CH-1-6 Introduction – International Human Resource Management : Chapter Notes

This Document Contains Chapters 1 to 6 Part I: Chapter Notes Chapter 1: INTRODUCTION Learning objectives: Being able to define key terms in international human resource management (IHRM) and consider several definitions of IHRM. Knowing about the historically significant issue of expatriate assignment management and reviewing the evolution of these assignments to reflect increasing diversity with regard to what constitutes international work and the type and length of international assignments. Getting acquainted with the differences between domestic and international human resource management and detailing a model that summarizes the variables that moderate these differences. Understanding the complexity of IHRM and the increasing potential for challenges to existing IHRM practices and current models, and developing an increasing awareness of the wide number of choices within IHRM practices due to increased transparency and the faster and more detailed diffusion of these practices across organizational units and firms. Chapter Summary: The purpose of this chapter is to provide an overview of the emerging field of international HRM. This is achieved by: Defining key terms in IHRM and considering several definitions. Introducing the historically significant issue of expatriate assignment management and reviewing the evolution of these assignments to reflect increasing diversity with regard to what constitutes international work and the type and length of international assignments. Outlining the differences between domestic and international human resource management by looking at six factors (more HR activities; the need for a broader perspective; more involvement in employees’ personal lives; changes in emphasis based on variances in the workforce mix of expatriates and locals; risk exposure; and more external influences) and detailing a model which summarizes the variables that moderate these differences. Presenting the complexity of IHRM, the increasing potential for challenges to existing IHRM practices and current models, and developing an increasing awareness of the wide number of choices within IHRM practices due to increased transparency and the faster and more detailed diffusion of these practices across organizational units and firms. We conclude that the complexity involved in operating in different countries and employing different national categories of employees is a key variable in differentiating between domestic and international HRM, rather than any major differences between the HR activities performed. We also discuss four other variables that moderate differences between domestic and international HRM: the cultural environment; the industry (or industries) with which the multinational is primarily involved; the extent to which a multinational relies on its home country’s domestic market; and the attitudes of senior management. These five variables are shown in Figure 1.3. Finally, we discuss a strategic HRM model applied in multinational enterprises (Figure 1.4), which draws together a number of external and organizational factors that impact on IHRM strategy and practice and in turn on MNE goals. Links to other chapters: This introductory chapter provides the basis for all the other chapters. The definitions and understanding of the differences between HRM and international HRM described herein are key to understanding the other chapters of the book. Discussion Questions: What are the main similarities and differences between domestic and international HRM? This question is addressed in ‘Defining international HRM’ (pp. 2-3) and ‘Differences between domestic and international HRM’ (pp. 4-5): HRM = ‘[...] those activities undertaken by an organization to utilize its human resources effectively’ (p. 2), including at least: human resource planning, staffing (recruitment, selection, placement), performance management, training and development, compensation (remuneration) and benefits, and industrial relations (similarities between domestic and international HRM). Differences: Domestic HRM involves employees working within only one national boundary. IHRM also includes aspects pertaining to the national or country categories involved in international HRM activities (the host country where a subsidiary may be located, the parent country where the firm is headquartered, and ‘other’ countries that may be the source of labor, finance, and other inputs), as well as the three categories of employees of an international firm (host country nationals, parent country nationals, and third country nationals). In IHRM, staff are moved across national boundaries into various roles within the international firm’s foreign operations (expatriates/international assignees). In IHRM, the complexity of operating in different countries and employing different national categories of workers is a key variable that distinguishes domestic and international firms. This complexity is due to six factors: more HR activities, the need for a broader perspective, more involvement in employees’ personal lives, changes in emphasis as a result of variances in the workforce mix of expatriates and locals, risk exposure, and broader external influences. Define these terms: “International HRM”, “PCN”, “HCN”, and “TCN”. This question is addressed in ‘Defining international HRM’ (pp. 2-4). International HRM= ‘[…] interplay between the three dimensions of human resource activities, types of employees, and countries of operation’ (Morgan). ‘We define the field of IHRM broadly to cover all issues related to the management of people in an international context. Hence, our definition of IHRM covers a wide range of human resource issues facing MNCs in different parts of their organizations. Additionally, we include comparative analyses of HRM in different countries’ (Stahl and Björkman, 2010);  definition used in this book (p.4). Three categories of employees in an international firm: PCN – parent country national HCN – host country national TCN – third country national For example, the US multinational IBM employs British citizens in its British operations (HCNs), often sends US citizens (PCNs) to Asia-Pacific countries on assignment, and may send some of its Singaporean employees on assignments to its Chinese operations (as TCNs). The nationality of the employee is a major factor in determining the person’s “category”, which in turn is frequently a major driver of the employee’s compensation and employment contract. Discuss two HR activities in which a multinational firm must engage, which would not be required in a domestic environment. The question refers to material found on p. 5 under ‘More HR activities.’ To operate in an international environment, a human resources department must engage in a number of activities that would not be necessary in a domestic environment. Examples of required international activities are: international taxation, international relocation and orientation, administrative services for expatriates, host-government relations, and language translation services. Expatriates are subject to international taxation, and often they have both domestic (i.e. home country) and host country tax liabilities. Therefore, tax equalization policies must be designed to ensure that there is no tax incentive or disincentive associated with any particular international assignment. The administration of tax equalization policies is complicated by the wide variations in tax laws across host countries and by the possible time lag between the completion of an expatriate assignment and the settlement of domestic and international tax liabilities. In recognition of these difficulties, many MNEs retain the services of a major accounting firm for international taxation advice. Host government relations represent an important activity for the HR department in an MNE, particularly in developing countries where work permits and other important certificates are often more easily obtained when a personal relationship exists between the relevant government officials and multinational managers. Maintaining such relationships helps resolve potential problems that can be caused by ambiguous eligibility and/or compliance criteria for documentation such as work permits. US-based multinationals, however, must be careful in how they deal with relevant government officials, as payment or payment-in-kind, such as dinners and gifts, may violate the US Foreign Corrupt Practices Act (FCPA). Further discussion on other activities can be found on pp. 5-6. Why is a greater degree of involvement in employees’ personal lives inevitable in many international HRM activities? Material to this question can be found in ‘More involvement in employees’ personal lives’ (p. 6). A greater degree of involvement in employees’ personal lives is necessary for the selection, training, and effective management of both PCN and TCN employees. The HR department or HR professional needs to ensure that the expatriate employee understands housing arrangements, health care, and all aspects of the compensation package provided for the assignment (cost-of-living allowances, premiums, taxes, and so on). In the international setting the HR department must be much more involved in order to provide the level of support required, and as a consequence it will need to know more about the employee’s personal life. For example, some national governments require the presentation of a marriage certificate before granting a visa for an accompanying spouse. Thus, marital status could become an aspect of the selection process, regardless of the best intentions of the MNE to avoid using a potentially discriminatory selection criterion. Discuss at least two of the variables that moderate differences between domestic and international HR practices. This question addresses material found in ‘Variables that moderate differences between domestic and international HRM’ (pp. 8-9) (see Figure 1.3). The text names five variables that act as “moderators” (diminishing or accentuating the differences between domestic and international HRM): complexity, the cultural environment, industry type, extent of reliance of the multinational on its home country domestic market, and the attitudes of senior management to international operations. Complexity: Many firms from advanced economies, with limited experience in international business, underestimate the complexities involved in successful international operations—particularly in emerging economies. There is considerable evidence to suggest that business failures in the international arena are often linked to the poor management of human resources. Cultural environment: Possibility of employee culture shock. Recognition and appreciation of cultural differences is essential, because international business involves the interaction and movement of people across national boundaries. In research, issues are: little agreement on either an exact definition of culture or on the operationalization of this concept, as well as the emic-etic distinction (emic refers to culture-specific aspects of concepts or behavior, and etic refers to culture-common aspects, i.e. universality divergence-convergence debate). Cultural awareness is essential for the HR manager at corporate headquarters as well as in the host location. Coping with cultural differences, and recognizing how and when these differences are relevant, is a constant challenge for international firms. Industry type: This is of considerable importance because patterns of international competition vary widely from one industry to another: multi-domestic versus global industry. Multi-domestic industry (competition in each country is essentially independent of competition in other countries, e.g. retail, distribution, and insurance). The HR department’s role will most likely be more domestic in structure and orientation. At times there may be considerable demand for international services from the HRM function. Global industry (a firm’s competitive position in one country is significantly influenced by its position in other countries, e.g. commercial aircraft, semiconductors, and copiers). Role of the HR department: an explicit recognition by the parent organization that its own peculiar ways of managing human resources reflect some assumptions and values of its home culture; an explicit recognition by the parent organization that its peculiar ways are neither universally better nor worse than others, but are different and likely to exhibit strengths and weaknesses, particularly abroad; an explicit recognition by the parent organization that its foreign subsidiaries may have other preferred ways of managing people that are neither intrinsically better nor worse, but could possibly be more effective locally; a willingness from headquarters to not only acknowledge cultural differences, but also to take active steps in order to make them discussable and therefore usable; and building a genuine belief by all parties involved that more creative and effective ways of managing people could be developed as a result of crosscultural learning.  Changes that are required to internationalize the HR function have more to do with mindsets than with behaviors. Pages 9-15 consider these five aspects in detail. References: Recent overviews on research in International Human Resource Management can be found in: Stahl, G., Björkman, I., and Morris, S. (Eds.) (2012). Handbook of Research in International Human Resource Management. 2nd Ed. Cheltenham, UK: Edward Elgar Publishing. Brewster, C. & Mayrhofer, W. (Eds.) (2012). Handbook of Research in Comparative Human Resource Management. Cheltenham, UK: Edward Elgar Publishing. On convergence and divergence see: Festing, M. (2012). Strategic Human Resource Management in Germany: Evidence of Convergence to the U.S. Model, the European Model, or a Distinctive National Model? In: Academy of Management Perspectives, Vol 26, (2), 37-54.
Chapter 2: THE CULTURAL CONTEXT OF IHRM Learning objectives Chapter 1 observed that international HRM differs from nationally-oriented HRM predominantly in the complexities that result from employees of various national origins working in different countries. People who work in internationally operating companies, as well as customers, suppliers, or representatives of government institutions in the host country, often face very different cultural and institutional environments due to differing socialization experiences. In this chapter we systematically review the environment of international HRM decisions so that the complexity of these decisions can be better understood and adequate solutions developed. This chapter has been designed in order to enable students to learn about the key findings of intercultural comparative research on: Definitions of culture Cultural concepts Results of intercultural management studies such as Hofstede’s research, the GLOBE study and others Reflections on cross-cultural management research Discussion of the development of cultures These concepts are highly relevant to developing a more comprehensive understanding and explanation of the complexity of international HRM. Chapter Summary In this chapter, we outline how the cultural environment may influence HRM. In summary it can be concluded that an adequate understanding of the cultural context, as it impacts on the behavior of an organization’s employees, is of critical importance. Thus, the results of crosscultural comparative research may provide valuable hints to managers about how to cope with employees from foreign cultures. Furthermore, these research results can form the basis for the development of intercultural training measures. These results could also be of great use to HRM in an international firm, because they could assist in undertaking a structured analysis of the transferability of specific elements of a parent firm’s existing HR policy to foreign subsidiaries. In this context, it would be conceivable to decide whether incentive systems for groups or for individuals would be effective in a specific culture. Table 2.1 in the text summarizes these ideas about the cultural context and gives examples of environmental differences which could lead to problems when MNEs attempt to introduce worldwide standardized HRM practices. Within this context, it is important to recall the discussion on the convergence and divergence of HRM and work practices, as mentioned in the first chapter. Links to other chapters and cases: This chapter provides important information on one of the key contextual issues for international human resource management. The importance of the cultural environment has already been introduced in Chapter 1 and will be addressed in many chapters again or linked to topics such as the cultural adaptation process (Chapter 5), international performance management (Chapter 6), and intercultural training (Chapter 7). Cases that provide the basis for a cultural discussion include Case 3 on transnational compensation, where, for example, risk aversion (which could be linked to uncertainty avoidance) plays an important role. A more general discussion on cultural values could be included in Case 7, which examines balancing values between Scandinavia and India. Discussion Questions Define culture. How can culture be conceptionalized? This question addresses material found in ‘Definition of culture’ (p. 24) and ‘Schein’s concept of culture’ (pp. 24-25). To date, there is no predominant consensus on the exact meaning of culture: ‘Culture consists of patterned ways of thinking, feeling, and reacting, acquired and transmitted mainly by symbols, constituting the distinctive achievements of human groups including their embodiments in artifacts; the essential core of culture consists of traditional […] ideas and especially their attached values…’ (Kluckhohn and Kroeber, 1950s). ‘[Culture is] mental programming’ or ‘software of the mind’ (Hofstede, 1991). Culture includes the customs of a community that are practiced by a majority and are based on four basic elements: standardization of communication, thought, feeling, and behavior (Hansen). Culture can be conceptualized on various levels (Schein, 2004): Artifacts or creations (conscious): visible organizational structures and processes; easily measurable, but hard to interpret variables such as, for example, the economic growth of a country or its political system. Values (partly conscious and partly unconscious): values of a company or culture, found in the intermediate level of consciousness; based on underlying assumptions, for example they are the basis for national legislation or attitudes towards abortion. Hofstede’s study can be positioned on this level. Underlying assumptions (invisible and unconscious): includes convictions, perceptions, thoughts, and feelings concerning, for example, the nature of reality and the nature of truth, time dimensions, the effect of spatial proximity and distance, the nature of being human, types of human activity, the nature of human relationships through religions, the basic understanding of democracy, and capitalist market organizations. Influences from artifacts, through values to underlying assumptions, are much weaker than those leading in the opposite direction, because the influence of underlying assumptions on values and artifacts is stronger than vice versa. Outline Hofstede’s cross-cultural management study and discuss it accordingly. This question is addressed under ‘Hofstede’s cross-cultural management study’ (pp. 26-33). It was the first major study in cross-cultural comparative research. It can be positioned on the values level (according to Schein). Original study at IBM (1967-1973): N=116,000 questionnaires which were completed by IBM employees at all hierarchical levels and with various qualifications.
Four dimensions of country cultures were identified: power distance, uncertainty avoidance, femininity vs. masculinity, and individualism vs. collectivism. These dimensions imply consequences for the structures of organizations. Chinese Value Survey N=100 people from 23 countries. The results reflected three dimensions similar to power distance, individualism vs. collectivism, and masculinity vs. femininity and one new dimension: Confucianism dynamics, which could not be related to the results of the original IBM study.
Dimension Definition Examples of Country Characteristics Major Difference lies in…
Power Distance The acceptance of members of a culture that power is not distributed equally in institutions expresses the emotional distance between employees and superiors High: acceptance of a hierarchical organization structure, in which every individual can occupy their place without any need for justification Many South Asian countries, South America Low: aspiration to equal power distribution, demand for explanations for any instance of formalized power inequality US, Anglo Saxon countries … how power inequality is dealt with
Uncertainty Avoidance Extent to which the members of a culture feel threatened by uncertain, ambiguous and/or unstructured situations and try to avoid them Strong: strict beliefs and behavioral codes, no tolerance for people and ideas that deviate from these Some Asian Cultures, e.g. Singapore, Hong Kong, German-speaking countries Weak: significance of practice exceeds the significance of principles; high tolerance of deviations Scandinavia … the reaction of individuals to time pressure or uncertainties in the future
Femininity vs. Masculinity Based on the assumption that values can be distinguished as more masculine or more feminine Masculine orientation: comprises the pursuit of financial success, heroism and a strong performance approach; role flexibility is less clear-cut German-speaking countries Feminine orientation: preferences for life quality, modesty and interpersonal relationships; role flexibility is more clear-cut Scandinavia … the form of social roles attributed to gender by the relevant society
Individualism vs. Collectivism Extent to which individual initiative and caring for oneself and one’s nearest relatives are preferred by a society as opposed to, for example, public assistance or the concept of extended family In more individualist cultures, there is merely a casual network of relationships between people. Each person is primarily responsible for himself US, Anglo Saxon countries More collective cultures have closer, more clearly defined systems of relationships. This applies both to extended families as well as companies Many South Asian countries, South America … the predominant self-sufficiency among individuals in a society (private & professional)
Confucianism or Long-term Orientation Basic orientation in the life of people, which can be either more longterm or short-term in nature Long-term: great endurance and/or persistence in pursuing goals, position of ranking based on status, adaptation of traditions to modern conditions, respect for social and status obligations within certain limits, high savings rates and high investment Short-term: personal candor and stability, avoiding loss of face, respect for social and status obligations without the consideration of costs, low savings rates and low investment activity, expectations of quick profit, respect for traditions, and x…the attitude towards time (short-long; pastpresent-future)
activity, readiness to subordinate oneself to a purpose, and the feeling of shame  future-oriented, dynamic Asian Countries greetings, presents and courtesies based on reciprocity  present-oriented or pastoriented, relatively static US
Discussion (see pp. 33-34 ‘A reflection on the Hofstede study’): Pro: Historical prominence—an important contribution to cross-cultural management research. Could be repeated at different points in time. Results could serve as guidelines for explaining behavior, at least in initial orientation. Contra: Deterministic and universalistic concept of culture (see discussion question 6). Reductionist approach. Lacking theory—limited validity o Dimensions were mainly derived a posteriori As Hofstede’s study is placed on the value level—the intermediate level of the Schein concept—it is questionable how far standardized questionnaires can capture the unconscious and therefore the underlying motives of actions No line between practices per se and perceived practices o Lack of separation between values and behavior Potential distortion of the Western perspective (the 2nd (Chinese Value) study took place because the risk that the cultural identity of researchers from Western industrial countries might influence the form of the questionnaire could not be ruled out. Countries rather than cultures are delimited o E.g. Yugoslavia in the 1990s and multicultural societies like Belgium show that national borders do not necessarily contain homogeneous groups  It should be assumed that national cultures are not the only influencing factors of behavior. Data is not representative—limited validity o Data from only one company (IBM) —although this helps to keep many factors constant—with a strong corporate culture and corresponding selected employees (no typical national citizens) Mainly limited to middle-class males in marketing and service positions o Future research should imply cross-level studies, intra-cultural differences, moderator variables, and the effects of interactions between culture variables. Static and outdated o Although it is assumed that cultures do not change fundamentally over 40-50 years, changes can be seen, for instance, through strong economic growth and significant system changes. Outline the methodical procedure and the results of the GLOBE study. Methodical procedure (material covered on pp. 35-36 in the text): Phase I (1993/1994): the development of underlying research dimensions (new social and organizational cultural dimensions and six leadership dimensions). Phase II: gather data on these dimensions. Phase III: analyze the effects of leadership behavior on the performance and attitudes of employees. Sample: 62 countries, 17, 370 people from middle management, 951 organizations, and three industries. Goal: The GLOBE research tries to study the complex relationships between culture, leadership behavior, organizational effectiveness, social co-habitation conditions, and the economic success of societies. Dimensions: Institutional collectivism, in-group collectivism, uncertainty avoidance, power distance, gender egalitarianism, assertiveness, performance orientation, and humane orientation. Partly based on Hofstede’s dimensions. Distinction in the questions between practices (as is) and values (should be). Results (p. 36) Separation of countries based on a literature analysis carried out in ten clusters: South Asia, Latin America, North America, the Anglo cluster, Germanic and Latin Europe, SubSaharan Africa, Eastern Europe, the Middle East, and Confucian Asia. These cultural regions have different characteristics within the respective cultural dimensions. Unique profiles emerge when combining cultural dimension characteristics with different cultures. Compare cross-cultural management studies and list their advantages and disadvantages. This question addresses mainly covered material in ‘A reflection of the Hofstede study’ (p. 33), ‘A reflection on the Globe study’ (p. 36), ‘The Trompenaars and Hampden-Turner study’ (pp. 36-37), and ‘Cultural dimensions by Hall and Hall’ (p. 38).
Studies (start) Data Basis Advantages Disadvantages
Hofstede (1960s) Quantitative N= 116,000 62 countries 1 industry Historical prominence; Could be repeated at different points in time; Results could serve as guidelines for explaining behavior Western research team; Limited industry focus (only 1); Equivalence of culture to nation; Level of analysis
GLOBE (1990s) Quantitative N= 17,370 62 countries 3 industries Distinction between practices and values; Multinational research team; Various culture levels (individual, organizational, social) and distinctions in the sample in some countries (e.g. South Africa, Switzerland, Limited industry focus (only 3); Equivalence of culture to nation (subcultures are not sufficiently reflected); Still: level of analysis (intra-national subcultures are not considered)
Germany); Refined dimensions (p.36)
Trompenaars & Hampden-Turner (1980s -?) Quantitative N= 30,000 55 countries (2002) Practical template to monitor behavior Operationalization and genesis of dimensions remain unclear (p.37)
Hall & Hall Qualitative Relationship between culture and communication; Practical template to monitor behavior Dimensions may be incomplete, closely related, and overlapping; Cultural regions are represented in a macro sense
To what extent do cultures undergo changes? Illustrate your statement with an example. This question is best answered via direct reference to the text ‘The development of cultures’ (p. 39). This discussion is closely related to the convergence (cultures are becoming more and more similar)-divergence (specific cultural characteristics remain) debate. The extent depends on the level of analysis: on the macro-level of culture (organizations) change takes place  convergence, because organizations are embedded in institutions that are also subject to convergence (e.g. joining the EU); but on the micro level (behavior) differences are enduring divergence. Hybridization of once distinct cultures occurs due to growing interdependence and migration. Intra-cultural changes due to, for example, demographic changes (beyond cultural borders), strong economic growth (e.g. PRC), and system changes (e.g. joining the EU) (see p. 34, 39). What do you think about the statement: ‘Cultures in Europe are becoming more similar?’ This question addresses material on p. 25 and p.39. In short: On the surface, cultures in Europe are becoming more similar (convergence), but not in depth (divergence). According to Scholz, Messemer, and Schröter (1991) there are great similarities on the artifact level of European states, which evokes the impression that there are no major differences between countries. However, the consensus is much lower on the levels of values and basic assumptions, which means that Europe is a culture corridor with major similarities and differences on the levels of basic assumptions, values, and artifacts. Example: Artifacts: laws and guidelines that are initiated at the European level. Values: national legislation on abortion. Underlying assumptions: Christianity, the basic understanding of democracy, and capitalist market organizations (p.25). References: Homepage of Geert Hofstede http://www.geert-hofstede.com. Website of the GLOBE Project: http://www.thunderbird.edu/-wwwfiles/ms/globe.
Chapter 3: THE ORGANIZATIONAL CONTEXT Learning objectives In this chapter we examine how international growth places demands on management, and the factors that impact on how managers of internationalizing firms respond to these challenges. We start with the premise that the human resource (HR) function does not operate in a vacuum, and that HR activities are determined by, and influence, organizational factors. Students should learn about the following areas: Issues of standardization and localization. Structural responses to international growth. Control and coordination mechanisms, including cultural control. Effect of responses on human resource management approaches and activities. Chapter summary The purpose of this chapter has been to identify the HR implications of the various options and responses that international growth places on the firm. This chapter focuses on: The general topic of balancing the standardization and localization of MNE operations, and how this balancing act runs throughout all human resource planning, processes, activities, and systems. The organizational context in which IHRM activities take place. Different structural arrangements are identified as the firm moves along the path to multinational status—from the export department through more complex variations such as matrix, heterarchy, transnational, and networked structures. Control and coordination aspects. Formal and informal mechanisms are outlined, with an emphasis on control through personal networks and relationships and corporate culture, thus drawing out HRM implications. How international growth affects the firm’s approach to HRM. Firms vary from one to another as they go through the stages of international development, and they react in different ways to the circumstances they encounter in various foreign markets. There is a wide variety of matches between IHRM approaches, organizational structure, and the stage of internationalization. Over twenty years ago, almost half of the US firms surveyed by Dowling reported that HR operations were unrelated to the nature of the firm’s international operations. A study by Monks of nine subsidiaries of multinationals operating in Ireland found that the majority adopted a local approach to the HR function, with headquarters involvement often limited to monitoring the financial implications of HR decisions. Stages of development and organizational forms should not to be taken into consideration, as normative research does suggest a pattern and a process of internationalization, although firms do vary in how they adapt to international operations. We use the parent firm’s nationality to demonstrate this point. Through the approach taken in this chapter, we are able to demonstrate that there is an interconnection between IHRM approaches and activities and the organizational context, and that HR managers have a crucial role to play in this respect. In order to better perform this role, it would seem important that HR managers understand various international structural options, along with the control and coordination demands imposed by international growth. It is this combined and complimentary pattern of structural control and personal control via HR activities that MNEs may apply to achieve their complex purposes.
Links to other chapters: This discussion builds upon material covered in Chapter 1 to provide a meaningful organizational context for drawing out the international dimension of human resource management—the central theme of this textbook. Discussion Questions What are the issues of standardization and localization in general for MNEs, and how do they particularly manifest themselves in IHRM activities? The text addresses this issue from p. 49 onwards in ‘Standardization and localization of HRM practices.’ The challenge of many multinationals is to create a system that operates effectively in multiple countries by exploiting local differences and interdependencies and at the same time sustaining global consistency. It is about keeping a balance between standardization (strategy, structure and corporate culture, firm size, and maturity) and localization (cultural and institutional environment, operation mode, and subsidiary mode), as shown in Figure 3.2 on p. 50. The aim of the global standardization of HRM practices is to reach the consistency, transparency and alignment of a geographically fragmented workforce around common principles and objectives. The use of common management practices is intended to foster a feeling of equal treatment among managers involved in crossborder activities and, at the same time, aims at a common understanding of what is expected from the employees. Furthermore, consistent systems facilitate administration processes by increasing operational efficiencies. The aim of realizing local responsiveness is to respect local cultural values, traditions, legislation, or other institutional constraints such as government policy and/or education systems regarding HRM and work practices. As mentioned above, attempting to implement methods and techniques that have been successful in one environment can be inappropriate in another. What are the stages a firm typically goes through as it grows internationally, and how does each stage affect the HR function? This question is best answered via direct reference to the text (p. 58). In general, it is important to note that the number of steps, or stages, along the path to multinational status varies from firm to firm, as does the time involved. Moreover, the sequence of stages can be different as well, as some intermediate steps can be leapfrogged. The stages considered in this question include exporting, use of a sales subsidiary, licensing, subcontracting, and foreign production (see Figure 3.4). Examples of stage impacts on the firm’s HR function: Exporting: the HR function is unclear, but it will involve a selection of export staff and perhaps the training of foreign agency staff. As these activities are handled by the marketing department or exporting staff, the HR department has little, if any, involvement in the development of policies and procedures surrounding the HR aspects of the firm’s early international activities. Sales subsidiary: the HR role may involve staff selection (HCN or PCN), as well as expatriation management issues and activities. It may be that, at this point, the HR department becomes actively involved in the personnel aspects of the firm’s international operations, though there is little empirical evidence as to when and how HR-designated staff become involved. Foreign production/international division: the role of corporate HR staff is primarily concerned with expatriate management, though there will be some monitoring of the subsidiary’s HR function. As the firm expands its foreign production or service facilities into other countries, thus increasing the size of its foreign workforce, accompanied by a growth in the number of expatriates, more formal HR policies become necessary such as, for example, the design of appropriate policies, especially for compensation and pre-departure training for expatriate management. Foreign production/global product/area division: as part of the process of accommodating subsidiary concerns through decentralization, the MNE strives to adapt its HRM activities to each host country’s specific requirements. Naturally, this impacts on the corporate HRM function. As there is an increasing devolution of responsibility for local employee decisions in each subsidiary, and with corporate HR staff performing a monitoring role, intervening in local affairs occurs less frequently. This HRM monitoring role reflects management’s desire for the central control of strategic planning, i.e. formulating, implementing, and coordinating strategies for its worldwide markets. Furthermore, growth in foreign exposure, combined with changes in the organizational structure of international operations, results in an increase in the number of employees needed to oversee activities between the parent firm and its foreign affiliates. Within the human resource function, the development of managers able to operate in international environments generally becomes a new imperative. What are the specific HRM challenges in a networked firm? This question is best answered via information found in ‘Beyond the matrix’ (pp. 6568). Managing both the intra-organizational and inter-organizational spheres, and the total integrated network, is crucial to global corporate performance. It involves what has been termed a “less-hierarchical structure”, featuring five dimensions: Delegation of decision-making authority to appropriate units and levels. Geographical dispersal of key functions across units in different countries. Delayering of organizational levels. De-bureaucratization of formal procedures. Differentiation of work, responsibility, and authority across the networked subsidiaries. A firm that is maturing into a networked organization (firm specificity) requires IHRM approaches and activities that will assist its ability to develop a flexible global organization that is centrally integrated and coordinated, yet locally responsive, i.e. a geocentric approach (p. 119). Country of origin can strongly influence a firm’s approach to organization structure. As MNEs from China and India internationalize, to what extent are they likely to differ from Japanese, European and US MNEs? This question addresses material found in ‘Different countries take different paths’ (pp. 68-70). European firms tend to move directly from a functional “mother-daughter” structure to a global structure with worldwide product or area divisions, or to a matrix organization without the transitional stage of an international division. It may be that there is a preference for matrix-type structures within European firms, particularly Nordic MNEs. U.S. firms have featured in a number of experiments with the matrix structure. Japanese firms have tended to progress from export divisions to international divisions, although at a slower pace than their US counterparts, in a ‘Greenfield’ approach. Chinese firms, with so-called Chinese bamboo network/family traits, are characterized by tight family control. The incremental approach involves moving into neighboring East and South East Asia before expanding into North America. Indian MNEs, as with Chinese MNEs, are difficult to assess, as there is a relative paucity of information regarding their internationalization. References: For deeper knowledge about the organizational context see: Bartlett, C. and Beamish, P. (2011). Transnational Management: Text, Cases and Readings in Cross-border Management, 6th edn, Boston, MA: McGraw-Hill/Irwin. Chapter 4: IHRM IN CROSSBORDER MERGERS AND ACQUISITIONS, INTERNATIONAL ALLIANCES, AND SMEs Learning objectives In this chapter we first concentrate on cross-border alliances, with a special emphasis on equity-based alliances. These alliances are given priority here due to their association with complex IHRM processes and practices, which are the main interest of study within this volume. Equity cross-border alliances include: • Mergers and acquisitions (M&As) and • International joint ventures (IJVs). At the end of the chapter we address the special case of globalizing small and medium-sized enterprises (SMEs) while looking for attendant IHRM responses. SMEs represent important elements in the world economy; however, in IHRM research they are often neglected. There is evidence that their approaches to international human resource management differ to a large extent from those of large MNEs, which is why we cover this topic in the present chapter. In summary, the learning objective of this chapter is that students become acquainted with the implications that international mergers and acquisitions, joint ventures, and the context of SMEs have for international human resource management. Chapters 2, 3 and 4 complement each other and are designed to deliver insights into the most important organizational contexts for international human resource management. Chapter summary In this chapter we extend the discussion conducted in Chapter 3 about the organizational context of MNEs to other organizational forms which pose specific problems to IHRM, i.e. cross-border alliances and globalizing SMEs. Cross-border M&As have seen tremendous growth in the course of globalization. We describe their formation process as well as four important development phases: the pre-M&A phase, due diligence phase, integration planning phase, and implementation phase. In each of the phases specific strategic HR requirements need to be taken into account in order to manage the M&A process effectively. The role of expatriates is mainly discussed with respect to learning effects. A comparative approach to HR in M&As indicates the complexity that emerges from the institutional and cultural environments in which the firms are embedded. The number of IJVs has increased significantly over the last few decades. In this chapter we outline the IJV formation process, which poses considerable challenges for the HR function. Four stages are identified for the development of IJVs (formation, development, implementation, advancement and beyond) that require specific HR measures and roles. We also address the importance of cross-cultural management in IJVs, which is an essential factor for effective cooperation across all levels of the IJV, including the top management team. Both types of equity-based cross-border alliances are very similar, as they involve strategic, comparative, and cross-cultural HRM issues as well as specified expatriate roles. The third organization form we address is the case of the internationalized SME. In this case, different challenges are identified. First we outline the strategic importance of SMEs in international business and examine barriers to SME internationalization. We also address important IHRM features distinguishing SMEs from MNEs: the founder/owner of the SME; recruitment, selection and retention; human resource development, with a special emphasis on learning; expatriate management; and the limited resources of the HR department in SMEs and outsourcing opportunities. Links to other chapters: In Chapter 3, we outlined how the international growth of MNEs places demands on management. In this chapter, the IHRM implications of other modes of international operations become our center of interest. Consequently, we move from an internal perspective on structure, control mechanisms, and managerial responses to a global perspective which includes external partners. Discussion Questions Describe the formation process of cross-border mergers, acquisitions, and international joint ventures. What are the major differences? This question addresses material in ‘Cross-border mergers and acquisitions’ (pp. 8690) and ‘International equity joint ventures’ (pp. 93-95). Note that this question addresses “formation processes” as opposed to “development phases”. The two aspects are treated separately in the text. A merger is the result of an agreement between two companies to join together their operations. Partners are often equals. An acquisition, on the other hand, occurs when one company buys another company with the intention of controlling the activities of the combined operations. Cross-border mergers and acquisitions (M&As) are defined as a ‘[...] partial or full takeover or the merging of capital, assets and liabilities of existing enterprises in a country by TNCs from other countries. M&As usually involve the purchase of existing assets and companies’ (p. 88). International joint ventures (IJVs) are defined, in line with Shenkar and Zeira, as ‘[a] separate legal organizational entity representing the partial holdings of two or more parent firms, in which the headquarters of at least one is located outside the country of operation of the joint venture. This entity is subject to the joint control of its parent firms, each of which is economically and legally independent of the other’ (p. 93). In contrast to M&As, the parent companies of an IJV keep their legal identity, and an additional new legal entity representing the IJV is established. The differences between the two can be seen when comparing the two definitions: In an M&A process, task integration and human integration need to take place. Preexisting cultures must be effectively integrated, and interdependencies between acquired and acquiring units must be managed. In an IJV, a new organizational entity is created, and the focus is on the compatibility of the respective partners, as well as managing the mutual learning processes between the parent companies and the new joint venture entity. Figures 4.2 and 4.5 provide a useful comparison of these differences. Describe the development phases of an M&A and the respective HR implications. This question addresses material found in ‘M&A phases and HR implications’ (pp. 9091). The M&A process usually consists of the following four steps: Pre-M&A phase: includes the screening of alternative partners based on an analysis of their strengths and weaknesses. Due diligence phase: focuses more extensively on analyzing the potential benefits of the merger. Here, product-market combinations, tax regulations, and also compatibility with respect to HR and cultural issues are of interest. Integration planning phase: based on the results of the due diligence phase, planning for the new company. Implementation phase: plans are put into action. The HR department becomes increasingly involved in the phases of M&A integration as the process evolves. Figure 4.4 (p. 91) provides further details on HR best practices in the various M&A process phases. Outline the development phases of an IJV and the respective HR implications. This question addresses material found in ‘IJV development stages and HRM implications’ (p. 95). Schuler distinguishes four stages: the formation, in which the partnership between the parent companies is the center of interest, the development and implementation of the joint venture itself, and the advancement of activities. Mutual learning opportunities between the parent companies are especially important from the beginning of the JV process, as they encompass all HR function activities, including recruitment, selection, training and development, performance management, and compensation. Within the different stages of IJV formation, the HR manager may take on many roles: partnership role, change facilitator and strategy implementer, innovator, and collaborator. In which way do cultural and institutional differences affect HR integration in M&As and in IJVs? For M&As, this question is addressed in ‘A comparative approach to HRM in M&A processes’ (p. 93). HRM policy characteristics for different countries: Performance-related pay: more popular in the USA than in Japan or Germany. Recruitment: tends to be rather short-term in the USA compared to Germany, France, and the UK. In Japan the lifetime orientation is now less prevalent, but there is still a longer-term focus than in the other countries. Training and career planning: most extensive in the USA. Results of a case study by Child et al.: American HRM: short-term, individualistic national business culture. Japanese HRM: long-term, consensual, team-based, collectivist national philosophies. French HRM: still tend to display an ethnocentric approach. German HRM: most anxious to adopt international practices in their acquisitions, even when these conflict with traditional practices. For IJVs, this question is addressed in ‘The importance of cross‐cultural management in international joint ventures’ (p. 96). The text notes that the primary areas of impact are related to collaboration, decisionmaking, and loyalty. The Beijing Lufthansa Centre Co. case example (p. 97) is provided as an illustration. What are the barriers to internationalization for SMEs? This question addresses material covered on pp. 96-100 in ‘SMEs: Strategic importance and barriers to internationalization.’ The text lists the top ten barriers to accessing international markets, as identified in an OECD survey (p.99): Shortage of working capital to finance exports. Identifying foreign business opportunities. Limited information to locate/analyze markets. Inability to contact potential overseas customers. Obtaining reliable foreign representation. Lack of managerial time to deal with internationalization. Inadequate quantity of and/or untrained personnel for internationalization. Difficulty in managing competitors’ prices. Lack of home government assistance/incentives. Excessive transportation/insurance costs. What are some of the typical challenges for HRM in internationalized SMEs? This question is addressed in some detail on pp. 100-103 in ‘IHRM features in SMEs.’ Key challenges include: The importance of the SME’s founder/owner: managers’ “experiential market knowledge” leads to an internalization process in geographically and culturally close markets—owners/founders with international work experience, established personal networks and relationships abroad, the necessary skills to conduct international business, and a more positive perception of the international environment are more likely to internationalize their business. Staff recruitment/selection/retention: small firms have more difficulties than large firms in recruiting adequate international managers. SMEs are often the second choice if less qualified employees do not meet the recruitment requirements of large organizations. SMEs often look for generalist knowledge; internationalizing SMEs should rethink their selection criteria and define a set of international competencies. SMEs should also consider, for example, improving the training opportunities and career paths of their key employees, as well as the importance of financial benefits. Learning challenges: HRM should encourage staff in boundary spanning positions (i.e. at the external interface of the SME) to pay attention to aspects relevant to internationalization decisions. This involves improving the capacity for perceiving relevant environmental developments; for example, a training program could include strategy and communication seminars. However, employees must be motivated to report and share their observations regularly and systematically, which requires good communication within the company. Training is often perceived as an “unaffordable luxury” in SMEs. Expatriate management: the internal recruitment of employees for international jobs is an important problem. In terms of expatriate training, the most important activities are language courses, while cross-cultural training only plays a minor role. The cultural integration of foreign acquisitions remains a challenge for most SMEs. Limited resources of the HR department and outsourcing: in terms of financial and human capital as well as time, it is important that HR activities are left to line managers who are not experienced in HR. Professional employer organizations are possible providers of HR-related services Outsourcing as a valuable strategy to cope with the size-related deficiencies of HRM in SMEs. References: Stahl, G. and Mendenhall, M. 2005. Mergers and Acquisitions. Managing Cultures and Human Resources. Stanford, CA: Stanford Business Books.
Chapter 5: SOURCING HUMAN RESOURCES FOR GLOBAL MARKETS—STAFFING, RECRUITMENT, AND SELECTION Learning objectives Chapters 2, 3 and 4 concentrated on the global environment and organization contexts. We now focus on the ‘managing people’ aspect. The aim of this approach is to establish the role of HRM in sustaining international business operations and growth. Students should first become acquainted with the following foundations: Issues relating to the various approaches to staffing foreign operations. The reasons for using international assignments: position filling, management development, and organizational development. The various types of international assignments: short-term, extended and longerterm, as well as nonstandard arrangements: commuter, rotator, contractual, virtual, and self-initiated assignments. The role of expatriates and non-expatriates in supporting international business activities. Next, students must learn about recruitment and selection issues, focusing especially on: The debate surrounding expatriate failure as a starting point. Selection criteria and procedures for international assignments. Gender in international HRM: dual careers and the female expatriate. Chapter summary This chapter expands on the role of staffing, recruitment, and selection in international operations in order to sustain international business operations. The following issues are discussed: We outline the various approaches to staffing international operations— ethnocentric, polycentric, geocentric, and regiocentric—and discuss their advantages and disadvantages. In addition, we present a model of delineating factors that may determine the choice of these options: context specificities, MNE characteristics, features of the local unit, and IHRM practices. Primary reasons for using international assignments include position filling, management development, and organization development. There are indicators that the importance of management development is increasing. Various types of international assignments can be distinguished, namely short, extended, and long-term (traditional), as well as nonstandard forms such as commuter, rotational, contractual, virtual, and self-initiated assignments. All are presented and include implications for the MNE as well as for the individual. Expatriate roles are complex—they can act as an agent for direct control, as an agent for socialization, as a network builder, a boundary spanner, and as a language node. These various expatriate roles help to explain why they are utilized and illustrate why international assignments continue to be an important aspect of international business from the organization’s perspective. We place emphasis on the fact that non-expatriates are also critical to international business operations. International business travelers present their own challenges, such as the effect of frequent absences on family and home life, possible negative health effects, and other stress factors. The management of such individuals, though, does not appear to fall within the domain of the HR department. Another important development in IHRM is the role of inpatriates, a group of employees which only differs by definition from the expatriate group because it includes only those employees who are sent to the headquarters from foreign locations, and not those who are assigned by the headquarters. Links to other chapters and cases: This chapter links to the preceding chapters of the book, as it is necessary to consider strategic reflections (Chapter 1), the cultural environment (Chapter 2), and the organizational environment (Chapters 3 and 4) when discussing the issues of staff recruitment and selection. It provides the basic consideration for Chapter 6 (international performance management), Chapter 7 (international training and development), and Chapter 8 (international compensation). This chapter can be taught together with Case 4. In the context of Case 4, the choice between ethnocentric, polycentric, regiocentric, and geocentric basic orientations and various approaches to staffing can be discussed using the practical example of Bosch’s activities in Kazakhstan. When focusing on selection, Case 2 provides a good basis for applying the content of this chapter to a practical example. Discussion Questions Outline the main characteristics of the four approaches to international staffing. This question addresses material found in ‘Approaches to staffing’ (pp. 114-117). The four approaches are: Ethnocentric: few foreign subsidiaries have any autonomy, strategic decisions are made at headquarters, key positions in domestic and foreign operations are held by managers from headquarters, and subsidiaries are managed by staff from the home country (PCNs). Polycentric: each subsidiary is treated as a distinct national entity with some decisionmaking autonomy. Subsidiaries are usually managed by local nationals (HCNs), who are seldom promoted to positions at headquarters, and PCNs are rarely transferred to foreign subsidiary operations. Geocentric: the MNE takes a global approach to its operations, recognizing that each part (subsidiaries and headquarters) makes a unique contribution through its unique competence. It is accompanied by a worldwide integrated business, and nationality it is less important than ability. Regiocentric: this approach reflects the geographic strategy and structure of the MNE. Like the geocentric approach, it utilizes a wider pool of managers, but in a limited way. Staff may move outside their home countries, but only within a particular geographic region. Regional managers may not be promoted to headquarters positions, but they do enjoy a degree of regional autonomy in decision-making. For example, a US-based MNE could create three regions: Europe, the Americas, and Asia-Pacific. Which factors determine the choice of staffing approach? Would a MNE choose the same staffing approach worldwide? Place your arguments in the context of the model, outlining determinants of staffing choices. This question addresses material found in ‘Determinants of staffing choices’ (pp. 118120). Figure 5.1 (p. 119) outlines the four determinants of staffing choices in an internationalizing firm: Context specificities: cultural values may differ considerably between headquarters and the host country context (e.g. a cultural similarity between the parent country and subsidiary country as a moderator in the relationship between MNE strategy and subsidiary staffing; MNEs tend to staff culturally distant subsidiaries with PCNs)  Positive effect on labor productivity. The institutional environment includes, for example, the legal environment and the education system. The latter may be directly linked to staff availability on the local labor market. The type of industry in which the firm is active may have an impact as well. Company specificities: the most relevant variables are MNE structure and strategy, international experience, corporate governance, and organizational culture. Local unit specificities: an important factor here is the establishment method of the subsidiary, i.e. whether it is a Greenfield investment, a merger, an acquisition, or a shared partnership. Furthermore, the strategic role of a subsidiary, its strategic importance for the MNE as a whole, and the related questions of the need for control and the locus of decision-making can influence staffing decisions. IHRM practices: selection, training and development, compensation, and career management (including expatriation and repatriation) play an important role in the development of effective policies required to sustain a preferred staffing approach. These factors influence staffing practices and are interdependent. If a company pursues the same staffing approach worldwide, it means that context and local unit specificities are neglected, i.e. this could be an ethnocentric approach. What are the reasons for using international assignments? The text ‘Reasons for international assignments’ (p. 121) details three key reasons: Position filling Management development Organization development What is the role of inpatriates? Do inpatriates guarantee a geocentric staffing policy? This question addresses material covered on pp. 127-128 in ‘The role of inpatriates.’ Inpatriates are the result of international assignments of HCNs or TCNs from a foreign location to the parent country (usually the corporate headquarters) of the MNE. They are expected to share their local contextual knowledge with HQ staff in order to facilitate effective corporate activities in these local markets. At the same time they are socialized into the HQ corporate culture and learn firm-specific routines and behaviors that enable them to master future management tasks within the organization. As a result, inpatriates seem to act both as knowledge senders and receivers. In the case of existing career opportunities for inpatriate HCNs or TCNs within headquarters and across the wider organization, inpatriation can be an important step in realizing a geocentric orientation within the MNE and thus an “open sky” (i.e. where career success is not dependent on an employee’s nationality) for HCN and TCN managers. As a newly-appointed Project Manager of a research team, you believe that you will be able to manage the project virtually from your office in London, even though the other six members are located in Munich. This will solve your personal dilemma, as your family does not want to be relocated. The project has a six-month deadline. What factors should you consider in order to make this virtual assignment effective? This question addresses material found in ‘Types of international assignments’ (pp. 121-123). Factors to be considered are: Good skills in communication technologies Visits to the host country Keeping in sight disadvantages (e.g. role conflict, dual allegiance, identification issues, potential cultural misunderstandings, and geographic distances that rule out normal group interaction) Time management of virtual vs. “real” work Should multinationals be concerned about expatriate failure? If so, why? The text addresses this issue on pp. 131-133 in ‘Expatriate failure and success.’ While expatriate failure is often overestimated in publications, MNEs should nevertheless be concerned about it, because this is an ongoing challenge that is associated with both direct and indirect costs. Direct costs include airfares and associated relocation expenses, as well as salary and training. The “invisible” or indirect costs are harder to quantify in monetary terms, but they can prove to be more expensive for firms. Failure to address these costs may result in loss of market share, difficulties with host-government officials, and demands that expatriates be replaced with HCNs (affecting the MNC’s general staffing approach). The possible effect on local staff is that morale and productivity could suffer. What are the most important factors involved in the selection decision? This question is best answered with reference to the text in ‘Selection criteria’ (p. 133). Factors such as technical ability, cross‐cultural suitability, family requirements, MNE requirements, language, and country/cultural requirements are all relevant and are illustrated in Figure 5.3. References: Beechler, S. and Woodward, I.C. 2009. ‘The Global ‘War for Talent,’ Journal of International Management, Vol. 15, No. 3 (2009), pp. 273-285. Caligiuri, P., Tarique, I., and Jacobs, R. 2009. ‘Selection for International Assignments,’ Human Resource Management Review, Vol. 19, No. 3 (2009), pp. 251-262. Collings, D., Scullion, H., and Dowling, P. 2009. Global staffing: A review and thematic research agenda. International Journal of Human Resource Management, 20 (6): 1253-1272. Scullion, H. and Collings, D. 2010. Global Talent Management (London: Routledge, 2010).
Chapter 6: INTERNATIONAL PERFORMANCE MANAGEMENT Learning objectives The aim of this chapter is to draw together the relevant literature on performance management in the international context as it relates to IHRM. The focus is on the subsidiary context, reflecting historical bias towards subsidiary management in the international business and performance management literature, although the focus is broadening. The approach is to identify those aspects that require a substantial modification of traditional performance management practices (especially appraisal criteria, the roles of various actors in the processes, and the processes themselves) that are imposed by international operations. Students learn especially about the following aspects: Multinational performance management at the global and local level: considering aspects such as non-comparable data, the volatility of the global environment, the effect of distance, and the level of subsidiary maturity. Performance management as part of an MNE’s control system. Factors associated with expatriate performance, including compensation package, task and role, headquarters support, host environment factors, and cultural adjustment. Performance management of expatriates and non-expatriates, and for those on nonstandard tasks and assignments such as commuter and virtual work. Issues related to the performance appraisal of international employees. Chapter summary Technical competence is a necessary but insufficient condition for successful international performance. Cross-cultural interpersonal skills, sensitivity to foreign norms and values, and ease of adaptation to unfamiliar environments are just a few of the managerial characteristics most multinationals seek when selecting international managers. The added challenge is the effective management and appraisal of performance across all of the MNE’s operations. In this chapter we explore: The basic components of a performance management system that is conscious of and responds to organizational, national, and international elements. Multinational performance aspects: whole (global) versus part (subsidiary), noncomparable data, the volatility of the global environment, the effect of distance, and the level of maturity. Performance management as a control mechanism is briefly discussed. Factors associated with expatriate performance: the compensation package, task and role, level of headquarters support, host-environment factors, and cultural adjustment. The performance management of non-expatriates and those on nonstandard assignments. We use the virtual assignment as an illustration of some of the aspects that need to be considered in these nontraditional assignment types. Issues relating to the performance appraisal of international employees. Appraisal of HCN managers and employees in subsidiary operations. Broadening out the discussion to the multinational level, and addressing performance management and appraisal concerns related to non-expatriates and those on nonstandard assignments, has been useful in reminding us that there are many dimensions to international business operations that need to be considered when designing an effective performance management system in the multinational context. Links to other chapters Performance management has a central function within HRM practices, as it may have major effects on training, career, and compensation decisions. Therefore, the link to Chapters 7 and 8 should not be neglected. Discussion Questions In the section on the volatility of the global environment, several world events are listed that have had profound implications for the global and local strategies of MNEs. Select a recent world event, identify the specific HR implications that may arise from this, and then devise policies as to how these may be handled. The question addresses one of the five named constraints that must be taken into account when considering foreign subsidiary performance, namely the impact of major events on international business. This issue is addressed on p. 158. One major event is the Arab Spring political disturbances in 2011. Increasingly erratic tectonic and weather events such as the Japanese tsunami in 2011, flooding in Europe and India in the winter of 2011-2012 and the hurricanes on the east coast of the U.S. in 2012 can impact what makes up realistic performance expectations and goals. Student responses to this question could include support for the creation of flexible and tailored long‐term goals in order to respond to specific situations found in foreign markets, as well as involving regional and subsidiary managers in strategic HR planning processes. This question can be used to address any current events and to discuss their impact on HRM to raise the students’ awareness of contextual issues. Discuss the major factors associated with appraising expatriate managerial performance. This question refers to material covered on pp. 160-165 and is discussed in detail in the text ‘Expatriate performance management.’ Figure 6.3 (p. 161) lists five factors related to expatriate performance: Compensation package: important for motivation and commitment. Task performance: various tasks include chief executive officer, structure reproducer, troubleshooter, and operative. These different tasks can be linked to four types of assignment (technical, developmental, strategic, and functional). Furthermore, role clarity and job similarity (abroad vs. domestically) may have an impact on the performance of an expatriate. Level of HQ support that is provided to the individual and the family. Host environment: the type of operation is important (wholly owned subsidiary vs. IJV) as well as the stage of international business. Cultural adjustment—self and family: difficulties in adjustment impact on performance and are often the cause of expatriate “failure”. In summary, expatriate performance management is much more complex than performance management on a national level, as more influence factors need to be considered in an international environment. One of the dangers of performance appraisal is that, because the focus is so much on a particular individual, the teamwork aspect is lost. In an international location, it is perhaps desirable to focus more on how the PCN has settled in and is operating as part of a team, rather than as an individual. This question requires students to take a position and then argue in support of it via theory and factual material. Implementation may pose difficulties, as with middle and upper managerial levels the issue of who carries out the performance appraisal is of some importance. The teamwork aspect may be more important for subsidiary chief executive officers (or senior managers), who typically are appraised by their immediate superiors. They work in countries geographically distant, yet they are evaluated by superiors back at headquarters who are not in a position to see on a day-to-day basis how the expatriate performs in the particular situation. Here, an evaluation by the team would be more fruitful—it really is a question about who conducts the PA. The problem in some cultures can be the cultural feedback mechanism, where bottom-up feedback is not common. Why is it important to include hard, soft, and contextual goals when assessing managerial performance? Material for this section is found in ‘Performance criteria’ (pp. 168-169). An appraisal system that uses hard, soft, and contextual criteria builds upon the strengths of each while minimizing their disadvantages. A detailed discussion can be found in the text. In what ways would the role of a manager working in a nonstandard international assignment arrangement differ from that of a typical expatriate manager? Material for this question can be drawn from pp. 166-167, ‘Performance management of non‐expatriates.’ An illustration of a virtual assignment proposes some aspects that need to be considered in nontraditional assignment types. Points of difference concerning the role could include: performance criteria and goals, feedback mechanisms, employee expectations (reward-performance-link), and the impact of non-standard assignments on HCNs. References: Cascio, W. (2006) ‘Global Performance Management Systems’, in G. Stahl and I. Björkman (eds), Handbook of Research in International Human Resource Management, Cheltenham: Edward Elgar, pp. 176-196. Engle, A., Dowling, P. and Festing, M. (2008) ‘State of Origin: Research in Global Performance Management, a Proposed Research Domain and Emerging Implications’, European Journal of International Management, 2 (2): 153-169. Festing, M., Knappert, L., Dowling, P.J., and Engle, A.D. (2012). Global Performance Management in MNEs—Conceptualization and Profiles of Country-Specific Characteristics in China, Germany, and the USA. Thunderbird International Business Review, 54, (6), 825-843. Instructor Manual for International Human Resource Management Peter J Dowling, Marion Festing , Allen D. Engle 9781408032091