C H A P T E R 1 4
Human resource management strategy
Chapter objectives
2. Describe the screening and selection criteria often used in choosing people for overseas
assignments.
4. Discuss the common elements of an international compensation package.
6. Describe some of the human resource management strategies that are currently receiving a
great deal of attention from (MNEs).
Chapter summary
1. International human resource management (IHRM) is the process of selecting, training,
2. There are a number of screening criteria that are used in choosing people for international
assignments. These include adaptability, self-reliance, age, experience, education, health,
3. Training and development programs are another key part of IHRM strategies. There are a
wide variety of these programs, ranging from environmental briefings to language training.
4. There are a number of common parts in a typical international compensation package,
including base salary, benefits, allowances and tax protection and/or equalization. In
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5. Labor relations practices vary widely in the international arena. For example,
6. There are a number of HRM strategies that are currently receiving a great deal of attention
from MNEs. Three of these are language training, cultural adaptation and competitive
compensation.
Chapter outline
Introduction
Selection and repatriation
International screening criteria and selection procedures
Repatriation of expats
Training and development
Types of training
Compensation
Labor relations
Labor relations practices
Industrial democracy
Industrial democracy in action
Strategic management and IHRM strategies
Language training
Cultural adaptation
Competitive compensation
Specifically designed HRM programs
Rugman and Collinson, International Business, 6th edition, Instructor’s Manual
Lecture outline
A. Introduction
1. International human resource management (IHRM) is the process of selecting, training,
developing and compensating personnel in overseas positions. There are three basic
sources of personnel talent that MNEs can tap for positions. One is home country
2. Staffing patterns may vary depending on the length of time the MNE has been
operating. Many MNEs will initially rely on home country managers to staff their
3. The size of the compensation package also plays an important role in personnel
selection and placement. As the cost of sending people overseas has increased, there has
B. Selection and repatriation
1. International screening criteria are those factors used to identify individuals regarded as
most suitable for overseas assignment. Some MNEs use an extensive list; others rely on
2. One screening criterion is an individuals ability to adapt to cultural change. In
determining how well an individual will adapt to cultural change, MNEs examine a
3. Managers who are posted to overseas assignments must be self-reliant and independent
because they often have to make on-the-spot decisions without consulting the home
office. Also, MNEs often find that young managers are eager for international
4. Some MNEs believe that a college degree, preferably a graduate degree, is important for
5. Expatriates must be in good physical and emotional health. Personnel with physical
7. One survey of US multinationals found that the primary reason for expatriate failure
8. The most common selection procedure is the interview. Some companies also use tests
to help in making the final choice for overseas assignments.
9. For US expatriates, an overseas assignment is usually two to three years, though some
10. Repatriation is the process of returning home at the end of an overseas assignment and
occurs for a number of reasons. The most common is that the predetermined time
11. While many expatriates look forward to returning, some find it difficult to adjust. A
number of reasons can be cited. One is that the home office job lacks the high degree of
authority and responsibility that expatriates had in their overseas job. Another is that
12. In addition to the factors considered above, several factors make repatriation after
longer periods difficult. These include (a) repatriates may no longer be well known
13. In recent years, MNEs have begun to address adjustment problems faced by returning
expatriates. Some organizations have now developed transition strategies that are
designed to help smooth the move from foreign to domestic assignments. One of these
strategies is the repatriation agreement, which spells out how long the person will be
Rugman and Collinson, International Business, 6th edition, Instructor’s Manual
C. Training and development
1. Training is the process of altering employee behavior and attitudes in a way that
increases the probability of goal attainment. Managerial development is the process by
which managers obtain the necessary skills, experiences and attitudes that they need in
2. The MNEs use a number of types of training and development programs, which can be
grouped into two general categories: standardized and tailor-made. Standardized
3. Research shows that the following six types of programs are most popular:
(a) environmental briefings used to provide information about such things as geography,
D. Compensation
1. A typical international compensation package includes base salary, benefits and
allowances. Most packages also address the issue of tax protection and/or tax
2. The MNEs also provide tax protection and/or tax equalization for expatriates. The most
common approach is for the MNE to determine the base salary and other extras
3. For the MNE, the overall compensation package can be substantial. This is why
currently there is a trend toward not sending expatriates to overseas positions unless
there is a need for their specific services. MNEs are increasingly replacing permanent
Rugman and Collinson, International Business, 6th edition, Instructor’s Manual
E. Labor relations
1. In managing labor relations, most MNEs use a combination of centralization and
decentralization, with some decisions being made at headquarters and others being
handled by managers on-site. Researchers have found that US MNEs tend to exercise
2. Labor relations practices vary widely. In some countries, the economy is strong and
unions can make major demands; in others the economy is weak and the unions ability
3. Labor unions have been traditionally strong in Germany. Unions set the pay scale for
around 90 percent of the countrys workers, with wages determined by job
classifications. Union membership is voluntary, but there is only one union in each
4. In Japan, unionmanagement relationships are extremely cooperative. Social custom
dictates nonconfrontational behavior. So, while labor agreements are often general and
5. Unlike the United States, many countries have industrial democracy, which is the
6. Codetermination is a legal system that requires workers and their managers to discuss
major strategic decisions before companies implement them. Work councils are groups
7. In Germany, industrial democracy and codetermination are both very strong, especially
in the steel and auto industries. Private firms with 2,000 or more employees (1,000 in
8. In Denmark, industrial democracy gives workers the right to participate in management
on both a direct and an indirect basis. The direct form maintains that employees are
9. Japans use of industrial democracy concepts are not tied to political philosophy, as in
Europe, but more oriented toward Japanese culture and the belief in group harmony.
F. Strategic management and IHRM strategies
2. While English is the primary language of international business, training in the host
country language can be particularly useful, because it allows managers to interact more
effectively with their local colleagues and workers and to communicate more directly
3. Closely tied to language training is the need for managers to understand the culture of
the country to which they are assigned. In preparing managers for overseas positions,
4. A cultural assimilator is a programmed learning technique that is designed to expose
members of one culture to some of the basic concepts, attitudes, role perceptions,
customs and values of another culture. Cultural assimilators are developed for pairs of
cultures, such as to familiarize managers from the United States with the culture in
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5. The MNEs are also beginning to evaluate more carefully the cost of sending people
overseas, as well as to review the expense of maintaining executive talent in the
6. The other major area of compensation that is receiving increased attention is that of
hiring and retaining top management talent. The cost of hiring senior managers has
become extremely high and most such individuals expect to receive a substantial
Answers to review and discussion questions
1. Many US MNEs are accused of not focusing their efforts sufficiently on
internationalization. How can they develop an international perspective among their
managers? Offer three suggestions.
2. What are some of the most common screening criteria for individuals being chosen for
international assignments? Identify and discuss four of them.
3. Why do MNEs tend to prefer interviews to testing when selecting people for
international assignments?
4. In what way is repatriation proving to be a major problem for MNEs? How can they
deal with this issue? Offer two substantive recommendations.
Repatriation is the process of returning home from an overseas assignment. One of the
repatriation problems that MNEs face is that the returning manager has no specific work
assignment back in the home office. A second is that the individual soon comes to believe that
5. What are some of the most common forms of training and development offered to
people going international or already operating abroad? Identify and describe three of
them.
6. What are the most important parts of an international compensation package?
Identify and describe three of them.
7. Why do some compensation packages have a hardship allowance?
8. In terms of compensation, why do many MNEs prefer to use a local manager rather
than bring in an expatriate?
9. What are some of the primary differences in labor relations practices between
Germany and Japan? Identify and discuss two of them.
10. How does industrial democracy work? Compare and contrast its use in Denmark,
Germany and Japan.
11. How are MNEs attempting to improve the language training given to their personnel
being posted overseas?
12. How would an MNE use a cultural assimilator to prepare people for overseas
assignments?
13. What are some of the latest trends in competitive compensation in the international
arena? Identify and describe two of them.
Rugman and Collinson, International Business, 6th edition, Instructor’s Manual
Answers to real cases
Offshoring to India
1. Porters well-known 1990 study on the competitive advantage of nations describes
factors that have promoted high rates of innovation in certain industries in certain
countries. These are summarized as the Porter Diamond framework showing how
factor conditions, related and supporting industries, demand conditions and the
strategy, structure and rivalry of other local firms can force continual improvements
in productivity and new product development. How does the development of Indian IT
fit into this framework?
2. What are the threats and opportunities for Western software firms arising from this
shift in the competitive landscape? How are they strategically responding to these?
3. What factors must a firm considering outsourcing take into account?
Rugman and Collinson, International Business, 6th edition, Instructor’s Manual
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Executive search firms
1. When staffing the needs of the foreign subsidiary of a German company, what pool of
candidates can the executive search firm (ESF) choose from? Why would an
international ESF be more capable of performing this task than the MNEs internal
human resources department?
2. How would compensation negotiations differ for home-, host-, and third-country
candidates?
A home-country candidate will require a base salary that is comparable to that of a similar
position in the home country, a set of benefits in the host country (and possibly in the home
3. What types of factors would the ESF use to identify a potential candidate for an
overseas assignment?