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This topic spans 2 sessions so the readings set out below cover this 2 sessions of topic content.
Topic Discussion notes: Read the Discussion notes for Topic 7.
Variables that Moderate Differences between Domestic and International HRM
Managing people for international assignments is more complex than that in the domestic environment.
According to Dowling et al. (2013), there are six factors that differentiate international from domestic HRM:
• more HR activities
. For example, a human resource department must deal with aspects such as
international relocation and orientation, administrative services for expatriates and host government
relations;
• the need for a broader perspective
. As seen in the way that HR managers must design and
administer programs for more than one national group of employees;
• more involvement in employees’ personal lives
. HR department may be involved in arranging
housing, health care, and children’s schooling;
• changes in workforce mix of expatriates and locals
. As the firm’s international operation expands,
the mix of expatriates and locals change and HR activities such as recruitment, selection and training
broadens;
• risk exposure
. Expatriate failure, loss of international market share and terrorism are examples of risk
that involve greater challenge than domestic operation;
• more external influences
. External factors such as the type of government, the state of economy and
the way each country conduct business affect the management of people in international business.
The Determinants of International HRM Approaches and Activities Framework
It is important for managers to understand the various interrelationships between organisational factors and
contextual factors that influence the management of people in international business.
Dowling et al. (2013) adapt the framework on approaches and activities of the management of HR developed
by Welch. This framework links between firm-specific variables (such as stage in internationalisation,
organisational structure and organisational culture) and situation variables (such as staff availability, need for
control) with international HRM approaches and activities. Contextual factors include the legal system and
cultural dimensions.
Figure 7.1: Determinants of International HRM Approaches and Activities Framework
Contextual Factors Affecting HRM in Global Market
Noe, Hollenbeck, Gerhart and Wright (2000) identify four contextual factors that affect the management of
people in the global markets, namely:
•
Culture;
•
education/human capital;
•
the political/legal system;
•
the economic system.
Figure 7.2 demonstrates the linkages of the factors.
Education/human capital
One of the key considerations of expanding to foreign markets is the availability of a qualified work force. A
country’s human capital, the productive capabilities of individuals that consist of the knowledge, skills, and
experience, can be an important HR issue. Countries with low human capital is attractive for operation that
needs low skills and low wage levels. On the other hand, countries with high human capital attract direct
foreign investment that creates high-skilled jobs.
Political/legal system
The political/legal system of a country often determines HRM regulations. The laws are a reflection of
societal norms of a particular country. In India, for example, the Indian labour law provides strong protection
to employees from layoff. Under the Industrial Dispute Act, layoffs and dismissal are difficult and the
involvement of government in the activity through the bureaucracy makes the process time consuming.
Economic system
The economic system of a country is influential to the practice of HRM. In socialist economic systems, the
free education system promotes the development of human capital. However, there is little monetary
incentive to further develop human capital. For example, the development of human capital in the former
Soviet bloc countries is focused on the investment of the Socialist Party. In the capitalist economic countries,
developing human capital, usually through education, is very costly. However, people are able to get the
reward through getting good jobs which further enables them to invest more on education. Therefore, in the
U.S. for example, salary levels indicate differences in the accumulation of human capital.
Culture
Culture often determines the effectiveness of HR practices. Practices effective in one culture may be less
effective when implemented in other cultures. For example, compensation in many companies in the western
countries is tied to individual performance. In Japan, however, group orientation is highly valued and the
reward system is linked to achievement of the group rather than that of individual employees. The
dimensions of national culture are discussed in the following section followed by explanation on the impact of
these dimensions on the management of people.
D
IMENSIONS OF NATIONAL CULTURE
The four dimensions of national culture developed by Hofstede are further conceptualised by Griffin and
Pustay (2007), who assert that these dimensions are not absolutes as there are people within the cultural
grouping who are at every point on each dimension. Selected people management issues that are impacted
by the dimension are presented below. (Griffin & Pustay, 2007; Milliman, Nason, Zhu, & De Cieri, 2002.)
The Contingency Model for International HRM
Given the differences of contextual factors in various countries, it is useful for managers to develop
contingency-based HRM practices that meet the need of the local workers. Thus specific HRM activities
such as recruitment and selection, training, and labour relations, can be analysed contingently on a countryby-
country basis (Hodgett, Luthans & Doh, 2006), as shown in Figure 7. HRM practices in Germany, Japan
and China are used as examples.
The Purpose of Expatriation
One of the strategic decisions that managers in international firms may make is sending expatriates for
international assignments. To enhance the effectiveness of the assignments and help with planning, it is
important to be fully aware of the purpose of the assignments and the role of expatriates whilst abroad.
Evans, Pucik and Barsoux (2004) argue that there are three reasons that drive expatriation:
• to fill positions
– usually due to the lack of technical or managerial skills in the foreign location;
• management development
– to provide international experience to high potential employees;
• organisational development
– for control and coordination of international operations.
The length of time spent abroad is generally linked to the purpose of assignments. Figure 7-5 shows the
framework developed by Evans, Pucik and Barsoux (2004) that can be used to clarify the nature of
expatriate roles in relation to the purposes of the assignment.
Model of International Adjustment
A model of expatriate adjustment proposed by Black, Mendenhall and Oddou (1991) is useful in helping
managers to understand factors that influence adjustment in international assignments. As shown in Figure
7.6 there are two determinants of adjustment in the Model:
•
‘Anticipatory adjustment’ is adjustment in the period before departure that consists of individual and
organisational factors;
•
Adjustment taking place in the host country, or ‘in-country adjustment’ includes factors related to
individual, job, organisation culture and organisation socialisation. The degree of adjustment is
influenced by factors such as job, organisation culture and non-work which include family-spouse
adjustment.
One of the strategies to overcome problems with international adjustment is by instituting a training and
development program for international managers. A planning model for the development of multinational
managers includes dealing with adjustment in foreign country by expatriates as well as adjustment to own
country when expatriates return to their own country (repatriation) (Hodgett, Luthans and Doh, 2006).
There are nine phases of development activities:
Phase 1:set the overall objective of the program that is to increase the effectiveness of expatriate or
repatriated executives;
Phase 2: recognise the problems that must be dealt with in order to reach the overall objectives;
Phase 3: identify the development objectives;
Phase 4: determine the amount of development that will be needed regarding each of these objectives;
Phase 5: choose the specific methods to be used in the development process from types or predeparture
training to language instruction to re-entry training;
Phase 6: conduct an intermediate evaluation of how well things are going and the institution of any
needed midstream corrections;
Phase 7: evaluate of how well the expatriate managers are doing, thus providing evaluation feedback of
the development process;
Phase 8:establish re-entry training for returning expatriates;
Phase 9:evaluate the effectiveness of the executives after they have returned.
(Source: Adapted from Hodgett, Luthans & Doh, 2006)
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Optional readings: Also browse through any of the optional readings that might be of interest.
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