Strategic HR Issues in

Global Business
Strategic HR issues in Global Assignments:
 Approaches to sending employees abroad:

An organization can use several different approaches in managing the process of sending
workers abroad. These are as follows:

Administrativ Tactical Strategic

e Approach Approac Approac
h h

The detailed information of these approaches has been given bellow:

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Administrative Approach:

An administrative approach involves merely assisting employees with paperwork and minor
logistics.

For example, hiring movers, ensuring that taxes are paid, and obtaining a work visa for the
employee and travel visas for family members.

Tactical Approach

A tactical approach involves managing the risk or failure factor.

For example, handling the administrative paperwork while also providing limited, usually one-
day training for the employee.

This approach does only what needs to be done to prevent failure.

Strategic Approach

A strategic approach to global assignments, involves much more support and coordination.

In addition to those items previously, strategically managing such a process would involve
adding extensive selection systems:

 Ongoing
 Integrated training
 A specific performance Management System
 Destination Services
 A strategized repatriation program at the end of the assignment

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Steps of strategic HR issues:

1. Establish specific purpose for

assignment

2. Select appropriate employee for

assignment
Steps of
Strategic 3. Organizational and individual purposes
HR Issues for assignment must be identified and
matched

4.Assesses adaptability to host culture of

both employee and any family members
who will be accompanying employee

5.Provide appropriate training for

employee and family members

6.Simultaneous training should be

conducted for headquarters staff

1. Establish specific purpose for assignment

The first step in the strategic management of global assignments is the establishment of a
specific purpose for the assignments. There may be numerous reasons for the assignment,
including:

 Business or market development

 The setup
 Transfer
 Integration of information technology
 Management of an autonomous subsidiary
 Coordination or integration of foreign with domestic operations
 A temporary assignment to a vacant position
 Development of local management talent

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Exhibit 14.2 Strategic HR issues in global assignments

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2. Select appropriate employee for assignments

 After the purpose of the assignment has been identified, the process of selecting an
appropriate employee for the assignment can commence.

 Much as there is an organizational purpose for the assignment, there should also be an
individual purpose for the assignment.

 An employee could be chosen for and accept an international assignment to prepare that
employee for a top management position, develop further skills(technical or interpersonal),
or allow an employee to follow a dual career spouse/partner.

3.Organizational and individual purposes for the assignment must be identified and
matched

 The assignment needs to be conceptualized as a win/win proposition.

 There should be clear articulated gain for both the organization and the employee as a
prerequisite to success on the assignment.

4.Assesses adaptability to host culture of both employee and any family members who will be
accompanying employee

 After an appropriate individual has been identified, it is important to assess the adaptability
to the host culture of both the employee and any family members who will be
accompanying the employee on the assignment.

 The most common reason for failure on an overseas assignment has to do with
adaptability skills rather than technical skills and is usually a consequence of the
adaptability of the employee’s family to the host culture.

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  Among the areas that an organization will need to assess the following criteria:

Technical abilities of the employee;

Adaptability;
Willingness;
Motivation to live overseas;
Tolerance of ambiguity;
Communication Skills;
Patience and openness to
differences in others;
Willingness to interact of both the employee and accompanying family
members.

5. Provide appropriate training for employee and family members

 Once an employee has been selected for the overseas assignment, the organization then
needs to provide the appropriate training for the employee and family members.

 The initial training should begin at least six to nine months to the start of the assignment.

 Longer training periods will reflect the need to learn language skills necessary in the host
country.

 Prior to departure, the employee and family, if possible, should be allowed a trial period
living overseas.

 Although this may involve significant costs, it should be viewed as an investment, the cost
incurred for such a trip will be much less than the monetary, political, and reputation
– damaging costs of a failed overseas assignment.

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6. Simultaneous training should be conducted for headquarters staff

 While the employee and family are being trained, simultaneous training should be
conducted for headquarters staff, which will be supervising and /or interacting with the
employee who is abroad.

 Clashes between local culture and headquarters are common on overseas assignments, and
headquarters are common on overseas assignments, and the headquarters personnel should
be provided with some sensitivity training.

 Sensitivity training will:

Help headquarters staff understand how and why local decisions are
being made;

Allow them to give the expatriate employee the necessary support and
empathy while keeping the expatriate informed as to what has been
happening at headquarters.

The principles and practices of general human resource management apply with few a few
additional concerns. These are shown bellow:

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  It is critical to assess
ongoing training needs of the
expatriate employee and
family after they have arrived
at the host country.

Additional Concerns  Performance management

will be more of a challenge;

 Many aspects of employee

and labor relations will be
localized;

 Compensation for the

expatriate will be different.

It is critical to assess ongoing training needs of the expatriate employee and family
after they have arrived at the host country:

 Particularly if this is the first time an employee of the organization has been assigned to a
particular country, it is likely that some unanticipated events that require additional support and
training could materialize.

Performance management will be more of a challenge

 The expatriate’s functional boss is usually located domestically, and others in the
organization may not be aware of how economic, social, and political conditions and
everyday living situations impact the expatriate’s performance.

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 Many aspects of employee and labor relations will be localized

 The expatriate may have to manage a local workforce under far more challenging
conditions than those presented domestically.

 The expatriate may also have to manage the dynamics of being a foreign manager of local
employees.

Compensation for the expatriate will be different

 It is costly to send an employee overseas, usually accounting to as much at three times the
employee’s annual domestic salary.

 Income tax payments for the employee may be complicated and costly.

 Benefit such as armed security guards or private schooling for the employee’s children may
be necessary.

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Determining Expatriate Compensation

There are three traditional approaches to determining expatriate compensation. These are as
follows:

Balance sheet Higher-of- Localizatio

method home-or- n
host Approach
approach

1. Balance sheet approach:

 With this approach, salary is based on home country pay, and additional expenses
associated with relocation and the assignments itself are added to arrive at an overall
reimbursement and compensation level.

 These expenses might include the cost of housing in the host country, furniture,
household help, a car and driver, or partner assistance.

 This approach ensures that the expatriate gains a sense of equity and fairness in the
compensation package.

 This system can be complex to administer, but it is still widely used, particularly for short term
or temporary assignments.

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 A sample figure of Balance Sheet Approach

2. Higher-of-home-or-host approach

 It takes into account the employee’s salary at home and adjusts it upward, to account for a
higher cost of living in the host country,

 This approach is usually accompanied by standard prerequisites for executives in the host
country and is used most commonly for intermediate term assignments of indefinite duration.

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3. Localization Approach

 Localization is the practice of adjusting a product’s functional properties and characteristics to

accommodate the language, cultural, political, and legal differences of a foreign market or
country.

 The employee’s salary is converted to the host country equivalent.

 Depending on the country, salary structures, and the cost of living, this approach can
initially result in a salary decrease for the employee.

 Localization has become an increasing popular approach for organizations, now used by
upward 78% of employers.

Purposes of Expatriation

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Expatriate selection assignments are some of the most critical decisions that organizations make
relative to their global operations. The success or failure of an expatriate assignment can easily
determine the fate and success of an organization’s entry into a new global market. “A local
perspective to expatriate success” examines these local factors (Organizational and Individual) and
how they impact expatriates an ultimately organizational performance.

Four Approaches to IHRM

 In establishing general human resource policy for the day-to-day management of all
employees abroad- locals as well as expatriates- the organization also needs to make
strategic decisions as to the level of standardization it desires across locations.

 Heenan and Perlmutter identified four different approaches , so that an organization can take
in setting and enforcing policy:

 Ethnocentric;
 Polycentric;
 Regiocentric;
 Geocentric.

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Ethnocentric Approach

An ethnocentric approach involves exporting the organization’s home country practices and
policies to foreign locations.

An ethnocentric staffing policy reflects the belief that the principles and practices the belief that
the principles and practices used by the home-office country are superior to those used by
companies in other nations.

This staffing policy leads companies to fill expatriate slots with executives from the home office.

Advantages of Ethnocentric Approach

There are several good reasons to staff foreign with expatriates. Some of them are as follows:

 Command and control: Familiarity with the way decisions are made and things get done at
headquarters means that expatriates can be counted on to transfer home-country procedures to
foreign operations.

 Local Talent gaps: In the face of a shortage of qualified local candidates, along with a particular
need to transfer specialized technologies, staffing overseas operations with highly skilled
expatriates makes sense.

 Social integration: Putting expatriates in positions around the world helps spread the word
about underlying corporate policies and practices.

 Ownership Structure: Deploying expatriate managers to foreign joint-venture operations

solidifies a company’s ownership interest in the venture.

 Local implementation: Because the process of transferring policies and practices is prone to
breakdown, it’s a good idea to have expatriate managers on hand to solve problems.

 High turnover among locals: Because expatriates are less likely to leave the company than local
employees- even highly skilled professionals – they’re less likely to leak proprietary
information in the event they change companies.

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 Management development: The international exposure and experience gained by expatriates
adds to a company’s fund of knowledge about international-business strategies and practices.

Drawbacks of Ethnocentric Approach:

 While ethnocentrism can aid a company domestically, it can cause problems for a
company when going abroad.

 Just as it allows domestic companies to protect their market, it can prevent a company
from entering a foreign market.

 Ethnocentric staffing policies can leave local managers and workers unmotivated and
demoralized.

 For example, an American company will have difficulties entering a foreign country if the
country is highly ethnocentric and does not look at American companies favorably.

Polycentric Approach

A polycentric outlook holds that staffing policies ought to adapt to differences between
operations in the home and host countries.

This policy sees the effectiveness of the business practices of foreign markets as
equivalent to those in the home country.

It motivates the company to staff each operation from headquarters in the home country to
each foreign subsidiary with people from the local environment.

For example, Google’s activity in Bangladesh.

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Advantages of Polycentric Approach

 Cost Containment: For a slew of reasons ranging from tax equalization to housing
allowances, as expatriate compensation package can be several times more than either a
home country base salary or the salary required to hire a local manager.

 Nationalism: Host countries- specially those that aren’t well disposed to foreign controlled
operations- often prefer local managers who can be trusted to put local interests above a
foreign firm’s global objectives.

 Management Development: Consistently awarding top jobs to expatriates makes it harder for
a company to attract, motivate, and retain local employees.

 Employee morale: Local workers often prefer to work for local managers.

 Expatriate failure rates: The unavoidable failure of some expatriates may ultimately take a toll
on the company in terms of unsatisfactory performance, sidetracked careers, and deflated
morale.

 Product issues: Because they’re arguably more astute at interpreting and dealing with local
conditions, local mangers are better able than expatriates to adjust operations accordingly.

Drawbacks of Polycentric Approach:

 Complicates value chain coordination

 Isolates country operations

 Reduces incentive to engage an international perspective

 Potential for quasiautonomous country operations.

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Regiocentric Approach

 It involves developing standardized practices and policies by geographic region;

therefore, there is some consistency and efficiency within operations.

 At the same time, there is someone variation among regions to support the local
markets.

 This approach commonly involves establishing autonomously managed regional

subsidiaries within geographic region.

Geocentric Approach

 A geocentric staffing policy seeks the best people for key jobs throughout the
organization, regardless of their nationality.

 This approach can be very difficult to implement, given different host government
policies and regulations and the need to address them simultaneously.

 Compensation plans and standards of living can be difficult to unify in an equitable way
across different cultures.

Advantages of Geocentric Approach

 All nations are created equal and possess inalienable characteristics that are neither
superior nor inferior but simply there.

 Headquarters and subsidiaries collaborate to identify, transfer, and diffuse best

practices.

Drawbacks of Geocentric Approach:

 Though develop, costly to run, hard to maintain.

 Contrary to many nations’ market development plans

 Difficult to find qualified expatriates.

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  Repatriation

 The final issue in managing international assignments is repatriation of returning

employees. This function is probably one of the most neglected areas in global human
resource management.

 Repatriation generally refers to the termination of the overseas assignment and coming
back to the home country or to the country where the HQ is located or to the home
subsidiary from where he/she was expatriated.

Recruitment and Pre-departure On assignment Re-entry or

selection training reassignmen
t

Reasons of Repatriation

 The period of posting got over

 The expats want their children study in a home country school

 The need for the expats to move on to another global assignment of a similar kind – where
he/she would have the opportunity to use the skills and expertise acquired.

 The assignees are not happy in their overseas assignment. Un-happiness can be result of:

 Inability to adjust to host country environment

 Spouse’s or children’s unwillingness to stay

 Lack of moral support from HQ at the time of crisis.

 Expats return because of failure to do the assigned job

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Process of Repatriation:

Phases of Repatriation Process (1)

1. Preparation
This involves developing plans for the future and collecting information about the new position
the expat is likely to occupy after returning home. During the pre re-entry phase, the mentor can play
an advisory role in finding the expat a suitable position within the organization. The company may
provide a checklist of items to be considered while leaving the host country.

Figure: Repatriation process

2. Physical Relocation

This stage involves removal of personal belongings, breaking ties with colleagues and friends and
traveling to the next posting, usually the home country.

Professional re-entry training should also be given to expat and his or her family that covers
social cultural contrast orientation, an updated political and social issues and changes in the
home country, job opportunities for the partner, an evaluation of the experiences in the host
culture and the psychological aspects of repatriation.

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Phases of Repatriation Process (2)

3. Transition

Phase in which the expatriate and his or her family readjust to their return to the home country.
Some companies hire relocation consults to assist in this phase also. Typical activities include
acquiring temporary accommodation, making arrangements for housing and schooling, performing
necessary administrative tasks (e.g. renewing driver’s license, applying for medical insurance,
opening bank accounts)

4. Readjustment

This phase involves copying with reverse culture shock and the expatriate’s career demands on the
organization. Generally, the more the host country culture differs from the home country culture, the
more difficult the re integration process will be. Likewise, the more successful the expat was in the
host culture, the more difficult it is to adjust to the work environment at the home base.

Issues to be addressed in a Repatriation Process:

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Career Level:

 The first career issue is resolving career anxiety by helping the employee returning from
abroad find an appropriate place that is connected with a career path for future.

 The second career issue is the organization’s reaction to the return. Is the repatriate made to feel
welcome? Is any value placed on the global experience? Are new skills that have been
developed being put to use?

 The third career issue is the lost of autonomy. In planning repatriation programs, some
consideration must be given to the level of autonomy the repatriate enjoyed overseas and the
correspondingly appropriate types of responsibilities, work assignments, and supervision for the
return assignment.

 The fourth career issue is adaption. During the expatriation period, there were probably some
significant changes taking place at the home office. The repatriate needs to be provided with
assistance in adapting to those changes to facilitate maximum performance in the new assignment.

Personal Level:

 The first personal level is logistics. Personal savings will need to be transferred, currency
converted, personal belongings inventoried and shipped, automobiles and homes possibly
purchased and sold, school transfers arranged, and possibly spousal employment assistance
arranged.

 The second personal issue is re-adjustment and integration into the community for the
employee.

 The third personal issue is re-adjustment and integration into the community for the employee’s
family. Although it may seem logical that the return home should be a welcome and easy
process, experience has shown that it often is not. Much as the workplace has changed and the
community in which the employee family lives, or is moving to may have changed dramatically
during the time abroad.

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References:

 Strategic Management of Human Resources – Jeffrey M Mello (3rd edition, Chapter 14,
Global Human Resource Management)

 International Business – Environment and operations – Daniels, Radebaugh, Sullivan(12th

edition, Chapter 20, Human Resource Management)

 Wordpress.com : chapter 9 – repatriation

 Google.com

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