Chapter 3

1. Chapter 3 IHRM: Sustaining international business operations

2. Chapter objectives The previous two chapters concentrated on the global environment and organizational contexts. We now focus on the ‘managing people’ aspect. The aim is to establish the role of HRM in sustaining international business operations and growth. We cover the following: • issues relating to the various approaches to staffing foreign operations:ethnocentric;polycentric;geocentric;regiocentric • the reasons for using international assignments: position filling, management development and organizational development (cont.)

3. Chapter objectives (cont.) • the various types of international assignments: short-term, extended and longer-term; and non-standard arrangements: commuter, rotator, contractual and virtual • the role of expatriates and non-expatriates (international business travelers) in supporting international business activities • the role of the corporate HR function.

4. Approaches to staffing • Factors affecting approaches to staffing • General staffing policy on key positions at headquarters and subsidiaries • Ethnocentric • Polycentric • Geocentric • Regiocentric • Constraints placed by host government • Staff availability

5. Ethnocentric PCN Rules • Strategic decisions are made at headquarters • Limited subsidiary autonomy • Key positions in domestic and foreign operations are held by headquarters’ personnel; PCNs (Expats) manage subsidiaries

6. Polycentric HCNs Rule • 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 & hold headquarter positions

7. GeocentricPCNs, HCNs, TCNs Rule • A global approach - worldwide integration • View that each part of the organization makes a unique contribution • Nationality ignored in favor of ability: • Best person for the job • PCNS, HCNs, TCNs hold key positions at headquarters & subsidiary

8. Regiocentric • Reflects a regional strategy and structure • Regional autonomy in decision making • Staff move only within the designated region, not globally like the geocentric approach. • Staff transfers between regions are rare

9. Table 3-1: The advantages and disadvantages of using PCNs, TCNs and HCNs

10. Figure 3-2: Determinants of IHRM approaches and activities

11. Reasons for international assignments • Position filling • Skills gap, launch of new business, technology transfer • Management development in international arena • Training and development purposes, assisting in developing common corporate values • Organizational development to subsidiary • Need for control, transfer of knowledge, competence, procedures and practices

12. Types of international expat assignments • Short term—troubleshoot; project supervisor • Up to 3 months • Extended term—troubleshoot; project supervisor • Up to 1 year • Long term • Varies from 1 to 5 years • The traditional expatriate assignment

13. Non-standard assignments • Commuter assignments—home to subsidiary; weekly or bi-weekly; London to Paris • Rotational assignments—oil rig assignments • Contractual assignments—R&D specialty • Virtual assignments—expat does not leave home; manages from home. Some of these arrangements assist in overcoming the high cost of international assignments but are not always effective substitutes for the traditional expatriate assignment; temporary

14. Disadvantage of non-standard assignments • Some of these arrangements assist in overcoming the high cost of international assignments but are not always effective substitutes for the traditional expatriate assignment; temporary

15. Expat needs to make frequent visits between home & subsidiary Face-to-face meetings still required Figure 3-3: Factors influencing virtual assignments

16. Virtual Assignment • Virtual assignments more common in European firms with few companies indicating the use of virtual assignment in the Asia-Pacific region • Virtual assignments—expat DOES NOT LEAVE HOME; manages from home. • Traditional assignments for expat you DO leave home.

17. Roles of an expatriate • Agent of direct control—ethnocentric • Agent of socialization—bumble bees • Network builder—spiders; contacts • Boundary spanner—collect host-country info. • Language node • Transfer of competence and knowledge

18. Figure 3-4: The roles of an expatriate

19. The role of non-expatriates • People who travel internationally yet are not considered expatriates as they do not relocate to another country • Road warriors, globetrotters, frequent fliers • Much of international business involves visits to foreign locations, eg. • Sales staff attending trade fairs • Periodic visits to foreign operations

20. A glamorous life? • International business travelers cite the positives as: • Excitement and thrills of conducting business deals in foreign locations • Life style (top hotels, duty-free shopping, business class travel) • General exotic nature

21. But a high level of stress! • Home and family issues – frequent absences • Work arrangements – domestic side of position still has to be attended to • Travel logistics – waiting in airports, etc. • Health concerns – poor diet, lack of sleep, etc. • Host culture issues – limited cultural training

22. Table 3-2: Various roles of corporate HR

23. The role of the corporate HR function • Can we manage our people like a global product? The feasibility of: • The concept of a global internal labour market • Standardization of work practices and HR activities • What HR matters require central control and what can be decentralized?

24. Chapter summary This chapter has expanded on the role of IHRM in sustaining international business operations. We have: • Looked at the various approaches to staffing international operations – ethnocentric, polycentric, geocentric and regiocentric – examining their advantages and disadvantages and factors that may determine the choice of these options. • Considered the reasons for using international assignments: position filling, management development and organization development. (cont.)

25. Chapter summary (cont.) • Discussed the various types of international assignments: short, extended and long-term (traditional); and non-standard forms such as commuter, rotational, contractual and virtual assignments. • Examined the various roles of the expatriate: as an agent for direct control, as an agent for socialization, as network builders, as boundary spanners and as language nodes. These various roles of the expatriate help to explain why expatriates are utilized and illustrates why international assignments continue to be an important aspect of international business from the organization’s perspective. (cont.)

26. Chapter summary (cont.) • Recognized that non-expatriates are also critical to international business operations. International business travelers present their own challenges, such as the effect of frequent absences on family and home life, the possible negative health effects and other stress factors. The management of such individuals, however, does not appear to fall within the domain of the HR department. • Looked at the role of the corporate HR function as the firm grows internationally, building on sections from Chapters 1 and 2.