From HRM to IHRM
Internationalization of HR
Prof. Dr. jur. Dietmar Högel
Teaching Visit: HHN / SSU
—  Friday, 04.09.2015, same time & place
¡  The Intercultural Challenge. Expat Training
& Preparation
¡  Lecture (90 minutes)
¡  Film „Outsourced“ (105 minutes)
} intercultural adventures of a US-Expat in India
} film is much used in intercultural trainings for
future expatriates (not only for India)
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Learning Objectives (1)
—  Upon completion of this lecture students
will be able to:
¡  describe the major differences between domestic HRM and IHRM and name the factors responsible for the complexity of IHRM
¡  define the term „expatriate“ and differentiate
expats from employees performing other
forms of international business activity
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Learning Objectives (2)
¡  to describe different assignment types and
expose typical reasons for sending expats
on a foreign assignment
¡  explain the vastly different role familyrelated issues play in HRM and IHRM
¡  to give an overview over typical IHRM activities and challenges
¡  identify convergence tendencies between
HRM and IHRM
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Outline (1)
1.  Domestic HRM (Recap)
2.  IHRM – A Tour d‘Horizon
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What HRM is about
Basic Questions
Expatriates
Location Challenges
Family Challenges
Compensation
Compliance
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Outline (2)
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The Poaching Challenge
Selected IHRM Activities
Expat Communities (on-/offline)
3.  Internationalization of HRM
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Multicultural Workforce in Germany
Concept of Workforce Diversity
4.  Recommended Literature
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1. Domestic HRM (Recap) (1)
—  Human Resource Management
The process of hiring and developing employees so that they become more valuable to the organization. HRM includes conducting
job analyses, planning personnel needs, recruiting the right people
for the job, orienting and training, managing wages and salaries,
providing benefits and incentives, evaluating performance, resolving
disputes, and communication with all employees at all levels. ...
http://www.businessdictionary.com/definition/human-resource-management-HRM.html
¡  Germans tend to clearly differentiate between:
} HR Management Task
} HR Administration Tasks (everyday routine tasks)
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1. Domestic HRM (Recap) (2)
—  HR Management Tasks (Personalgestaltung)
} HR Planning
} Recruitment
} Working Structures
} Mgt. / Leadership
} Compensation
} HR Development
} Release
Pre-entry
Working Life
End of Work
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1. Domestic HRM (Recap) (3)
—  The very core Function of HRM
¡  It is the vital function of HRM to constantly
provide the company with
} qualified employees
} in required numbers
} at the right time
} for the right duration
} at the right work place.
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1. Domestic HRM (Recap) (4)
—  Strategic Challenges of HRM
¡  Effects of demographic decline (Germany)
} „war for talent“ → yesterday‘s lecture on SWP
¡  Effects of globalization
} transparency of world job markets (internet!)
} decreasing emotional attachment (loyalty) of
employees to their companies
} difference in labour costs between countries
} others ...
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1. Domestic HRM (Recap) (5)
—  But ...
... what happens when HRM goes
international?
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2. International HRM (1)
—  What IHRM is about
¡  The focus of IHRM lies on expatriates (expats, international assignees).
¡  They are sent abroad by their companies on
temporary work assignments for various
reasons.
¡  The costs of foreign assignments are high.
But, as economic globalization intensifies,
their number keeps rising.
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2. International HRM (2)
¡  International Assignment Objectives
Brookfield, 2015 Global Mobility Trends Survey Report
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2. International HRM (3)
¡  It is the core task of IHRM to assure the successful completion of assignments by
} recruiting and selecting the right people
} preparing them for their assignment in an optimal
way
} helping them with all bureacratic, factual and
psychological problems of relocation to a foreign
country
} extending all this to the expats‘ family members
(in the frequent case of an accompanied assignment)
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2. International HRM (4)
—  Basic Questions
¡  In which way are domestic HR activities
modified in an international environment?
¡  Which activities unnecessary in a domestic
environment do we need in IHRM?
¡  Which factors make a differentiation between domestic and international HRM inevitable?
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2. International HRM (5)
Domestic HRM
International HRM
—  Home-Country
—  Two or more countries
involved
—  People from one Country
—  People from two or more
countries
—  „Classic“ HR-activities
—  Modified and new HRactivities
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2. International HRM (6)
¡  Different types of countries
} parent-country (PC)
} host-country (HC)
} third countries (TC)
¡  Different categories of people
} parent country nationals (PCN)
} host country nationals (HCN)
} third country nationals (TCN)
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2. International HRM (7)
¡  Different set of HR activities
} recruitment & selection for an assignment
} predeparture training / intercultural preparation
} health requirements / medical care / health
insurance
} finding solutions for partners and children of
employee
† e.g. finding a job for the spouse/partner and getting a
work permit
† finding adequate childcare / school for the children
} tax equalization ... and many more
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2. International HRM (8)
Three-­‐dimensional Model of IHRM (planning
staffing)
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2. International HRM (9)
¡  Complexity of IHRM
The complexity of operating in different countries
and employing different
national categories of
staff is a key variable that
differentiates domestic
and international HRM.
Dowling/Festing/Engle, IHRM 2008
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2. International HRM (10)
—  Expatriates (Expats)
¡  „Classic“ Expats are the traditional focus of
IHRM
¡  Human linking pins of the
globalized Economy
¡  Valuable source of information:
The Global Mobility Trends Survey Report
(published by annually by Brookfield Global
Relocation Services; free download)
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2. International HRM (11)
¡  Expats: IHRM-Definition / Terminology
} international assignee / expatriate / Auslandsentsandter / экспатриант
} professionals sent abroad on a temporary foreign assignment by their companies
} expats relocate to the assignment destination
(mostly with their families)
¡  Duration of International Assignments
} short-term assignment: 3 to 12 months
} long-term assignments: 12 months and longer
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¡  Under 6 months (short term): 6%
¡  1 to 2 years: 17%
¡  2 to 3 years: 30%
¡  3 to 4 years: 18%
48%
72%
¡  over 4 years: 7%
¡  (permanent: 7%)
(long term assignment)
¡  6 months to 1 year (extended): 15%
21%
(short term
assignment)
2. International HRM (12)
(localization)
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2. International HRM (13)
¡  Non-Expats
} Inpat: international assignee HCN oder TCN
from a foreign location to company HQ
} Business Travellers: travel the world within the
context of normal home country obligations without relocating (business diplomats, sales staff)
} Commuter Expats: assignee commutes between
home and host location
† on a daily, weekly, monthly basis or on demand
† intermediate step between extended business travel
and full relocation
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2. International HRM (14)
} One-way Permanent Move: a PCN relocates to
host country for an indefinite period of time
} Localization: conversion away from international
assignee status to host terms
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2. International HRM (15)
¡  Profile of the average expat*
Gender?
PCN/TCN?
Age?
Marital Status?
Accompanied by partner?
Accompanied by children?
Duration of assignment?
Employed prior to assignt.
* Based on data provided by Brookfield, 2015 Global Mobility Trends Survey Report
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2. International HRM (17)
—  Location Challenges
¡  Top Assignment Destinations
Brookfield, 2015 Global Mobility Trends Survey Report
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2. International HRM (18)
¡  What makes an assignment destination
“challenging”?
} language barriers
} cultural differences
} high cost of living
} difficult housing situation
} food
} lack of adequate schools (for children)
} restrictive visa and/or work-permit legislation
(for partners)
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2. International HRM (19)
} lack of safety (crime)
} security threats (political violence, terrorism, civil
war)
} environment: water and air pollution
} disease, poor sanitation facilities
} inadequate medical care, health system
} lack of recreational facilities
} traffic issues, traffic congestion
} climate (extreme heat or cold, humidity)
} etc.
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2. International HRM (20)
¡  Most challenging assignment destinations
Brookfield, 2015 Global Mobility Trends Survey Report
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2. International HRM (21)
¡  Countries with highest rates of international
assignment failure
Source: Brookfield, 2015 Global Mobility Trends Survey Report
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2. International HRM (22)
—  Family Challenges
¡  Remember: profile of the average expat*
Gender?
male (81%)
PCN/TCN?
PCN
Age?
40 (30 – 49 = 71%)
Marital Status?
married / partnered (74%)
Accompanied by partner?
with spouse / partner (80%)
Accompanied by children?
with children (52%)
Duration of assignment?
3 years
Employed prior to assignt.
yes (92%)
* Based on data provided by Brookfield, 2015 Global Mobility Trends Survey Report
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2. International HRM (23)
¡  Reasons for assignment refusal
Copyright Prof. Dr. D. Högel (WS 2015/16) Source: Brookfield, 2015 Global Mobility Trends Survey Report
55%!
33
2. International HRM (24)
¡  Critical family challenges
Source: Brookfield, 2015 Global Mobility Trends Survey Report
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2. International HRM (25)
¡  The „trailing spouse“
} Although it is a headache to solve family related
problems and it may double or triple the cost of
an assignment most
companies prefer to
send couples or families on foreign work assignments. Why?
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2. International HRM (26)
} The average expat is a family man!
} Family concerns are reason No 1 for assignment
refusal!
} There is a significant causal relationship between the expat’s and his/her spouse’s willingness to accept an assignment offer (de facto
right of veto)!
} As an important stabilizing element spouses and
family are a key factor for assignment success!
} For an assignment companies have to recruit not
only the potential expat but the whole family!
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2. International HRM (27)
} spouse/partner assistance provided by companies
Source: Brookfield, 2015 Global Mobility Trends Survey Report
(... continued on next slide)
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2. International HRM (28)
Source: Brookfield, 2015 Global Mobility Trends Survey Report
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2. International HRM (29)
¡  Children
} 52% of expats are accompanied by their children
} childrens’ education and family adjustment are
the most critical family challenges
} some expats have children during their assignment
} family concerns are reason No 1 for assignment
refusal
} companies have to come up with solutions to
child-related problems
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2. International HRM (30)
„… the main challenge is about education; that´s why we offer the
assistance of an education counselor to advise about the most suitable options at the host location ...“
Verbatim Comment, GRTS Report 2009, p. 43
} availability of adequate schooling
† catering the special needs of expatriate children (e.g.
language, culture, etc.)
† compatibility with parent country education system
† preparation for a smooth re-entry after the assignment
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2. International HRM (31)
} Education assistance for expat families
† financial assistance with a child’s education during an
international assignment (school fees etc.)
† employer assistance varies according to company
culture, budgetary restrictions, employee expectations,
etc.
† 52% of MNEs always contribute to educational
expenses (ORC Worldwide Survey 2008).
„… schooling is the key point for most parents; availability of good
schooling is always a deal maker/breaker. ...“
Verbatim Comment, GRTS Report 2009, p. 43
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2. International HRM (32)
—  Compensation: the “Expat Package”
¡  Objectives (company perspective)
} attracting and retaining qualified staff in countries where the copany needs them (incentive
function)
} concistency with the overall strategy, structure
and business needs of the company as a global
player (unified patterns)
} facilitating the transfer of international employees in the most cost effective manner
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2. International HRM (33)
¡  Objectives (expat perspective)
} financial protection in terms of benefits, social
security, living standard
} financial advancement through increased income (or savings)
} financial aspects of housing, education of children, recreation, travel, reduced income of
spouse etc.
} this adds up to a considerable potential for additional complexity, problems and technical issues
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2. International HRM (34)
¡  Compensation system for expats
} base salary
† the foundation block of the expat package
† linked to parent- or host country, international rate?
† paid in parent- or host country currency, split salary?
} foreign service inducement (hardship premium)
† reward for accepting the assignment (5 – 40% of base
salary)
† for actual hardships (i.e. separation from family)
† for negative tax consequences etc.
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2. International HRM (35)
} allowances
† aimed at maintaing financial status quo of expat
† cost-of-living allowance (cola)
† housing allowance
† home leave allowance
† education allowance
† relocation allowance
† etc.
} other benefits
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2. International HRM (36)
¡  Tax equalization
} expats face both domestic and hostcountry tax liabilities
} wide variations of tax laws in
different (host) countries
} tax equalization policies
} high cost of international taxation
consultancy
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2. International HRM (37)
—  Compliance
¡  The company must assure that the organization and its employees are complying with
} internal policies and procedures
} legal regulations of parent country, host country
and international law
} i.e. German managers in Russia have to act in
accordance with German law, Russian law and
international law (e.g. bribery, „крыша“, „фонд
для подкупа“ etc.)
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2. International HRM (38)
¡  Sanctions
} company may be sued (e.g. Daimler! Siemens!)
} expat-manager may be prosecuted and fired
¡  Consequences
} high personal risk to the expat
} pressure to succeed can lead to insoluble
conflicts
} expat needs clear guidelines and backing of HQ
in case of lost business opportunities
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2. International HRM (39)
—  The Poaching Challenge
¡  Reason No 1 for assignment failure!
¡  Opportunity for recruiters
¡  Threat to employers
¡  The retention of expats and other qualified
personell is one of the most important HRchallenges in the international arena!
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2. International HRM (40)
—  Selected IHRM Activities
¡  IHRM activities are multifold and complex.
¡  Some of them need the expertise of highly
specialized professionals.
¡  Only big international enterprises have
substantial IHRM departments.
¡  Even they outsource special issues to specialist, e.g. to international tax consultants.
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2. International HRM (41)
¡  Planning the staffing of international operations
¡  Recruitment and selection of future expats
} Poor candidate selection is the 4th important reason for assignment failure!
} 90% of expats are recruited internally (a striking
difference between HRM and IHRM!)
} Great, if MNE can draw upon a pool of internationally experienced managers.
} If you don‘t win the spouse/partner you lose!
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2. International HRM (42)
¡  Activities regarding international relocation
and orientation
} expat preparation / predeparture training (issue for
tomorrow‘s lecture!)
} helping with immigration procedures (i.e. visa,
long-term stay permits, work permits etc.)
} travel details
} providing (adequate) housing / accomodation at
the target location
} home sale assistance (to assist the employee in
selling his home in the departure location)
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2. International HRM (43)
} assuring medical care and health insurance
} finding a job for spouse/partner (work permit!)
} finding school and childcare for the children
} ... and many more
¡  Many relocation and orientation activities
can be outsourced to (international) relocation service providers → expat relocation
services
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2. International HRM (44)
¡  Activities during the assignment
} keeping the psychological contract
† keeping promises
† living up to expectations
} installing a mentor (senior executive with expat
experience?) before the assignment
} weekly contact between mentor and expat (phone,
skype etc.)
} informing expat about changes in parent company
} preparing expat (+ family) for and managing of
repatriation, offering a repatriation program
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2. International HRM (45)
¡  Repatriation of expats
} repatriation is the activity of bringing the expatriate (incl. family) back to the parent country
} repatriated expat = repatriate = repat
} the final and often critical stage of an assignment
} expat-turnover (expat attrition rate) is high: 12%*
} 80% of international managers leave their company within 2 years of repatriation*
} they take all their international know-how and
experience with them (to the competition)
* Source: Brookfield, 2015 Global Mobility Trends Survey Report
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2. International HRM (46)
} companies face the challenge to prevent this loss
of know-how and competence by assisting repats
and their families
} job-related repatriation problems
† career anxiety
† work adjustment problems
† consequences of „Out of sight, out of mind“-effect
† kingpin syndrome
} social repatriation problems
† family (spouse/partner, children) adjustment problems
† loss of social networks („phone doesn‘t ring any more“)
† reverse culture-shock
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2. International HRM (47)
—  Expat Communities
¡  important factor of location attractiveness
¡  social contacts for spouse/partner & children
¡  Real and online-communities
} real: often „run“ by expat-wives
} online: exchange of multifold information
† legal issues, chat-rooms, articles, experience reports
† tipps on jobs, housing, everyday life, shopping, dating ...
† useful links to other relevant sources of information
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3. Internationalization of HRM (1)
—  Multicultural Workforce in Germany
¡  Age pyramid Germany 2013
Germans (without migration background)
Germans (with migration background)
Foreigners
Source: Mikozensus, Statistisches Bundesamt, Fachserie 1, Reihe 2.2.2013
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3. Internationalization of HRM (2)
¡  Population with migration background
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3. Internationalization of HRM (3)
¡  Migration balance: selected countries 2013
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3. Internationalization of HRM (4)
¡  Workforces in Germany are characterized
by a high percentage of employees with different migration backgrounds.
¡  Challenges
} integration of foreign employees (and their
families)
} prevention of discrimination
} promotion of workplace diversity
} using diversity management as a means of
creating a more effective company
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3. Internationalization of HRM (5)
—  The Concept of Workforce Diversity
Workforce diversity is a workforce consisting of a broad mix of employees from different racial and ethnic background, of different ages
and genders, sexual orientation, religious belief, physical abilities
and of different domestic and national cultures.
¡  The concept of diversity goes way beyond
anti-discriminitation:
} diversity is promoted, made part of the employer
brand ...
} in order to create a more effective company
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Daimler Employer Brand
http://www.daimler.com/career/thats-us/diversity/
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3. Internationalization of HRM (6)
¡  Dimensions of Diversity
} generation diversity
} gender diversity
} religious beliefs
} handicapped
} race / ethnicity
} cultural diversity
} sexual orientation
http://web.jhu.edu/sebin/t/m/DiversityWheel_Small.jpg
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3. Internationalization of HRM (7)
¡  Diversity management
The practice of addressing and supporting multiple lifestyles and
personal characteristics within a defined group. Management activities includes educating the group and providing support for the acceptance of and respect for various racial, cultural, societal, geographic, economic and political backgrounds.
http://www.businessdictionary.com/definition/human-resource-management-HRM.html
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3. Internationalization of HRM (8)
¡  Business case for diversity
} different perspectives lead to higher innovation
levels
} customers/markets are diverse which should
closely be reflected by a diverse workforce
} overcoming ethnocentric outlooks on a diverse
world with diverse markets
} taking advantage of all talent from different generations, ages, genders and backgrounds
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3. Internationalization of HRM (9)
Copyright Prof. Dr. D. Högel (WS 2015/16) Screenshots: http://your.bosch-career.com/en/web/de/de/bosch_
arbeitgeber/vielfalt/internationalitaet/kulturelle_vielfalt_50
¡  Where HRM and IHRM come together
67
3. Internationalization of HRM (10)
¡  Success through intercultural competence!
} IHRM: A foreign assignment is likely to fail if the
expat lacks intercultural competence.
} HRM: Intercultural competence is a prerequisite
for successfully managing a diverse (multicultural) workforce in a domestic setting.
} HRM/IHRM: Sending managers on so-called
developmental assignments makes sense.
} IHRM/HRM: Interculturally experienced repats
have a valuable contribution to make to successful diversity management in their home company.
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4. Recommended Literature (1)
¡  Dowling, P.J./Festing, M./
Engle A.D., International
Human Resource
Management. Managing
People in an multinational
Context, 6th ed. 2013,
Cengage Learning EMEA
Copyright Prof. Dr. D. Högel (WS 2015/16) 69
4. Recommended Literature (2)
¡  M. Festing / Dowling, P.J./
Weber, W. / Engle A.D.,
Internationales Personalmanagement, 3. Auflage
2011, Gabler Verlag,
39,95.- EUR
Copyright Prof. Dr. D. Högel (WS 2015/16) 70
4. Recommended Literature (3)
¡  Rees, C./Edwards, T., International
Human Resource Management: Multinational Companies in National, Regional and Global Context, 2nd Ed.
2010, 48.99 €
¡  Harzing, A.-W./Pinnington, A. (eds.),
International Human Resource Management, 3rd Ed., Sage, London
(2010), 39.99 €
Copyright Prof. Dr. D. Högel (WS 2015/16) 71
4. Recommended Literature (4)
¡  Dickmann, A./Brewster, C./Sparrow,
P., International Human Resource
Management: A European Perspective, 2nd Ed. 2008, Routledge, 39.- €
¡  Briscoe, D.R. / Schuler, R.S. / Claus,
L., IHRM: Policies and Practices for
Multinational Enterprises, Routledge
Chapman & Hall, 3rd. ed. 2008 (4th
edition to appear in July 2011)
Copyright Prof. Dr. D. Högel (WS 2015/16) 72
4. Recommended Literature (5)
¡  De Bono, S./Van Der Heijden, B./
Jones, S., Managing Cultural Diversity, Meyer & Meyer Verlag, 2008
¡  Schneider, S.C./Barsoux, J.-L.,
Managing across Cultures, 2nd
edition, FT Prentice Hall, Harlow
(2003)
¡  Mor Barak, M.E., Managing Diversity,
Sage Publications Inc, 3rd rev. ed.,
2013
Copyright Prof. Dr. D. Högel (WS 2015/16) 73
4. Recommended Literature (6)
¡  Laws, B./Koziner, A./Waldenmeier, M.,
Mitarbeiter ins Ausland entsenden.
Verträge gestalten und Vergütung optimieren, Dr. Th. Gabler Verlag, 1. Aufl.
2008
¡  Kühlmann, T., Auslandseinsatz von
Mitarbeitern, Göttingen 2004
¡  Heuser, A., Entsendung deutscher Mitarbeiter ins Ausland, Bertelsmann, 1.
Aufl. 2004
Copyright Prof. Dr. D. Högel (WS 2015/16) 74