatives are tightly controlled (e.g. Japan, France, Spain). Lower uncertainty avoidance cultures are characterized by greater readiness to take risks and less emotional resistance to change (Sweden).

Masculinity vs. Femininity:

Looked at the relationship between gender and work roles.

In masculine cultures, sex roles are sharply differentiated and traditional “masculine values,” such as achievement and the effective exercise of power (e.g. Hungary, Iraq, Venezuela). In feminine cultures, sex roles are less sharply distinguished, and little differentiation is made btw men and women in the same job (e.g. Finland, Netherlands).

33

Managing Expat FailureManaging Expat FailureManaging

expatriates

1. Design a job that maximizes role clarity, minimizes role conflict and compensates for role novelty with proper selection if a candidate with a high level of international experience

2. Use discerning measures for selection of international employees and their companion

3. Educate native and foreign employees in intercultural communication competencies

4. Provide opportunity for language lessons5. Provide a technical assistant to help with the details

of starting life in a different culture6. Create open, frequent communication with the home

organization to dispel feelings of abandonment and to ensure a favorable position upon returning

7. Create opportunities for positive social interactions in order to communicate and become better acquainted with host country members and with host country

34

Staffing MNC’sStaffing MNC’sFemale

expatriates

Several reasons account for minimal presence of females in foreign assignments :

Lack of Motivation: there is a perceived lack of motivation for female employees to relocate internationally

Stereotyping : common impression that women are best fit to work in their own countries

Capabilities : include skills and rescission to cope with stress while they score well on all of the critical competencies and score particularly high on relational skills

Organizational Process : include the diversity orientation of the organization, superior-subordinate relationship and home country selection processes for international assignments

Host Country limitations : certain countries do not encourage women expats

Family constraints : is a common delimiter

35

Staffing MNC’sStaffing MNC’sFemale

expatriates

Advantages of Female expatriates:

Good Relational Skills Rarity of women expats make them unique Shortage of competent managers, more in

the pool helps Female Role Models will facilitate more

female managers entering the pool

36

Recent trends in International staffing Recent trends in International staffing

International Staffing

OffshoringDual Career

Couples

Recruiting sources

Background

Checks

Work Force

Diversity

37


Work

Force

Diversity

Diversity is a key metric on which organizations measure themselves

Diversity implies a workforce mix with fair representation of gender, ethnicities and races

Organizations have diversity policies that drive focused hiring to ensure the desired workforce blend

Diversity costs money, cash cost, opportunity cost and a heightened exposure to business risk, however organizations remain committed to it year after year

38


Offshoring

Outsourcing of non-core standardized services is the new facet of globalization

The spurt in hiring to staff these new-order companies in the emerging and the developing countries has hugely contributed to the revenue and growth of these countries

On the other hand the outsourcing country, usually in the developed economies, stands to loose jobs to low cost and high skills countries making it ‘outplacement and retrenchment a core activity

39


Background Checks

Background checks are carried out to verify personal, professional and other mandated information related to safe employment of candidates

Priced by quantum/scope of the personal and professional level of check that is being carried out, it is a core responsibility of the staffing team to ensure that the employee being on-boarded is cleared from all sides

40


Recruiting sources

Increasing demand for resources has driven widespread innovation in sourcing

Job portals and employee referrals are among the newer and more common sources

Focus on hiring at entry level and then grooming employees for growth is a also gaining popularity as another high retention sourcing strategy

41


Dual Career

Couples

Managing dual career couples Find a job for the trailing

spouse Commute/remote

assignments Sabbaticals Intra-company employment On assignment career

support

Difference between Domestic & International Staffing

Firms predisposition towards who should hold key positions in head quarters and subsidiaries(ethnocentric,polycentric,regiocentric,geocentric)

Constraints imposed by host government Firms ability to attract right talent Persuading managers to release

bestemployees for international assignment

Issues in Staff Selection: The Myth of a Global Manager

There is a universal approach to management (ethnocentric attitude, convergence-divergence – best practices, impact of organizational culture over local culture)

People can acquire multicultural adaptability and appropriate behavior (depends on reaction to particular cultural environment, depends on effectiveness (successful use of managerial and technical skill in a foreign env.) and coping skills (being reasonably comfortable or can atleast survive in a foreign env.)

There are common characteristics shared by global managers ( lang. familiarity, inclusive behavior,linking the foreign assignment with their own career progress)

There are no impediments to global mobility (reality is time, cost, host country requirements curtail the effectiveness of the MNC)


Choosing an Approach to IHRM

Corporate international strategy Political and legal concerns Level of development in foreign locations Technology and the nature of the product Organizational life cycle Age and history of the subsidiary Organizational and national cultural

differences


Recruitment and Selection

Processes through which an organization takes in new members

Recruitment

Attracting a pool of qualified applicants for the positions available

Selection

Choosing the candidate whose qualifications most closely match the job requirements


Selecting the Right Candidate

Need a balance between internal corporate consistency and sensitivity to local labor practices

Consider cultural values Must comply with local labor laws


Training and Development

Planned individual learning, organization development, and career development


Delivery of Programs Worldwide Centralized

Ethnocentric – training originates at headquarters and corporate trainers travel to subsidiaries

Geocentric - training develops through input from both headquarters and subsidiary staff and trainers could be from any location


Delivery of Programs Worldwide

DecentralizedTraining on a local or regional basisLocal people develop training

materials and techniques for use in their own area

Effective training considers cultural background of trainees


Developing Globally Minded Managers

Companies whose CEO's have international assignment experience are better performers

Companies must identify managers with global potential and provide them various training and development opportunities


Performance Evaluation

Systematic appraisal of employees’ performance within the organization

Depends on overall HRM strategy Should consider cultural

influences


Compensation and Benefits

Develops and administers the salary system and other forms of remuneration

Compensation and benefit levels reflect local labor market conditions

Company usually develops policy to offer salaries and benefits representing a specific market level

Culture influences value put on various compensation and benefit practices


Labor Relations

Identifies and defines the roles of management and workers in the workplace

In many countries, government regulated

Unions organized at the local, company, regional (within country), or national level

Number of workers within a country who are union members varies


Managing Expatriates

Must deal with the complexities of employing and moving people outside of their home countries

Cost a major factor


Expatriate Failure Rates

Number who do not remain abroad for the duration of their assignment

Varies by country and gender Failure rate correlated with the

rigor of selection and training procedures


Expatriate Selection

Western European, Japanese multinationals emphasize technical competence and ability to acclimate

North American corporations select mainly on technical competence

Behaviors successful at home may not work abroad

Previous experience abroad may or may not predict future success


Cross-Cultural Training Methods

Explain the major aspects of the host country culture, including customs, traditions, every daybehaviors.

Explain the history, geography, economy, politics, and other general information about thehost country and region.

Portray a real-life situation in business or personal life to illustrate some aspect of livingor working in the host culture.

Cultural Briefings

Area Briefings

Cases


Cross-Cultural Training Methods

Role Playing

Culture Assimilator

Field Experiences

Allows the trainee to act out a situation that heor she might face in living or working in thehost country.

Provides a written set of situations that the trainee might encounter in living or working inthe host country. Trainee selects one from a setof responses to the situation and is givenfeedback as to whether it is appropriate and why.

Provide an opportunity for the trainee to go tothe host country or another unfamiliar culture to experience living and working for a short time.

How Situational Factors Influence the Selection of a CCT Method

Degree ofTrainingRigor

High

LowHigh

LowLow High

Classroom Language TrainingFilms

FACTUALBooks

LecturesArea Briefings

Case StudiesCulture Assimilators

Sensitivity TrainingANALYTICAL

Interactive Language TrainingRole Plays

Field TripsSimulations

EXPERIENTIAL

Degree ofJob Novelty

Degree ofCulture Novelty

Training Methods

Degree of Interaction with HCNs


Cross-Cultural Adjustment

Expatriates must adjust to new work situation, interactions with locals, and new general environment

Company can facilitate adjustment by providing training for expatriates and their families before and during the assignment

Expatriates often experience cultural shock


Culture Shock Cycle

Low

High

1 2 3 4 5 6

Months in a New Culture

Mo

od


Expatriate Evaluation

Job abroad may include more than what it does at home

Senior expat managers often evaluated on financial performance of subsidiary


Expatriate Compensation

Influenced by general corporate compensation policy

Expats usually receive extra compensation and benefits

Different packages offered in different locations


Typical Expatriate Benefits

Overseas premium Housing allowance Cost of living allowance (COLA) Moving expenses Tuition for dependent education Home leave Tax reimbursement plans


Expatriate Reentry

Reverse culture shock common Many organizations fail to

successfully manage expatriate reentry

Individuals may pursue boundaryless career

Organizations can help to ease reentry

© 2005 Prentice-Hall, Inc.

8-66

Changes in Global Mobility

New types of cross-border employee transfers becoming popular

Most important objectives for cross-border transfers to transfer skills and knowledge and to develop and manage global competencies


Convergence or Divergence?

Large corporations’ preference for consistent worldwide systems

Smaller companies’ desire for more professional systems

Need to follow local HRM laws

Development of unique techniques and practices to suit local cultural and legal requirements


Implications for Managers

Every international manager has responsibility for effectively managing human resources, therefore must understand IHRM functions

Helpful to understand IHRM because of potential career impact

Expat

Documents

ties btw individuals

mbas citing

important

projected

parent company

reasons young

international

parent company