INTERNATIONAL HUMAN
RESOURCES MANAGEMENT
The rapid movement toward a global economy makes this chapter vital for all students interested
in management today. We begin the chapter with a brief overview of the different organizational
CHAPTER LEARNING OUTCOMES
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Explain the economic, political, and cultural factors in different
countries that HR managers need to consider.
Identify the types of organizational forms used for competing
internationally.
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LECTURE OUTLINE
I. THE GLOBAL ENVIRONMENT
• The global environment of today is much different than it was 10 years ago. Because
technological, political, cultural, and economic conditions are constantly shifting across
the world, how people are managed in those changing environments will shift as well. On
A. Global Similarities
• Some key factors that have influenced human resource management include
increased (1) free trade, (2) service-based business, and (3) integrated technology
platforms. Because these factors have increased the economic integration across
countries, they have emphasized the need for HRM practices and systems to be
more globally integrated and consistent across countries.
B. Global Differences
• First, political differences are found in a country’s labor laws, property rights, and
patents.
II. MANAGING ACROSS BORDERS
• While estimates vary widely, approximately 70 to 85 percent of the U.S. economy
today is affected by international competition. Companies large and small in all parts
of the world are competing around the globe with one another.
Explain how labor relations differ around the world.
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1. The international corporation is essentially a domestic firm that has built on its
existing capabilities to penetrate overseas markets.
• Note that although various forms exist, we generally refer to any company that
conducts business outside its home country as an international business.
A. Domestic versus International HRM
• While various international business journals have published articles on HRM, it
was not until 1990 that a journal devoted to this area, the International Journal of
Human Resource Management, was launched. Today, however, international HR
management is a front-and-center issue.
• International HRM differs from domestic HRM in several ways:
1. A greater number of HR functions must be performed, in many instances
requiring special expertise.
B. Staffing Internationally
• There are three sources of employees with which to staff international operations:
(1) expatriates, or home-country nationals; (2) host-country nationals (natives of
the host country); and (3) third-country nationals (natives of a country other
than the home country or the host country). Countries sometimes restrict firm’s
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• Use Figure 15.4: Changes in International Staffing over Time to show that at
early stages of international expansion, many organizations use home-country
expatriates, but as international operations grow, the use of host-country nationals
are interested in their career growth.
C. Recruiting Internationally
• Improved telecommunications and travel have made it easier to match up
employers and employees of all kinds worldwide. This is important because many
developed countries, including China, face future labor shortages.
• Recruitment is subject to more government regulation abroad than in the United
1. Apprenticeships
• A major source of trained labor in European nations is apprenticeship training
2. Staffing Transnational Teams
• Transnational teams are composed of members from different
nationalities working on projects that span multiple countries and time zones.
This has the advantage of speeding products to market because projects can be
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cultural training can benefit trans-national teams by helping them overcome
D. Selecting Employees Internationally
A major difference in HR selection practices is that U.S. firms generally hire on the
basis of talent and merit, whereas in many countries, family ties, social status,
1. Selecting Global Managers
• The selection process should emphasize different factors, depending on the
extent of contact the business will have with the local culture and the
degree to which the foreign environment differs from the home
environment. For example:
a. If the job involves community contact, this should be given appropriate
weight.
• Although home–country and third–country nationals must possess
managerial and technical skills, they are frequently more familiar with physical,
cultural, and language issues. There has been a steady shift toward using
local employees to fill vacancies. For managerial positions, third-country
expatriates are frequently employed.
• Use Figure 15:5 Comparison of Advantages in Sources of Overseas
Managers to discuss the advantages of each of the three types of managers.
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Causes of Expatriate Assignment Failure to discuss the most prevalent
reasons for failure among expatriates. A poor cultural fit is a major reason
process have more success retaining their expatriate managers.
II. TRAINING AND DEVELOPMENT
A lack of training is one of the principal causes of failure among employees working
internationally. Employees need to know as much as possible about (1) the place they are
going; (2) their own culture, and (3) the history, values, and dynamics of their own
organization.
A. Content of Training Programs
There are at least four essential elements of training and development programs
1. Language Training
• Most employees find language to be their biggest problem when it comes
2. Cultural Training
• Cross-cultural differences are the most elusive aspect of international
business, but successfully done, it tends to improve the satisfaction and
success of expatriates and their employees. Managerial attitudes and
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3. Assessing and Tracking Career Development
• International assignments provide definite benefits, such as responsibility
4. Managing Personal and Family Life
• As noted earlier, personal and family stress are among the most frequent
causes of an employee’s failure to complete an international assignment.
5. Repatriation
• After returning from an international assignment, what can an individual
manager expect in terms of a new position in the organization? What
financial burdens will the individual incur as a result of being overseas? Will
III. COMPENSATION
• This is one of the most complex areas of international HRM. Since different countries
have different norms for employee compensation, human resource managers and their
consultants should consider carefully the motivational use of incentives and rewards.
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A. Compensation of Host-Country Employees
• Hourly wages and benefits (including vacation days) vary dramatically from
country to country. Refer students to Figure 5.12: Hourly Wages in Different
B. Compensation of Host-Country Managers
Overall, international firms are moving toward a narrowing of the salary gap
between the host-country manager and the expatriate. Firms are also beginning to
C. Compensation of Expatriate Managers
• For shorter assignments, usually those that are project-based, expatriate managers
are usually given per-diem pay. These managers are lese likely to bring their
family members with them, and the assignment becomes more like a commuting
assignment.
• For longer assignments, there are two approaches: Home-based pay, based on the
balance-sheet approach, usually involves four facets: (1) base pay, (2) cost-of-
living allowances, (3) incentives, and (4) assistance programs. Increasingly,
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personal security. These employees can sometimes command three times their
domestic pay. Lastly, what competitors are paying should also factor into the
compensation mix.
IV PERFORMANCE APPRAISAL
One of the biggest problems with managing employees abroad is that it is difficult to
evaluate their performance. Problems in this area can lead to higher failure rates and even
derail a person’s career.
A. Who Should Appraise Performance?
B. Home versus Host-Country Evaluations
Domestic managers may be unable to understand the expatriate’s experiences, and
C. Performance Criteria
Because expatriate assignments are extremely costly, many HR managers are
increasingly under pressure to calculate the return-on–investment of these assignments.
What did the firm get for the millions of dollars it spent to send an expatriate abroad?
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D. Providing Feedback
• In addition to receiving feedback from home-country and host-country managers,
the expatriate should also provide feedback about the support she or he is
receiving.
• The expatriate should receive immediate debriefing upon her or his return home.
V. THE LABOR ENVIRONMENT WORLDWIDE
Labor relations and the labor environment abroad differ significantly from that in the in the
A. Collective Bargaining in Other Countries
In some countries the government plays a major role in collective bargaining. In
Australia and New Zealand, for example, for most of the twentieth century, labor
B. International Labor Organizations
The most active international union has been the International Confederation of Free
Trade Unions, which represents 125 million trade unionists in 145 countries and
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C. Labor Participation in Management
In many European countries provisions for employee representation are established by
ANSWERS TO END–OF-CHAPTER DISCUSSION QUESTIONS
1. As organizations expand internationally, HR managers have to be aware of the need to bal–
ance global and local concerns. Selection concerns relate to the use of expatriates versus
local managers. Training concerns range from language training to cultural awareness and
2. Joint ventures are likely to affect HRM in the following ways:
• Expatriate employees will be required to adjust to attitudes and behaviors of foreign
3. One could prepare for a career in international HRM by taking coursework and getting any
4. Some of the ways that different components of the cultural environment can affect HRM in
an international organization are:
• Language: The number of languages spoken in a given organization increases the
complexity of communication with and between employees. The degree of language
skills of managerial personnel affects the ease of communication and understanding
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5. Expatriates have the advantage of knowing the products, technical systems, organizational
policies, company culture, and the likes of Starbucks. Host-country nationals, on the other
hand, are more likely to understand their customers’ specific needs and wants. They may also
6. American managers can experience difficulties in their relationships with employees in foreign
operations including:
• The failure to recognize and accommodate taboos, rituals, attitudes toward time, social
7. The following are steps companies can take to increase the likelihood that the assignments
are successful experiences for spouses and families:
• Include the spouse in planning, whenever possible.
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• Use MNC personnel and outside personnel to help meet the needs of the spouse and
family.
9. If the cost of living is lower in the foreign country, organizations must make accommoda–
tions for these differences. It could potentially be damaging if expatriates went on an interna-
10. Grooming managers for leadership might include setting specific developmental goals for
expatriate, host–country, and third-country managers (e.g., accomplishing training
11. The major differences between labor-management relations in Europe and those in the United
States are as follows:
12. Codetermination involves having representatives of labor on the board of directors as
required by law. Students will have different opinions on whether codetermination will
become popular in the United States.
ANSWERS TO USING THE INTERNET ACTIVITIES
Internet Exercise #1, page 650
Question:
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Visit the Society for Human Resource Management (SHRM) website and look for an
introduction to the global human resources discipline. Identify at least three common human
resource facets and describe how the global environment affects each.
Answer:
Student answers will vary depending on the human resource facets selected. The website lists
Internet Exercise #2, page 670
Question:
Visit the Thunderbird School of Global Management and look up Thunderbird’s Global Human
Resource Management Association. What are the values of the program? What types of
Chapter 15: International Human Resources Management 227
opportunities are offered to students to promote the fields of human resources and organizational
development?
Answer:
Thunderbird’s Global Human Resource Management Association (GHRMA) is a student-led
organization that is dedicated to promoting the fields of human resources and organizational
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VIDEO CASE DISCUSSION GUIDE
1. The video provides a number of possible answers to this question, so students may say
that they recruit through the company website, through other websites, through employee
referrals, through university job placement programs, and so forth.
NOTES FOR END–OF-CHAPTER CASE STUDIES
Case Study 1: How about a 900 Percent Raise?
1. In the age of globalization, not only are countries becoming more mobile, but so are
2. The nurses face many of the same challenges as U.S. expatriates sent abroad: language and
cultural barriers as well as differing nursing protocols. In some instances, the nurses will
3. One long-term strategy the hospitals should pursue is the retention of the nurses they
develop, given their significant investment in training them. The hospitals will also need to
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Case Study 2: A “Turnaround” Repatriation Plan: U.S. Company Moves
Indian Workers Back Home
1. If the employees are anxious to return home, the situation is a win-win proposition for both