International Business
Oded Shenkar and Yadong Luo
Chapter 17
Global Human Resource
Management
Chapter 17: Global Human Resource Management
Do You Know?
• Some basic stages that Multinational
Enterprises go through to staff themselves?
• What the reasons are for assigning an
expatriate to foreign branches and/or
subsidiaries?
• That the rate of success for expatriates is tied
to their abilities, openness, and training?
• What some of the basic parts of expatriate
compensation are?
• How working for subsidiary versus working
for an international joint venture differs for the
expatriate?
Chapter 17: Global Human Resource Management
BP Amoco
• BP Amoco, originally British Petroleum,
acquired Standard Oil of Ohio between 1976
and 1987. After that, it acquired Atlantic
Richfield.
• With the acquisitions, it established
• BP-Amoco as a world power in oil
development, exploration, refining, and
distribution.
• In order to give itself sufficient expertise in
world affairs, the company undertook the
mission of internationalizing the Board of
Directors, based in London. To date, the Board
consists of 10 non-Brits, and 14 Brits.
Chapter 17: Global Human Resource Management
International Human Resources (IHRM)
• International Human Resources
Management is the procurement,
allocation, utilization, and motivation of
human resources in the international
arena.
• With quality and conflict among the top
issues for international managers, firms
deal with multiculturalism, dispersion,
international taxation, relocation, and
foreign culture orientation in selecting
and developing expatriate managers.
Chapter 17: Global Human Resource Management
Strategic IHRM
• Strategic IHRM is defined as “human
resources, management issues,
functions and policies and practices that
result from the strategic activities of the
Multinational Enterprise and in impact it
has on the international concerns and
goals of that organization.
Chapter 17: Global Human Resource Management
Strategic IHRM
Strategic IHRM has three main orientations:
• The Adaptive System – that seeks to imitate
local HRM practices
• The Exportive System – that seeks to
replicate the HRM system of the home
country in host country, affiliates, partners,
and subsidiaries
• The Integrative System – that seeks to
emphasize global integration while permitting
some local variation
Chapter 17: Global Human Resource Management
Strategic IHRM
Exhibit 17-1: Model of strategic international
human resource management (SIHRM)
Chapter 17: Global Human Resource Management
Staffing the MNE
• Staffing the Multinational Enterprise is a
difficult endeavor.
• Firms must deal with gaining a global
orientation in the Board of Directors, the
rank and file of the company, and deal
with a number of country specific
issues.
Chapter 17: Global Human Resource Management
Staffing the MNE: The Board
• Firms seeking a global orientation frequently
start with the Board.
• By doing this, they gain needed international
insight into markets, customer demands, and
country specific business issues.
• Firms typically start with nationals who have
international experience, and then move on to
foreign nationals.
• Representation is an important issue as firms
seek true expertise in the international
market.
Chapter 17: Global Human Resource Management
Staffing the MNE: Rank Terms
• PCN – Parent Company Nationals
• HCN – Host Country National
• TCN – Third Country National
Chapter 17: Global Human Resource Management
Staffing the MNE: The Ranks
Staffing the Multinational Enterprise’s
employees is also a difficult endeavor. Firms
go through stages where they use:
• Ethnocentric Staffing – PCNs almost
exclusively
• Polycentric Staffing – HCN in key positions
• Regiocentric Staffing – Regional basis
• Geocentric Staffing – TCN, HCN, PCN equal
status
Chapter 17: Global Human Resource Management
Staffing the MNE: The Ranks
Exhibit 17-3: Hourly compensation costs in U.S.
dollars for production workers in manufacturing, 2001
Chapter 17: Global Human Resource Management
Staffing the MNE: Issues
• Adjustment Of/To Corporate Policies
• Variations In Employment Markets And
Labor Policies
• HCN Adjusting To Higher Productivity
Requirements
• Finding Skilled HCN
• Very High Turnover
Chapter 17: Global Human Resource Management
The Expatriate Workforce
• The Expatriate Workforce is small in
comparison with total Multinational
Enterprise employment, less than 1% of
total employment.
• The numbers are growing as more
companies are pursuing global
objectives.
Chapter 17: Global Human Resource Management
The Expatriate Workforce: Terms
• Traditional Expatriate, older and
experienced, selected for experience and
knowledge
• International Cadre, individuals who move
from one assignment to another
• Permanent Expatriate, employees who are
permanently assigned to overseas locations
• Young Expatriate, needs experience, is sent
for rotating assignments
• Temporary Expatriate, goes on short
assignments
…/…
Chapter 17: Global Human Resource Management
The Expatriate Workforce: Terms
• Expatriate Trainee, placed abroad for
management experience as part of
Multinational Enterprise initiation
• Virtual Expatriate, the expatriate who
takes on foreign assignments while
staying in the home office
Chapter 17: Global Human Resource Management
The Expatriate Workforce: Pro
• There are advantages to using
expatriates.
• Frequently, locals are not ready to take
the responsibility.
• Expatriates contribute essential
knowledge and corporate history.
• Expatriates serve as a mechanism for
performance control, and transmit
corporate culture and goals.
Chapter 17: Global Human Resource Management
The Expatriate Workforce: Con
• There are disadvantages to using
expatriates.
• There is a disincentive to the local
workforce whose promotion is blocked
and who earn poor wages.
• Expatriates can rob a company of skill
development, insight development, and
initiative of locals. Expatriates also have
a high risk of failure.
Chapter 17: Global Human Resource Management
Expatriate Failure
• Failure is frequent. It occurs when the
assignee returns prematurely or when
performance does not meet
expectations.
• Rates range from 15% to 80%. The
highest failure rate is for United States
nationals.
Chapter 17: Global Human Resource Management
Failure Costs
• The costs for failure are substantial,
ranging from $55,000 to $150,000 per
failure in direct costs.
• The real cost if higher as it includes cost
of selection and replacement, training,
preparation, moving, lost revenue, lost
reputation, lost opportunity, and lost
future value.
Chapter 17: Global Human Resource Management
Failure Reasons
• The reasons for failure are legion.
• They include spouse unhappiness,
inability to adjust, immaturity, inability to
cope with responsibility, stress, lack of
technical competence.
• Lack of motivation is also a problem.
• Dual career families are frequently hurt
in the expatriate assignment.
Chapter 17: Global Human Resource Management
Expatriate Selection
A firm needs to select on:
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Feedback Seeking Behavior
Feedback Using Behavior
Adventure Seeking Behavior
Seek Learning
Open To Criticism
Flexibility
Cultural Sensitivity
Business Knowledge
Courage
Motivational Ability
Integrity
Insight
Commitment
Risk Taking
Chapter 17: Global Human Resource Management
Expatriate Selection
Successful expatriates need three sets of skills:
• Personal Skills, stress orientation,
reinforcement needs, substitution, physical
mobility, technical competence, dealing with
alienation, isolation, realistic expectations
• People Skills, relational abilities, willingness
to communicate, non-verbal communication,
respect for others, empathy
• Perception Skills, flexible attribution, open
mindedness, and judgment suspension
processes
Chapter 17: Global Human Resource Management
Expatriate Selection
• You could also look for realistic
expectations, open-mindedness,
respect for others’ beliefs, trust in
people, tolerance, locus of control,
flexibility, patience, social adaptability,
initiative, risk-taking, sense of humor,
and spouse support
Chapter 17: Global Human Resource Management
Expatriate Preparation
• Preparation is essential to expatriate
success.
• The U-curve theory states that
expatriates go through four stages of
adjustment: the honeymoon, culture
shock, adjustment, and mastery.
• Effective preparation can speed the
expatriate through the stages.
Chapter 17: Global Human Resource Management
Expatriate Training
Training for expatriates has several
stages:
• Practical Information - on living
conditions in host country
• Area Studies – information of the
macro environment
• Cultural Awareness Information
Chapter 17: Global Human Resource Management
Expatriate Compensation
• Research suggests that the
compensation package should reduce
expenses while enhancing commitment
to the employer, job satisfaction, and
willingness to relocate internationally.
Chapter 17: Global Human Resource Management
Expatriate Compensation
Typical for expatriate compensation:
• Salary, with deferment options
• Benefits, like insurances to cover health and
other risks
• Housing, which can be very expensive.
• Service Allowances And Premiums,
including education allowances, home leave,
relocation, transportation, automobiles,
security, inconveniences
• Tax Equalization, to compensate when host
country tax policies hurt the expatriate
Chapter 17: Global Human Resource Management
Expatriate Compensation
Exhibit 17-7: Adoption of U.S.-style compensation by
foreign firms in the United States
Chapter 17: Global Human Resource Management
HRM Problems in Foreign Affiliates
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Staff Friction
Blocked Promotion
Exile Syndrome
Split Loyalties
Compensation Gaps
Blocked Communication
Limited Delegation
Screening Of Information
Unfamiliarity
Chapter 17: Global Human Resource Management
Repatriation
• Repatriation represents a major adjustment
for the expatriate.
• Many firms do not provide a guarantee of
reassignment prior to departure, and most
don’t know what their next assignment will be.
• Those reassigned frequently feel their
employer does not make effective use of their
foreign experience. Most firms do not provide
spouse career counseling or other forms of
family repatriation assistance.
• Many expatriates leave within 1 year of
repatriation
Chapter 17: Global Human Resource Management
Preparing for an Assignment in a
Foreign Affiliate
Exhibit 17-9: Management education
requirements in two types of foreign affiliates
Chapter 17: Global Human Resource Management