LEARNING OBJECTIVES

After studying this chapter, you should be able to:

1. Explain staffing decisions with a focus on expatriates

2. Identify training and development needs for expatriates and host

country nationals

3. Discuss compensation and performance appraisal issues

4. Understand labor relations in both home and host countries

5. Discuss how the institution- and resource-based views shed

additional light on HRM

6. Participate in three leading debates concerning HRM

7. Draw implications for action

STAFFING

human resource management (HRM) -

activities that attract, select, and manage employees
staffing - HRM activities associated with hiring
employees and filling positions
host country nationals (HCNs) - known as
“locals”
STAFFING
expatriates (expats) - Nonnative employees who
work in a foreign country

parent (home) country nationals (PCNs) -

employees who come from the parent country of the
multinational enterprise (MNE) and work at its local
subsidiary

third country nationals (TCNs) - employees

who come from neither the parent country nor the host
country
APPROACHES TO STAFFING
ethnocentric approach - emphasis on the norms
and practices of the parent company (and the parent
country of the MNE) by relying on PCNs
polycentric approach - emphasis on the norms
and practices of the host country
geocentric approach - focus on finding the most
suitable managers, who can be PCNs, HCNs, or TCNs
ROLES OF EXPATRIATES

strategists - representing interests of the MNE’s

headquarters
daily managers - run operations, to build local
capabilities and gain international management
experience
ambassadors - representing headquarter’s interests
in the subsidiaries and representing the interests of the
subsidiaries when interacting with headquarters
trainers - for their replacements
Expatriate Failure and Selection
(1) premature (earlier than expected) return
(2) unmet business objectives
(3) unfulfilled career development objectives

Using the relatively easy-to-observe measure of premature

return, studies in the 1980s reported that 76% of US MNEs
have more than 10% expatriates failures, and 41% and
24% of European and Japanese MNEs, respectively, have a
comparable number of failure cases
TRAINING EXPATRIATES
short stay - short and less rigorous - survival-level
language training (such as “Where is the ladies’ room?”
and “I’d like a beer”) suffice

long stay (several years) - imperative that longer

length and more rigorous training be provided, especially
for neophyte expatriates, entails more extensive
language training and sensitivity training, preferably with
an immersion approach (training conducted in a foreign
language/culture environment)

enlightened firms involve the spouse in expatriate

training
REPATRIATION
process of facilitating career anxiety experienced
by repatriates (returning expatriates)
psychological contract - informal understanding of
expected delivery of benefits in the future for current
services
repatriates also experience a loss of status, spouse and
children may also find it difficult to adjust back home
mentor - helps alleviate the “out-of-sight, out-of-mind”
feeling by ensuring that the expatriate is not forgotten at
headquarters and by helping secure a challenging position
for the expatriate upon return
TRAINNG AND DEVELOPMENT
FOR HOST COUNTRY NATIONALS

To stem the tide of turnover, many MNEs have formal

career development plans and processes for HCNs

Kodak, for example, strives for the “Four Greats”:

(1) great hires
(2) great moves (fast promotion)
(3) great assignments, and
(4) great feedback
PERFORMANCE APPRAISAL
performance appraisal - evaluation of employee
performance for promotion, retention, or termination
purposes
when expatriates evaluate HCNs, cultural differences
may create problems
expatriates need to be evaluated by their own
supervisors
in some cases, expatriates are the top manager in a
subsidiary (such as country manager), and their
supervisors are more senior executives based at
headquarters
many expatriates feel that they are not evaluated fairly
EXPATRIATE COMPENSATION
going rate approach - pay expatriates the going
rate for comparable positions in a host country
balance sheet approach - attempt to balance
the cost of living differences based on parent country
levels and adds a financial inducement to make the
package attractive
HOST COUNTRY NATIONAL
COMPENSATION
low-level HCNs - especially those in
developing countries, have relatively little
bargaining power; they have a job at the MNE
subsidiaries often because of their low labor cost
HCNs in management and
professional positions - have
increasing bargaining power; high-caliber HCNs,
because of their scarcity, will obtain more pay
LABOR RELATIONS AT HOME
firms’ key concern is to cut cost and enhance
competitiveness
labor unions’ declared interest is to help workers earn
higher wages and obtain more benefits through collective
bargaining
labor unions’ bargaining chip is the credible threat to
strike, slow down, refuse to work overtime, or some
other forms of disruption
managers’ bargaining chip lies in their threat to shut
down operations and move jobs overseas
unions are organized on a country-by-country basis
LABOR RELATIONS ABROAD
MNEs prefer to deal with nonunionized work forces

in many developing countries, governments welcome

MNEs and at the same time silence unions
INSTITUTIONS AND HRM
formal institutions - every country has rules, laws,
and regulations governing the do’s and don’ts of HRM
informal rules of the game - embodied in cultures,
norms, and values, also assert a powerful influence

HR and expatriate managers need to avoid

stereotyping and consider changes
RESOURCES AND HRM
VRIO dimensions

does a particular HR activity add value? Labor-intensive

chores, such as administering payroll, benefits, and basic
training, may not add value - they can be outsourced
the relentless drive to learn, share, and adopt “best
practices” may reduce their rarity and thus usefulness
it is relatively easy to imitate a single practice; it is
much more difficult to imitate a complex HR system
consisting of multiple, mutually reinforcing practices that
work together
do HR practices support organizational capabilities
to help the firm accomplish its performance goals? Too
little or too much diversity may hurt performance
BEST FIT vs. BEST PRACTICE
A firm needs to search for the best external and internal fit.
The quest for the best fit is continuous. The “best fit”
school argues: It depends.
The “best practice” school begs to differ. Proponents argue
that firms should adopt best practices irrespective of
context.
Critics of the “best practice” school make two points. First,
they point out that “there is overwhelming evidence
against a universal set of HR practices based on national
variations.” Second, they argue that from a resource-based
view, if all firms adopt universal “best practices,” such
practices lose their value.
EXPATRIATION vs. INPATRIATION
Addressing the expatriation problem, one solution is
inpatriation – relocating employees of a foreign
subsidiary to the MNE’s headquarters for the purposes of
(1) filling skill shortages at headquarters and (2)
developing a global mindset for such inpatriates.
Most inpatriates are expected to eventually return to their
home country to replace expatriates. Unfortunately, many
are ineffective.
Inpatriates, just like expatriates, have their fair share of
problems and headaches.
ACROSS-THE-BOARD PAY CUT
vs. REDUCTION IN FORCE
Reduction in force (RIF), a euphemism for mass layoffs, is
often used in the United States and United Kingdom.
However, outside the Anglo-American world, mass layoffs
are often viewed as unethical.
One alternative is for the entire firm to have an across-the-
board pay cut while preserving all current jobs.
Firms that implement across-the-board pay cuts have lost
numerous star performers who find “greener pastures”
elsewhere.
This raises serious concerns as to whether such large-scale
sacrifice is worth it, at least in an individualistic culture.