INTERNATIONAL HRM

BMG935 CRN 26091

ID NUMBER:

Module Coordinator: Victoria Charles

The business world has now become a global playing field where firms are trusting on their
HR departments to bring together their global operations (Goldblatt et al, 2011).
Multinational corporations (MNCs) in order to achieve its organizational objectives, need the
global human capital of the company to be used wisely disregarding national boundaries.
Thus, the International human resource (IHR) managers cannot design its strategies just
taking into account local factors but thinking globally. Firms failure in international
environments is due to their lack of understanding the primary differences in managing
cross-cultural workforce; not considering the diverse political, social and economic variables
amongst countries will bring a negative impact to the firms human resources (Dowling et
al., 2008; Sparrow et al., 2014).

As globalization has increased the complexity of HRM activities, International HR managers

have to encompass broad strategies that fit workforces expectations while achieving the
companys objectives. Ghotbi (2010) and Sparrow et al (2014) pointed out that MNCs are
dealing with pushes and pulls effects that influence the way the workface is managed.
Push effects seek the global integration of the organizational operations while pull effects
attempt to adapt the particularities of each market. Bearing that on mind, Evans et al. (2002)
acknowledged three international HRM faces the builder - building appropriate HRM
foundations at the start of the internationalisation process; the change partner - realigning
HRM to face the requirements of high speed environment as the company increases its
operations abroad; and the navigator - developing the competences of the organisation and
its workface, managing the balance between opposite forces as global integration and local
responsiveness. By trying to implement these orientations, International HR managers
would be involved in every facet of international business strategy and implementing HR
policies and procedures to ensure a fair, safe and productive work facility (Sparrow et al,
2014).

International HR practitioners need to adopt a wide perspective of globalization. Sparrow et

al (2014) highlight that as they deal with human beings they have to cope not just with the
consequences of the globalization of markets and industries but the impact that these have
on behaviour, attitudes and mindsets. One employee who has been successful in one
nation is not necessarily successful in another nation. Managerial failures overseas may be
evaded by using effective selection procedures and predeparture trainings programs
(Phatak, 1997). Thus, in order to eliminate this issue, international HR managers need to
make emphasis on functions and activities such as relocation, orientation, transfer,
compensation and ethics in order to help employees to adjust in completely new
environments and bring positive results to the company.

One of the most important task for IHR professionals is planning. It is crucial for them to
understand in detail not only the specific positions requirements but also to know the cultural
differences of the workplace. Taking Hofstede (2011) model, there are five dimensions in
cultural differences that influence the adaptation of expats: 1) power distance (related to
social inequality perceptions in other cultures). 2) uncertainty avoidance (different peoples
skill to face unknown circumstances. 3)Individualism versus collectivism (integration of
people in primary groups). 4) Masculinity versus femininity (division of emotional roles
between men and women). 5) Long term versus short term orientation (futures projections).
Those five dimensions allow IHR practitioners to understand how to plan successfully the
human capital in order to hire the right employee, in the specific place, time and position.
Therefore, this planning must fit with the companys global strategy and host-country culture.
For instance, Cuevas et al (2011) in Baileys case study, point out the importance of cross-
cultural training expats need to carry out before taking international assignments. The issue
in this case study was that the IHR manager provided to Bailey outstanding economic
compensations and rewards for moving abroad but did not take into consideration the
importance of training him and his family to face the cultural impact.

Choosing employees to effectively work overseas depends on different things, most

essentially on adjustment and on ensuring that employees family get the genuine
panoramic, counselling, and support required to make the transition abroad. These
orientation and training processes must be done not just before the departure but also during
the assignment and before the repatriation. Once the expatriate arrives to the host-country,
he/she faces practical challenges that will be need to be supported by a pastoral care
assistant provided by the company to overcome the cultural shock (Dowling et al, 2008).
Finally, Dowling et al. state that when the assignment is completed, managers must organize
the expatriates return in order to minimize the expat disappointment caused by the reverse
culture shock. Most of the firms are not successful in their repatriate re-entry problems
which wipe out any return on investment. Kellogg Co (IHRM topic 4) positively increased is
turnover rate among expatriation/repatriation success by implementing a deep selection
process in which the possible candidate to go abroad as well as his/her family must take a
pile of assessments to revise their profiles and then discussed possible risks they may
encounter during the assignment.

Firms management values will impact how IHR managers staff their operations overseas
based on three approaches to managing people in MNCs. Ethnocentric companies tend to
emphasize home-country attitudes, polycentric companies focus more on host-country
employees, and geocentric employers attempt to select the best candidate from wherever
they might be (Phatak, 1997; Dowling et at, 2008 and Peng et al, 2016). There is a pattern
in the MNCs that can be detected when determining staffing choices. HR practitioners adjust
the international staffing and recruitment policies according to the stage of
internationalization of the company in order to gain a sustainable competitive advantage in
the companys operations. Phatak, (1997) highlight that the companys decision to go
straightforward with one of those approaches depends on the HR systems strategic factor.
If the company believes that through tacit knowledge it is preserved and encouraged the
intangible assets, the probability of being transferred to its subsidiaries will be higher. On
the other side, if that is not considered relevant by the company, it is possible that it
delegates its design to the host-country executives, especially when the external pressures
require a local responsiveness. According to Taylor (1996), in the adaptive approach, the
company does not consider the human resource as an essential factor to gain advantage;
therefore, IHR managers tend to hire host-country nationals while in the exportive approach
it is believed exactly the opposite; host-country employees meet the firm-specific needs of
the company more effectively.

Lertxundi (2016) claim that the decisions made in the HR department in MNCs are also
directly influenced by their costs. He makes emphasis in the transaction cost theory (TCT)
by saying that ex ante cost operating in international fields influence the corresponding costs
of physical establishment and learning of new cultures and markets. The cultural gap
between the headquarters and the subsidiary generates a feeling of uncertainty and risk
concerning their international operations (Foss, 2008). Thus, the impact that staffing
decisions have on operations abroad is crucial, particularly when selecting key executives.
IHR managers need to consider and choose a policy that best fit the companys structure,
budget, length of time of overseas assignment, qualification and competence of host country
nationals when ensuring success of the cross-border operations (Thoo et al, 2013).
Employees at the bottom of the pyramid are usually HCNs while executives are PCNs due
to the relevant responsibilities in their position. Although the cost of expats is much higher,
IHR managers project them as a strategy to transfer know-how knowledge and have control
on the operations which in long-term may generate cost reductions to the company because
in that way risk could be reduced. Coca-Colas strategy HR strategy believes that local
people are better equipped to do business at their home locations. However, there is still a
need for expatriates when it comes to fill positions with specific need that cannot be found
in the home country or for employees own development (Anfuso, 1994).

Moreover, IHR departments have to overcome with more added issues based on managing
pay and rewards across national borders. Compensation policies should attract, retain and
encourage staff, while at the same time harmonise these costs with the expected returns for
the company (Dowling et al, 2008 and Reiche, 2011). Managers have two main strategic
approaches when managing expatriate compensations: the balance sheet approach and the
going rate approach. (Reiche, 2011 and Aswathappa, 2008). The first one aims to maintain
the headquarters pay structures plus additional differentials such as cost of living
adjustments. On the other hand, the second approach is based on local salary standards.
The expatriate compensation is linked to the salary scale of the host country (Phatak, 1997;
Reiche 2011, Dowling et al, 2008 and Aswathappa,2008). Despite the fact that he going-
rate approach may be more cost-effective, the most broadly used approach by companies
is the balance-sheet. This is due to the fact that is more relevant for companies attract and
motivate potential applicants for overseas assignments than cost saving. For instance,
Coca-Cola in order to retain and attract its expatriates in China, offered to pay a 15% bonus
for breathing the countrys polluted air (Bloomberg, 2014). The pollution issues in China has
made difficult to HR departments the selection and retain process of new hires, therefore,
they need to come up with appealing offers that would make potential expatriates think twice
before rejecting them.

Taking all those HR practices into account, it could be observed that every company must
manage a number of basic and important human resource tasks such as recruiting and
staffing, pay and rewards, training, and ethics. Evans et al. (2012) argue that the quality of
those simple tasks relates to their consistency, the way in which they fit together. The theory
about the builder HR makes emphasis on how a solid foundation of practices in MNCs will
increase overall performance. For instance, the example given above about Baileys case
study exemplifies how the company invests a lot of money by finding the right candidate to
send abroad but did not take into consideration retention through feedback practices and
cultural training. The lack of consistency on the basic tasks of HR departments lead a failure
during the expatriate assignment. Thus, managers must create consistent activities that fulfil
the workforce and firms expectations but there is a risk that they get stuck in the phase of
HR building (Nilsson et al, 2003). According to Evans et al (2002), the strategy of the firm
must not be taken for granted because the goals of the firm may have changed with time.
The partner change appears when there is a necessity to realign the firms strategies. For
example, when trying to choose what approach to follow when managing people across
borders (ethnocentric, polycentric, geocentric). However, a firm cannot go through constant
change and due to costs issues as well as the importance for consistency in order to keep
employees satisfied appear the role of the navigator (Nilsson et al, 2003). At this stage,
firms are now become so international that they need to balance its operations between
global integration and social responsiveness.

International human resource practitioners must carry out diverse activities to ensure a
successful survival of MNCs operations overseas. To meet the demands of MNCs,
managers need to perform new complex activities. All those managerial activities are based
on particular contexts, resources and competencies available at headquarters and
subsidiary levels. According to this, there is a choice to be made by international managers
on the approach they must follow to fulfil all the objectives and goals set by the company.
Push-pull influences are important when selecting the approach due to the fact that they
reflect the organizational firms mission and vision and in that order, allow managers to
establish clear policies and procedures to implement their activities by ensuring fair, safe
and productive work facility. The stage of internationalisation requires new roles for the
international HR manager and through the three faces of HRMs model: the building, the
partner change and the navigator they have a clear light to not make the mistake of getting
stuck in just one approach but gaining competitive advantage through its practice.
References

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