International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module 14
14-1
Module 14: Managing Human Resources in an
International Context
YOUR CONTENT
Summary
Learning Objectives
Key Terms and Definitions
Content Outline
ENGAGEMENT & APPLICATION
Boxed Text Discussion Questions with Suggested Answers
End of Module Exercises
Bonus Activities
Video Suggestions
CONNECT TOOLS FOR ASSESSEMENT OF LEARNING
Connect Content Matrix
Connect Activities
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module 14
14-2
YOUR CONTENT
SUMMARY
This module examines how human resource management and worldwide labor conditions
impact businesses operating in the international environment. Effective managers for
international companies are in high demand but short supply. One expert on China says sending
LEARNING OBJECTIVES
LO 14-2 Explain the relationship between competitive strategies (international,
LO 14-3 Compare recruitment and selection considerations for home-country, host-
country, and third-country nationals as international company executives.
LO 14-4 Distinguish among the training and development considerations for home-
KEY TERMS AND DEFINITIONS
allowances (p. 395)
Employee compensation payments added to base salaries of
expatriates because of higher expenses encountered when
living abroad
bonuses (p. 396)
Expatriate employee compensation payments in addition to
base salaries and allowances because of hardship,
inconvenience, or danger
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module 14
14-3
brain drain (p. 376)
The loss by a country of its most intelligent and best-educated
people
collective bargaining (p. 378)
The process in which a union represents the interests of
workers bargaining in negotiations with management
compensation packages (p.
398)
For expatriate employees, packages that can incorporate
many types of payments or reimbursements and must take
into consideration exchange rates and inflation
culture shock (p. 387)
The anxiety people often experience when they move from a
culture that they are familiar with to one that is entirely
different
ethnocentric policy (p. 379)
A policy of hiring and promoting based on the parent
company’s home-country frame of reference
expatriate (p. 371)
A person living outside his or her country of citizenship
geocentric policy (p. 379)
A policy of hiring and promoting based on ability and
experience without considering race or citizenship
guest worker (p. 376)
Person who goes to a foreign country legally to perform
certain types of jobs, on a temporary basis
home-country national (p.
379)
Same as parent company national
host-country national (HCN) (p.
379)
Employee who is a citizen of the nation in which the subsidiary
is operating, which is different from the parent company’s
home nation
international status (p. 399)
Entitles the expatriate employee to all the allowances and
bonuses applicable to the place of residence and employment
labor market (p. 372)
The pool of available potential employees with the necessary
skills within commuting distance from an employer
labor mobility (p. 374)
The movement of people from country to country or area to
area seeking jobs
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module 14
14-4
labor union (p. 378)
An organization of workers, formed to advance the interest of
its members
parent-country national (PCN)
(p. 379)
Employee who is a citizen of the nation in which the parent
company is headquartered; also called home-country national
polycentric policy (p. 379)
A policy of hiring and promoting based on the specific local
context in which the subsidiary operates
regiocentric policy (p. 379)
A policy of hiring and promoting based on the specific regional
context in which the subsidiary operates
reverse brain drain (p. 377)
The return home of highly skilled immigrants who have made
a contribution in their adopted country
third-country national (TCN)
(p. 379)
Employee who is a citizen of neither the parent company
nation nor the host country
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module 14
CONTENT OUTLINE
The following section provides the flow of information using the LEARNING OBJECTIVES as a
guide, KEY TERMS learners will need to take away from the course, and LECTURE NOTES to drive
home teaching points.
LO 14-1
Identify several of the major factors that may affect the
quantity and quality of labor in a nation.
• Worldwide Labor Conditions
o Overall Size of the Workforce
o Aging of Populations
o Urbanization of Workforce
o Immigrant Labor
o Guest Workers
o Brain Drain
o Labor Unions
Key Terms:
• labor market
• labor mobility
• guest worker
• brain drain
• reverse brain drain
• labor union
• collective bargaining
I. Worldwide Labor Conditions
1. Overall Size of the Workforce
a. Populations in developing nations tend to be growing and becoming younger.
b. Over one-third of the world’s 15– to 24-year-olds live in India and China.
c. Populations in many developed nations are projected to decline due to low
birthrates and low levels of immigration.
2. Aging of Populations
a. An aging population is a trend affecting the workforce of many nations.
regarding immigration; economic growth; and a range of political issues.
3. Urbanization of Workforce
a. The population and labor force worldwide have been shifting dramatically
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module 14
14-6
Copyright © 2020 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
d. The rate of urbanization has been nearly 6 times faster in developing
countries, from 1975 to 2015.
e. Urbanization often creates a pool of low-cost, low-skill workers.
4. Immigrant Labor
a. Labor mobility is the movement of people from country to country or area to
area to get jobs.
b. People often move to secure better economic situations. (see Figure 14.3)
c. 64 percent of the world’s migrants live in developed countries.
d. The U.S. has 4 percent of the world’s population but nearly 20 percent of the
world’s migrants.
e. Migrant labor ranges from highly skilled jobs to lower-skilled positions in
agriculture, cleaning, and domestic service.
c. When economies slow, fewer workers are needed, unemployment increases
among the nation’s citizens, and guest workers are either not renewed or are
deported.
c. Reverse brain drain is the return home of highly skilled immigrants who have
made a contribution in their adopted country.
d. New economic opportunities in their home countries, as well as political
barriers and challenges in host developed nations, have encouraged reverse
interests of the company.
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module 14
c. There is a trend of declining numbers of union members in most developed
nations, especially within industrial sectors.
d. International developments such as offshoring of production activities have
been perceived as a threat by some national unions, promoting some
multinational labor activity.
LO 14-2
Explain the relationship between competitive strategies
(international, multidomestic, global, and transnational)
and international human resource management
approaches (ethnocentric, polycentric, regiocentric, and
global).
• The Strategic Approach to International Human
Resource Management
Key Terms:
• ethnocentric policy
• polycentric policy
• regiocentric policy
• geocentric policy
• home-country national
• parent-country national
(PCN)
• host-country national
(HCN)
• third-country national
(TCN)
II. The Strategic Approach to International Human Resource Management
A. Companies confront two competing forces—pressure to achieve global integration and
reduce costs, and pressure to respond to local differentiation—that determine which
of four alternative competitive strategies a firm should adopt (home replication,
multidomestic, global, transnational).
B. A company’s competitive strategy should drive the organization’s approach to
international human resource management (IHRM).
C. Heenan & Perlmutter developed a model linking competitive strategy with an
organization’s IHRM approach.
1. Hiring approach: ethnocentric, polycentric, regiocentric, or geocentric.
2. Employee classifications: home-country national or parent-country national
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module 14
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o Ethnocentric Staffing Policy
o Polycentric Staffing Policy
o Regiocentric Staffing Policy
o Geocentric Staffing Policy
III. Recruitment and Selection of Employees
A. Ethnocentric Staffing Policy
1. Companies with primarily international strategic orientation use home-country
citizens (PCNs) for key posts.
2. Decisions made at HQ, using home country’s frame of reference.
3. PCNs usually not knowledgeable about host-country culture and language, but
experience abroad gives a worldwide perspective and prepares them for
4. Can be expensive to staff with PCNs.
B. Polycentric Staffing Policy
2. Human resource policies created at local level for specific context of the local
operations.
3. HCNs have no problem with unfamiliarity of local customs, culture, and language
and costs are usually lower than PCNs.
4. HCNs may need considerable training to understand the IC and its way of doing
5. Many of the best HCNs get hired away due to a shortage of talented, experienced
personnel.
6. Can be a conflict of loyalty by HCN between host country and IC.
1. Companies with primary regional strategy orientation use regional-area nationals
for subsidiary staffing, meaning a mix of HCNs and third-country nationals (TCNs).
D. Geocentric Staffing Policy
1. Companies with primary transnational strategy orientation staff globally, using
worldwide staffing pools.
3. Employees with the strongest set of skills tend to be more difficult to hire and
retain, due to their value and relative scarcity of their skill sets.
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module 14
LO 14-4
Distinguish among the training and development
considerations for home-country, host-country, and
third-country nationals as international company
executives.
• Training and Development of Employees
o Home- or Parent-Country National
o Host-Country National
• HCNs Hired in the Home Country
• HCNs Hired in the Host Country
o Third-Country National
Key Terms:
IV. Training and Development of Employees
A. Home- or Parent-Country National (PCN)
1. Due to the difficulty of an overseas assignment, few recent college graduates are
hired for an overseas assignment.
2. New hires need time to adjust to the workplace and learn the business.
3. Preparation for international assignment includes language training and special
assignments to overseas locations.
B. Host-Country National (HCN)
a. The same criteria for selecting PCNs apply to HCNs.
i. Having studies in the parent company’s country may help.
ii. Sent to IC HQ to be indoctrinated in firm’s policies and procedures.
iii. May become distanced from developments and relationships in host
country while in home country.
c. HCNs Hired in the Host Country
i. May set up in-house training programs in host-country subsidiary.
iv. May be sent repeatedly to parent-company HQ, divisions, other
subsidiaries to gain skills and network.
C. Third-Country National (TCN)
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module 14
1. May be advantageous in terms of costs, culture knowledge.
2. Host-Country Attitudes: Some host country governments may prefer hiring of
their citizens.
3. Prevalent in developing countries due to lack of skilled employees.
4. Generalizations about TCNs are difficult.
a. Wide range of multi-country experience.
b. Various routes to professional TCN status.
5. As ICs take a geocentric view to staffing, likely to see greater use of TCNs.
LO 14-5
Identify some of the challenges and opportunities of an
expat position.
• Expatriates
o The Expatriate’s Family
• Trailing Spouses in Two-Career Families
• Challenges for Expatriate Children
o Preparation for the Transition: Language
Training
o Expatriate Services
o Repatriation—The Shock of Returning Home
Key Terms:
• culture shock
V. Expatriates
A. Different types of expats:
1. HCN hires are sometimes called inpatriates.
2. HCNs or TCNs given short-term assignment abroad are called flexpatriates.
3. Expatriates being sent to broader range of countries than ever before, and
average age is declining and higher proportion are women.
4. Expats can bring scarce technical or managerial skills to host country.
5. Expat experience helps employee develop skills for promotion to leadership
positions of greater scope and responsibility.
6. Costs of expatriates are substantial and failure rates are high.
7. Culture shock affects ALL expatriates regardless of international experience.
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module 14
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8. To enhance expat performance, ICs should consider what support is provided pre–
assignment and during assignment.
9. Reverse culture shock happens when expat returns home.
B. The Expatriate’s Family
1. As many as 90 percent of expatriate failures are family-related, particularly
difficult for spouses.
2. Trailing Spouses in Two-Career Families
a. Career implications significant to both expat and spouse.
b. Dissatisfied spouse may affect expat performance, marriage, etc.
c. IHRM addressing spousal issues more closely.
3. Challenges for Expatriate Children
a. Expatriate children may suffer the most.
b. Children have challenges as well as benefits.
c. Children sometimes referred to as third-culture kids (TCKs).
C. Preparation for the Transition: Language Training
1. English is lingua franca of the world.
2. Goal is to establish goodwill and show interest in host country.
3. Fluency not needed, but day-to-day communication helpful.
D. Expatriate Services
2. IHRM needs to offer career counseling and reorientation.
LO 14-6
Describe some of the complications of compensation
packages for expatriate executives.
o Salaries
o Allowances
• Housing Allowances
• Cost-of-Living Allowances
• Allowances for Tax Differentials
Key Terms:
• compensation
packages
• international
status
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module 14
14–12
• Education Allowances
• Moving and Orientation Allowances
o Bonuses
• Overseas Premiums
• Contract Termination Payments
• Home Leave
o Compensation Packages Can Be Complicated
• What Percentage of the Base Salary?
• What Exchange Rate?
o Compensation of Third-Country Nationals
o International Status
o Perks
o What’s Important to You?
VI. Compensation for International Assignments
A. Expatriate compensation programs must be managed proactively to keep them fair
and attractive and able to attract the quantity and quality of potential expats needed
by the IC.
1. Traditional method for American ICs is balance sheet approach, with base salary
equal to domestic counterpart, supplemented by allowances and bonuses.
2. Can be complex and expensive to administer, especial for IC in broad range of
nations and regions. (Table 14.2)
3. Some ICs attempt to localize workforce or phase out expat package over time.
addition that can be allocated on individual preference basis.
B. Salaries
1. Usually standard for each level of the management hierarchy throughout the IC.
C. Allowances
1. Payments to compensate expatriates for extra costs of living abroad, such as:
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module 14
14–13
c. Allowances for tax differentials.
d. Education allowances.
e. Moving and orientation allowances.
D. Bonuses (or premiums)
1. Paid in recognition that expatriates and their families undergo hardships and
inconveniences and make sacrifices living abroad. They include:
a. Overseas premiums. (Table 14.4)
b. Contract termination payments.
c. Home leave.
E. Compensation Packages Can Be Complicated
a. What to pay in host country currency?
b. Home country currency?
c. Other country currency?
F. Compensation of Third-Country Nationals
1. Trend is to treat them the same as HCN expats.
G. International Status
1. Given to a manager with international status.
1. Relative priority of different items is influenced by personal and family
considerations.
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module 14
14–14
ENGAGEMENT & APPLICATION
BOXED TEXT DISCUSSION QUESTIONS WITH SUGGESTED ANSWERS
IB IN PRACTICE: Executives with a Global Skill Set Are in Big Demand
The importance of finding executives with a global skill set is particularly critical in developing
economies and examples from Latin America and China are presented. Some of the challenging
1. What kinds of skills or experience are needed in order to succeed in a foreign assignment?
2. How might a company go about assessing whether or not a candidate has the proper set of
such skills and experiences?
Again, answers may vary on this question. Some students might suggest that assessment tests
be administered. Others will suggest the need for training programs. Certain students might
GLOBAL DEBATE: Why Aren’t More Women Selected for International Assignments?
The question of this box feature alone will present controversy in your class, as women will
answer with a resounding and emphatic, “YES!” Once past that, the question serves well as a
starting point for a stimulating class discussion on such topics as:
• Is there a glass ceiling for women in IB management?
• What education and training do women need in order to be strong candidates for
global assignments?
International Business, 2e
Geringer, McNett, Ball
Instructor Guide to Module 14
• Do women on international assignments need different support than men?
• Are women in your class interested in an IB career? Why and/or why not?
Online and Hybrid: A classroom discussion option is to assign individuals, groups, or the class as
a whole to examine the issue of gender in selecting personnel for international assignments.
1. Should ICs select more women for expatriate assignments? Why or why not?
The answers to this question will vary, and it is intended to help people think through the issues
from various perspectives. It is common for students, especially women, to emphatically state
that ICs SHOULD select more women for expatriate assignments. They might argue that women
2. Are there circumstances in which you believe female expatriates should be most strongly
considered, or in which they should not be considered at all? Why?
This question raises an issue that almost always generates strong opinions and a variety of
perspectives. In general, research suggests that women have tended to perform well in