Unit-4

International Business Management

BBA-306

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Recap of Previous Topic
1. Main concerns of CSR.

2. Advantages and Disadvantages of CSR.

3. Growing importance of CSR.

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 Learning Outcomes
1. International Recruitment and Selection.

2. What are the methods of training?

3. Explain the EPRG framework.

4. Write a note on International Compensation.

5. Difference between Performance Appraisal and

performance Management?

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PO4: Ability to understand, analyze and communicate
internal, external and global environment of business by
making efficient use of ICT.

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GLOBAL HUMAN RESOURCE MANAGEMENT

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 Definition of Global Human
Resource Management

• IHRM is the process of procuring, allocating and

effectively utilizing human resources in multinational
corporation.

• What is Global Human Resource Management As a

field it is about: the understanding, researching,
applying and revising all human resource activities in
their internal and external contexts as they impact the
process of managing human resources in enterprises
throughout the global environment to enhance the
experience of multiple stakeholders, including investors,
customers, employees, partners, suppliers,
environment, and society.

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Differences Between Domestic
and Global HRM
• Responsibility for greater number of activities
• Need for greater level of expertise
e.g. employment laws
• Necessity for closer involvement with
employees (e.g. expatriate families)
• Greatly expanded and different mix of
employees
• Having to deal with more external influences
• Having to face greater exposure to problems
and difficulties
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 International Recruitment and
Selection

• Recruitment – Defined as searching for and

obtaining potential job candidates in
sufficient numbers for and quality so that
the organization can select the most
appropriate persons for its job needs.
• Selection – Defined as the process
of gathering information for the purposes
of evaluating and deciding whom
should be employed in particular jobs.

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 Approaches to global staffing

1. Ethnocentric

Staffing the most important positions in foreign subsidiaries with

expatriates from the company's home country. Expatriates are
often believed to better represent the interests of the home
office and ensure that the foreign offices are aligned with
home headquarters. In fact, many expatriates are selected
from the company's current employees and are simply
transferred to a foreign subsidiary.

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 Pros and Cons of the Ethnocentric

Advantages of the Ethnocentric Approach

The obvious advantage to ethnocentric staffing is the alignment of interests and

perspective of the home office with all foreign subsidiaries abroad.

Communication is also easier because there should be no language and cultural

barriers.

The company may also be able to transfer employees with a clear performance
record that will provide some level of predictability.

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Disadvantages of the Ethnocentric Approach
•One can lose local perspective and insights that
local employees can provide that may help
overcome unique hurdles in each foreign office
•. Moreover, hiring expatriates tends to be
expensive compared to hiring locally.
•Additionally, a high ratio of expatriates may create
local resentment at foreign subsidiaries, which
may hurt morale.

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 2. Polycentric Approach

When a company adopts the strategy of limiting

recruitment to the nationals of the host country (local
people), it is called a polycentric approach.

The purpose of adopting this approach is to reduce the

cost of foreign operations gradually.

The companies that adopt this method normally have a

localized HR department, which manages the human
resources of the company in that country.

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Advantages of the Polycentric Approach
• It eliminates language barriers, avoids adjustment
problems of expatriate managers and their
families, and removes the need for expensive
cultural awareness training programmes.
• Hiring costs are reduced

• IncreasesMotivation
• The approach also responds effectively to the
demands that are made by the host countries.
• This approach also provides opportunities to
advance and promote local nationals.

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Disadvantages of the Polycentric Approach
• Polycentric approach experiences a lot of
difficulties in exercising effective control over
the operations that are carried out in the
subsidiaries.
• There are also difficulties in communicating
with the personnel that are based inthe home
country.
• The approach also limits mobility of careers
for the nationals from the home country and
foreign countries.
• There is also lack of opportunities for the
home country’s nationals to achieve
international and cross-cultural experience
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 Geocentric Approach

The Geocentric Approach is a method of international

recruitment where the MNC’s hire the most suitable person for
the job irrespective of their Nationality.

The rationale behind the Geocentric Approach is that the world is

a pool of talented staff and the most eligible candidate, who is
efficient in his field, should be appointed for the job irrespective
of his nationality.

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Advantages of the Geocentric Approach

• Facilitates the development of an

international team

• Supports cooperation and resource

sharing across units.

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Disadvantages of the Geocentric Approach
• Immigration controls and work permits for
the foreign manager and his family
• Provision of extensive, time-consuming
(and sometimes)expensive information
and documentation for foreign nationals
• High Training and relocation cost
• Devising an appropriate compensation
structure

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 Regiocentric Approach

The regiocentric approach uses managers from various

countries within the geographic regions of business.

Although the managers operate relatively independently

in the region, they are not normally moved to the
company headquarters.

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Advantages of the Regiocentric Approach
Culture fit, i.e. the managers from the same region as that of the
host country may not encounter any problem with respect to the
culture and the language followed there.

Less cost is incurred in hiring the natives of the host country.

The managers work well in all the neighboring countries within

the geographic region of the business.

The nationals of host country can better influence the decision of

managers at headquarters with respect to the entire region.

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Disadvantages of the Regiocentric Approach
The managers in different regions may not understand the
viewpoint of the managers employed at the headquarters.

There could be a communication barrier because of different

languages.

The manager selected from a particular region may lack the

international experience.

It may lead to the confusion between the regional objectives

and the global objectives.

The regional managers may only focus on accomplishing the

regional targets and may oversee the impact on the firm as a
whole.
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 The Problem of “Expatriate
Failure”
• Expatriate failure means the premature
return of an expatriate manager before
the completion of his or her international
assignment due to the person’s failure to
attain the expected performance levels
and due to the persons continuing
inability to adjust to the new work and
cultural environment in the host country.

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The Reasons for “Expatriate
Failure”
• Inability to Cope With Larger
International Responsibility
• Manager’s Personal or Emotional
Maturity
• Manager’s Inability to Adjust
• Other Family Reasons
• Spouse’s Inability to Adjust
• Difficulties with the new environment
• Personal or emotional problems
• Lack of technical competence
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 Criteria for Selecting Staff for
International Assignments

• SELECTION DECISION:
• Technical Ability
• Cross-Cultural Suitability
• Family Requirement.
• Language
• Organization-Specific
Requirements

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• Selection Tests
• Selection Tests entails the use of certain
personal and other related criteria with a
view to determining whether a person is
suitable or not for an inter-national
expatriate assignment Problems with such
tests relate to their:
• Reliability
• Culture- bounded-ness

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 International Training and
Development
-Training strategies bridge the gap

–MNCs may make use of expatriates for short-

term or long-term international job assignments.
–The staffing orientation that is adopted in
the subsidiary unit influences the training
impetus
–The control and coordination linkages that the
parent unit wishes to establish with the subsidiary
unit drive the training budget and the strategy
–The role and responsibilities of the position
determine the extent and content of training.
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 EXPATRIATE TRAINING

• The focus is on ascertaining the cultural

awareness and the fit for the host country’s
culture
• MNCs offer Cross-Cultural Training (CCT)
– A planned intervention – To increase the
knowledge and skills of expatriates to live and work
effectively – To achieve general life satisfaction in
an unfamiliar host culture
•The effectiveness of a CCT is reflected by the
cognitive, affective and behavioral changes
that occur during and after the training.

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 Benefits and Drawbacks of
CCTMerits Demerits
Increases chances of Develops a false sense of
success in assignment confidence in global employee
Provides a comprehensive May not remove cultural biases
global perspective for and prejudices
managers
Instills a sense of confidence into May not be taken seriously by
people the recipients
Foreign employees can be May not make a visible difference
managed better in business volumes
Reduces culture shock due to Can never fully prepare an assignee to
frequent travels abroad face real problems

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INTERNATIONAL TRAINING PROCESS
1.Analysis
Establishing instructional problems, goals and objectives.
2.Design
Specify content and technology requirements.
3. Development
Create and assemble content.
4. Implementation
Prepare instructors and develop learners.
5.Evaluation
Assess delivery, learning, behavior, change or impact.

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 NEEDS
ANALYSIS
•Needs assessment diagnoses present
problems and identities future challenges to
be met through training and development. •

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 METHODS OF TRAINING
• Didactic general culture training:

– Called as educative training. – Seeks to incur a cognitive

understanding of a culture so that its norms and behavior
can be easily be appreciated by the assignees. – Methods
of imparting training are
•lectures, • seminars, • study materials, •
discussions, • videotapes,

Didactic specific culture training: – Seeks to instruct

about the particular cultural– Methods of imparting training
are – •
area studies, • videotapes, • orientation, • primary visits, •
case studies

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• Experiential general cultural Training: –
Experiential general culture training methods
help assignees experience the impact of cultural
differences on their behaviors. – Methods in this
category include – • immersion programmes •
intensive workshops.
• Experiential specific cultural Training: – These
methods seek to help expatriates experience and
learn from interactions with individuals from the
host culture. – Training includes • role-playing, •
look-see
trips, • cultural coaching • language training.
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 Host country
National Training
• NEED ANALYSIS
– The individual Need Assessment remains the
same as in Expatriates
– The training needs analysis at an organizational or
assignment levels are
• Orientation to parent country processes and reporting
mechanism.
• Familiarity and awareness of parent company work
practices, work culture, values.
• Provisions for career planning and development
initiatives.
• Training for Global corporate vision and mission.
• Training for uniformity in global work practices.
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• TRAINING GOALS AND
MEASURES – The ability to have
the subsidiary similarly managed as
the parent unit.
• Short-term – awareness
• Long-term – to carryout the objectives of
the organization

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• METHODS OF TRAINING: – On-the-Job
– Class room training – On-site visits –
Mentoring – E- learning –

• EVALUATING THE EFFECTIVENESS –

The ability of the individual to build
successful subsidiary operations –
Establish competent teams – Achieve the
units objectives while adhering to global
processes and policies
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• TCN TRAINING • Besides training of HCN
and PCN, TCNs also need to be trained. –
The focus is on ascertaining the technical,
cultural and managerial fit of the person
for the role. – The approach is similar to
that of the HCN.

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 International Performance
Management
• Performance appraisal – It is the process of
assessing an individuals performance in a
systematic way. – The performance being
measured against various job related factors as
well as individual traits. – In addition ones
potential for performance is measured.
• Performance management – This stretches
beyond appraisal. – The emphasis in
performance management is enhanced
employee performance.

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 Performance appraisal Performance
Management
Primary focus Assessing performance Improving
and potential for employee
performance performance and
development
Activities involved Designing Set of HR
appraisal activities
programme designed and
Build database executed to
employee- wise assess
performance and
improve it also
Leadership Directional, evaluative Facilitate; coaching
Frequency Usually yearly once Often, can be on-going
Degree of formality High Low
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 APPRAISING THE PERFORMANCE

• The international HR manager should

decide on three key areas
– specifying performance criteria
– identifying the appraisers
– deciding on the frequency of appraisal

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• Performance Criteria – The criteria for
assessing performance should be clear,
relevant, practical and reliable if
assessments were to be meaningful

• Trait Based – Traits are abstract

properties of individuals • openness to
other cultures • ability to live in other
cultures • loyalty to the company •
articulation and level of initiative

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• Behavior Based
– Focus on what the person actually does
Accomplish the job is very important
It emphasizes on how a job is done.

• Result Based – How much profit the assignee

brought into the organization during the
assignment – Adherence to target dates for
commissioning plants/offices – Establishing
strategic alliances.

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• Others:
– A new approach “the balanced score card”
•Propounded by Kaplan and Norton – the
financial perspective
•organization’s short-term and long-term
financial performance – the internal business
perspective
• focus on production and operating statistics
•order fulfillment or cost per order – the
innovation and learning perspective
•human resource—its potential to learn and
grow – the customer perspective.
•Customer’s view, customer retention
and satisfaction
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 Who are the Appraisers?

• Appraisers are immediate

managers/leaders at the host and parent
locations, team members and clients – Self-
appraisal is a common practice
• In most MNCs, appraisal systems
have a combination of these
appraisers
• Some common practices adopted by the
industry are: – Matrix reporting – Use of
multiple appraisers (360-degree appraisal)
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 PERFORMANCE MANAGEMENT

• PROVIDING FEEDBACK – Feedback controls the

work behavior of employees by directing actions.

• OPPORTUNITIES FOR IMPROVEMENT – Feedback

has a developmental aspect as it highlights the need for
training and development. – Opportunities to expatriates
to improve, socialize and adjust to local environment.

• LINKING REWARDS AND RESULTS – establishing

linkages between performance and compensation

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 ISSUES IN MANAGING PERFORMANCE
IN GLOBAL CONTEXT
• Cultural consequences on performance management
– rewarding performance – managing under
performers – managing virtual teams
• Assessing subsidiary performance is also a critical
dimension
• There are three ways in which cultural differences
impact performance management: –
Goal commitment and participation in organizations
– Feedback performance relationship – Feedback
seeking behavior

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 International Compensation

• International Compensation is an internal rate of

return (monetary or non monetary rewards / package)
including base salary, benefits, perquisites and long
term & short term incentives that valued by
employee’s in accordance with their relative
contributions to performance towards achieving the
desired goal of an organization. It influences:
• Organizational culture
• Recruitment and selection of competent employees
• Motivation and performance

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 Objectives of compensation
• Compensation decisions are strategic decisions and play a
key role in achieving performance and sustainable
competitive advantages for national as well as international
firms.
Therefore the key objectives are:
• Attract employees who are qualified , experienced and
interested in international assignments.
• Facilitate the movement of expatriate’s from one
subsidiary to another, from home to subsidiary, and back
from subsidiary to home.
• Provide a consistent and reasonable relationship between the
pay levels of employees at headquarters, domestic affiliates
and foreign subsidiaries.
• Be cost effective by reducing unnecessary expenses.
• Should be easily understood and easy to administer.

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 Components of Compensation

• Components of international
compensation comprises the base
salary, incentives, benefits, allowances,
foreign service inducement/ hardship
premium, long term benefits and taxes
etc.

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Base Salary:
Base salary is the amount of money that an
expatriate normally receives in the home
country.
• The salaries usually are paid in Home
currency, local currency, or a combination
of the two. The base pay also serves as
the benchmarks against which bonuses
and benefits are calculated.

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Benefits:
• Alternatively known as indirect compensation,
• Benefits constitute a substantial portion of
international compensation ( approx. one third of
compensation for regular employees is benefits).
• Benefits include a suit of programmes such as:
– Entertainment, Festival celebrations, Gifts, Use of club
facilities, provision of hospitality including food and
beverage, employee welfare, use of health club,
Conveyance tour and travel, Hotel Board and Lodging,
vehicles, telephone and other telecommunication
facilities.
• Basically an employee tends to join and stay with an
org. which guarantees an attractive benefits
programme.
• Vacation along with holidays and rest breaks
help employees mitigate fatigue and enhance
productivity during the hours employees actually
2019 work.
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 Allowance

• The most common allowance relates to the cost

of living – an adjustment for different in the cost
of living between the home country and foreign
country assignment. This allowance is designed
to provide the expatriate with the same standard
of living that he or she enjoyed in the home
country. Spouse assistance, housing allowance
relocation allowance and educational allowance
are the popular in expats Compensation.

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 Incentives
• An additional payment (or other remuneration) to employees
as a means of increasing output. Increasingly, MNCs these
days are designing special incentive programmes for
keeping expatriates motivated. In the process, a growing
number of firms have dropped the ongoing premium for
overseas assignments and replaced it with a one – time,
lump-sum premium.
The lump – sum payment has at least three advantages:
• First, expatriates realizes that they are paid this only once
and that too when they accept an overseas assignment. So
the payment tends to retain its motivational value.
• Second, costs to the company are less because there is
only one payment and no future financial commitment.
This is so because incentive is a separate payment,
distinguishable from a regular pay, and it is more rapidly for
saving or spending.
• Third, less chances for pre mature repatriation.
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 Foreign Service / Hardship Premium

• This is often perceived as an inducement in the

form of a salary premium to accept an overseas
assignment. Generally, salary premiums vary
from 5—40% of the base salary. Actual salaries
depend upon the assignment, actual hardship,
and length of assignment etc. In addition, if the
work – week in the host country is longer than
in the home country , the assignee will be paid
for the extra hours worked.

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 Long term Benefits
• The most common long term benefits offered to employees of
MNCs are Employee Stock Option Schemes (ESOP). Traditionally
ESOPs were used as means to reward top management or key
people of the MNCs. Some of the commonly used stock option
schemes are: -

• Employee Stock Option Plan (ESOP)- a certain nos. of shares are

reserved for purchase and issuance to key employees. Such
shares serve as incentive for employees to build long term value for
the company.

• Restricted Stock Unit (RSU) – This is a plan established by a

company, wherein units of stocks are provided with restrictions on
when they can be exercised. It is usually issued as partial
compensation for employees. The restrictions generally lifts in 3-5
years

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 Taxes

• The final component of the expatriate’s remuneration

relates to taxes. MNCs generally select one of the
following approaches to handle international taxes:
1. Tax equalization: Firms withhold an amount equal to
the home country tax obligation of the expatriate, and
pay all taxes in the host country.
2. Tax protection: The employee pays up to the amount
of taxes he or she would pay on remuneration in the
home country. In such a situation, the employee is
entitled to any windfall received if total taxes are less
in the foreign country than in the home country.

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 Remuneration/ Compensation

• External Factors:

a) Domestic
Labor Market - Cost of living - Labor Union -
Govt. Legislation - Society – Economy

b) International
Parent Nationality - Labor market characteristics
- Local Culture - Home and Host Countries
Government’s Roles - Industry Types - Competitors
Strategy.
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• Internal Factors
a) Domestic
- Business strategy - Job Evaluation
and Performance Appraisal - The
employee
b) International
- Goal orientation - Capacity to pay -
Competitive Strategy - Org. Culture - Int.
Workforce composition - Lab. Relations -
Subsidiary role
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 Subjective Questions

Q1 What are the methods of training?

Q2 Explain the EPRG framework.

Q3 Write a note on International Compensation.

Q4 Difference between Performance Appraisal and performance

Management?

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Source:

K. Aswathappa

Page no. 705 to 749

Name of the Chapter: International Human

Resource Management

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 Thank
you

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