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Ans. International human resource management (IHRM) is the process of procuring, allocating, and effectively utilizing human resources in a multinational corporation. If the MNC is simply exporting its products, with only a few small offices in foreign locations, then the task of the international HR manager is relatively simple. However, in global firms human resource managers must achieve two somewhat conflicting strategic objectives. First, they must integrate human resource policies and practices across a number of subsidiaries in different countries so that overall corporate objectives can be achieved. At the same time, the approach to HRM must be sufficiently flexible to allow for significant differences in the type of HR policies and practices that are most effective in different business and cultural settings. As Compared to HRM, IHRM requires: (I) encompasses more functions, (2) Has more heterogeneous functions, (3) Involves constantly changing perspectives, (4) Requires more involvement in employees¶ personal lives, (5) Is influenced by more external sources, and (6) Involves a greater level of risk than typical domestic HRM. Difference in Strategy: When compared with human resource management, IHRM requires a much broader perspective on even the most common HR activities. This is particularly so for HR managers operating from a MNC¶s headquarters (HQ). The number and variety of IHRM activities are daunting. International HR managers must deal with issues as varied as international taxation; international relocation and orientation; various other administrative services for expatriates; selecting, training and appraising local and international employees; and managing relations with host governments in a number of countries around the world. Examples to show strategic differences between HRM and IHRM When dealing with one particular HR function area such as compensation, the international HR manager is faced with a great variety of national and international pay issues. For example, while dealing with pay issues, the HQ-based HR manager must coordinate pay systems in different countries with different currencies that may change in relative value to one another over time. In the case of fringe benefits provided to host company employees, some interesting complications might arise. For instance, it is common in the United States to provide
health insurance benefits to employees and the employee¶s family, which usually means spouse and children. In some countries however, the term ³family´ may include a more extended group of relatives²multiple spouses, aunts, uncles, grandparents, nephews, and nieces. How does the firm¶s benefit plan deal with these different definitions of family is another issue which crops up in IHRM. Cultural Differences: An aspect of the broader scope of IHRM is that the Head Quarter-based manager deals with employee groups that have different cultural backgrounds. The HQ manager must coordinate policies and procedures to manage expatriates from the firm¶s home country (parent country nationals, PNCs), host-country nationals (HCNs), as well as third country nationals (TCNs, e.g. a French manager working for an American MNC in the firm¶s Nigerian subsidiary) in subsidiaries around the world. Structure System Differences: The head quarter based manager must develop HR systems that are not only acceptable to the host country but also compatible with company-wide systems being developed by his or her HQ-based counterpart. These policies and practices must effectively balance the needs and desires of local employees, PCNs and TCNs. Such issues are not there in domestic Human Resource Management. It is at the subsidiary level that the increased involvement of IHRM in the personal lives of employees becomes particularly apparent. It is not unusual for subsidiary HR managers to be involved in arranging housing, healthcare, transportation, education, and recreation activities for expatriate and local staff. IHRM activities are also influenced by a greater number of external forces than are domestic HR activities. The HQ-based manager may have to set equal employment opportunity (EEO) policies that meet the legal requirements of both the home country and a number of host countries. Because of the visibility that foreign firms tend to have in host countries (especially in developing countries), subsidiary HR managers may have to deal with ministers, other political figures, and a great variety of social and economic interest groups than would normally be encountered in a purely domestic HRM. Ans. When employees work in their home country, it is simple to determine who is responsible for the performance appraisal process. We discover that the process is not so clear-cut when dealing with expatriates. Performance management may be understood as a process that enables an international firm to evaluate and continuously improve individuals, subsidiary unit, and corporate performance, against clearly defined, preset goals and targets. An expatriate's performance needs to be assessed to effect his or her promotions, assess training and development needs, and introduce pay rises.
Expatriate Performance Appraisal Challenges: The main challenges are Fit of international operation in multinational strategy Complex and volatile environments Time difference and distance separation Local cultural situation
Expatriates want the following in the performance appraisal system: Most expatriates believe more weight should be given to an on-site manager's appraisal than to an off-site manager's appraisal A former expatriate who has served in the same location could be involved in the appraisal process to help reduce bias. When the policy is for foreign on-site mangers to write performance evaluations, home office managers should probably be consulted before an on-site manager completes a formal termination evaluation Mode of Performance appraisal: Peer and Self-assessment as a mode of performance appraisal are likely to be useful, given the nature of expatriate assignments which often are reliant upon geographically dispersed reporting lines and involve as key elements team work and participation. Standardized performance management processes are typically adopted in expatriate performance management, Regardless of the effectiveness or availability of performance management tools, expatriate success depends largely on the manager and expatriate in question: how well they both understand, internalize and accept performance management and how skilful they are in its implementation. To this end, appropriate training should be available for all expatriates, including their managers.
In designing a Performance Management System, a firm must consider its specific circumstances, and that off-the-shelf solutions may not produce the desired improvements in expatriate and company performance. Further, a firm may have to supply several tools or the use of its various employee groups. While standardizing objectives of a PM process seems attractive, allowing diversity in the means and tools to achieve these objectives may be quite useful. In fact, the development of alternative PM tools, modified from a standardized global set, may result in more effective implementation of PM worldwide Appoint an Ombudsman - Functional involvement provides someone to act as ombudsman for the expat. This person can add a memo to the appraisal explaining the circumstances, which would mitigate the negative effects of the appraisal and allow both sides to be heard. Functional review allows the home country to guarantee that all expats are treated fairly and are held to the same standard of performance. To ensure expat performance is understood and rated appropriately, companies and expats recommend having functional review in the home country in addition to having the appraisal completed in the assignment location. While measuring performance should be done at the assignment location, determining the amount of salary increase is clearly a process of the home country. Ans. The experience of expatriate selection and assignment has been a mixed success for multinational firms. Several selection strategies have been used, but failure situations in individual assignment cases are known to be in nearly every multinational firm. New research has indicated that the problem of insuring success for an expatriate is quite different from the problem of avoiding failure. A different set of factors is critical to each of these two problems. When this distinction is made, the variables related to the expatriate selection and assignment problem are considerably more ordered and operable. The important factors to be considered while selecting an expatriate are as follows:
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Tolerance for ambiguity - expatriate has the ability to function in a situation with no rules and parameters, and where things do not necessarily "make sense" Low goal/task orientation- not obsessed with setting highly demanding goals and quick results. A high propensity to drive for results could be very frustrating to the expat and he/she could become very quickly demoralised and or explosive towards host nationals Open-mindedness - receptive to other ideas and will listen to other's points of view - seeks out more information before making a decision
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Tolerance for differences - ability to accept change and accept differences in others. The ability to live closely to people who may have fundamentally different habits Communicativeness - ability to communicate and express oneself well / having social extension Non Judgmental - does not quickly judge others - expatriates who are nonjudgmental often show interest in the beliefs of other cultures and are more likely to establish meaningful intercultural relationships. Not cynical of others Empathy - to appreciate how others feel - intellectual or emotional identification with others. Flexibility - ability to consider alternative ways of doing things - flexibility is vital in expatriates who work in joint ventures, interact with multi-cultural staff and who may work as negotiators Warmth in relationships - social adaptability and interpersonal relationships. Ability to socialise with new people in unfamiliar situations is important. Someone who is not at home in small intimate groups will have trouble in adapting. Research has shown that strong people skills are very important to expatriate success and effectiveness. Expats who are aloof and prefer to be alone have a great disadvantage compared to those who are sincerely interested in others Motivation - self-motivation is essential for expats as without it they may feel helpless when confronted by new and changing life situations Self reliance/Strong sense of self - a strong sense of self in expats manifests itself in a way that they can control the events and outcomes in their lives. They are more likely to exert an effort into making things happen
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Select More Carefully ± Ensure that expatriates are qualified to perform the jobs expected of them at a level consistent with the pay they will receive. But this will require the organization to: a. Make sure that expatriate managers have social as well as technical skills needed. b. See if there are local employees who are equally qualified. If so, are they paid comparably? c. Communicate performance expectations and criteria for success clearly to the expatriate.
Expatriate selection process : The selection process can be seen in the diagram below. The selection process is done in a phased out manner. The first step is to identify a pool of potential expatriate. After the pool has been selected it is judged for its intelligent quotient competencies. The analytical skills are judged. A behavioral study of expatriate is done to understand their learning style and thinking style because the organization needs to adapt to think level of expatriates. Assignments are designed for them they can be internal or external which will depend on the need of the hour. The last step involves matching of expatriates with their desired jobs and assigning them to that job.
Therefore, the critical issues, which arise as expatriates¶ assignments evolve into a global assignment scope, must be viewed in a systematic manner. This paper develops a unique theory-based expatriation selection process based upon a systemic assessment of potential expatriate candidates¶ multiple IQs, learning styles, thinking styles, and the nature of the expatriate assignment. In addition, a practical step-by-step managerial process is developed that can be used in the selection of expatriate managers for global assignments
Ans. IR" may be defined as the means by which the various interests involved in the labour
market are accommodated, primarily for the purpose of regulating employment relationships. National differences in economic, political and legal systems produce markedly different IR systems across countries Multinationals generally delegate the management of IR to their foreign subsidiaries. However, a policy of decentralization should not keep corporate headquarters from exercising some coordination over IR strategy. Generally, corporate headquarters will become involved in or oversee labor agreements made by foreign subsidiaries because these agreements may affect the international plans of the firm and/or create precedents for negotiations in other countries.
globalization has disturbed the status quo between "capital" and "labour" in each country, in the sense that capital is significantly more mobile in an open international environment, while labour remains relatively immobile (here it should be noted that, under globalization, international labour migration is continuing, but, proportionately to the rate in the1970's, has not increased see World Bank 1995: 53). This can place "labour" at a relative disadvantage, in that "capital" can now employ "labour" in different countries, at lower cost and on a basis which can prejudice the continuing employment of workers in the originating country. The scope of IR must now be viewed as extending to all aspects of work-related activities which are the subject of interaction between managers, workers and their representatives, including those which concern enterprise performance. But issues which are critical to the manner in which an enterprise operates - such as job design, work organization, skills development, employment flexibility and job security, the range of issues emerging around HRM, and cross-cultural management issues have not until recently been considered as part of labour-management relations; and, in many cases, they have not previously been made the subject of collective bargaining or labour-management consultation. But this situation is changing, and has been particularly noticeable in Western industrialized countries. As noted previously, this is part of a trend in many countries towards the need for increased workplace flexibility as a result of globalization. It is being demonstrated in the region, particularly in the export-exposed sectors of national economies, through higher wage flexibility, increased emphasis on enterprise level bargaining and the growth of enterprise unionism. The increasing shift from import substitution to export promotion in India provides a current example of a resurgence in collective bargaining to produce required changes in work organization, better use of technology, general efficiency and productivity. Whether collective bargaining should be introduced in the government sector has been a matter for debate in Southeast Asia and some South Asian countries for some time, but little real progress in this direction has been made. In the Western Pacific (Australia and New Zealand), however, public sector collective bargaining now takes place, and there is increasing use of 18 contract employment for senior government officials. There has also been an increasing incidence in some countries (eg, Australia and New Zealand) of direct bargaining between managers and individual workers. In the trend towards decentralization of bargaining and workplace flexibility in the region, there appears to be a close relationship between the levels of economic development and of international integration exhibited by a particular country Cross-cultural managing and working
One overarching consequence of increasing globalization is that managers from investing countries in and outside the region are having to adapt their own national management practices to the circumstances prevailing in different Asian countries. This requires recognition that, because Asia is characterised by diversity, there is a need for knowledge and sensitivity about legal, IR and HR (and other management) practices in different cultural environments. Workplace rules, practices and behaviour which apply in one country may not apply or be inappropriate in another. Trade unions and workers also need to understand and adapt to changing enterprise (including cultural) practices which may be foreign to them. 20 Governments have to become familiar with the customs, practices and expectations of investing countries so as to be able to provide appropriate supporting policies and programmes. In each of these situations, the persons involved need access to information, experience and strategies to enable them to adjust effectively to new work environments. Transplanting ways of managing people from one country to another, and developing new (culturally sensitive) ways for managers and workers to work together, can be much more difficult than transplanting management systems and structures dealing with issues such as marketing and finance. The growing incidence of industrial disputation in some local operations of foreign-owned enterprises and joint ventures in a number of Asian countries suggests that this process of transition is not yet being successfully managed.
A skilled and adaptable workforce The main sources of productivity growth are technological change, increases in capital intensity, economies of scale and improvements in labour efficiency. Education and training will play a vital role in promoting labour efficiency through the enhancement of workforce skills, and the World Bank has emphasised the significant link between skills development and a country's manufacturing export capacity (World Bank 1993: 43 - 48). Training of workers in narrow skills is no longer appropriate. Modern technology is increasingly demanding broader skills and new mixes of previously quite distinct skills. In addition, the rapid pace of technological change demands an ability to adapt quickly; so, the formation of skills has to rely not only on initial training, but equally on opportunities for retraining and upgrading existing skills. Flexible forms of work organization and management Taking advantage of the scope for greater workplace flexibility through changes to work organization (which includes the design, operation and skills requirements of jobs and the arrangement of working time) is an important factor in the ability of firms to maintain and improve competitiveness. Flexibility at the workplace requires workers to have several skills and a broader understanding of the production or work process to enable them to carry out a range of activities. To achieve this
outcome, managers and supervisors need to be forward looking, inform and involve workers, and use approaches which enable people to develop and use properly their talents and abilities. In particular, they need to pay far greater attention to training and skills development. This should lead to greater versatility for employers in how they organize and carry out work and a greater capacity to cope with fluctuations in production. The ability to adjust working time arrangements and the identification and removal of restrictive work and management practices are also important. The latter practices, in particular, inhibit flexibility and efficiency, and exist for reasons other than the safe and efficient performance of work tasks. Culturally-sensitive management strategies As noted earlier in this paper, globalization involves managers and workers moving from one country to another. In doing so, they enter into a new society and culture. Some aspects of these cultures are obvious (eg, another language, other laws and customs, etc) and can with the necessary goodwill be adapted to. But there are other elements of culture which are not so visible. They include the assumptions made and premises relied on by the members of a certain society; values and unwritten codes of behaviour; and patterns of thinking and problem-solving. They are what the people in that society take for granted. These elements are the essence of a particular culture and are the most difficult to detect. A manager or worker coming from and entirely different culture with its own never-questioned assumptions and values - may not perceive or understand these elements or have difficulty accepting them. As such they can be the basis for tension and conflict in the workplace. Managers assuming work responsibilities in a new country must acquaint themselves with both visible and invisible cultural traits, and adopt appropriate strategies to ensure that cultural mismanagement considerations do not become a source of reduced enterprise performance. Ans. The workforce of the 21st century is increasingly diverse and multicultural. To effectively manage and lead in this environment, HR must be knowledgeable about cross-cultural factors-on both the domestic and global fronts-in human resource management. By promoting education in cross-cultural competencies throughout the organization, HR can better serve the company to successfully achieve its mission and goals. Effective cross-cultural communication is necessary to build and maintain business relationships. To support their organizations, HR professionals can develop HRM practices and policies that promote cross-cultural training and reward managers for their part in educating employees on effective cross-cultural communication.
When working with people from different cultures and/or countries, organizational leaders must know how to "read" body language, a key communication factor in highcontext cultures. Misunderstanding body language can lead to inaccurate expectations. With many Western companies now doing business with India, a good example of a common cross-cultural difference is one of the head gestures by Indians. As crosscultural trainer and management consultant Craig Storti explains, the Indian head gesture for "yes" appears similar to how Westerners shake their head to indicate "no." When seeing this gesture, Westerners may think that the Indian has disagreed, when that is not necessarily so. (23) Taking time to understand communication through body language can make the difference in a positive or negative outcome. These various points are representative of the many scenarios that require flexibility and knowledge about language and cross-cultural communication. As globalization continues to expand, it is increasingly important for HR to understand the implications of HRM in a changing world. Not all HRM strategies will fit every situation. Communication styles and cultural value dimensions need to be taken into consideration when establishing or changing HRM strategies, policies and practices. Whether in domestic or global business environments, HRM must adapt to crosscultural factors for the success of the organization and its people. Whether in a domestic or global workplace, HR needs to be cognizant of cross-cultural decision-making and the corresponding influence on HRM. By being aware of cultural differences in the decision-making process (e.g., the reasons for making decisions, the various ways that decisions are made in different cultures, the party responsible for making those decisions--individuals, groups, various levels within the organization--and the ways decisions are implemented), HR can better gauge culturally appropriate decisions and work with managers of other cultures in the decision-making process. Gaining cross-cultural competence takes time, education, experience, openness and sensitivity. When people lack intercultural skills, miscommunications can damage business relationships, deadlines can be missed, projects may fail and talented people will go to the competition. Key HR responsibilities are to understand how cross-cultural factors interact with HRM, be the conduit for organizational learning for cross-cultural intelligence and foster cross-cultural communication throughout the organization. Ans. Companies in the newer industries, especially those in information technology, biochemicals, and electronics, have reported to be more flexible in formulating expatriate-compensation packages and more willing to break with the balance-sheet approach (www.fortune.com). These companies are more and more using younger members of the staff and sending them abroad for shorter periods of time - often technical people in 6 months or less - as most of today's young skilled employees are much more flexible in terms of cross-culture orientation/exploration and family life. The shorter assignments also seem to be better for the employee-company relationship because it means that the employees are not "out of sight, out of mind" long enough to lose close contact with the parent company.`
. The going rate approach is based on local market rates. The expatriate¶s base salary is linked to that of the host country. If working in a low-pay country the multinational usually supplements base pay with additional benefits and payments. This approach leads to equality with local nationals, simplicity, and helps the expatriate to identify with the host country. One of the main problems is it can lead to a variation between assignments for the same employee. Meaning, the same employee can hold a similar position in two different countries and make more money in one than the other. The basic objective of the balance sheet approach is the maintenance of home-country living standard plus a financial inducement. This is the most common system used in multinational firms. The balance sheet approach is designed to equalize the purchasing power of employees at comparable position levels living overseas and in the home country, and to provide incentives to offset qualitative differences between assignment locations. There are two main options in the area of international compensation ± Going Rate Approach (also referred to as the Market Rate Approach) ± Balance Sheet Approach (also known as the Build-up Approach). Going rate approach Based on local market rates Relies on survey comparisons among ± Local nationals (HCNs) ± Expatriates of same nationality ± Expatriates of all nationalities Compensation based on the selected survey comparison Base pay and benefits may be supplemented by additional payments for low-pay countries. Advantages ± Equity withy local nationals ± Simplicity ± Identification with host country ± Equity among different nationalities Disadvantages ± Variation between assignments for same employee ± Variation between expatriates of same nationality in different countries ± Potential re-entry problems Example: Should a Pakistani bank operating in London use local British salaries, the salary other Pakistani competitor banks in London or the average slalry offered by all foreign banks operating in London as the reference points for the base salalry offered.
The Balance Sheet Approach
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The basic objective is to µkeep the expatriate whole¶ through maintenance of home-country living standard plus a financial inducement to make the package attractive. o Home-country pay and benefits are the foundations of this approach o Adjustments to home package to balance additional expenditure in host country o Financial incentives (e.g., expatriate/hardship premium) added to make the package attractive o Most common system in usage by multinationals
Major Categories Incorporated in the Balance Sheet Approach (cont.)
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Goods and services o Home-country outlays for items such as food, personal care, clothing, household furnishings, recreation, transportation, and medical care. Housing o Major costs associated with housing in the host country. Income taxes o Parent-country and host-country income taxes. Reserve o Contributions to savings, payments for benefits, pension contributions, investments, education expenses, social security taxes, etc.
Advantages: ± Equity Between assignments Between Expatriates of the same nationality ± Facilitate re-entry ± Easy to communicate to employees Disadvantages: ± Can result in great disparities Between expatriates of different nationalities Between expatriates and local nationals ± Can be complex to administer ± May entail difficulty to attract human capital The Balance Sheet Approach presents the fundamental issues involved in developing a compensation approach for expatriate assignments. How to consider differences between countries in the cost of goods and services, housing, income taxes, and other elements
Example of an Expatriate compensation
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An expatriate working in a U.S. branch may receive: o Base pay: $1,400/mon
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Housing: up to $1,400/mon (Optional) Itemized reimbursement: $500/mon Discretionary expense (e.g., gifts & gratuity to clients and partners): $1000/special holidays Benefits: Social security/Medicare (Optional) Health care: $200/mon paid by employer Unemployment coverage Workers comp
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A U.S. expatriate working for a Chinese university: o Base pay variation: $1,500-$10,000/mon o Housing: Free for initial 6 months or up to a lump sum subsidy of $1,500-10,000 for a contract of 3 years or above (optional) o Benefits: Pension coverage for a 5 year contract or paid at the option of the expatriate o Health care: Completely paid by employer or optional incentive to the expatriate o Home leave 1-2 times/Yr o Paid vacations and observed Chinese holidays o Initial research launch grant: $10,000 .
The balance sheet approach is a method of compensating expatriate employees for cost differences between countries. Normally used for assignments of limited duration, it seeks to ensure that the expatriate¶s purchasing power and home-country lifestyle do not change significantly during the course of an assignment²even if costs are higher abroad, as they
so often are.
The Use of Caps on Expatriate Pay Components Incentive payments³10% of the participants cap for salary above a predefined threshold; 13% base their caps on a flat amount; and 77% of the respondents do not set caps. Hardship allowances³15% cap for salary above a predefined threshold; only 9% use a flat amount, leaving 75% not using caps. Goods and services differentials³18% cap for salary above a predefined threshold; 82% do not implement caps. Ans. Repatriation occurs when an expatriate of a multinational corporation returns to the country of his/her origin from an overseas assignment (Hodgetts and Luthans, 1997). While repatriation is perceived to be a non-issue for many companies, there is substantial literature on expatriation and the challenges that must be addressed when moving an employee and his/her family to a country with different cultural
dimensions and significant social and economic contrasts (Dowling and Schuler, 1990; Klaff, 2002; O'Neil and Kramer, 1995; Tung, 1988). Thus, there is a strong recognition of the problems faced when moving to a foreign climate. However, many companies assume that the move back to home territory will be relatively simple because the language is the repatriate's own, the culture is one with which the whole family should be familiar, and the home conditions are perceived to be the same as those left behind. From this perspective, it would appear that repatriates would slip smoothly into the old environment and not require significant support. Unfortunately, this simplistic view of the transition ignores many issues. Repatriation is a complex process, generating similar issues to those encountered when managing expatriation (Engen, 1995; Swaak, 1997). First, the repatriate is returning from a high-status position with high autonomy to a less highly profiled role in the parent company. Career opportunities may also diminish, rather than expand, as a result of working overseas. The challenges and satisfaction associated with greater responsibility may be exchanged for a feeling of boredom and underutilization. In addition, the repatriate is no longer "special" or different from fellow workers. There is feeling of being 'let-down', which significantly affects work satisfaction. Additionally, the transition back home may be problematic for all family members (Hammer and Hart, 1998). A returning expatriate may experience reverse culture shock when he or she re-enters the home country (Hammer and Hart, 1998). Salary and fringe benefits provided while on foreign assignments are now lost, and the expatriate and family must adjust to a lower standard of living. The spouse and children are also confronted with practical readjustment problems, such as housing and schooling. It is understandable that companies may find their repatriates somewhat disillusioned and jaded on their return. Repatriate retention is proving to be a major concern to those working in the international sector. Despite the substantial costs involved in developing the potential of high caliber employees to take and hold expatriate roles, these same people are often dissatisfied on their return to their homelands (Napier and Peterson, 1991; Suutari and Valimaa, 2002; Tung 1998). It has been reported that up to 25 percent of repatriates wish to leave the company after their return to a "normal post" (Abueva, 2000; Adler, 1991; Black and Gregersen, 1990). This turnover rate is significantly higher than for local incumbents (Black, Gregersen et al., 1992; Brewster 1997; Gregersen 1992; Harvey 1989; Kendall 1981; MacDonald and Arthur, 2005; Mendenhall and Oddou, 1991; Oddou, 1991). It represents a significant loss--the cost of losing a single repatriated employee has been estimated to be as high as $1.5 million (Abueva, 2000; Black, 1992; Peck, 1997). he Challenge of Repatriation Traditionally, expatriates have been primarily managerial executives, with the role of controlling an overseas branch of the parent company. However, the increasing globalisation of business has led to an expansion in the range of personnel that is sent overseas to work and gain experience. Engineers, information technologists, and other specialists are increasingly moving into a globalised work arena (Chew,
2004; Latta, 1999). The resulting diversity of repatriated personnel generates two challenges. First, the processes and policies relating to repatriation must be more rigorously developed and documented in order to facilitate equitable and efficient management of the program. Second, there should be a greater awareness of the need to develop such programs in order to increase the retention rate of experienced expatriates (Birdseye and Hill, 1995; Morley, 2003; Punnett and Rick, 1997)
Given that expatriates are very costly and difficult to manage, and that it is difficult to measure their contribution or value, there will be pressure to use these much cheaper mechanisms wherever possible. Decisions on expatriate selection are usually made in a less than organized and coherent manner, and often taken by line managers who simply ignore the laiddown criteria espoused by the HR department.
To remove oneself voluntarily from the nation of one's birth and reside permanently or for a long period in another nation. The right of expatriation allows one to change his or her citizenship. In dealing with expatriates, an international company should recognise their value and have experienced staff to deal with them and follow written policies on expatriates' benefits.[18] Salary of internationally assigned personnel customarily consists of standard salary and monetary benefits such as cost of living and/or hardship allowances supported by non-monetary incentives i.e. housing and education. Some companies will completely cover the cost of the education, even at relatively expensive international schools, while other, usually smaller companies, encourage families to find local schooling options.
Ans. Polycentric & Regiocentric Staffing Model
Polycentric approach
Definition: Polycentricity (polycentrism) is a belief that local people know the local environment better than outsiders. A polycentric staffing policy uses host-country nationals to manage foreign subsidiaries and
parent-country nationals for the key positions at corporate headquarters. This approach can minimize the dangers of cultural myopia, but it can create a gap between home and host-country operations. The policy is best suited to a multidomestic strategy.
Each subsidiary is a distinct national entity with some decision-making autonomy; HCNs manage subsidiaries who are seldom promoted to HQ positions; PCNs rarely transferred to subsidiary positions.
Rationale and advantages: Gives hope for profit maximisation through flexibility because local managers can react quickly to market needs in the areas of pricing, production, product life cycle, and political activity. Absence of problems associated with expatriate managers including cultural myopia. Provides continuity in the management of foreign subsidiaries. Problems and disadvantages: No synergy because there is little communication between national units. Limits experience of host nationals to their own country. Corporate headquarters may become isolated from national units and lead to lack of integration. This in turn may lead to corporate inertia. Regiocentric approach (Note: This option is not covered by Hill (2005); it is included here for interest and to indicate that other authors have a perspective which is different from Hill (2005). Definition: Regiocentricity is the variation of staffing policy to suit particular geographic areas. A geocentric
staffing policy seeks the best people for key jobs throughout the organization, regardless of their nationality. This approach is consistent with building a strong unifying culture and informal management network and is well suited to both global and transnational strategies. Immigration policies of national governments may limit a firm's ability to pursue this policy.
Reflects a regional strategy and structure; Regional autonomy in decision making; Staff move within the designated region, rather than globally;
Staff transfers between regions are rare.
Rationale and advantages: Policy varied to suit the nature of the firm's business and product strategy. Allows interaction between executives because of inter-regional transfers. Shows some sensitivity to local conditions. Provides a 'stepping stone' for a firm wishing to move from an ethnocentric or polycentric approach to a geocentric approach. Problems and disadvantages: May produce federalism at a regional (rather than a country) basis and constrains the firm from taking a global stance. May improve career prospects at the national level, but only to the regional level: staff may never attain positions at corporation headquarters.
Ans. Staffing deals specifically with the acquisition, training and allocation of the organisation's
human resources. In both the domestic and the international context, the staffing process can be seen as a series of steps that are performed on a continuing basis to keep the organisation supplied with the right people in the right positions at the right time. The steps in this process are:
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human resource planning (this is part of the organisation's strategic plan) recruitment selection induction and orientation training (to improve job skills) development (to educate people beyond the requirements of their present position) performance appraisal remuneration and rewards transfers separations.
In an international business, the way in which these steps are administered depends very much on the firm's strategy and the staffing policy chosen to support that strategy. There are four choices in policy: the ethnocentric approach, the polycentric approach, the geocentric approach and the regiocentric approach. What follows is a shorthand description based on Dowling and Welch (2004) of the four using the same criteria for each approach. You should use these descriptions as the 'skeleton' of your understanding of the four approaches and use the reading from Hill (2005) to provide the 'flesh'.
health insurance benefits to employees and the employee¶s family, which usually means spouse and children. In some countries however, the term ³family´ may include a more extended group of relatives²multiple spouses, aunts, uncles, grandparents, nephews, and nieces. How does the firm¶s benefit plan deal with these different definitions of family is another issue which crops up in IHRM. Cultural Differences: An aspect of the broader scope of IHRM is that the Head Quarter-based manager deals with employee groups that have different cultural backgrounds. The HQ manager must coordinate policies and procedures to manage expatriates from the firm¶s home country (parent country nationals, PNCs), host-country nationals (HCNs), as well as third country nationals (TCNs, e.g. a French manager working for an American MNC in the firm¶s Nigerian subsidiary) in subsidiaries around the world. Structure System Differences: The head quarter based manager must develop HR systems that are not only acceptable to the host country but also compatible with company-wide systems being developed by his or her HQ-based counterpart. These policies and practices must effectively balance the needs and desires of local employees, PCNs and TCNs. Such issues are not there in domestic Human Resource Management. It is at the subsidiary level that the increased involvement of IHRM in the personal lives of employees becomes particularly apparent. It is not unusual for subsidiary HR managers to be involved in arranging housing, healthcare, transportation, education, and recreation activities for expatriate and local staff. IHRM activities are also influenced by a greater number of external forces than are domestic HR activities. The HQ-based manager may have to set equal employment opportunity (EEO) policies that meet the legal requirements of both the home country and a number of host countries. Because of the visibility that foreign firms tend to have in host countries (especially in developing countries), subsidiary HR managers may have to deal with ministers, other political figures, and a great variety of social and economic interest groups than would normally be encountered in a purely domestic HRM. Ans. When employees work in their home country, it is simple to determine who is responsible for the performance appraisal process. We discover that the process is not so clear-cut when dealing with expatriates. Performance management may be understood as a process that enables an international firm to evaluate and continuously improve individuals, subsidiary unit, and corporate performance, against clearly defined, preset goals and targets. An expatriate's performance needs to be assessed to effect his or her promotions, assess training and development needs, and introduce pay rises.
Expatriate Performance Appraisal Challenges: The main challenges are Fit of international operation in multinational strategy Complex and volatile environments Time difference and distance separation Local cultural situation
Expatriates want the following in the performance appraisal system: Most expatriates believe more weight should be given to an on-site manager's appraisal than to an off-site manager's appraisal A former expatriate who has served in the same location could be involved in the appraisal process to help reduce bias. When the policy is for foreign on-site mangers to write performance evaluations, home office managers should probably be consulted before an on-site manager completes a formal termination evaluation Mode of Performance appraisal: Peer and Self-assessment as a mode of performance appraisal are likely to be useful, given the nature of expatriate assignments which often are reliant upon geographically dispersed reporting lines and involve as key elements team work and participation. Standardized performance management processes are typically adopted in expatriate performance management, Regardless of the effectiveness or availability of performance management tools, expatriate success depends largely on the manager and expatriate in question: how well they both understand, internalize and accept performance management and how skilful they are in its implementation. To this end, appropriate training should be available for all expatriates, including their managers.
In designing a Performance Management System, a firm must consider its specific circumstances, and that off-the-shelf solutions may not produce the desired improvements in expatriate and company performance. Further, a firm may have to supply several tools or the use of its various employee groups. While standardizing objectives of a PM process seems attractive, allowing diversity in the means and tools to achieve these objectives may be quite useful. In fact, the development of alternative PM tools, modified from a standardized global set, may result in more effective implementation of PM worldwide Appoint an Ombudsman - Functional involvement provides someone to act as ombudsman for the expat. This person can add a memo to the appraisal explaining the circumstances, which would mitigate the negative effects of the appraisal and allow both sides to be heard. Functional review allows the home country to guarantee that all expats are treated fairly and are held to the same standard of performance. To ensure expat performance is understood and rated appropriately, companies and expats recommend having functional review in the home country in addition to having the appraisal completed in the assignment location. While measuring performance should be done at the assignment location, determining the amount of salary increase is clearly a process of the home country. Ans. The experience of expatriate selection and assignment has been a mixed success for multinational firms. Several selection strategies have been used, but failure situations in individual assignment cases are known to be in nearly every multinational firm. New research has indicated that the problem of insuring success for an expatriate is quite different from the problem of avoiding failure. A different set of factors is critical to each of these two problems. When this distinction is made, the variables related to the expatriate selection and assignment problem are considerably more ordered and operable. The important factors to be considered while selecting an expatriate are as follows:
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Tolerance for ambiguity - expatriate has the ability to function in a situation with no rules and parameters, and where things do not necessarily "make sense" Low goal/task orientation- not obsessed with setting highly demanding goals and quick results. A high propensity to drive for results could be very frustrating to the expat and he/she could become very quickly demoralised and or explosive towards host nationals Open-mindedness - receptive to other ideas and will listen to other's points of view - seeks out more information before making a decision
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Tolerance for differences - ability to accept change and accept differences in others. The ability to live closely to people who may have fundamentally different habits Communicativeness - ability to communicate and express oneself well / having social extension Non Judgmental - does not quickly judge others - expatriates who are nonjudgmental often show interest in the beliefs of other cultures and are more likely to establish meaningful intercultural relationships. Not cynical of others Empathy - to appreciate how others feel - intellectual or emotional identification with others. Flexibility - ability to consider alternative ways of doing things - flexibility is vital in expatriates who work in joint ventures, interact with multi-cultural staff and who may work as negotiators Warmth in relationships - social adaptability and interpersonal relationships. Ability to socialise with new people in unfamiliar situations is important. Someone who is not at home in small intimate groups will have trouble in adapting. Research has shown that strong people skills are very important to expatriate success and effectiveness. Expats who are aloof and prefer to be alone have a great disadvantage compared to those who are sincerely interested in others Motivation - self-motivation is essential for expats as without it they may feel helpless when confronted by new and changing life situations Self reliance/Strong sense of self - a strong sense of self in expats manifests itself in a way that they can control the events and outcomes in their lives. They are more likely to exert an effort into making things happen
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Select More Carefully ± Ensure that expatriates are qualified to perform the jobs expected of them at a level consistent with the pay they will receive. But this will require the organization to: a. Make sure that expatriate managers have social as well as technical skills needed. b. See if there are local employees who are equally qualified. If so, are they paid comparably? c. Communicate performance expectations and criteria for success clearly to the expatriate.
Expatriate selection process : The selection process can be seen in the diagram below. The selection process is done in a phased out manner. The first step is to identify a pool of potential expatriate. After the pool has been selected it is judged for its intelligent quotient competencies. The analytical skills are judged. A behavioral study of expatriate is done to understand their learning style and thinking style because the organization needs to adapt to think level of expatriates. Assignments are designed for them they can be internal or external which will depend on the need of the hour. The last step involves matching of expatriates with their desired jobs and assigning them to that job.
Therefore, the critical issues, which arise as expatriates¶ assignments evolve into a global assignment scope, must be viewed in a systematic manner. This paper develops a unique theory-based expatriation selection process based upon a systemic assessment of potential expatriate candidates¶ multiple IQs, learning styles, thinking styles, and the nature of the expatriate assignment. In addition, a practical step-by-step managerial process is developed that can be used in the selection of expatriate managers for global assignments
Ans. IR" may be defined as the means by which the various interests involved in the labour
market are accommodated, primarily for the purpose of regulating employment relationships. National differences in economic, political and legal systems produce markedly different IR systems across countries Multinationals generally delegate the management of IR to their foreign subsidiaries. However, a policy of decentralization should not keep corporate headquarters from exercising some coordination over IR strategy. Generally, corporate headquarters will become involved in or oversee labor agreements made by foreign subsidiaries because these agreements may affect the international plans of the firm and/or create precedents for negotiations in other countries.
globalization has disturbed the status quo between "capital" and "labour" in each country, in the sense that capital is significantly more mobile in an open international environment, while labour remains relatively immobile (here it should be noted that, under globalization, international labour migration is continuing, but, proportionately to the rate in the1970's, has not increased see World Bank 1995: 53). This can place "labour" at a relative disadvantage, in that "capital" can now employ "labour" in different countries, at lower cost and on a basis which can prejudice the continuing employment of workers in the originating country. The scope of IR must now be viewed as extending to all aspects of work-related activities which are the subject of interaction between managers, workers and their representatives, including those which concern enterprise performance. But issues which are critical to the manner in which an enterprise operates - such as job design, work organization, skills development, employment flexibility and job security, the range of issues emerging around HRM, and cross-cultural management issues have not until recently been considered as part of labour-management relations; and, in many cases, they have not previously been made the subject of collective bargaining or labour-management consultation. But this situation is changing, and has been particularly noticeable in Western industrialized countries. As noted previously, this is part of a trend in many countries towards the need for increased workplace flexibility as a result of globalization. It is being demonstrated in the region, particularly in the export-exposed sectors of national economies, through higher wage flexibility, increased emphasis on enterprise level bargaining and the growth of enterprise unionism. The increasing shift from import substitution to export promotion in India provides a current example of a resurgence in collective bargaining to produce required changes in work organization, better use of technology, general efficiency and productivity. Whether collective bargaining should be introduced in the government sector has been a matter for debate in Southeast Asia and some South Asian countries for some time, but little real progress in this direction has been made. In the Western Pacific (Australia and New Zealand), however, public sector collective bargaining now takes place, and there is increasing use of 18 contract employment for senior government officials. There has also been an increasing incidence in some countries (eg, Australia and New Zealand) of direct bargaining between managers and individual workers. In the trend towards decentralization of bargaining and workplace flexibility in the region, there appears to be a close relationship between the levels of economic development and of international integration exhibited by a particular country Cross-cultural managing and working
One overarching consequence of increasing globalization is that managers from investing countries in and outside the region are having to adapt their own national management practices to the circumstances prevailing in different Asian countries. This requires recognition that, because Asia is characterised by diversity, there is a need for knowledge and sensitivity about legal, IR and HR (and other management) practices in different cultural environments. Workplace rules, practices and behaviour which apply in one country may not apply or be inappropriate in another. Trade unions and workers also need to understand and adapt to changing enterprise (including cultural) practices which may be foreign to them. 20 Governments have to become familiar with the customs, practices and expectations of investing countries so as to be able to provide appropriate supporting policies and programmes. In each of these situations, the persons involved need access to information, experience and strategies to enable them to adjust effectively to new work environments. Transplanting ways of managing people from one country to another, and developing new (culturally sensitive) ways for managers and workers to work together, can be much more difficult than transplanting management systems and structures dealing with issues such as marketing and finance. The growing incidence of industrial disputation in some local operations of foreign-owned enterprises and joint ventures in a number of Asian countries suggests that this process of transition is not yet being successfully managed.
A skilled and adaptable workforce The main sources of productivity growth are technological change, increases in capital intensity, economies of scale and improvements in labour efficiency. Education and training will play a vital role in promoting labour efficiency through the enhancement of workforce skills, and the World Bank has emphasised the significant link between skills development and a country's manufacturing export capacity (World Bank 1993: 43 - 48). Training of workers in narrow skills is no longer appropriate. Modern technology is increasingly demanding broader skills and new mixes of previously quite distinct skills. In addition, the rapid pace of technological change demands an ability to adapt quickly; so, the formation of skills has to rely not only on initial training, but equally on opportunities for retraining and upgrading existing skills. Flexible forms of work organization and management Taking advantage of the scope for greater workplace flexibility through changes to work organization (which includes the design, operation and skills requirements of jobs and the arrangement of working time) is an important factor in the ability of firms to maintain and improve competitiveness. Flexibility at the workplace requires workers to have several skills and a broader understanding of the production or work process to enable them to carry out a range of activities. To achieve this
outcome, managers and supervisors need to be forward looking, inform and involve workers, and use approaches which enable people to develop and use properly their talents and abilities. In particular, they need to pay far greater attention to training and skills development. This should lead to greater versatility for employers in how they organize and carry out work and a greater capacity to cope with fluctuations in production. The ability to adjust working time arrangements and the identification and removal of restrictive work and management practices are also important. The latter practices, in particular, inhibit flexibility and efficiency, and exist for reasons other than the safe and efficient performance of work tasks. Culturally-sensitive management strategies As noted earlier in this paper, globalization involves managers and workers moving from one country to another. In doing so, they enter into a new society and culture. Some aspects of these cultures are obvious (eg, another language, other laws and customs, etc) and can with the necessary goodwill be adapted to. But there are other elements of culture which are not so visible. They include the assumptions made and premises relied on by the members of a certain society; values and unwritten codes of behaviour; and patterns of thinking and problem-solving. They are what the people in that society take for granted. These elements are the essence of a particular culture and are the most difficult to detect. A manager or worker coming from and entirely different culture with its own never-questioned assumptions and values - may not perceive or understand these elements or have difficulty accepting them. As such they can be the basis for tension and conflict in the workplace. Managers assuming work responsibilities in a new country must acquaint themselves with both visible and invisible cultural traits, and adopt appropriate strategies to ensure that cultural mismanagement considerations do not become a source of reduced enterprise performance. Ans. The workforce of the 21st century is increasingly diverse and multicultural. To effectively manage and lead in this environment, HR must be knowledgeable about cross-cultural factors-on both the domestic and global fronts-in human resource management. By promoting education in cross-cultural competencies throughout the organization, HR can better serve the company to successfully achieve its mission and goals. Effective cross-cultural communication is necessary to build and maintain business relationships. To support their organizations, HR professionals can develop HRM practices and policies that promote cross-cultural training and reward managers for their part in educating employees on effective cross-cultural communication.
When working with people from different cultures and/or countries, organizational leaders must know how to "read" body language, a key communication factor in highcontext cultures. Misunderstanding body language can lead to inaccurate expectations. With many Western companies now doing business with India, a good example of a common cross-cultural difference is one of the head gestures by Indians. As crosscultural trainer and management consultant Craig Storti explains, the Indian head gesture for "yes" appears similar to how Westerners shake their head to indicate "no." When seeing this gesture, Westerners may think that the Indian has disagreed, when that is not necessarily so. (23) Taking time to understand communication through body language can make the difference in a positive or negative outcome. These various points are representative of the many scenarios that require flexibility and knowledge about language and cross-cultural communication. As globalization continues to expand, it is increasingly important for HR to understand the implications of HRM in a changing world. Not all HRM strategies will fit every situation. Communication styles and cultural value dimensions need to be taken into consideration when establishing or changing HRM strategies, policies and practices. Whether in domestic or global business environments, HRM must adapt to crosscultural factors for the success of the organization and its people. Whether in a domestic or global workplace, HR needs to be cognizant of cross-cultural decision-making and the corresponding influence on HRM. By being aware of cultural differences in the decision-making process (e.g., the reasons for making decisions, the various ways that decisions are made in different cultures, the party responsible for making those decisions--individuals, groups, various levels within the organization--and the ways decisions are implemented), HR can better gauge culturally appropriate decisions and work with managers of other cultures in the decision-making process. Gaining cross-cultural competence takes time, education, experience, openness and sensitivity. When people lack intercultural skills, miscommunications can damage business relationships, deadlines can be missed, projects may fail and talented people will go to the competition. Key HR responsibilities are to understand how cross-cultural factors interact with HRM, be the conduit for organizational learning for cross-cultural intelligence and foster cross-cultural communication throughout the organization. Ans. Companies in the newer industries, especially those in information technology, biochemicals, and electronics, have reported to be more flexible in formulating expatriate-compensation packages and more willing to break with the balance-sheet approach (www.fortune.com). These companies are more and more using younger members of the staff and sending them abroad for shorter periods of time - often technical people in 6 months or less - as most of today's young skilled employees are much more flexible in terms of cross-culture orientation/exploration and family life. The shorter assignments also seem to be better for the employee-company relationship because it means that the employees are not "out of sight, out of mind" long enough to lose close contact with the parent company.`
. The going rate approach is based on local market rates. The expatriate¶s base salary is linked to that of the host country. If working in a low-pay country the multinational usually supplements base pay with additional benefits and payments. This approach leads to equality with local nationals, simplicity, and helps the expatriate to identify with the host country. One of the main problems is it can lead to a variation between assignments for the same employee. Meaning, the same employee can hold a similar position in two different countries and make more money in one than the other. The basic objective of the balance sheet approach is the maintenance of home-country living standard plus a financial inducement. This is the most common system used in multinational firms. The balance sheet approach is designed to equalize the purchasing power of employees at comparable position levels living overseas and in the home country, and to provide incentives to offset qualitative differences between assignment locations. There are two main options in the area of international compensation ± Going Rate Approach (also referred to as the Market Rate Approach) ± Balance Sheet Approach (also known as the Build-up Approach). Going rate approach Based on local market rates Relies on survey comparisons among ± Local nationals (HCNs) ± Expatriates of same nationality ± Expatriates of all nationalities Compensation based on the selected survey comparison Base pay and benefits may be supplemented by additional payments for low-pay countries. Advantages ± Equity withy local nationals ± Simplicity ± Identification with host country ± Equity among different nationalities Disadvantages ± Variation between assignments for same employee ± Variation between expatriates of same nationality in different countries ± Potential re-entry problems Example: Should a Pakistani bank operating in London use local British salaries, the salary other Pakistani competitor banks in London or the average slalry offered by all foreign banks operating in London as the reference points for the base salalry offered.
The Balance Sheet Approach
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The basic objective is to µkeep the expatriate whole¶ through maintenance of home-country living standard plus a financial inducement to make the package attractive. o Home-country pay and benefits are the foundations of this approach o Adjustments to home package to balance additional expenditure in host country o Financial incentives (e.g., expatriate/hardship premium) added to make the package attractive o Most common system in usage by multinationals
Major Categories Incorporated in the Balance Sheet Approach (cont.)
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Goods and services o Home-country outlays for items such as food, personal care, clothing, household furnishings, recreation, transportation, and medical care. Housing o Major costs associated with housing in the host country. Income taxes o Parent-country and host-country income taxes. Reserve o Contributions to savings, payments for benefits, pension contributions, investments, education expenses, social security taxes, etc.
Advantages: ± Equity Between assignments Between Expatriates of the same nationality ± Facilitate re-entry ± Easy to communicate to employees Disadvantages: ± Can result in great disparities Between expatriates of different nationalities Between expatriates and local nationals ± Can be complex to administer ± May entail difficulty to attract human capital The Balance Sheet Approach presents the fundamental issues involved in developing a compensation approach for expatriate assignments. How to consider differences between countries in the cost of goods and services, housing, income taxes, and other elements
Example of an Expatriate compensation
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An expatriate working in a U.S. branch may receive: o Base pay: $1,400/mon
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Housing: up to $1,400/mon (Optional) Itemized reimbursement: $500/mon Discretionary expense (e.g., gifts & gratuity to clients and partners): $1000/special holidays Benefits: Social security/Medicare (Optional) Health care: $200/mon paid by employer Unemployment coverage Workers comp
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A U.S. expatriate working for a Chinese university: o Base pay variation: $1,500-$10,000/mon o Housing: Free for initial 6 months or up to a lump sum subsidy of $1,500-10,000 for a contract of 3 years or above (optional) o Benefits: Pension coverage for a 5 year contract or paid at the option of the expatriate o Health care: Completely paid by employer or optional incentive to the expatriate o Home leave 1-2 times/Yr o Paid vacations and observed Chinese holidays o Initial research launch grant: $10,000 .
The balance sheet approach is a method of compensating expatriate employees for cost differences between countries. Normally used for assignments of limited duration, it seeks to ensure that the expatriate¶s purchasing power and home-country lifestyle do not change significantly during the course of an assignment²even if costs are higher abroad, as they
so often are.
The Use of Caps on Expatriate Pay Components Incentive payments³10% of the participants cap for salary above a predefined threshold; 13% base their caps on a flat amount; and 77% of the respondents do not set caps. Hardship allowances³15% cap for salary above a predefined threshold; only 9% use a flat amount, leaving 75% not using caps. Goods and services differentials³18% cap for salary above a predefined threshold; 82% do not implement caps. Ans. Repatriation occurs when an expatriate of a multinational corporation returns to the country of his/her origin from an overseas assignment (Hodgetts and Luthans, 1997). While repatriation is perceived to be a non-issue for many companies, there is substantial literature on expatriation and the challenges that must be addressed when moving an employee and his/her family to a country with different cultural
dimensions and significant social and economic contrasts (Dowling and Schuler, 1990; Klaff, 2002; O'Neil and Kramer, 1995; Tung, 1988). Thus, there is a strong recognition of the problems faced when moving to a foreign climate. However, many companies assume that the move back to home territory will be relatively simple because the language is the repatriate's own, the culture is one with which the whole family should be familiar, and the home conditions are perceived to be the same as those left behind. From this perspective, it would appear that repatriates would slip smoothly into the old environment and not require significant support. Unfortunately, this simplistic view of the transition ignores many issues. Repatriation is a complex process, generating similar issues to those encountered when managing expatriation (Engen, 1995; Swaak, 1997). First, the repatriate is returning from a high-status position with high autonomy to a less highly profiled role in the parent company. Career opportunities may also diminish, rather than expand, as a result of working overseas. The challenges and satisfaction associated with greater responsibility may be exchanged for a feeling of boredom and underutilization. In addition, the repatriate is no longer "special" or different from fellow workers. There is feeling of being 'let-down', which significantly affects work satisfaction. Additionally, the transition back home may be problematic for all family members (Hammer and Hart, 1998). A returning expatriate may experience reverse culture shock when he or she re-enters the home country (Hammer and Hart, 1998). Salary and fringe benefits provided while on foreign assignments are now lost, and the expatriate and family must adjust to a lower standard of living. The spouse and children are also confronted with practical readjustment problems, such as housing and schooling. It is understandable that companies may find their repatriates somewhat disillusioned and jaded on their return. Repatriate retention is proving to be a major concern to those working in the international sector. Despite the substantial costs involved in developing the potential of high caliber employees to take and hold expatriate roles, these same people are often dissatisfied on their return to their homelands (Napier and Peterson, 1991; Suutari and Valimaa, 2002; Tung 1998). It has been reported that up to 25 percent of repatriates wish to leave the company after their return to a "normal post" (Abueva, 2000; Adler, 1991; Black and Gregersen, 1990). This turnover rate is significantly higher than for local incumbents (Black, Gregersen et al., 1992; Brewster 1997; Gregersen 1992; Harvey 1989; Kendall 1981; MacDonald and Arthur, 2005; Mendenhall and Oddou, 1991; Oddou, 1991). It represents a significant loss--the cost of losing a single repatriated employee has been estimated to be as high as $1.5 million (Abueva, 2000; Black, 1992; Peck, 1997). he Challenge of Repatriation Traditionally, expatriates have been primarily managerial executives, with the role of controlling an overseas branch of the parent company. However, the increasing globalisation of business has led to an expansion in the range of personnel that is sent overseas to work and gain experience. Engineers, information technologists, and other specialists are increasingly moving into a globalised work arena (Chew,
2004; Latta, 1999). The resulting diversity of repatriated personnel generates two challenges. First, the processes and policies relating to repatriation must be more rigorously developed and documented in order to facilitate equitable and efficient management of the program. Second, there should be a greater awareness of the need to develop such programs in order to increase the retention rate of experienced expatriates (Birdseye and Hill, 1995; Morley, 2003; Punnett and Rick, 1997)
Given that expatriates are very costly and difficult to manage, and that it is difficult to measure their contribution or value, there will be pressure to use these much cheaper mechanisms wherever possible. Decisions on expatriate selection are usually made in a less than organized and coherent manner, and often taken by line managers who simply ignore the laiddown criteria espoused by the HR department.
To remove oneself voluntarily from the nation of one's birth and reside permanently or for a long period in another nation. The right of expatriation allows one to change his or her citizenship. In dealing with expatriates, an international company should recognise their value and have experienced staff to deal with them and follow written policies on expatriates' benefits.[18] Salary of internationally assigned personnel customarily consists of standard salary and monetary benefits such as cost of living and/or hardship allowances supported by non-monetary incentives i.e. housing and education. Some companies will completely cover the cost of the education, even at relatively expensive international schools, while other, usually smaller companies, encourage families to find local schooling options.
Ans. Polycentric & Regiocentric Staffing Model
Polycentric approach
Definition: Polycentricity (polycentrism) is a belief that local people know the local environment better than outsiders. A polycentric staffing policy uses host-country nationals to manage foreign subsidiaries and
parent-country nationals for the key positions at corporate headquarters. This approach can minimize the dangers of cultural myopia, but it can create a gap between home and host-country operations. The policy is best suited to a multidomestic strategy.
Each subsidiary is a distinct national entity with some decision-making autonomy; HCNs manage subsidiaries who are seldom promoted to HQ positions; PCNs rarely transferred to subsidiary positions.
Rationale and advantages: Gives hope for profit maximisation through flexibility because local managers can react quickly to market needs in the areas of pricing, production, product life cycle, and political activity. Absence of problems associated with expatriate managers including cultural myopia. Provides continuity in the management of foreign subsidiaries. Problems and disadvantages: No synergy because there is little communication between national units. Limits experience of host nationals to their own country. Corporate headquarters may become isolated from national units and lead to lack of integration. This in turn may lead to corporate inertia. Regiocentric approach (Note: This option is not covered by Hill (2005); it is included here for interest and to indicate that other authors have a perspective which is different from Hill (2005). Definition: Regiocentricity is the variation of staffing policy to suit particular geographic areas. A geocentric
staffing policy seeks the best people for key jobs throughout the organization, regardless of their nationality. This approach is consistent with building a strong unifying culture and informal management network and is well suited to both global and transnational strategies. Immigration policies of national governments may limit a firm's ability to pursue this policy.
Reflects a regional strategy and structure; Regional autonomy in decision making; Staff move within the designated region, rather than globally;
Staff transfers between regions are rare.
Rationale and advantages: Policy varied to suit the nature of the firm's business and product strategy. Allows interaction between executives because of inter-regional transfers. Shows some sensitivity to local conditions. Provides a 'stepping stone' for a firm wishing to move from an ethnocentric or polycentric approach to a geocentric approach. Problems and disadvantages: May produce federalism at a regional (rather than a country) basis and constrains the firm from taking a global stance. May improve career prospects at the national level, but only to the regional level: staff may never attain positions at corporation headquarters.
Ans. Staffing deals specifically with the acquisition, training and allocation of the organisation's
human resources. In both the domestic and the international context, the staffing process can be seen as a series of steps that are performed on a continuing basis to keep the organisation supplied with the right people in the right positions at the right time. The steps in this process are:
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human resource planning (this is part of the organisation's strategic plan) recruitment selection induction and orientation training (to improve job skills) development (to educate people beyond the requirements of their present position) performance appraisal remuneration and rewards transfers separations.
In an international business, the way in which these steps are administered depends very much on the firm's strategy and the staffing policy chosen to support that strategy. There are four choices in policy: the ethnocentric approach, the polycentric approach, the geocentric approach and the regiocentric approach. What follows is a shorthand description based on Dowling and Welch (2004) of the four using the same criteria for each approach. You should use these descriptions as the 'skeleton' of your understanding of the four approaches and use the reading from Hill (2005) to provide the 'flesh'.
