INTERNATIONAL HUMAN
RESOURCE MANAGEMENT
Staffing Approach
June 11, 2008 1
HRM and the Organizational Context (1)
HRM activities determine, and are also
influenced by organizational considerations:
• The organization’s level of internationalization
• Internationalization strategy in foreign markets
• Control and coordination requirements
• Strategic importance of foreign operations in
relation to the organization’s overall
profitability
June 11, 2008 2
HRM and the Organizational Context (2)
Ideally, HRM considerations should play a
key role in an organization’s decision to
internationalize itself, rather than a market-
driven strategy, which is usually followed
HRM constraints and factors may have a
significant impact on an organization’s
internationalization strategy
June 11, 2008 3
Managing and Staffing Approaches in the
International Context (1)
The HRM literature identifies the following four managing and
staffing approaches, which are also indicative of top management
attitude:
• Ethnocentric Approach – High level of control exerted by the
parent organization / corporate headquarters over foreign
subsidiaries. Key positions in the subsidiaries are managed by
expatriates from the parent country (i.e. PCNs)
• Polycentric Approach – Subsidiaries are treated as distinct
national entities with a certain level of decision-making
autonomy. They are usually managed by local nationals (i.e.
HCNs). These are seldom promoted to positions at corporate
headquarters and, likewise, PCNs are rarely transferred to
foreign subsidiaries
June 11, 2008 4
Managing and Staffing Approaches in the
International Context (2)
• Geocentric Approach – Global perspective resulting in
there being no discrimination of PCNs, HCNs and TCNs,
who, depending on capability and performance, are given
the opportunity to work in key positions anywhere (parent
organization, subsidiaries) in the organization
• Regiocentric Approach – Considered a precursory step in
the direction of geocentricism. Managers may be
transferred freely within a particular geographic region.
These may enjoy a considerable level of autonomy in
decision-making but are usually not transferred to the
parent organization
June 11, 2008 5
Organizational Typologies (1)
Bartlett and Ghoshal identify the following types of
corporate organizational modals:
• Multinational Modal – Characterized by
decentralization of many of the organization’s key
assets, responsibilities and decisions. Management
regards overseas operations as a portfolio of
independent businesses. For example, Siemens has
many different lines of business around the world,
but it is not really consolidated into one whole, and
each country of operation is autonomous. Bayer,
ADP and Levi also fit into this category
June 11, 2008 6
Organizational Typologies (2)
• Global Modal – It has a central hub where most of
the strategic assets, resources and decisions are
centralized. The management views overseas
operations as a pipeline to a global marketplace.
Examples include British Airlines, Deutsche Bank
and NCR
• International Modal - Sits midway between the
decentralized and centralized models. Many of the
key assets, responsibilities and decisions are
decentralized, but controlled from headquarters.
Management regards overseas operations as
appendages to a central, domestic corporation.
Johnson & Johnson fits this description
June 11, 2008 7
Organizational Typologies (3)
• Transnational Modal – It's a distributed network with
distributed resources and capabilities. The
management oversees a complex process of
coordination and cooperation in an environment of
shared decision-making. It has distributed control.
This kind of corporation can have very small
corporate headquarters
Hewlett-Packard and Cendant are examples of
transnational corporations
June 11, 2008 8
The Internationalization Process
• Organizations have several options available for
expanding their operations into foreign markets
• The option pursued by the organization depends on
a host of factors, for example, its size, available its
resources (including human resources), strategy,
confidence and environmental contingencies
• Linked to the internationalization of organizations
are the need for effective and efficient coordination
and control mechanisms and, among other things,
appropriate HRM policies
June 11, 2008 9
HRM and „Soft“ Modes of Internationalization
by Organizations (1)
Typical „soft“ modes of internationalization include:
Licensing – A business arrangement in which the
manufacturer of a product (or a firm with proprietary
rights over certain technology, trademarks, etc.) grants
permission to some other group or individual to
manufacture that product (or make use of that proprietary
material) in return for specified royalties or other
payment. Often does not involve a heavy committment of
human resources
Management Contracts – Involve the transfer of
experienced managerial and technical staff to another
organization for a fee and for a specified period of time.
Management contracts usually involves training the
organization‘s employees
June 11, 2008 10
HRM and „Soft“ Modes of Internationalization
by Organizations (2)
Alliances – A collaboration between organizations under
which their resources are pooled, exchanged or
integrated for mutual benefit. The committment of human
resources depends on the level of inter-organizational
interaction
Projects and Joint Ventures – Potentially considerable
challenges on the human resource management function
due to the usually close and sustained inter-
organizational interaction which is necessary for such
collaborative vventures, and the consequent varying
management styles and philosophies, work ethics and
cultures
June 11, 2008 11
The HRM Function in the Context of
Internationalization (Export)
• By and large, little implications for HR policies for
manufacturing organizations unless their export
sales reach a “critical level”
HCN Intermediary Export Manager
Export Department
(local knowledge) (PCN)
• Service-based industries would establish a branch
office or go into a joint venture with a local partner
as the nature of their business (i.e. provision of
services) would necessitate this
June 11, 2008 12
The HRM Function in the Export Context (1)
Managing Director
Production Finance Marketing / Sales HR
Manager Manager Manager Manager
Domestic Export
Sales Sales
June 11, 2008 13
The HRM Function in the Export Context (2)
Managing Director
Production Finance Export HR
Manager Manager Manager Manager
Sales
Exports
Subsidiary
PCNs
HCNs
Firms would tend to replace sales agents and distributors in foreign
markets with their own sales subsidiaries or branch offices for any
several reasons: Problems with foreign agents and distributors, more
confidence in self-handling international sales activities, the desire for
more control and because of increasing importance which exporting
activity has on the success of the organization
June 11, 2008 14
HRM in the Context of Internationalization
(Foreign Production)
There may be several reasons for a firm desiring to establish
production facilities overseas, for example:
• Cheaper production and transportation costs
• Host government investment incentives and import restrictions
• Maintaining markets
Means of establishing production facilities overseas include
setting up a facility independently, entering into joint ventures or
acquiring local companies. Usually, going international means
creating an international division at corporate headquarters
At this (initial) stage of internationalization, some organizations
will usually make extensive use of PCNs, others will use HCNs to
capitalize on local conditions or satisfy local regulations
June 11, 2008 15
Challenge of Internationalization for Organizations:
Centralization versus Decentralization
Need for national responsiveness: Need for more centralization:
Differences in market structures Multinational Customers
Distribution channels Global Competitors
Customer needs Economies of Scale
Local culture Flow of Information
Host Government pressures
Pressure for Pressure for
Decentralization Centralization
June 11, 2008 16
The HRM Function in the Context of
Internationalization (International Division)
Managing Director
Production Marketing Finance Human Resources
Staff
Domestic Domestic selection
International
Division Division Expatriates
Division
(Product A) (Product B)
Exporting Subsidiary Subsidiary
Departing Country A Country B
Production Marketing Finance Human Resources
June 11, 2008 17
The HRM Function in the Context of
Internationalization (Global Product Division)
Chief Executive Officer
Global Product Human
Production Marketing Finance
Division Resources
Product Product Product Product
A B C D
Europe Americas Asia-Pacific
Pakistan
Marketing Human Resources
June 11, 2008 18
The HRM Function in the Context of
Internationalization (Global Area Division)
Chief Executive Officer
Human
Production Marketing Finance
Resources
Asia-
Europe Americas
Pacific
Pakistan
Marketing Human Resources
Product A Product B Product C Product D
June 11, 2008 19
The HRM Function in the Context of
Internationalization (Matrix)
Chief Executive Officer
Human
Production Marketing Finance
Resources
Vice-President Vice-President
Global Products International
Asia-
Europe Americas
Pacific
Product A
Human
Product B Resources
Pakistan
June 11, 2008 20
The HRM Function in the Context of
Internationalization (Network Structures)
The Heterarchy – An organization has different “centers” in
different locations, for example, R&D activities are
concentrated in one center, training in another. It places
considerable demands on the human resource function
management (experienced personnel, incentive packages to
motivate and control employee performance, promotion of
awareness of common corporate goals)
The Transnational – Characterized by interdependence of
resources and responsibilities across subsidiaries and
business units resulting in large flows of information, people,
resources etc. Complex level of communication, cooperation
and coordination required along with strong corporate identity
and well-developed worldwide management perspective. Seeks
to achieve global integration while retaining localized flexibility.
Human resources need to be flexible, quickly transferable and
think across national and subsidiary boundaries
June 11, 2008 21
The HRM Function in the Context of
Internationalization (A Complex Network Structure)
Center
e.g. R&D
Subsidiary Subsidiary
Corporate
Headquarters
Center Subsidiary
(e.g. Training)
Subsidiary
June 11, 2008 22
Control Mechanisms in a Networked
Organizational Environment
Control Mechanisms
FORMAL INFORMAL
Structure
Reporting Systems
Budgets Personal Corporate
Performance Targets Relationships Culture
In networked organizational environments, there is a tendency to rely more on
Informal controls instead of formal controls that are usually prevalent in the
hierarchichal-type environments
June 11, 2008 23
Control and Coordination Issues for HRM in
International Networked Organizational Environments
In networked organizational environments, human resource
management has a crucial role to play, for example through:
• Contact facilitation for information and knowledge
diffusion
• Training and development for fostering informal
communication channels and building a corporate culture
• Assisting in creating personal networks amongst key
staff persons
• Staffing Decisions and Transfers
June 11, 2008 24
The “ideal” Organizational Structure?
There is no “ideal” structure for organizations which
are internationalizing. The determination of
organizational structure will depend on a plethora of
factors and considerations, such as:
• Size of the organization
• Management traditions and policies
• Circumstances prevailing in the host countries
Some organizations have experimented with different
organizational structures with a view to finding the
appropriate structure best suiting their requirements
June 11, 2008 25
