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Chapter One

Introduction

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Chapter Learning Objectives

After reading this chapter, you should be able to:

• define key terms in international human resource management (IHRM) and consider several definitions of IHRM

• discuss the historically significant issue of expatriate assignment management and review the evolution of these assignments to reflect the increasing diversity with regard to what constitutes international work and the type and length of international assignments

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Chapter Learning Objectives

• outline the differences between domestic and international human resource management, and detail a model which summarizes the variables that moderate these differences

4(c) 2009 by Nelson Education Limited.

Chapter Learning Objectives

• discuss the complexity of IHRM, the increasing potential for challenges to existing IHRM practices and current models, and an increasing awareness of the wide number of choices within IHRM practices due to increased transparency and faster and more detailed diffusion of these practices across organizational units and firms

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Opening Vignette

Expansion Plans: Kraft and Ivanhoe Mines Ltd. (Canada)

• changing characteristics of HR in an international context• planning, recruiting and selecting• developing and rewarding• evaluating performance and dismissing

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Terms

MNE

culture shock

emi-etic distinction

HCN

PCN

TCN

NAFTA

UNCTAD

expatriate

inpatriate

HRM

IHRM

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Interrelationships between Approaches to the Field

(Figure 1.1)

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Multinational Enterprise (MNE)

• a firm which owns or controls business activities in more than one foreign country

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Defining HRM

An organization’s HRM activities include

• human resource planning• staffing (recruitment, selections, placement)• performance management• training and development• compensation (remuneration) and benefits• industrial relations

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A Model of HRM (Figure 1.2)

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Defining IHRM

The interplay among these three dimensions in

Figure 1.2

• human resource activities• type of employees• countries of operation

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Defining Expatriate

• an employee who is working and temporarily resigning in a foreign country

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International Assignments Create Expatriates (Figure 1.3)

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Defining Inpatriate

• transfer of subsidiary staff into the parent country (headquarters) operations

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Differences Between Domestic HRM and IHRM

IHRM complexity can be attributed to six factors• more HR activities • the need for a broader perspective• more involvement in employee’s personal lives• changes in emphasis as the workforce mix of expatriates

and locals varies• risk exposure• broader external influences

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More HR Activities

International

• taxation• relocation and orientation• expatriate administrative services• host government relations• language translation services

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The Need for a Broader Perspective

• administering programs that are equitable for more than one group.

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More Involvement in Employee’s Personal Lives

Ensure expatriates understand• housing arrangements• healthcare• compensation (cost-of-living allowances, premiums,

taxes)• visa requirements• schooling

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Risk Exposure

• expatriate failure• direct costs• indirect costs• militant activities• emergency evacuation

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Broader External Influences

• government• economy• labour standards and costs• taxation• health and safety• laws, compliance regulations, codes of conduct

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Variables that Moderate Differences Between Domestic and IHRM (Figure 1.4 )

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The Cultural Environment

Defining culture

• a shaping process overtime that generates relative stability, reflecting a shared knowledge structure that accentuates variability in values, behavioural norms, and patterns of behaviour.

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The Cultural Environment

Defining culture shock

• many adjustments to new cultural environments in short periods of time, challenging peoples frames of reference in that their sense of self (nationality) comes into question.

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The Cultural Environment

Prior rather than posthoc

Do national differences represent cultural differences?

Answer – noPage 1-31

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The Cultural Environment

Emic – etic aspects of concepts or behaviour

• Emic culture – specific (specificity/divergence)• Etic culture – common (universality/convergence)

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The Cultural Environment

• cultural awareness• cultural differences• differences in work-related values

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Industry Type

• multi domestic industry• global industry

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Industry Type

Laurent’s Steps to Truly International HRM(IHRM Notebook 1.2)

• recognize that one’s own HRM reflects home cultureassumptions and values

• recognize that one’s own peculiar ways are neither universally better nor worse than others - just different and likely to exhibit strengths and weaknesses, particularly abroad

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Industry Type

• recognize that organization’s foreign subsidiaries may prefer other ways to manage people – ways that are neither intrinsically better nor worse, but possibly more effective locally

• headquarters willingness to acknowledge cultural differences and steps to make them discussable and therefore usable

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Industry Type

• build shared genuine belief that cross-cultural

learning will result in more creative and effective ways of managing people

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Reliance of the Multinational on it’s Home Country Domestic Market

• NAFTA

• UNCTAD

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World Top 10 Nonfinancial Transnational Corps., Ranked By

Transnational Index (Table 1.1)

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World Top Ten Non-Financial Transnational Corps., Ranked Only

By Foreign Assets (Table 1.2)

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Attitudes of Senior Management to International Operations

Fostering a global mindset

• think globally• globally oriented staff

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Strategic HRM in Multinational Enterprises (Figure 1.5 )

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Discussion Questions

1. What are the main similarities and differences between domestic and international HRM?

2. Define these terms: IHRM, PCN, HCN, and TCN.

3. Discuss at least two of the variables that moderate differences between domestic and international HR practices.

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Case: Two Sides to Every Story

1. What are the key HR related problems in this case?

2. What could Pressman’s International HR function at headquarters have done differently to avoid some of the current HR related problems and conflicts?

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Case: Two Sides to Every Story

3. How could headquarters’ International HR department overcome these challenges?

4. What lessons could be learnt from this case in terms of level of HR involvement in international expansion decisions?

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