BUS 305

1. Chapter 16
Managing Human Resources
in an International Context
McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

2. 16-2
Learning Objectives
• LO1 Discuss the importance of creating a company “global
mind-set.”
• LO2 Explain the relationship between competitive strategies
(international, multidomestic, global, and transnational) and
international human resource management approaches
(ethnocentric, polycentric, regiocentric, and global).
• LO3 Compare home-country, host-country, and third-country
nationals as international company executives.
• LO4 Explain what an expatriate is, and identify some of the
challenges and opportunities of an expat position.
• LO5 Discuss the increasing importance of accommodating the
trailing spouse of an expatriate executive.
• LO6 Identify some of the complications of compensation
packages for expatriate executives
• LO1 Discuss the importance of creating a company “global
mind-set.”
• LO2 Explain the relationship between competitive strategies
(international, multidomestic, global, and transnational) and
international human resource management approaches
(ethnocentric, polycentric, regiocentric, and global).
• LO3 Compare home-country, host-country, and third-country
nationals as international company executives.
• LO4 Explain what an expatriate is, and identify some of the
challenges and opportunities of an expat position.
• LO5 Discuss the increasing importance of accommodating the
trailing spouse of an expatriate executive.
• LO6 Identify some of the complications of compensation
packages for expatriate executives

3. 16-3
The Global Mind-set
•A prerequisite for global industry
dominance
•Global Mind-set:
– “Combines an openness to and an awareness of
diversity across markets and cultures with a
propensity and ability to synthesize across this
diversity”

4. 16-4
The International Human Resource
Management (IHRM) Approach
• Competitive strategy
should drive the
firm’s approach to
IHRM
• IHRM approaches: b
– Ethnocentric
– Polycentric
– Regiocentric
– Geocentric
• Competitive strategy
should drive the
firm’s approach to
IHRM
• IHRM approaches: b
– Ethnocentric
– Polycentric
– Regiocentric
– Geocentric
• IHRM Employee
Classifications:
1.Home Country
National or Parent
Country National
(PCN)
2.Host Country
National (HCN)
3.Third-country
National (TCN)
• IHRM Employee
Classifications:
1.Home Country
National or Parent
Country National
(PCN)
2.Host Country
National (HCN)
3.Third-country
National (TCN)

5. 16-5
Recruitment and Selection of Employees
• Ethnocentric
Staffing Policy
– “related to hiring and
promoting employees on the
basis of the parent company’s
home-country frame of
reference”
• Polycentric Staffing
Policy
– “related to hiring and
promoting employees on the
basis of the specific local
context in which the
subsidiary operates”
• Ethnocentric
Staffing Policy
– “related to hiring and
promoting employees on the
basis of the parent company’s
home-country frame of
reference”
• Polycentric Staffing
Policy
– “related to hiring and
promoting employees on the
basis of the specific local
context in which the
subsidiary operates”
• Regiocentric Staffing
Policy
– “related to hiring and
promoting employees on the
basis of the specific regional
context in which the
subsidiary operates”
• Geocentric Staffing
Policy
– “related to hiring and
promoting employees on the
basis of ability and expertise
without considering race or
citizenship”
• Regiocentric Staffing
Policy
– “related to hiring and
promoting employees on the
basis of the specific regional
context in which the
subsidiary operates”
• Geocentric Staffing
Policy
– “related to hiring and
promoting employees on the
basis of ability and expertise
without considering race or
citizenship”

6. 16-6
Recruitment and Selection of Employees
• Ethnocentric
Staffing Policy
– International
Strategic Orientation
– Decisions made at
headquarters with home
country frame of reference
– Use Parent Country
Nationals (PCNs) in key
expatriate foreign
management & technical
positions
• Ethnocentric
Staffing Policy
– International
Strategic Orientation
– Decisions made at
headquarters with home
country frame of reference
– Use Parent Country
Nationals (PCNs) in key
expatriate foreign
management & technical
positions
• Issues:
– Expatriates have
difficulty with cultural
bias toward host country
– Specialized teams need to
be sent to deal with
specific problems
• Prepares Managers for
higher level positions at
headquarters
• Issues:
– Expatriates have
difficulty with cultural
bias toward host country
– Specialized teams need to
be sent to deal with
specific problems
• Prepares Managers for
higher level positions at
headquarters

7. 16-7
Recruitment and Selection of Employees
• Polycentric Staffing
Policy
– Multidomestic
Strategic Orientation
– HR policies created at
local level for local
operations context
– Some governments
demand employment at
all levels to reflect racial
composition of the society
• Polycentric Staffing
Policy
– Multidomestic
Strategic Orientation
– HR policies created at
local level for local
operations context
– Some governments
demand employment at
all levels to reflect racial
composition of the society
• Issues:
– Familiarity with local
customs, culture and
language
– Hiring costs lower
– Training costs may be
high
– Unfamiliar with IC home
country and corporate
culture, policies and
culture
– Best people may be
pirated by other firms
• Issues:
– Familiarity with local
customs, culture and
language
– Hiring costs lower
– Training costs may be
high
– Unfamiliar with IC home
country and corporate
culture, policies and
culture
– Best people may be
pirated by other firms

8. 16-8
Recruitment and Selection of Employees
• Regiocentric Staffing
Policy
– Regional Strategic
Orientation
– Regional employees
selected for key
positions from HCNs
and TCNs
• Regiocentric Staffing
Policy
– Regional Strategic
Orientation
– Regional employees
selected for key
positions from HCNs
and TCNs
• Issues:
– Problems of using
home or host country
nationals can be
avoided
– An executive
adapting to one
language and culture
can adapt to another
more easily
– Potential cost savings
• Issues:
– Problems of using
home or host country
nationals can be
avoided
– An executive
adapting to one
language and culture
can adapt to another
more easily
– Potential cost savings

9. 16-9
Recruitment and Selection of Employees
• Geocentric Staffing
Policy
– Transnational
Strategic Orientation
– Find the best person
for the job regardless
of national origin
– Capitalize on
advantages of each
staffing policy
• Geocentric Staffing
Policy
– Transnational
Strategic Orientation
– Find the best person
for the job regardless
of national origin
– Capitalize on
advantages of each
staffing policy
• Issues:
– HRM strategy must
be consistent across
all subsidiaries
– HRM borrows best
practices from
wherever found
– HRM does not show
any preferences to
HQ practices
• Issues:
– HRM strategy must
be consistent across
all subsidiaries
– HRM borrows best
practices from
wherever found
– HRM does not show
any preferences to
HQ practices

10. 16-10
Expatriates
• Expatriate
– “a person living outside
his/her country of
citizenship”
• Inpatriates
– “Employees hired in the
host country”
• Flexpatriates
– “home or third-country
employees on short term
assignments”
• Expatriate
– “a person living outside
his/her country of
citizenship”
• Inpatriates
– “Employees hired in the
host country”
• Flexpatriates
– “home or third-country
employees on short term
assignments”
• Why use
expatriates?
– Bring technical or
managerial skills that might
be scarce in host country
– Transfer and install
companywide
systems/cultures
– Trusted connection for
oversight and control of
foreign operations
– Develop skills/experiences
for promotion
• Why use
expatriates?
– Bring technical or
managerial skills that might
be scarce in host country
– Transfer and install
companywide
systems/cultures
– Trusted connection for
oversight and control of
foreign operations
– Develop skills/experiences
for promotion

11. 16-11
Culture Shock
• Culture Shock
– “anxiety people often
experience when they move
from a culture they are
familiar with to one that
is entirely different”
• Symptoms:
– Lack of direction from not
know how to do things in
new culture
– Emotional discomfort
– Disorientation or confusion
• Reverse Culture Shock
– Occurs when returning home
• Culture Shock
– “anxiety people often
experience when they move
from a culture they are
familiar with to one that
is entirely different”
• Symptoms:
– Lack of direction from not
know how to do things in
new culture
– Emotional discomfort
– Disorientation or confusion
• Reverse Culture Shock
– Occurs when returning home
• Three dimensions of
cross-cultural
adjustment:
1. Work Context
• job clarity, role conflict,
discretion in job
completion
1. Adjustment to General
Environment
• Differences in housing,
food, education, health,
safety, transportation
1. Interaction with Local
Nationals
• Differences with
behavioral norms,
communication patterns
• Three dimensions of
cross-cultural
adjustment:
1. Work Context
• job clarity, role conflict,
discretion in job
completion
1. Adjustment to General
Environment
• Differences in housing,
food, education, health,
safety, transportation
1. Interaction with Local
Nationals
• Differences with
behavioral norms,
communication patterns

12. 16-12
The Expatriate’s Family
• Facts:
– 90% expatriate failures
are family related
– 81% who decline give
family concerns as reason
– Unhappy spouses are a
major reason for early
return
– Expatriate failure
translates into a loss of a
“million-dollar corporate-
training investment” in
the executive
• Facts:
– 90% expatriate failures
are family related
– 81% who decline give
family concerns as reason
– Unhappy spouses are a
major reason for early
return
– Expatriate failure
translates into a loss of a
“million-dollar corporate-
training investment” in
the executive
• Trailing Spouses in
Two-Career Families are
a Challenge for ICs
– Offer help in adjustment
– Provide assistance with job
hunting in host country
– Identify career opportunities
– Provide cultural training
• Expatriate Children
May Suffer the Most
– Third Culture Kids (TCKs)
are multilingual and hold
several passports
• Trailing Spouses in
Two-Career Families are
a Challenge for ICs
– Offer help in adjustment
– Provide assistance with job
hunting in host country
– Identify career opportunities
– Provide cultural training
• Expatriate Children
May Suffer the Most
– Third Culture Kids (TCKs)
are multilingual and hold
several passports

13. 16-13
Preparation for the Transition:
Language Training
• English is world’s lingua franca, common 2nd
language
• Expatriate and family need host country language
skill for effective adjustment
• Many foreign customers speak English but prefer
their language in negotiations
• Mandarin Chinese is the new “hot” language
• English is world’s lingua franca, common 2nd
language
• Expatriate and family need host country language
skill for effective adjustment
• Many foreign customers speak English but prefer
their language in negotiations
• Mandarin Chinese is the new “hot” language

14. 16-14
Expatriate Services
• Health care programs ex
assist companies and
expatriates with:
– Claims administration
– Language translations
– Currency conversions
– Service standardization
– Websites for expat issues:
• http://www.expatexpert.com/
• http://www.branchor.com/
• Health care programs ex
assist companies and
expatriates with:
– Claims administration
– Language translations
– Currency conversions
– Service standardization
– Websites for expat issues:
• http://www.expatexpert.com/
• http://www.branchor.com/
• Other expatriate
services include
assistance with:
– banking services
– culture and language
training
– house hunting, utilities
hook-up, grocery and
hardware shopping
– long-distance care for
relatives
– schools
– clubs, organizations, and
memberships
• Other expatriate
services include
assistance with:
– banking services
– culture and language
training
– house hunting, utilities
hook-up, grocery and
hardware shopping
– long-distance care for
relatives
– schools
– clubs, organizations, and
memberships

15. 16-15
Repatriation – the Shock of
Returning Home
• Issues to Address:
– Reverse culture shock
– Autonomy abroad but restrictive work context at
home
– Headquarters' people and attitudes will change
– Returning expatriate’s skills and knowledge are
valuable but may be unappreciated
– Positions of responsibility similar to that of
expatriate position may not be available home
– Promotion or career expectations may not happen
– Family adjustment at home can be problematic
• Issues to Address:
– Reverse culture shock
– Autonomy abroad but restrictive work context at
home
– Headquarters' people and attitudes will change
– Returning expatriate’s skills and knowledge are
valuable but may be unappreciated
– Positions of responsibility similar to that of
expatriate position may not be available home
– Promotion or career expectations may not happen
– Family adjustment at home can be problematic

16. 16-16
Compensation
• Compensation &
Salary Trends:
– Paying HCNs the same
salaries as their domestic
counterparts –
• permits worldwide
consistency
• add allowances &
bonuses
– Trend to use “local terms”
package equal to local
manager
– “Equal-pay-for-equal-
work” concept with extra
payments to expats
• Compensation &
Salary Trends:
– Paying HCNs the same
salaries as their domestic
counterparts –
• permits worldwide
consistency
• add allowances &
bonuses
– Trend to use “local terms”
package equal to local
manager
– “Equal-pay-for-equal-
work” concept with extra
payments to expats

17. 16-17
Allowances
• Allowances
– “employee compensation payments added to base
salaries because of higher expenses encountered
when living abroad”
• Examples:
– Housing allowances
– Cost-of-living allowances
– Allowances for tax differentials
– Education allowances
– Moving and orientation allowances
• Allowances
– “employee compensation payments added to base
salaries because of higher expenses encountered
when living abroad”
• Examples:
– Housing allowances
– Cost-of-living allowances
– Allowances for tax differentials
– Education allowances
– Moving and orientation allowances

18. 16-18

19. 16-19
Bonuses
• Bonuses
– “Expatriate employee
compensation payments in
addition to base salaries and
allowances, because of
hardship, inconvenience, or
danger”
• Examples:
– Overseas premium
– Contract termination
payment
– Home leave
• Bonuses
– “Expatriate employee
compensation payments in
addition to base salaries and
allowances, because of
hardship, inconvenience, or
danger”
• Examples:
– Overseas premium
– Contract termination
payment
– Home leave

20. 16-20
Compensation Packages Can Be Complicated
• Compensation Packages
– “for expatriate employees, packages that incorporate many types of
payments or reimbursements and must take into consideration
exchange rates and inflation”
• Issues:
– Expensive – can add 50+% to base salary
– What percentage?
• Allowances and percentage of base salary are usually paid in host
country currency
• Percentage is usually 65 to 75 % with the remainder banked where
employee directs
– What Exchange Rate?
• Firms must decide which exchange rate to use
• This is more difficult in countries with exchange controls and
nonconvertible currencies
• Compensation Packages
– “for expatriate employees, packages that incorporate many types of
payments or reimbursements and must take into consideration
exchange rates and inflation”
• Issues:
– Expensive – can add 50+% to base salary
– What percentage?
• Allowances and percentage of base salary are usually paid in host
country currency
• Percentage is usually 65 to 75 % with the remainder banked where
employee directs
– What Exchange Rate?
• Firms must decide which exchange rate to use
• This is more difficult in countries with exchange controls and
nonconvertible currencies

21. 16-21
Compensation of
Third-Country Nationals
• There is a trend toward applying the same
compensation plan to third country nationals as home
country expatriates
• Problems can arise in
– The calculation of the income tax differential when
an American expatriate is compared with an
expatriate from another country
– Home leave bonus
• There is a trend toward applying the same
compensation plan to third country nationals as home
country expatriates
• Problems can arise in
– The calculation of the income tax differential when
an American expatriate is compared with an
expatriate from another country
– Home leave bonus

22. 16-22
International Status
• International Status
– “Entitles expatriate
employee to all the
allowances and bonuses
applicable to the place of
residence and
employment”
• International Status
– “Entitles expatriate
employee to all the
allowances and bonuses
applicable to the place of
residence and
employment”
• Being from another country does
not always qualify for
international status
• Host-country employees can be
promoted to international status
without being sent abroad
• Rewards are used to retain
valuable employees
• International status means
receiving some or all available
allowances and bonuses
• Complexity of compensation
requires international personnel
management specialists or
consultants
• Being from another country does
not always qualify for
international status
• Host-country employees can be
promoted to international status
without being sent abroad
• Rewards are used to retain
valuable employees
• International status means
receiving some or all available
allowances and bonuses
• Complexity of compensation
requires international personnel
management specialists or
consultants

23. 16-23
Perks
• Cars, including driver
for high level executives
• Private pension plan
• Retirement payment
• Life insurance
• Health insurance
• Emergency evacuation
services (for medical or
other reason)
• Cars, including driver
for high level executives
• Private pension plan
• Retirement payment
• Life insurance
• Health insurance
• Emergency evacuation
services (for medical or
other reason)
• Kidnapping, ransom, &
extortion insurance
• Company housing
• Directorship of a foreign
subsidiary
• Seminar holiday travel
• Club memberships
• Kidnapping, ransom, &
extortion insurance
• Company housing
• Directorship of a foreign
subsidiary
• Seminar holiday travel
• Club memberships

24. 16-24
What’s Important to You?
• What elements of
compensation and
benefits are
important to you?
– Cost of living?
– Safety?
– Medical facilities?
– Housing?
– Schools?
– Restaurants?
– Sports facilities?
– Shopping?
– Theatre & entertainment?
– Number of vacation days?
• What elements of
compensation and
benefits are
important to you?
– Cost of living?
– Safety?
– Medical facilities?
– Housing?
– Schools?
– Restaurants?
– Sports facilities?
– Shopping?
– Theatre & entertainment?
– Number of vacation days?
• Where to locate the
business?
– Local business environment?
– Office rents?
– Cost of living?
– Labor?
– Advanced financial sectors?
– Reliable legal system?
– Political stability?
– Emerging country?
– Developed country?
• Where to locate the
business?
– Local business environment?
– Office rents?
– Cost of living?
– Labor?
– Advanced financial sectors?
– Reliable legal system?
– Political stability?
– Emerging country?
– Developed country?

25. 16-25
GLOBAL gauntlet
Are Women Appropriate
for International
Assignments?
• Myth 1: Women do not want to be
international managers.
• Myth 2: Companies refuse to send
women abroad.
• Myth 3: Foreign prejudice against
women renders them ineffective.
• Adler: “70% of ICs researched were
hesitant to select women for
expatriate assignments.”
Are Women Appropriate
for International
Assignments?
• Myth 1: Women do not want to be
international managers.
• Myth 2: Companies refuse to send
women abroad.
• Myth 3: Foreign prejudice against
women renders them ineffective.
• Adler: “70% of ICs researched were
hesitant to select women for
expatriate assignments.”
• Why are firms reluctant
to send women abroad?
• Are the reasons given
valid today?
• Should ICs recruit more
women for international
assignments?
• When might a woman be
a stronger choice? A
weaker choice?
• Why are firms reluctant
to send women abroad?
• Are the reasons given
valid today?
• Should ICs recruit more
women for international
assignments?
• When might a woman be
a stronger choice? A
weaker choice?