UNIT-1

International Human Resource Management (IHRM) can be defined as a set of activities targeting
human resource management at the international level. It strives to meet organizational objectives
and achieve competitive advantage over competitors at national and international level.

IHRM comprises of typical HRM functions such as recruitment, selection, training and
development, performance appraisal and dismissal done at the international level and additional
exercises such as global skills management, expatriate management and so on.
In short, IHRM is concerned with handling the human resources at Multinational Companies
(MNCs) and it includes managing three types of employees −
 Home country employees − Employees residing in the home country of the company where
the corporate head quarter is situated, for example, an Indian working in India for some
company whose headquarters are in India itself.
 Host country employees − Employees residing in the nation in which the subsidiary is
located, for example, an Indian working as an NRI in some foreign country.
 Third country employees − These are the employees who are not from home country or
host country but are employed at the additional or corporate headquarters.
For example, an Indian MNC, which has its corporate office in America, may employ a French
person as the CEO to the subsidiary. The Frenchman employed is a third country employee.

IHRM vs. HRM

There are many similarities between HRM at the national as well as international level. However, let
us have a look at the differences between them with the help of points given below −
 Domestic HRM takes place at the national level, that is, within a country and IHRM takes
place at the international level, that is, in between two or more than two countries.
 Domestic HRM is bothered about managing employees belonging to one nation and IHRM is
bothered about managing employees belonging the home country and host country as well as
third country employees.
 Domestic HRM is concerned with managing limited number of HRM activities at the
national level and IHRM is concerned with managing additional activities such as expatriate
management.
 Domestic HRM is less complicated due to less imprint from the external environment. IHRM
is comparatively more complicated, as it is deeply affected by the external factors such as
cultural distance and institutional factors.
We can conclude that both IHRM and HRM share some grounds of similarities as well as
dissimilarities, but both have their own importance. Further, they contribute to the development of a
country in a combined manner
Difference between Global or IHRM and Domestic HRM
Common activities between Domestic HRM and IHRM
 Expanding Role of HRM in International Firms

Managing human resources effectively in companies that do business globally requires cultural
awareness and the ability to respond quickly in dynamic environments. Human resource
professionals typically handle the recruiting, interviewing, hiring, training and developing of
employees that businesses need to achieve their business goals. They also establish the policies and
procedures designed to ensure a fair, safe and productive work facility. Managing individuals in
international settings requires motivating and inspiring employees to work collaboratively, even
when they don't reside in the same location

Providing Training

Human resource professionals maintain a productive environment by ensuring that employees have
the skills and knowledge to accomplish job tasks. They make arrangements for training courses
that enable employees to get the proper credentials for performing their function. This also ensures
that companies adhere to all government regulations. For example, all companies must be certain
that employees follow the standards for that assure a safe and healthy workplace setting. In Europe,
work councils composed of both employers and employees might mandate training not covered by
other trade union agreements.

Fostering Global Collaboration

As companies become more international, human resource professionals have become more
generalist. They tend to know less about day-to-day, internal operations and focus more on
ensuring personnel work effectively together as teams. They care about competitive advantage,
profitability and economic survival during tough financial times. Their role may have been
restricted to hiring employees, managing benefits and handling disciplinary action in the past, but
human resource professionals now deal with controlling health care costs, reducing employee
attrition and participating in the community, as well.

Working with Managers

Years ago, human resource professionals in traditional small business settings focused on
completing administrative tasks, such as recruiting and hiring personnel, often without input from
department managers. As companies become more global, human resource professionals act as
business partners to interview and orient new employees to the workplace. A complex business
operation typically requires specialized personnel, so human resource professionals must work
cooperatively with managers on the production lines.

Building Teams

Human resource professionals who support international business operations typically must to
ensure that diverse teams work well together. By conducting team-building workshops, promoting
acceptance of cultural diversity and motivating employees to achieve strategic goals, they help
their company build strong teams. By recognizing that in some countries individual recognition
plays a larger role than others, human resource professionals can create awareness about how
teams can function effectively across borders to maintain company profitability.
 Issues and challenges in IHRM

What makes international business strategy different from the domestic is the
differences in the business environment. The important special problems in international
business are given below:

1. Political and legal differences. The political and legal environment of foreign markets
are different from that of the domestic. The complexity generally increases as more
number of countries are included in the company’s business portfolio. It should also be
noted that the political and legal environment is not the same in all provinces of many
home markets. For instance, the political and legal environment is not exactly the same
in all the states of India.
2. Cultural differences. The cultural differences are one of the most difficult problems in
International business. Many domestic markets, however, are also not free from
cultural diversities.
3. Economic differences. The economic environment may change from country to
country.

4. Differences in the currency unit. The currency unit varies from nation to nation. This
may sometimes cause problems of currency convertibility, besides the problems of
exchange rate fluctuations. The monetary system and regulations may also vary.
5. Differences in the language. An international marketer often encounters problems
arising out of the differences in the language. Even when the same language is used in
different countries, the same words or terms may have different meanings or
connotations. The language problem, however, is not something peculiar to the
international business.
6. Differences in the business infrastructure. The availability and nature of the business
facilities available in different countries may vary widely. For example, an advertising
medium that is very effective in one market may not be available or may be
underdeveloped in another market.
7. Trade restrictions. Trade restrictions, particularly import controls, is a very important
problem which an international marketer faces.
8. High costs of distance. When the markets are far removed by distance, the transport
cost becomes high and the time required for effecting the delivery tends to become
longer. Distance tends to increase certain other costs also.
9. Differences in trade practices. Trade practices and customs may differ between
markets.
Emerging Challenges in International HRM

Beginning with the last decade of 20th century, globalisation, liberalisation and
technological advances have changed the way the business is being done across the world,
and India has not been exception to that. These three factors are still continuing to haunt
business organisations to align their strategies to the needs of fast changing environment.
Since HRM is the prime mover of human resources through which organisations have to
encounter threats posed by the environment, it is facing lot of challenges in managing people
effectively. In order to meet its basic objectives, HR personnel have to identify the nature of
these challenges and define their roles and responsibilities more sharply to counter these
challenges. HR challenges posed by the present dynamic environment may be broadly
classified into following four categories:

1. Mergers and acquisitions,

2. Changing workforce profile,
3. Newer organisational designs, and
4. Increasing quality consciousness.

These are the major categories of challenges, and within each category, there might be
several challenges that HR personnel have to face.

The following are some of the important factors which make international HRM
complex and challenging.

Labour Market Conditions

The skill levels, the demand and supply conditions and the behaviour characteristics of
labour vary widely between countries. While some countries experience human resource
shortage in certain sectors, many countries have abundance. In the past, developing countries
were regarded, generally, as pools of unskilled labour. Today, however, many developing
countries have abundance of skilled and scientific manpower as well as unskilled and
semiskilled labour. This changing trend is causing significant shift of location of business
activities. Hard disk drive manufacturers are reported to be shifting their production base
from Singapore to cheaper locations like Malaysia, Thailand and China.
 While in the past unskilled and semiskilled labour intensive activities tended to be
located in the developing countries, today sophisticated activities also find favour with
developing countries. The changing quality attributes of human resources in the developing
countries and wage differentials are causing a locational shift in business activities, resulting
in new trends in the global supply chain management. India is reported to be emerging as a
global R&D hub. India and several other developing countries are large sources of IT
personnel. In short, the labour changing labour market characteristics have been causing
global, restructuring of business processes and industries. And this causes a great challenge
for strategic HRM.
Cultural Differences

Cultural differences cause a great challenge to HRM. The behavioural attitude of

workers, the social environment, values, beliefs, outlooks, etc., are important factors, which
affect industrial relations, loyalty, productivity, etc. There are also significant differences in
aspects related to labour mobility. Cultural factors are very relevant in inter personal
behaviour also. In some countries it is common to address the boss Mr. so and so but in
countries like India addressing the boss by name would not be welcome. In countries like
India people attach great value to designations and hierarchical levels. This makes delaying
and organisational restructuring difficult.

Changing Political Environment

A firm operating in different countries is confronted with different environments with

respect to government policies and regulations regarding labour.

Attitude towards Employment

The attitude of employers and employees towards employment of people show great
variations among different nations. In some countries hire and fire is the common thing
whereas in a number of countries the ideal norm has been lifetime employment. In countries
like India workers generally felt that wile they have the right to change organisations as they
preferred, they had a right to lifetime employment in the organisation they were employed
with. In such situations it is very difficult to get rid of inefficient or surplus manpower. The
situation, however, is changing in many countries, including India.

Variance in Employment

Besides the tenancy of employment, there are several conditions of employment the
differences of which cause significant challenge to international HRM. The system of
rewards, promotion, incentives and motivation, system of labour welfare and social security,
etc., vary significantly between countries.
 Unit-2
Human and Cultural Variables in Global Organizations –

Culture: The Meaning, Characteristics, and Functions

Meaning of Culture:
Culture is used in a special sense in anthropology and sociology. It refers to the sum of human
beings’ life ways, their behaviour, beliefs, feelings, thought; it connotes everything that is acquired
by them as social beings.

Culture has been defined in number of ways. There is no consensus among sociologists and
anthropologists regarding the definition of culture. One of the most comprehensive definitions of the
term culture was provided by the British anthropologist Edward Tylor. He defined culture as ” that
complex whole which includes knowledge, belief, art, morals, law, custom and any other capabilities
and habits acquired by man as a member of society”.

There are some writers who add to this definitions some of the important” other capabilities and
habits” such as language and the techniques for making and using tools. Culture consists of all
learned, normative behaviour patterns – that is all shared ways or patterns of thinking and feeling as
well as doing.

It is, Cooley, Argell and Car say,

“The entire accumulation of artificial objects, conditions, tools, techniques, ideas, symbols and
behaviour patterns peculiar to a group of people, possessing a certain consistency of its own, and
capable of transmission from one generation to another.”

According to E.A. Hoebel,

“Culture is the sum total of integrated learned behaviour patterns which are characteristics of the
members of a society and which are therefore not the result of biological inheritance.”

According to H.T. Mazumadar,

“culture is the sum total of human achievements, material as well as non-material, capable of
transmission, sociologically, i.e., by tradition and communication, vertically as well as horizontally”.

Characteristics of Culture:
From various definition, we can deduce the following characteristics:
1. Learned Behaviour:
Not all behaviour is learned, but most of it is learned; combing one’s hair, standing in line, telling
jokes, criticising the President and going to the movie, all constitute behaviours which had to be
learned.

Sometimes the terms conscious learning and unconscious learning are used to distinguish the
learning. For example, the ways in which a small child learns to handle a tyrannical father or a
rejecting mother often affect the ways in which that child, ten or fifteen years later, handles his
relationships with other people.

Some behaviour is obvious. People can be seen going to football games, eating with forks, or driving
automobiles. Such behaviour is called “overt” behaviour. Other behaviour is less visible. Such
activities as planning tomorrow’s work (or) feeling hatred for an enemy, are behaviours too. This sort
of behaviour, which is not openly visible to other people, is called Covert behaviour. Both may be, of
course, learned.

2. Culture is Abstract:
Culture exists in the minds or habits of the members of society. Culture is the shared ways of doing
and thinking. There are degrees of visibility of cultural behaviour, ranging from the regularised
activities of persons to their internal reasons for so doing. In other words, we cannot see culture as
such we can only see human behaviour. This behaviour occurs in regular, patterned fashion and it is
called culture.

3. Culture is a Pattern of Learned Behaviour:

The definition of culture indicated that the learned behaviour of people is patterned. Each person’s
behaviour often depends upon some particular behaviour of someone else. The point is that, as a
general rule, behaviours are somewhat integrated or organized with related behaviours of other
persons.

4. Culture is the Products of Behaviour:

Culture learnings are the products of behaviour. As the person behaves, there occur changes in him.
He acquires the ability to swim, to feel hatred toward someone, or to sympathize with someone. They
have grown out of his previous behaviours.

In both ways, then, human behaviour is the result of behaviour. The experience of other people are
impressed on one as he grows up, and also many of his traits and abilities have grown out of his own
past behaviours.

5. Culture includes Attitudes, Values Knowledge:

There is widespread error in the thinking of many people who tend to regard the ideas, attitudes, and
notions which they have as “their own”. It is easy to overestimate the uniqueness of one’s own
attitudes and ideas. When there is agreement with other people it is largely unnoticed, but when there
is a disagreement or difference one is usually conscious of it. Your differences however, may also be
cultural. For example, suppose you are a Catholic and the other person a Protestant.

6. Culture also includes Material Objects:

Man’s behaviour results in creating objects. Men were behaving when they made these things. To
make these objects required numerous and various skills which human beings gradually built up
through the ages. Man has invented something else and so on. Occasionally one encounters the view
that man does not really “make” steel or a battleship. All these things first existed in a “state nature”.

Man merely modified their form, changed them from a state in which they were to the state in which
he now uses them. The chair was first a tree which man surely did not make. But the chair is more
than trees and the jet airplane is more than iron ore and so forth.

7. Culture is shared by the Members of Society:

The patterns of learned behaviour and the results of behaviour are possessed not by one or a few
person, but usually by a large proportion. Thus, many millions of persons share such behaviour
patterns as Christianity, the use of automobiles, or the English language.

Persons may share some part of a culture unequally. For example, as Americans do the Christian
religion. To some persons Christianity is the all important, predominating idea in life. To others it is
less preoccupying/important, and to still others it is of marginal significance only.

Sometimes the people share different aspects of culture. For example, among the Christians, there are
– Catholic and Protestant, liberal or conservation, as clergymen or as laymen. The point to our
discussion is not that culture or any part of it is shred identically, but that it is shared by the members
of society to a sufficient extent.

8. Culture is Super-organic:
Culture is sometimes called super organic. It implies that “culture” is somehow superior to “nature”.
The word super-organic is useful when it implies that what may be quite a different phenomenon
from a cultural point of view.

For example, a tree means different things to the botanist who studies it, the old woman who uses it
for shade in the late summer afternoon, the farmer who picks its fruit, the motorist who collides with
it and the young lovers who carve their initials in its trunk. The same physical objects and physical
characteristics, in other words, may constitute a variety of quite different cultural objects and cultural
characteristics.
9. Culture is Pervasive:
Culture is pervasive it touches every aspect of life. The pervasiveness of culture is manifest in two
ways. First, culture provides an unquestioned context within which individual action and response
take place. Not only emotional action but relational actions are governed by cultural norms. Second,
culture pervades social activities and institutions.

According to Ruth Benedict, “A culture, like an individual is a more or less consistent pattern of
thought and action. With each culture there come into being characteristic purposes not necessarily
shared by other types of society. In obedience to these purposes, each person further consolidates its
experience and in proportion to the urgency of these drives the heterogeneous items of behaviour;
take more and more congruous shape”.

10. Culture is a way of Life:

Culture means simply the “way of life” of a people or their “design for living.” Kluckhohn and Kelly
define it in his sense, ” A culture is a historically derived system of explicit and implicit designs for
living, which tends to be shared by all or specially designed members of a group.”

Explicit culture refers to similarities in word and action which can be directly observed. For example,
the adolescent cultural behaviour can be generalized from regularities in dress, mannerism and
conversation. Implicit culture exists in abstract forms which are not quite obvious.

11. Culture is a human Product:

Culture is not a force, operating by itself and independent of the human actors. There is an
unconscious tendency to defy culture, to endow it with life and treat it as a thing. Culture is a creation
of society in interaction and depends for its existence upon the continuance of society.

In a strict sense, therefore, culture does not ‘do’ anything on its own. It does not cause the individual
to act in a particular way, nor does it ‘make’ the normal individual into a maladjusted one. Culture, in
short, is a human product; it is not independently endowed with life.

12. Culture is Idealistic:

Culture embodies the ideas and norms of a group. It is sum-total of the ideal patterns and norms of
behaviour of a group. Culture consists of the intellectual, artistic and social ideals and institutions
which the members of the society profess and to which they strive to confirm.

13. Culture is transmitted among members of Society:

The cultural ways are learned by persons from persons. Many of them are “handed down” by one’s
elders, by parents, teachers, and others [of a somewhat older generation]. Other cultural behaviours
are “handed up” to elders. Some of the transmission of culture is among contemporaries.
For example, the styles of dress, political views, and the use of recent labour saving devices. One
does not acquire a behaviour pattern spontaneously. He learns it. That means that someone teaches
him and he learns. Much of the learning process both for the teacher and the learner is quite
unconscious, unintentional, or accidental.

14. Culture is Continually Changing:

There is one fundamental and inescapable attribute (special quality) of culture, the fact of unending
change. Some societies at sometimes change slowly, and hence in comparison to other societies seem
not to be changing at all. But they are changing, even though not obviously so.

15. Culture is Variable:

Culture varies from society to society, group to group. Hence, we say culture of India or England.
Further culture varies from group to group within the same society. There are subcultures within a
culture. Cluster of patterns which are both related to general culture of the society and yet
distinguishable from it are called subcultures.

16. Culture is an integrated system:

Culture possesses an order and system. Its various parts are integrated with each other and any new
element which is introduced is also integrated.

17. Language is the Chief Vehicle of Culture:

Man lives not only in the present but also in the past and future. He is able to do this because he
possesses language which transmits to him what was learned in the past and enables him to transmit
the accumulated wisdom to the next generation. A specialised language pattern serves as a common
bond to the members of a particular group or subculture. Although culture is transmitted in a variety
of ways, language is one of the most important vehicles for perpetuating cultural patterns.

To conclude culture is everything which is socially learned and shared by the members of a society.
It is culture that, in the wide focus of the world, distinguishes individual from individual, group from
group and society.

Functions of Culture:
Among all groups of people we find widely shared beliefs, norms, values and preferences. Since
culture seems to be universal human phenomenon, it occurs naturally to wonder whether culture
corresponds to any universal human needs. This curiosity raises the question of the functions of
culture. Social scientists have discussed various functions of culture. Culture has certain functions for
both individual and society.

Following are some of the important functions of culture:

1. Culture Defines Situations:
Each culture has many subtle cues which define each situation. It reveals whether one should prepare
to fight, run, laugh or make love. For example, suppose someone approaches you with right hand
outstretched at waist level. What does this mean? That he wishes to shake hands in friendly greeting
is perfectly obvious – obvious, that is to anyone familiar with our culture.

But in another place or time the outstretched hand might mean hostility or warning. One does not
know what to do in a situation until he has defined the situation. Each society has its insults and
fighting words. The cues (hints) which define situations appear in infinite variety. A person who
moves from one society into another will spend many years misreading the cues. For example,
laughing at the wrong places.

2. Culture defines Attitudes, Values and Goals:

Each person learns in his culture what is good, true, and beautiful. Attitudes, values and goals are
defined by the culture. While the individual normally learns them as unconsciously as he learns the
language. Attitude are tendencies to feel and act in certain ways. Values are measures of goodness or
desirability, for example, we value private property, (representative) Government and many other
things and experience.

Goals are those attainments which our values define as worthy, (e.g.) winning the race, gaining the
affections of a particular girl, or becoming president of the firm. By approving certain goals and
ridiculing others, the culture channels individual ambitions. In these ways culture determines the
goals of life.

3. Culture defines Myths, Legends, and the Supernatural:

Myths and legends are important part of every culture. They may inspire, reinforce effort and
sacrifice and bring comfort in bereavement. Whether they are true is sociologically unimportant.
Ghosts are real to people who believe in them and who act upon this belief. We cannot understand
the behaviour of any group without knowing something of the myths, legends, and supernatural
beliefs they hold. Myths and legends are powerful forces in a group’s behaviour.

Culture also provides the individual with a ready-made view of the universe. The nature of divine
power and the important moral issues are defined by the culture. The individual does not have to
select, but is trained in a Christian, Buddhist, Hindu, Muslim or some other religious tradition. This
tradition gives answers for the major (things imponderable) of life, and fortuities the individual to
meet life’s crises.

4. Culture provides Behaviour Patterns:

The individual need not go through painful trial and error learning to know what foods can be eaten
(without poisoning himself), or how to live among people without fear. He finds a ready-made set of
patterns awaiting him which he needs only to learn and follow. The culture maps out the path to
matrimony. The individual does not have to wonder how one secures a mate; he knows the procedure
defined by his culture.

If men use culture to advance their purposes, it seems clear also that a culture imposes limits on
human and activities. The need for order calls forth another function of culture that of so directing
behaviour that disorderly behaviour is restricted and orderly behaviour is promoted. A society
without rules or norms to define right and wrong behaviour would be very much like a heavily
travelled street without traffic signs or any understood rules for meeting and passing vehicles. Chaos
would be the result in either case.

Social order cannot rest on the assumption that men will spontaneously behave in ways conducive to
social harmony.

Cultural variables

The national cultural system is composed of diverse variables including language, religion, rules and
regulations, political system, social organization, history, economy, technology, education, values,
attitudes, customs, traditions, concept of time, music, art, and architecture, for instance.
Notwithstanding, in this chapter, a few of these variables are being studied in order to compare and
contrast the national cultural systems of the three countries under study.

Religion

Religion plays the role of a foundation stone in every aspect of human life . With regard to the role of
religion in one’s professional life, Weber suggests that, for example, the Protestants work ethic
promotes hard working, saving money, and managing time well and therefore, leisure activities
(going to bar, nightclubs, gambling) are not well seen Furthermore, working is seen as a way to
receive God’s blessing and mercy and therefore, working is viewed as the most important obligation
in one’s life Work is believed to contribute to the overall well-being of the individual and society
around . The influence of religion is also found in building positive attitude toward work,
organizational commitment, and job quality. Protestantism emphasizes hard work, individual
achievement, and a sense that people can control their environment . Similarly, the religion of Islam
places great importance on the role of work and working in one’s life. Time should not be wasted and
planning is important to achieve good results. Islamic messages and guidance vehemently support
contributing to the development of the world. In Islam, work is given special importance to the extent
that it is considered as an act of worship itself . Therefore, Islam lays a lot of emphasis on work and
the need for man to work in earning his livelihood so as to be independent, self-sufficient, and in
order to uphold his dignity among his peers and in his community/society. Employees have to fulfill
their jobs for the societal obligation with the purpose to seek pleasure of Allah. Muslim must perform
his duty as a religious obligation, and motivational reward is not only linked with earthly reward but
also awarded in the hereafter . Employees must adhere to diligence and efficiency as well as fairness
in preserving public interest. Religion is a system of common beliefs or attitudes concerning a being
or a system of thought that people consider sacred, divine, or the highest truth. Religion also
incorporates the moral codes, values, institutions, traditions, and rituals associated with this system.
Religion influences culture and therefore business and consumer behavior, in various ways .

Social organization
Social organization is another key element of nation cultural system. Different cultures have different
social systems or system to organize the society around family systems, neighborhood, ethnic
groupings, and tribal systems for instances [33]. The social organization is also about how these
variables (of social organizations within each cultural system) are defined and interpreted. For
example, family may include your immediate or direct relatives including your wife/husband and
children (which is also called a nuclear family system) in one culture; and your wife/husband,
children, parents, uncles, cousins, etc., are in other cultures (which is considered extended or
traditional family system). Whether nuclear or extended, the family is a social group characterized by
common residence, economic cooperation, and reproduction . Social organizations as a national
cultural component also include aspects of ethnicities, classification based on economics, family
trees, distribution of roles and responsibilities among gender (male and female), and social
hierarchies so and so forth .

Language

The role of language as a national cultural component is undebatable in the field of international
business and management. It is not only important for business or management communication but
also and most importantly, it shows the insight of a culture. Learning the language of the host has
both verbal (words) and nonverbal (facial expressions and gestures) characteristics. Languages are
also classified as high and low context . The low-context language-speakers focus on the words,
message, and the content when communicating, whereas the high-context language-speakers focus
more on the context, surroundings, and how the words are communicated. The low-context language-
speakers tend to depend on the clarity of the message, written documents, preciseness, and
information-rich document. As a result, speakers must rely more heavily on providing greater
message clarity, as well as other guarantees like written documents and information-rich advertising.
High-context communicators generally look for long-term personal relationships, mutual trust, and
personal prestige . In high-context communication, the message cannot be understood without a great
deal of background information. Low-context communication spells out more of the information
explicitly in the message . In low-context cultures, context is less important; most information is
explicitly spelled out . The role of language is fundamental for conversations, establishing and
managing interpersonal affairs, managing organizations beyond the national borders, and leading
multinational agreements and relationships . Our histories, traditions, knowledge are preserved and
disseminated through language. Language and linguistic structures are culture-centered which means
while the culture supplies the meaning and meaning-making mechanisms, language in itself provides
the symbols to support the delivery of such meanings to the intended audience or target . In nutshell,
language reflects the culture in that it presents ideas, thoughts, and artifacts and is a channel of
sharing information, knowledge, values, experiences, and thoughts .

. Time concept

This element of the national cultural system describes that how individuals in a particular cultural
group approach to manage time. Time concept includes feeling, perception, and use of time. Either
the nature or individuals control time. Time is money and thus can be wasted and invested. In
cultures where time is perceived as controllable factor, people tend to be punctual, agenda-oriented,
and monochromic. Business practices such as schedules, planning, appointments for meetings, and
taking responsibility for late delivery of products and services are parts and parcels of the corporate
management culture. In cultures where time is considered as something to do with the nature or
environment, people tend to be less punctual and polychromic . In essence, the way people perceive
the time factor will influence the way individuals control their time. In monochromic time-oriented
cultures, individual employees establish goals and plan accordingly in order to increase job
performance and job satisfaction. Time management influences every aspect of an individual’s life
including work life, family life, social and private life .

Cross Cultural Differences

As enterprise operations continue to be globalized through overseas expansions, joint ventures,

mergers and acquisitions as well as strategic relationships and partnerships transnational
organizations need to give attention to issues of culture in human resource management practices as a
panacea for prosperity. The global organization is competent if only it is able to bridge the gap
between management and culture so that personal relationships with other peoples in the organization
and society become in harmony. This is critical because cultural relativity and reality in organizations
influence operations. The study was designed to explore possible relationships between cultural
dimensions and global human resource management. The survey research design was employed and
data generated through primary and secondary sources. The participants comprised of 385
respondents from a cross-section of the population in Nigeria. By Chi-Square test, it was found that
culture has a significant positive relationship with global human resource management.
1. INTRODUCTION
Perhaps nothing is more crucial for the global business enterprise than the issues of culture
and how to effectively manage the people who work in the organization. The hiring and treatment of
employees in global organizations often seem so bound up in culture, rules, regulations, and red tape
that effective management is frequently extremely difficult.
Attempts to find solutions to such difficulties provide justification for the current interest in
the areas of global human resource management and culture. In management circles, interest in
culture is an attempt to grasp the realities of collective life in the workplace that cannot be easily seen
and described by means of such identifiers as job titles, organizational charts, among other elements.
In recent years, culture has been especially critical in explaining the differences in
management practices in different countries of the world. Management is always the same: getting
the people of the organization to make things happen in a productive way so that the organization
prospers and the people thrive. It is also believed that human resource management is the basis of all
management activity, but it is not the basis of all business activity.
Managing resourceful humans requires a constant balancing between meeting the human
aspirations of the people and meeting the strategic needs of the business. The human aspirations of
people can vary wildly from country to country and from culture to culture, as the case may be.
Human resource management signifies a distinctive philosophy towards carrying out people-oriented
organizational activities; one which is held to serve the modern business more effectively and
efficiently. Although plant, equipment and financial assets are resources required by organizations,
the people – the human resources – are particularly important. Human resources provide the creative
spark in any organization. People design and produce the goods and services, control quality, market
the products, allocate financial resources, and set overall strategies and objectives for the
organization.
Without effective people, it may be impossible for an organization to achieve its objectives.
Consequently, human resource management practices must take into cognizance the political,
cultural and economic dimensions in society so as to be very effective. In general, human resource
management is linked to a series of integrated decisions that form the employment relationship; their
quality directly contributes to the ability of the organization and the employees to achieve set
objectives (MILKOVICH; BOUDREAU, 1997).
Global human resource management involves the process of employing and developing
people in organizations which operate globally. It means working across national boundaries to
formulate and implement resourcing, development, career management and remuneration strategies,
policies and practices which can be applied to a global workforce.
This may include parent country nationals working for long periods as expatriates or on short
term assignments, local country nationals, or third country nationals who work for the global
organization in a local country but are not parent company nationals.
Sparrow and Hiltrop (1997) note that human resource management may be affected by
national culture in definition of what makes an effective manager, such as giving face-to-face
feedback, readiness to accept international assignments, expectations of management, subordinate
relationships, pay systems and differential concept of social justice as well as approaches to
organizational structuring and strategic dynamics.
These relate to the non material component and culture that involves invisible aspects which
cannot be physically seen or touched, rather it is manifested through people’s philosophy. Organizing
is culturally dependent; it consists of manipulating symbols that have meaning for the people who are
managed or organized; such meanings are associated with symbols which are heavily affected by
what was learnt in the course of socialization.
The lack of cross-cultural applicability of models in global human resource management has
spurred researches into worker motivation in different countries. Some of the studies reveal that
although needs often motivate employees, these needs may vary dramatically from one culture to
another culture.
The saliency of any one person’s needs is determined by his or her socialization in a given
culture and to have comparative advantage, global human resource management practices must be
flexible enough to adjust in line with management practices in the local environment (HOFSTEDE,
1980).
Torrington (1994) argues that global human resource management is in many ways simply
human resource management on a larger scale, more complex, more varied and involving more co-
ordination across national boundaries. He opines that certainly the same basic techniques of
recruitment and training may be used, but these have to be adapted to fit different cultures and local
requirements.
According to Perkins (1997) the intensity of global competition has led to organizational
forms that let go the traditional loose-tight options of geographical businesses for governance
patterns that have begun to recognize that reciprocity in relationships is the key to success, with an
emphasis on local partnering to combine large-scale global brand recognition and local components.
Torrington (1994) suggests that global human resource management is not just about coping
practices from other countries which will not necessarily translate culturally. Neither is it simply a
matter of learning the culture of every country and suitably modifying behaviour in each of them
which is an impossible ideal because of the robust and subtle nature of national cultures.
He hypothesizes that global human resource management is best defined by reference to 7c’s
characteristics of: cosmopolitan, culture, compensation, communication, consultancy, competence,
and co-ordination. He suggests that there are no universal prescriptions for global human resource
management and that his 7c’s are critical in effective global human resource management activities.
Earlier on, Hofstede (1980) in his classic work put forward four cultural dimensions namely:
power distance, uncertainty avoidance, individualism-collectivism and masculinity-femininity that
affect global operations. These characteristics and dimensions of culture almost conform to the
transnational model of global human resource management in which the organization develops multi-
dimensional strategic capabilities directed towards competing globally but also donates local
responsiveness to local requirements.

Comparative management literature continues to explore the question whether or not cultural
values significantly affect global managerial practices and the need for the cross-cultural manager to
remain sensitive to this possibility for three reasons. First, to avoid attributing a lack of motivation to
someone who is only differently motivated, second, so that the manager may use methods to
motivate subordinates that are consistent with their motives and structure appropriate reward
systems, and to help managers perform a self-diagnosis of their motive structure.
The issue of culture in management is so pervasive that researchers state “only by being
acutely aware of our own cultural biases can we become aware of others”. The assumption that the
cultural environment is a major factor for consideration in global human resource management
continues to receive great attention by management theorists.
Hofstede's cultural dimensions theory
Hofstede's cultural dimensions theory is a framework for cross-cultural communication, developed
by Geert Hofstede. It shows the effects of a society's culture on the values of its members, and how
these values relate to behaviour, using a structure derived from factor analysis.
Hofstede developed his original model as a result of using factor analysis to examine the results of a
worldwide survey of employee values by IBM between 1967 and 1973. It has been refined since. The
original theory proposed four dimensions along which cultural values could be
analyzed: individualism-collectivism; uncertainty avoidance; power distance (strength of social
hierarchy) and masculinity-femininity (task-orientation versus person-orientation). Independent
research in Hong Kong led Hofstede to add a fifth dimension, long-term orientation, to cover aspects
of values not discussed in the original paradigm. In 2010, Hofstede added a sixth dimension,
indulgence versus self-restraint.
Hofstede's work established a major research tradition in cross-cultural psychology and has also been
drawn upon by researchers and consultants in many fields relating to international business
and communication. The theory has been widely used in several fields as a paradigm for research,
particularly in cross-cultural psychology, international management, and cross-cultural
communication. It continues to be a major resource in cross-cultural fields. It has inspired a number
of other major cross-cultural studies of values, as well as research on other aspects of culture, such as
social beliefs.

History

In 1965 Hofstede founded the personnel research department of IBM Europe (which he managed
until 1971). Between 1967 and 1973, he executed a large survey study regarding national values
differences across the worldwide subsidiaries of this multinational corporation: he compared the
answers of 117,000 IBM matched employees samples on the same attitude survey in
different countries. He first focused his research on the 40 largest countries, and then extended it to
50 countries and 3 regions, "at that time probably the largest matched-sample cross-national database
available anywhere." The theory was one of the first quantifiable theories that could be used to
explain observed differences between cultures.

This initial analysis identified systematic differences in national cultures on four primary
dimensions: power distance (PDI), individualism (IDV), uncertainty avoidance (UAI) and
masculinity (MAS), which are described below. As Hofstede explains on his academic website, these
dimensions regard "four anthropological problem areas that different national societies handle
differently: ways of coping with inequality, ways of coping with uncertainty, the relationship of the
individual with her or his primary group, and the emotional implications of having been born as a girl
or as a boy". In 1984 he published Culture's Consequences, a book which combines the statistical
analysis from the survey research with his personal experiences.
In order to confirm the early results from the IBM study and to extend them to a variety of
populations, six subsequent cross-national studies were successfully conducted between 1990 and
2002. Covering between 14 and 28 countries each, the samples included commercial airline pilots,
students, civil service managers, 'up-market' consumers and 'elites'. The combined research
established value scores on the four dimensions for a total of 76 countries and regions.
In 1991 Michael Harris Bond and colleagues conducted a study among students in 23 countries,
using a survey instrument developed with Chinese employees and managers. The results from this
study led Hofstede to add a new fifth dimension to his model: long term orientation (LTO) initially
called Confucian dynamism. In 2010, the scores for this dimension were extended to 93 countries
thanks to the research of Michael Minkov who used the recent World Values Survey. Further
research has refined some of the original dimensions, and introduced the difference between country-
level and individual-level data in analysis.
Finally, Minkov's World Values Survey data analysis of 93 representative samples of national
populations also led Geert Hofstede to identify a sixth last dimension: indulgence versus restraint.

Differences between cultures on the values dimensions

Putting together national scores (from 1 for the lowest to 100 for the highest), Hofstede's six-
dimensions model allows international comparison between cultures, also called comparative
research:

 Power distance index shows very high scores for Latin American and Asian countries, African
areas and the Arab world. On the other hand, Germanic countries, including Anglophone
countries, have a lower power distance (only 11 for Austria and 18 for Denmark).
For example, the United States has a 40 on the cultural scale of Hofstede's analysis.
Compared to Guatemala where the power distance is very high (95) and Israel where it is
very low (13), the United States is in the middle.

 Germany scores a high UAI (65) and Belgium even more (94) compared to Sweden (29) or
Denmark (23) despite their geographic proximity. However, few countries have very low
UAI.
 Masculinity is extremely low in Nordic countries: Norway scores 8 and Sweden only 5. In
contrast, Masculinity is very high in Japan (95), and in European countries like Hungary,
Austria and Switzerland influenced by German culture. In the Anglo world, masculinity
scores are relatively high with 66 for the United Kingdom for example. Latin American
countries present contrasting scores: for example Venezuela has a 73-point score whereas
Chile's is only 28.
 High long-term orientation scores are typically found in East Asia, with China having 118,
Hong Kong 96 and Japan 88. They are moderate in Eastern and Western Europe, and low in
the Anglo countries, Africa and in Latin America. However, there is less data about this
dimension.
 There is even less data about the sixth dimension. Indulgence scores are highest in Latin
America, parts of Africa, the Anglo world and Nordic Europe; restraint is mostly found in
East Asia and Eastern Europe
 Managerial implications of Hofstede’s model

As the business world becomes more global, employees will likely face someone from another
country at some point in their careers, companies will negotiate with companies from other countries,
and even employees of domestic companies will likely encounter someone from another country.

Furthermore, trends suggest that immigration, the movement of people from their home country to
other countries, will continue to grow worldwide, a process that will contribute to making
companies’ workforces increasingly diverse. Additionally, many multinational companies rely on
expatriates to run their local operations. An expatriate is foreign employee who moves to and works
in another country for an extended period of time. All of these trends mean that during your career
you are likely to encounter someone from a different culture and that the potential for cross-cultural
tensions is high. It is therefore important for any international management student to understand
culture to better prepare for dealing with such tensions.

According to Geert Hofstede,5 a Dutch social psychologist, culture is “the collective programming
of the mind which distinguishes the member of one group or category of people from another.” It
tells people who they are, which behaviors are appropriate, and which are not acceptable in any
society. It affects almost everything we do, see, feel, and believe. In fact, if you have heard of the
“American dream,” where if one works hard, one can achieve one’s dream, you are aware of one
characteristic aspect of American culture.

Consider any aspect of your life, and it is likely influenced by your culture. The food you eat, the
clothes you wear, and even how you address your boss or teacher are influenced by your culture.
Societies develop cultural norms, values, and beliefs to assist their members in adapting to their
environments.

Why is an understanding of culture critical to a manager in a global environment? As you have

already seen, anyone from any country is likely to encounter someone from another country at the
workplace. Such interactions can result in misunderstanding or tensions if not properly managed.
Business magazines are full of examples of cross-cultural misunderstandings that have doomed
relationships and business. For another example, U.S. managers sent to Beijing, China, get frustrated
because they find that their hosts are more interested in socializing than concluding a deal.
Understanding Chinese culture would have prevented the latter misunderstanding because the U.S.
managers would understand that it is very important for Chinese companies to get to know who they
are working with before signing any deal. In this section, you will learn about one of the most
powerful tools for understanding cultural differences: Hofstede’s model of national culture.
(See Table 6.1)

Hofstede’s Model of National Culture

Power Uncertainty
Countries Distance Individualism Avoidance Masculinity

Adapted from Geert Hofstede, “Culture’s consequences: Comparing values, behaviors and
institutions across nations,” 2nd edition, 2001, Thousand Oaks, CA: Sage Publications.

Australia Low High Low High

 Hofstede’s Model of National Culture

Power Uncertainty
Countries Distance Individualism Avoidance Masculinity

Canada Low High Low High

China High Low Medium Medium

Germany Low High Medium High

Mexico High Medium High High

France High High High Low

Spain Medium Medium High Low

Greece Medium Medium High Medium

Denmark Low High Low Low

Finland Low High Medium Low

Brazil High Medium Medium Medium

India High Medium Low Medium

Japan Low Medium High High

U.K. Low High Low High

U.S.A. Low High Low High

Table6.1
Although there are several frameworks to understand cultural differences, one of the most powerful
is Hofstede’s model.6 Hofstede is a Dutch social scientist who developed his model by surveying
over 88,000 employees in IBM subsidiaries from 72 countries. Hofstede developed this cultural
model primarily on the basis of differences in values and beliefs regarding work goals. Hofstede’s
framework is especially useful because it provides important information about differences between
countries and how to manage such differences. Recent reviews of research have shown the utility of
Hofstede’s framework for a wide variety of managerial activities, such as change management,
conflict management, leadership, negotiation, and work-related attitudes. 7

Cultural Dimension 1: Power Distance

Hofstede’s original survey of the more than 88,000 employees of the 72 countries revealed four
major cultural dimensions. The first cultural dimension is power distance, the degree to which
members of a society accept differences in power and authority. In societies with high power
distance, people are more likely to accept that power inequality is good and acceptable. People in
high power distance societies are more likely to accept that there are some powerful people who are
in charge and that these people are entitled to special benefits. In contrast, societies with low power
distance tend to consider that all members are equal. Table 6.2 shows the levels of power distance
(and the other cultural dimensions discussed later) in 15 selected societies. Hofstede’s scores range
from 100 (the highest power distance) to 0 (the lowest). In the table, we break Hofstede’s scores into
high (70–100), medium (40–69), and low (0–39).

Implications of Power Distance

Type of Work
Activity High Power Distance Low Power Distance

Adapted from Geert Hofstede, “Culture’s consequences: Comparing values, behaviors and
institutions across nations,” 2nd edition, 2001, page 107-108, Thousand Oaks, CA: Sage
Publications.

 Very centralized
 Flat organizational
Organizational  Tall hierarchies with clear
hierarchies
structures levels of managers and
 Decentralized structures
subordinates

 Concentration of authority  Dispersed authority

at the top  Managers rely on personal
Managerial  Managers rely on formal experience
authority rules to manage  More consultative or
 Authoritative managerial collaborative forms of
style and decision making decision making

Relationship with  Subordinates expect to be  Subordinates often

supervisors told what to do expected to be consulted
 Perfect boss is seen as one  Ideal manager is seen as a
who is an autocrat democratic leader
 Implications of Power Distance

Type of Work
Activity High Power Distance Low Power Distance

 Information sharing  Openness to sharing

constrained by hierarchy information

 Wide salary gap between  Low salary gap between

top and bottom of top and bottom of
organization company
Other issues  Managers often feel  Managers feel paid
underpaid and dissatisfied adequately and are
with careers satisfied

Table6.2

As Table 6.1 shows, many of the emerging markets in regions such as Asia and Latin America, such
as India, Brazil, and Mexico, all have high power distance scores. In such countries, the concern for
hierarchy and inequality in organizations is rooted in early socialization in the family and school. In
these countries, children are expected to obey their parents and elders. When these children enter
school, teachers assume the dominant role. Children must show respect, and they seldom challenge a
teacher’s authority. As these individuals take on work roles, the allegiance to teachers is transferred
to bosses. Thus, people in high power distance societies will seldom question their supervisors. In
contrast, Anglo countries such as the United States, Canada, and the United Kingdom have low
power distance. In these countries, people do not expect power differences, and everyone is seen as
an equal.

Management Implications of Power Distance

What are the implications of power distance for international management? Table 6.2 shows some of
the key differences between high and low power distance societies for work-related issues. As you
can see, it is important for managers to express their authority and know-how in high power distance
societies. Subordinates expect clear directions from their managers and assume they will be told what
to do. In high power distance societies, employees will often equate age with wisdom and seniority.
For instance, if a multinational is sending people to negotiate in a high power distance country, they
should send higher-level and older managers if they want to be taken seriously.

Cultural Dimension 2: Individualism and Collectivism

The second cultural dimension we consider here is individualism/collectivism. Individualism refers

to the degree to which a society focuses on the relationship of the individual to the
group. Collectivism refers to the degree to which a society focuses on the relationship of the group
as a whole.

In societies with high individualism (or low collectivism) scores, individuals are valued for their
achievements and are rewarded and recognized for such achievements. In contrast, people who live
in societies with low individualism (high collectivism) are seen as being part of a wider group,
known as the in-group. The in-group includes the family, team, or social class, and how individuals
relate to such wider groups is seen as important to their success. In other words, people’s success is
gauged by how others in their groups view and support them.

Table 6.3 shows the levels of individualism in the same selected 15 nations. We again see similar
patterns whereby more Anglo cultures such as the U.S., Canada, and the U.K. have relatively high
levels of individualism. In contrast, Asian, Latin American, and many emerging countries tend to
have cultures that are either on the medium or low range of the individualism dimension. Table
6.3 shows some of the implications of individualism for management. The effects of most
management practices are determined by whether they are done at a group or individual level. For
example, in countries with low individualism, one will find that employees are hired and promoted
mostly on the basis of association with a larger group, such as a university or high school. In such
societies, emphasis is placed on loyalty, seniority, and age. To operate smoothly in such societies,
companies need to appreciate the importance of the larger social group. Additionally, as Table
6.3 also shows, care should be taken in terms of how rewards are distributed. Rewarding individual
team members in low individualism societies can result in tensions because the individual team
member may become stigmatized. In such cases, rewards done on a group level may work best.

Implications of Individualism

Type of Work High Individualism/Low

Activity Low Individualism/High Collectivism Collectivism

Adapted from Geert Hofstede, “Culture’s consequences: Comparing values, behaviors and
institutions across nations,” 2nd edition, 2001, page 169-170, Thousand Oaks, CA: Sage
Publications.

 Employees act in the interest of in-  Employees act in their

group (members of the family or own interests
Relationship same university)  Employee commitment
with  Employee commitment to to organizations high
companies company relatively low  Employee-employer
 Employee-employer relationships relationship based on
is almost like a family link the market

 Hiring and promotion takes in-

 Hiring and promotions
group into consideration
based on rules
 Better to reward based on equality
 Family relationships
(give everyone the same reward)
Human unimportant in hiring
rather than equity (base reward on
resource,  Better to reward based
work effort) Relatives of
management on equity
employees preferred in hiring
 Training done best
 Training best when focused at
individually
group level

Other issues  Belief in collective decisions  Belief in individual

 Treating friends better than others decision making
is normal  Treating friends better
 Support of teamwork than others at the
 Less mobility across occupations workplace is
considered unethical
 Implications of Individualism

Type of Work High Individualism/Low

Activity Low Individualism/High Collectivism Collectivism

 More mobility across

occupations within
company
 Personal relationships very critical
 Tasks and company
in business
prevail over personal
relationships in
business

Table6.3

Cultural Dimension 3: Uncertainty Avoidance

Hofstede’s third cultural dimension is uncertainty avoidance, the degree to which people in a
society are comfortable with risk, uncertainty, and unpredictable situations. People in high
uncertainty avoidance societies tend to want to avoid uncertainty and unpredictability. As a result,
work environments in such countries try to provide stability and certainty through clear rules and
instructions. In contrast, societies with low uncertainty avoidance are comfortable with risk, change,
and unpredictability. In these countries, risky and ambiguous situations are less likely to upset
people.

Table 6.4 shows details of the levels of uncertainty avoidance for the selected 15 countries. We see
that Anglo and Scandinavian countries have relatively lower uncertainty avoidance scores. In
contrast, many emerging markets (such as Brazil, Mexico, and China) have medium to high
uncertainty avoidance scores. Such findings suggest that companies should adapt their practices to
conform to the levels of uncertainty avoidance. In high uncertainty avoidance countries, for example,
managers are advised to provide structure and order to reduce uncertainty and ambiguity for
subordinates. Companies in these cultures have many written rules and procedures that tell
employees exactly what the organization expects of them. Additionally, managers should give clear
and explicit directions to their subordinates about exactly what is expected of them in performing
their jobs. By reducing any ambiguity, subordinates are less anxious.

In contrast, in low uncertainty avoidance countries, subordinates are much more comfortable and
ambiguity. Managers can therefore give more flexibility and freedom to employees. Design of
organizations also allows for fewer rules and regulations.
Table 6.4 provides more detail on the implications of uncertainty avoidance on several managerial
aspects.

Implications of Uncertainty Avoidance

Type of Work High Uncertainty

Activity Low Uncertainty Avoidance Avoidance

Based on Geert Hofstede, “Culture’s consequences: Comparing values, behaviors and institutions
across nations,” 2nd edition, 2001, page 169-170, Thousand Oaks, CA: Sage Publications.

 Strong loyalty to
 Weak loyalty to companies employing
 Average duration of organizations
Relationship with
employment shorter  Employment are long
companies  Preference for smaller term in duration
organizations  Preference for larger
companies

 Superiors pessimistic
 Superiors optimistic about
about subordinate
subordinate ambition and
ambition
leadership abilities
 Top managers often
 Top managers usually
involved in
Characteristics of involved in strategy
operations
supervisors/managers  Power of superiors based
 Power of superiors
on relationships and
based on control of
position
uncertainties
 Transformational leaders
 Hierarchical control
preferred
roles preferred

 Innovators feel
 Innovators feel less constrained by rules
constrained by rules  Rational
Entrepreneurship and  Renegade championing championing
innovation  Tolerance for ambiguity in  Formalized
procedures and structures management
 Innovation welcomed structures
 Innovation resisted

Table6.4
Cultural Dimension 4: Masculinity

The fourth and final dimension we consider is masculinity, the degree to which a society emphasizes
traditional masculine qualities such as advancement and earnings. In high masculinity societies, work
tends to be very important to people, gender roles are clear, and work takes priority over other
aspects of a person’s life, such as family and leisure. In addition, masculine societies emphasize
earnings and achievements, and employees tend to work very long hours and take very little vacation
time.

Table 6.5 shows the masculine scores for selected societies. As the table shows, Anglo cultures such
as the U.S. and Canada tend to have high masculinity. This is not surprising given that both the U.S.
and Canada tend to have some of the highest number of hours worked. In contrast, Latin European
countries such as France and Spain have much lower masculinity as reflected in the importance of
leisure in these societies. Scandinavian cultures also reflect low masculinity, a characteristic that is
consistent with the preference for quality of life in such countries. We also see that many of the
emerging nations have medium to high masculinity.

Table 6.5 provides some more insights into the implications of masculinity differences for work-
related issues. As you can see, companies in high masculinity societies can count on very work-
oriented employees. Multinationals are therefore advised to motivate their employees through pay
and security. In contrast, individuals in more feminine societies tend to prefer interesting work and
more leisure. Strong motivational policies in these societies emphasize a balance between work and
leisure, and multinationals in such societies tend to have stronger policies catering to both genders.

Implications of Masculinity

Type of Work
Activity High Masculinity Low Masculinity

Based on Geert Hofstede, “Culture’s consequences: Comparing values, behaviors and institutions
across nations,” 2nd edition, 2001, page 318, Thousand Oaks, CA: Sage Publications.

 Work in order to live

 Live in order to work  Preference for lower
Relationship  Preference for high pay number of work hours
with work  Workers look for security,  Workers look for better
pay and interesting work working conditions and
relationships in work

Managers’  Managers seen as cultural  Managers are employees

characteristics heroes like others
 Successful managers  Successful managers are
primarily exhibit male seen as possessing both
characteristics male and female
 Managers need to be characteristics
competitive, firm, aggressive,  Managers hold fairly
and decisive Managers are modest career ambition
very ambitious  More women in
 Fewer women in management
 Implications of Masculinity

Type of Work
Activity High Masculinity Low Masculinity

management  Managers less prepared to

 Managers prepared to move uproot family because of
family for career reasons career move

 Low salary gap between

top and bottom of
 Large pay gap between company [what about
genders Job applicants gender gap?]
oversell their abilities  Managers feel paid
 Absences due to sickness adequately and are
lower satisfied
Other issues  General preference for larger  Absences because of
companies sickness higher
 Conflicts are resolved  Preference for smaller
through fighting until the best organizations
“man” wins  Conflicts are resolved
through compromise and
negotiations

Human Resource Management(HRM) is a management function that helps Mangers

recruit, select, train and develop members for an organization. HRM is concerned with the
people’s dimension in organization. It focuses on people in organizations. HRM refers to a set
of Program’s, functions and activities designed and carried out in order to maximize both
employee as well as organizational effectiveness.

Human resource management encompasses those activities designed to provide,

motivate and coordinate a the human resources of an organization. Human resource
management is a modern term for what has traditionally been referred to as personnel
administration or personal management.

Human Resource Functions

Human resource functions refer to tasks performed in an organization to provide for

and coordinate human resources. Human resource functions are concerned with a variety of
activities that significantly influence almost all areas of an organization and aim at:
➢ Ensuring that the organization fulfils all of its equal employment opportunities and
other government obligations.

➢ Carrying out job analysis to establish the specific requirements for individual jobs
within an organization.

➢ Forecasting the human resource requirements necessary for the organization to achieve
its objectives-both in terms of number of employees and skills

➢ Developing and implementing a plan to meet these requirements.

 ➢ Recruiting and selecting personnel to fill specific jobs within an organization. ➢
Orienting and training employees.

➢ Designing and implementing management and organizational development

programmes.

➢ Designing systems for appraising the performance of individuals. ➢

Assisting employees in developing career plans.

In Global village, organizations have crossed the boundary of the country in terms of
their business operations. The success of a domestic business depends on its human resources,
so in the case with an international business. The type of people, the willingness with which
they work and the commitment they exhibit towards the organization determine the
competitive edge of an MNC in the international market. The international firm may have the
best of resources at its headquarters. The resources cannot be effectively utilized or
transferred to foreign affiliates without using the human power.

An international business must procure, motivate, retain, and effectively utilize

services of people both at the corporate office and at the foreign plants. The process of
procuring, allocation, and effectively utilizing human resources in an international business is
called international human resources management (IHRM).

IHRM is the interplay among the three dimensions - HR activities, types of

employees, and countries of operation

1. The three broad activities of IHRM, namely procurement, allocation and utilizing
cover all six activities of domestics HRM. The six functions of domestic HRM are HR
planning, employee hiring, training an development, remuneration, performance
management, and industrial relations. These six functions can be dovetailed with the
three broad activities of IHRM..

2. The three national or country categories involved in IHRM activities are - the host
country where a subsidiary may be located, the home country where the company has
its headquarters, and other countries that may be the source of labour or finance.

3. The three types of employees of an international business are host country nationals,
parent country nationals, and third country nationals. Thus, for example, IBM which
employs Australian citizens in its Australian operations, often sends US citizens to
Aisa Pacific countries on assignment, and may send some of its Singaporean
employees to its Japanese operations.
Domestic HRM and IHRM Compared

Several factors differentiate IHRM from domestic HRM. The main characteristics of
IHRM are.

1. More HR activities.
2. Need for a broader perspective.
3. More involvement in employee personal lives,
4. Changes in emphasis as the workforce mix of expatriates and local varies.
5. Risk exposure, and
6. More external influences.

More Human Resources Activities

The scope of IHRM is much broader than managing domestic HR activities. There are
issues connected with international taxation, international orientation and relocation,
administrative services for expatriates, host government regulations, and language translation
services.

Need for Broader Perspective

When compared to domestic HRM, IHRM requires a much broader perspective on

even the most common HR activities. For example, while dealing with pay issues, the
corporate HR manager must co-ordinate pay systems in different countries with different
currencies that may change in relative value to one another over time. While handling fringe
benefits too, complications tend to arise. It is a common practice in most countries to provide
health insurance to employees and their families. The family in some countries is understood
to include the employee’s spouse and children. In other countries, the term family may
encompass a more extended group of relative multiple spouses, aunts, uncles, grandparents,
nephews and nieces. It is a difficult task for an international business to deal with the different
definitions of family.

More Involvement in Employee’s Personal Lives

A greater degree of involvement in the employee’s personal lives is necessary for the
selection, training and effective management of both parent country and third country
nationals. The HR department needs to ensure that the expatriate employee understands
housing arrangements, health care, and all aspects of remuneration packages provided for
 the foreign assignment. Many international business maintain an “ International Human
Resource Service ” section that coordinate administration of the above programmes and
provides service for the parent country and third country nationals such as handling their
banking, investments, home rental while on assignment, coordinating home visits, and final
repatriation.

Involvement of the HR department in the personal lives of the employees is limited in

domestic HRM. The firm may, for example, provide employee insurance programme, or
when a transfer is involved, the HR department may provide some assistance in relocating the
employee and his or her family. But in the international setting, the HR department must
involve itself more and understand the personal lives of employees to provide the service and
support needed by them. For example, some governments ask to submit a marriage certificate
before granting visa to an accompanying spouse. Thus, marital status could become an
important consideration in the selection process. In such a situation, the HR department
should advises all candidates being considered for the positions of the host country’s visa
requirement with regard to marital status and allow each candidate to decide whether he or
she wishes to remain in the selection process. Apart from providing suitable housing and
schooling in the home country. These issues do not figure in domestic HR management.

Changes in Emphasis

As an international business matures, the emphasis placed on various HR activities

change. For example, as the need for parent company and third country nationals declines and
more trained locals become available, resources previously allocated to areas such as
expatriate taxation, relocation, and orientation are transferred to activities such as staff
selection, training, and management development. The later activity may require
establishment of a programme to bring high potential local staff to corporate headquarters for
development assignments. The need to enhance emphasis in HR activities, as a foreign
subsidiary matures, is clearly a factor that broadens the responsibilities of local HR activities.

Risk Exposure

Risk exposure is high in domestic HRM. Unfair hiring practice may result in a firm
being charged with the violation of the Constitutional provisions and be liable for penalties.
Failure to maintain cordial relations with unions may result in strikes and other forms of
labour unrest. In IHRM, these risks exit and in addition, there are other hazards that are
unique and more threatening. Depending on the countries where the MNC operates, the
headquarters and subsidiary HR managers may have to worry about the physical
 safety of the employees. In many countries Kidnapping and terrorism are common and the
international HR managers must learn to live with them. Terrorism poses a great risk to
international operations. Firms are, therefore, forced to speed 1 to 2 per cent of their revenues
on protection against terrorism. These are not the problems usually confronted by domestic
HR managers.

Besides these risks, it has been estimated that an average expatriate manager, with
family, costs an MNC nearly $ 2,50,000 (US) per year and that rates for American Expatriate
managers have ranges from 25 to 40 percent between 1965 and 1985. If managers do not
perform well and must be recalled to the home country, their failure represents huge financial
losses for the firms. The risks associated with the poor selection decisions are high.

Yet another risk is that of expropriation of seizure of MNC’s assets in a foreign

country. If HR policies antagonize the host country unions or important political groups, the
MNC may be asked to leave the country, have its assets seized, or find the local government
taking the majority control of its operations. This is not the sort of risk that most domestic HR
managers face.

External Influence

The IHRM activities are influenced by a greater number of external factors than are
domestic HRM functions. Because of the visibility that the international business tend to have
in host countries (particularly in developing countries) the subsidiary HR managers may have
to deal with ministers, political figures, and a greater variety of economic and social interest
groups than domestic HR managers would normally encounter. A host country government
can dictate hiring procedures as is the case in Malaysia. During the 1970s, the Malaysian
government introduced an injunction according to which foreign firms must comply with an
extensive set of affirmative action rules designed to provide additional employment
opportunities for the Malaysians.

In developed countries, labour is more expensive and better organized than in less
developed countries, and governments require compliance with guidelines on issues such as
labour relations, taxation, health and safety. These factor shape the activities of the subsidiary
manager considerably. The subsidiary HR manage also needs to spend time learning and
interpreting the local ways of doing business and the general code of conduct regarding
activities such as giving gift. It is also likely the that subsidiary HR manager will become
more involved in administering benefits such as housing, education and other facilities that
are readily available in the local country.
 Unit -3
International staffing and Compensation Practices

Managing International HR Activities:

Managing international HR activities is an elaborate and complex task. The basic steps
involved in international HR activities are

1. HR Planning
2. Recruitment and Selection
3. Training and Development
4. Performance Management
5. Remuneration
6. Repatriation
7. Employee Relations

HR Planning
HRP assumes greater relevance in international business where efficient use of human
resources is necessary to realize strategic global objectives. But the implementation of HRP
procedures may be difficult in some host countries than in others. In cultures where people
are viewed as being basically subjugated to nature, there is very little need for HRP. After all,
why plan when people are unable to determine what happens? The implementation of
extensive HRP systems in such cultures would be met with bewilderment at best and
significant resistance at worst. Likewise, societies that are oriented towards the present would
not view long term planning as valuable. In societies oriented towards the past, planning
would tend to focus on purely historical data and the use of these data in predicting future HR
needs.

Such an approach might be appropriate for firms that operate in relatively stable
environments, but would not work well for firms operating in highly volatile environments,
where the past has little to do with the future.

Six other key issues in international HRP are as follows:

1. Identifying top management potential early.

2. Identifying critical success factors for future international managers.
3. Providing developmental opportunities.
4. Tracking and maintaining commitment to individuals in international career paths.
5 Tying strategic business planning to HRP and vice versa
 6. Dealing with multiple business units while attempting to achieve globally and
regionally focused (e.g European or Asian) strategies.

The Importance of International Human Resources

Attracting the most qualified employees and matching them to the jobs for which they
:
are best suited is important for the success of any organization. For international
organizations, the selection and development of human resources is especially challenging
and vitally important. As prevalent and useful as e-mail and Web- and teleconferencing have
become, and despite the increasing incidence of subcontracting and outsourcing, face-to-face
human contact will remain an important means of communication and transferring “tacit”
knowledge —knowledge that cannot be formalized in manuals or written guidelines. Hence,
most companies continue to deploy human resources around the world as they are needed,
although the range of options for filling human resources needs is expanding.

Sources of Human Resources

MNCs can tap four basic sources for positions: (1) home-country nationals; (2) host-
country nationals; (3) third-country nationals; and (4) Inpatriates. In addition, many MNCs
are outsourcing aspects of their global operations and in so doing are engaging temporary or
contingent employees. The following sections analyze each of these major sources.

Home-Country nationals

Home-country nationals are managers who are citizens of the country where the
MNC is headquartered. In fact, sometimes the term headquarters nationals is used. These
managers commonly are called expatriates, or simply “expats,” which refers to those who
live and work outside their home country. Historically, MNCs have staffed key positions in
their foreign affiliates with home-country nationals or expatriates. Based on research in U.S.,
European, and Japanese firms, Rosalie Tung found that U.S. and European firms used home-
country nationals in less developed regions but preferred host-country nationals in developed
nations. The Japanese, however, made considerably more use of home-country personnel in
all geographic areas, especially at the middle- and upper-level ranks.

There are a variety of reasons for using home-country nationals. One of the most
common is to start up operations. Another is to provide technical expertise. A third is to help
the MNC maintain financial control over the operation.
 In the past, expatriates were almost always men, but over the last decade there has
been a growing number of female expatriates as companies realize that women want
international assignments and are prepared to assume the challenges that accompany these
jobs.

In recent years, there definitely has been a trend away from using home-country
nationals. This is true even among Japanese firms, which long preferred to employ expats and
were reluctant to allow local nationals a significant role in subsidiary management.

Beamish and Inkpen conducted an analysis of over 3,200 Japanese subsidiaries and
found that the percentage of expats in larger units has been declining steadily over the last
four decades. What has caused this? Four reasons for the declining use of Japanese expats
have been cited. First, as the number of Japanese subsidiaries worldwide has increased, it has
become more difficult to find the requisite number of qualified expats to handle these
assignments. Second, the growing number of effective local managers makes it no longer
necessary to rely as heavily on expats. Third, the high cost of keeping expats overseas is
having a strong negative effect on company profits. Fourth, Japanese human resource
management policies are changing, and the old “rice paper ceiling” that prevented non-
Japanese from being promoted into the upper management ranks of subsidiaries is now
beginning to disappear. This last development, in the United States in particular, is a result of
Japanese firms realizing that their American subsidiaries have not been able to compete
effectively. Japanese expat managers have been outflanked by their American counterparts. In
particular, Japanese managers have not known how to fine-tune products for the U.S. market;
did not understand how to tailor market approaches to different customer segments; and were
unable to develop the speed, flexibility, and responsiveness needed to compete with the
Americans.15 It is highly likely that MNCs from other countries besides Japan are also
following this trend of using local managers in lieu of expats.

Host-Country Nationals

Host-country nationals are local managers who are hired by the MNC. For a number
of reasons, many multinationals use host-country managers at the middle and lower-level
ranks: Many countries expect the MNC to hire local talent, and this is a good way to meet this
expectation. Also, even if an MNC wanted to staff all management positions with home-
country personnel, it would be unlikely to have this many available managers, and the cost of
transferring and maintaining them in the host country would be prohibitive.
 In European countries, home-country managers who are assigned to a foreign
subsidiary or affiliate often stay in this position for the remainder of their career. Europeans
are not transferred back to headquarters or to some other subsidiary, as is traditionally done by
U.S. firms. Another approach, the least common, is always to use a home-country manager to
run the operation.

U.S. firms tend to rely fairly heavily on host-country managers. Tung identified four
reasons that U.S. firms tend to use host-country managers: (1) These individuals are familiar
with the culture. (2) They know the language. (3) They are less expensive than home-country
personnel. (4) Hiring them is good public relations. European firms that use host-country
managers gave the two major reasons of familiarity with the culture and knowledge of the
language, whereas Japanese firms gave the reason that the host-country national was the best-
qualified individual for the job.

Third-Country Nationals

Third-country nationals (TCNs) are managers who are citizens of countries other
than the country in which the MNC is headquartered or the one in which they are assigned to
work by the MNC.

Tung found that the two most important reasons that U.S. MNCs use third-country
nationals were that these people had the necessary expertise or were judged to be the best ones
for the job. European firms gave only one answer: The individuals were the best ones for the
job.

A number of advantages have been cited for using TCNs. One is that the salary and
benefit package usually is less than that of a home-country national, although in recent years,
the salary gap between the two has begun to diminish. A second reason is that the TCN may
have a very good working knowledge of the region or speak the same language as the local
people. This helps to explain why many U.S. MNCs hire English or Scottish managers for top
positions at subsidiaries in former British colonies such as Jamaica, India, the West Indies,
and Kenya. It also explains why successful multinationals such as Gillette, Coca-Cola, and
IBM recruit local managers and train them to run overseas subsidiaries. Other cited benefits of
using TCNs include:

1. These TCN managers, particularly those who have had assignments in the headquarters
country, can often achieve corporate objectives more effectively than do expatriates or
local nationals. In particular, they frequently have a deep understanding of the
corporation’s policies from the perspective of a foreigner and can communicate and
implement those policies more effectively to others than can expats.
 2. During periods of rapid expansion, TCNs can not only substitute for expatriates in new
and growing operations but can offer different perspectives that can complement and
expand on the sometimes narrowly focused viewpoints of both local nationals and
headquarters personnel.
3. In joint ventures, TCNs can demonstrate a global or transnational image and bring
unique cross-cultural skills to the relationship.

Inpatriates

In recent years a new term has emerged in international management—inpatriates. An

inpatriate is an individual from a host country or a third-country national who is assigned to
work in the home country. Even Japanese MNCs are now beginning to rely on inpatriates to
help them meet their international challenges.

This growing use of inpats is helping MNCs better develop their global core
competencies. As a result, today a new breed of multilingual, multi-experienced, so-called
global managers or transnational managers is truly emerging.

Subcontracting and Outsourcing

Other potential sources of international management talent are subcontracting and

offshore outsourcing. Offshore outsourcing is made possible by the increasing organizational
and technological capacity of companies to separate, coordinate, and integrate geographically
dispersed human resources—whether employed directly by the firm or contracted out—
across distant geographic borders.

On the one hand, offshore outsourcing, as well as the hiring of temporary workers
from a Broad on special visas, similar to inpatriates, presents significant opportunities for cost
savings and lower overhead. On the other hand, the recent wave of media attention has
focused on widespread concern that in an age of cheap telecommunications, almost any job,
professional or blue-collar, can be performed in India for a fraction of U.S. wages.

Moreover, although the cost for a computer programmer or a middle manager in India
remains a small fraction of the cost for a similar employee in the United States (a programmer
with three to five years’ experience makes about $25,000 in India but about $65,000 in the
United States), the wage savings do not necessarily translate directly into overall savings
because the typical outsourcing contract between an American company and an Indian vendor
saves less than half as much as the wage differences would imply.
 Microsoft recently revealed that it has been paying two Indian outsourcing companies,
Infosys and Satyam, to provide skilled software architects for Microsoft project.

Though politically controversial, outsourcing can save companies significant costs and
is very profitable for firms that specialize in providing these services on a contract basis. U.S.-
based firms such as EDS, IBM, and Deloitte have developed specific competencies in global
production and HR coordination, including managing the HR functions that must support it.
These firms combine low labor costs, specialized technical capabilities, and coordination
expertise.

Recruitment

The response of an international firm to an international recruitment and selection

depends on:

1. Its general staffing policy on key positions in headquarters and subsidiaries,

2. Its ability to attract the right candidate, and
3. The constraints placed by the host government on hiring policies.

There are four major approaches to multinational staffing decisions.

Ethnocentric Approach

Under this, parent nation employees fill all key positions in a multinational. While
this approach may be common for firms at the early stages of internationalization, there are
business reasons for pursuing such an approach: (a) a perceived lack of qualified host nation
employees, and (b) the need to maintain good communication, coordination, and control links
with corporate headquarters.

Normally, when a multinational company acquires a firm in any other country it

wishes to replace local manager with the parent company nationals to ensure that the culture
and values to be uniform in all the units of the MNC throughout the globe. Subsequently,
based on the competency of the local people they may be inducted to the company to have the
local understanding in terms of managing people and market dynamics. This policy has a lot
of disadvantages.

(a) It limits the promotion opportunities of host country nationals, which may lead to
decline in productivity and high labour turnover. In the process, company may lose
 (b) The parent company nationals being placed in the host country take lots of time in
understanding the local dynamics leading to faulty decisions.

(c) The salary structure of the parent company nationals creates a feeling which is much
better than its employees in other countries, discrimination and frustration among the
employees from the host country. For example, an American multinational (parent
company) posting an American employee In India (host country) and giving the
salary in dollars term will create negative feeling among the Indian employees
working in the same MNC in India drawing salary in Indian rupees.

Moreover, it is quite expensive to employ expatriates in foreign locations. This has

been reflected in a study by Cieri, Dowling & Taylor (1991). The findings say that 50% of
responding firms estimated that the average cost of expatriates was three to four times that of
a normal salary and 18% indicated more than four times the salary

Polycentric Approach

This approach is basically taken up while employing host country nationals in the
subsidiary of the MNC operating in that country and its basic premise is that parent country
nationals will only hold positions in the corporate headquarters. This policy resolves many
disadvantages of ethnocentric approach and has the following advantages:

(a) There would be no language barrier. The local dynamics can be well taken care of by
the local people. The hassles of cultural adjustment are not there.
(b) Managing local politics and administration will be very easier.
(c) This is less expensive than the ethnocentric approach.

However, it also has a few disadvantages:

(a) Maintaining understanding between the corporate and the subsidiary management
becomes difficult.
(b) It also becomes difficult to imbibe the original culture of the company.

(c) This will not provide the opportunity to the host country employees to get exposure
and experience outside their own country, which will minimize their growth and
development in the organization beyond their own country.
Geocentric Approach

This approach subscribes the view of employing the best people in key positions
throughout the organization without the consideration of any nationality. This addresses the
disadvantages of both ethnocentric and polycentric approach. It is not necessary that the
competent people are available only in the host or parent nations. They may be available in
any part of the globe. Moreover, it helps the organization to develop core competency taking
the best talents in the core team.

This approach has some drawbacks like the constraints in terms of the employment
policy of the particular country, the paper work involved in hiring a foreign national instead
of a local national, hassles ‘of obtaining work permit for dependents of the employee.
Moreover, this is expensive in terms of the investment towards training and development of
the individual, benchmarking the salary with the international compensation package, which
is definitely more than the salary to be given to the individual in his home country. Though
this approach gives long-term benefits in terms of developing an international core team, the
success depends on the commitment of the top management in accepting and adapting the
system.

Regiocentric Approach

This approach advocates the division of operations of the multinational company on

the basis of some geographical regions and allows the transfer of employees within a
particular region. Many companies have the regional divisions like Europe, America and
Asia-Pacific and encourage the transfer of their senior managers within a particular region
from one subsidiary to other. Its main advantages are:

(a) A major motive for using such an approach is that it allows interaction between
executives transferred to regional headquarters from subsidiaries and parent country
nationals posted to the regional headquarters.
(b) It also reflects some sensitivity to local conditions.

(c) Another advantage is that such an approach can prove highly effective for a
multinational to move from a purely ethnocentric to geocentric approach.

Some of the disadvantages are:

(a) It can produce ‘federalism’ at a regional rather than a country basis.

(b) While this approach does improve career prospects at the national level, it only
moves the barrier to the regional level.
 Though there are different recruitment techniques narrated above, the company should
adopt a particular strategy at a particular time or a combination of some strategies depending
on the need of the organization.

Selection Criteria for International Assignments

Making an effective selection decision for an overseas assignment can prove to be a

major problem. Typically, this decision is based on international selection criteria, which
are factors used to choose international managers. These selections are influenced by the
MNCs experience and often are culturally based. Sometimes as many as a dozen criteria are
used, although most MNCs give serious consideration to only five or six.

General Criteria

A company sending people overseas for the first time often will have a much longer
list of criteria than will an experienced MNC that has developed a “short list.”

Criteria in Expatriate Selection

1. Ability to adapt
2. Technical competence
3. Spouse and family adaptability
4. Human relations skill
5. Desire to serve overseas
6. Previous overseas experience
7. Understanding of host country culture
8. Academic qualifications
9. Knowledge of language of country
10. Understanding of home country culture

Adaptability to Cultural Change

Overseas managers must be able to adapt to change. They also need a degree of
cultural toughness. Research shows that many managers are exhilarated at the beginning of
their overseas assignment. After a few months, however, a form of culture shock creeps in,
and they begin to encounter frustration and feel confused in their new environment.
 One analysis noted that many of the most effective international managers suffer this cultural
shock.

Organizations examine a number of characteristics to determine whether an individual

is sufficiently adaptable. Examples include work experiences with cultures other than one’s
own, previous overseas travel, knowledge of foreign languages (fluency generally is not
necessary), and recent immigration background or heritage. Others include (1) the ability to
integrate with different people, cultures, and types of business organizations; the ability to
sense developments in the host country and accurately evaluate them; the ability to solve
problems within different frameworks and from different perspectives; (4) sensitivity to the
fine print of differences of culture, politics, religion, and ethics, in addition to individual
differences; and (5) flexibility in managing operations on a continuous basis despite lack of
assistance and gaps in information.

Physical and Emotional Health

“Most organizations require that their overseas managers have good physical and
emotional health. Some examples are fairly obvious. An employee with a heart condition
would be rejected for overseas assignment; likewise, an individual with a nervous disorder
would not be considered. The psychological ability of individuals to withstand culture shock
also would be considered, as would the current marital status as it affects the individual’s
ability to cope in a foreign environment.

Age, Experience, and Education

Most MNCs strive for a balance between age and experience. There is evidence that
younger managers are more eager for international assignments. These managers tend to be
more “worldly” and have a greater appreciation of other cultures than older managers do. By
the same token, young people often are the least developed in management experience and
technical skills; they lack real-world experience. To gain the desired balance, many firms send
both young and seasoned personnel to the same overseas post.

Many companies consider an academic degree, preferably a graduate degree, to be of

critical importance to an international executive; however, universal agreement regarding tie
ideal type of degree is nonexistent. MNCs, of course, use formal education only as a point of
departure for their own training and development efforts.
Language Training

One recognized weakness of many MNCs is that they do not give sufficient attention
to the importance of language training. English is the primary language of international
business, and most expatriates from all countries can converse in English. Those who can
speak only are at a distinct disadvantage when doing business in non-English-speaking
countries.

Motivation for a Foreign Assignment

Although individuals being sent overseas should have a desire to work abroad, this
usually is not sufficient motivation.

International management experts contend that the candidate also must believe in the
importance of the job and even have something of an element of idealism or a sense of
mission. Applicants who are unhappy with their current situation at home and are looking to
get away seldom make effective overses managers.

Some experts believe that a desire for adventure or a pioneering spirit is an acceptable
reason for wanting to go overseas. Other motivators that often are cited include the desire to
increase one’s chances for promotion and the opportunity to improve one’s economic status.
For example, many U.S. MNCs regard international experience as being critical for promotion
to the upper ranks. In addition, thanks to the supplemental wage and benefit package, U.S.
managers sometimes find that they can make, and especially save, more money than if they
remained stateside.

Spouses and Dependents or Work-Family Issues

Spouses and dependents are another important consideration when a person is to be

chosen for an overseas assignment. If the family is not happy, the manager often performs
poorly and may either be terminated or simply decide to leave the organization.

One popular approach in appraising the family’s suitability for an overseas assignment
is called adaptability screening. This process evaluates how well the family is likely to stand
up to the rigors and stress of overseas life. The company will look for a number of things in
this screening, including how closely knit the family is, how well it can withstand stress, and
how well it can adjust to a new culture and climate.
Leadership Ability

The ability to influence people to act in a particular way-leadership-is another

important criterion in selecting managers for an international assignment. Determining
whether a person who is an effective leader in the home country will be equally effective in
an overseas environment can be difficult, however. When determining whether an applicant
has the desired leadership ability, many firms look for specific characteristics, such as
maturity, emotional stability, the ability to communicate well, independence, initiative,
creativity, and good health. If these characteristics are present and the person has been an
effective leader in the home country, MNCs assume that the individual also will do well
overseas.

International Human Resource - Selection Procedures

MNCs use a number of selection procedures. The two most common are tests and
interviews. Some international firms use one; a smaller percentage employ both. Theoretical
models containing the variables that are important for adjusting to an oversea assignment have
been developed. These adjustment models can help contribute to more effective selection of
expatriates. The following sections examine traditional testing and interviewing procedures,
then present an adjustment model.

Testing and Interviewing Procedures

Some evidence suggests that although some firms use testing, it is not extremely
popular. For example, an early study found that almost 80 percent of the 127 foreign
operations managers who were surveyed reported that their companies used no tests in the
selection process. This contrasts with the more widespread testing that these firms use when
selecting domestic managers. Many MNCs report that the costs, questionable accuracy, and
poor predictive record make testing of limited value.

Many firms do use interviews to screen people for overseas assignments. One expert
notes: “ It is generally agreed that extensive interviews of candidates (and their spouses) by
senior executives still ultimately provide the best method of selection.” Tung’s research
supports these comments. For example, 52 percent of the U.S. MNCs she surveyed reported
that in the case of managerial candidates, MNCs conducted interviews with both the manager
and his or her spouse, and 47 percent conducted interviews with the candidate alone. For
technically oriented positions, 40 percent of the firms interviewed both the candidate and the
spouse, and 59 percent conducted interviews with the candidate alone.

The Adjustment Process

In recent years, international human resource management specialists have developed

models that help to explain the factors involved in effectively adjusting to overseas
assignments. These adjustment models help to identify the underpinnings of the effective
selection of expatriates.

There are two major types of adjustments that an expatriate must make when going on
an overseas assignment. One is the anticipatory adjustment. This is carried out before the
expat leaves for the assignment. The other is the in-country adjustment, which takes place on
site
The anticipatory adjustment is influenced by a number of important factors. One factor
is the pre departure training that is provided. This often takes the form of cross-cultural
seminars or workshops, and it is designed to acquaint expats with the culture and work life of
the country to which they will be posted. Another factor affecting anticipatory adjustment is
the previous experience the expat may have had with the assigned country or with countries
with similar cultures. These two factors, training and previous experience, help to determine
the accuracy of the expat’s expectations.

The organizational input into anticipatory adjustment is most directly related and
concerned with the selection process. Traditionally, MNCs relied on only one important
selection criterion for overseas assignments: technical competence. Obviously, technical
competence is important, but it is only one of a number of skills that will be needed. If the
MNC concentrates only on technical competence as a selection criterion, then it is not
properly preparing the expatriate managers for successful adjustment in overseas assignments.
Expats are going to go abroad believing that they are prepared to deal with the challenges
awaiting them, and they will be wrong.

Once the expatriate is on site, a number of factors will influence his or her ability to
adjust effectively. One factor is the expat’s ability to maintain a positive outlook in the face of
a high-pressure situation, to interact well with host nationals, and to perceive and evaluate the
host country’s cultural values and norms correctly. A second factor is the job itself, as
reflected by the clarity of the role the expat plays in the host management team, authority the
expat has to make decisions, the newness of the work-related challenges, and the amount of
role conflict that exists. A third factor is the organizational culture and how easily the expat
can adjust to it. A fourth is nonwork matters, such as the toughness with which the expatriate
faces a whole new cultural experience and how well his or her family can adjust to the rigors
of the new assignment. A fifth and final factor identified in the adjustment model is the
expat’s ability to develop effective socialization tactics and to undersand “what’s what” and
“who’s who” in the host organization.
.

These anticipatory and in-country factors will influence the expatriate’s mode and
degree of adjustment to an overseas assignment. They can help to explain why effective
selection of expatriates is multifaceted and can be very difficult and challenging; But if all
works out well, the individual can become a very important part of the organization’s
overseas operations.

International business have choices of hiring three categories of employees parent

country nationals(PCNs) host country nationals (HCNs) and third country nationals (TCNs)
Table brings out the advantages and disadvantages of each choice.
The Advantages and Disadvantages of Using PCNs, HCNs and HCNs

Advantages Disadvantages
PCNs ➢➢ Family with the home ➢➢Difficulty in adapting to the foreign language
office, goals, objectives, and the socio economic.
policies and practices. ➢➢ Excessive cost of selecting, training and
➢➢ Easy organizational maintaining expatriate managers and their
control and coordination. familiar abroad.
➢➢ Promising managers are ➢➢
given international Promotional opportunities for HCNs are
exposure. limited.

➢➢ PCNs are the best people ➢➢ PCNs may impose an inappropriate HQ

for assignment because style.
of special skills and ➢➢ Compensation for CNs and HCNs may
differ.
experiences.
➢➢Family adjustment problems, especially
concerning the unemployed spouses.

HCNs ➢➢ Familiarity with the socio ➢➢ Difficult in exercising effective

economic, political and legal control over the subsidiary’s
environment and with business operations.
practices in the host country. ➢➢ Communication difficulties
➢➢ Lower cost incurred in hiring as in dealing with home office
compared to PCNs and TCNs personnel.

➢➢ Promotional opportunities to locals ➢➢ Lack of opportunity for the

and consequently their motivation home country’s nationals to gain
and commitment. international and cross cultural
➢➢ Responds effectively to the host experience.
country’s demands for localization ➢➢ HCNs have limited career
of the subsidiary’s operations. opportunity outside the
Languages and other barriers are subsidiary.
➢➢
eliminated. ➢➢ Hiring HCNs may encourage a
federation of nationals rather
➢➢ Continuity of management
than global units.
improves, since HCNs stay longer
in positions.
 TCNs ➢➢ Salary and benefit requirements ➢➢ Host country government may
may be lower thatn for PCNs resent hiring TCNs
➢➢ TCNs may be better informed ➢➢ TNCs may not want to return
than PCNs about host country to their own countries after
environment. assignment.
➢➢ TCNs are truly international ➢➢ Host country’s sensitivity with
manager. respect to nationals of specific
countries.
➢➢ HCNs are impeded in their efforts
to upgrade their own ranks and
assure responsible positions in
the multinational subsidiaries.

The Expatriate Problem

Of the three staffing policies we discussed above, two of them, namely ethnocentric
and geocentric approaches and two categories of employees viz., PCNs and TCNs rely on
extensive use of expatriate employee working outside their home country with a planned
return to that or a third country. As expatriates play a major role in international businesses,
MNCs take great care in their selection process.

A major problem connected with expatriates is their premature return to their home
country. Popularly called expatriate failure, the subject has assumed considerable importance
in the literature on international business. As stated earlier, expatriate failure results in
considerable losses to MNCs. Several reasons have been assigned to explain why people
return home before the assignment period expires. Table summarises the cause for expatriate
failure.
Reasons for Expatriate Failure (in Descending Order of Importance)

Us Firms Japanese Firms

➢➢ Inability of spouse to adjust ➢➢Inability to cope with larger
➢➢ Manager’s inability to adjust international responsibilities
➢➢ Other family reasons ➢➢ Difficulties with the environment
➢➢ Manager’s personal or emotional maturity ➢➢ Personal or emotional problems
➢➢ Inability to cope with larger international ➢➢ Lack of technical competence
responsibilities ➢➢ Inability of spouse to adjust
 One of the reasons for expat failure in his/ her inability to adjust to host country
culture These difficulties typically include an inability to converse well in the local language,
problems in obtaining certain products and food supplies of personnel preference, home
sickness and so on. In this stage it is characterized by what is called culture shock.

Culture shock is explained in terms of its disruption to established routines of

behavior. The more routines that are disrupted, the more severe is the culture shock. In
addition, the more critical the routine that is disrupted, the greater mental energy is required to
adjust, and the greater the frustration, anxiety and anger. Culture shock is a critical stage, and
how the individual copes with the psychological adjustment in this phase has an important
outcome in terms of success or failure.

If culture shock is handled successfully, the expatriate enters the third stage, which
may be called the adapting or adjusting phase. He / she begins to feel more positive, works
more effectively and lives a more satisfying life. Neither the highs of tourist stage nor the
lows of culture shock phase usually mark this adaptive phase. If culture shock is not handled
successfully, the expatriate’s work performance deteriorates and he/she will eventually return
home having not really done the job well or enjoyed the time spent abroad.

One way to reduce expatriate failure is by improving selection procedures to eliminate

inappropriate candidates.

Training In International Management

Training is the process of altering employee behavior and attitudes in a way that
increases the probability of goal attainment. Training is particularly important in preparing
employees for overseas assignments because it helps ensure that their full potential will be
tapped. One of the things that training can do is to help expat managers better understand the
customs, cultures, and work habits of the local culture. The simplest training, in terms of
preparation time, is to place a cultural integrator in each foreign operation. This individual is
responsible for ensuring that the operation’s business systems are in accord with those of the
local culture. The integrator advises, guides, and recommends actions needed to ensure this
synchronization.

Unfortunately, although using an integrator can help, it is seldom sufficient. Recent

experience clearly reveals that in creating an effective global team, the MNC must assemble
individuals who collectively understand the local language, have grown up in diverse cultures
or neighborhoods, have open, flexible minds, and will be able to deal with high degrees of
stress. In those cases where potential candidates do not yet possess all of these requisite
 skills or abilities, MNCs need a well-designed training program that is administered before
the individuals leave for their overseas assignment (and, in some cases, also on-site) and then
evaluated later to determine its overall effectiveness. The most common topics covered in
cultural training are social etiquette, customs, economics, history, politics, and business
etiquette.

The Impact of Overall Management Philosophy on Training

The type of training that is required of expatriates is influenced by the firm’s overall
philosophy of international management. For example, some companies prefer to send their
own people to staff an overseas operation; others prefer to use locals whenever possible.

Briefly, four basic philosophical positions of multinational corporations (MNCs) can

influence the training program:

1. An ethnocentric MNC puts home-office people in charge of key international

management positions. The MNC headquarters group and the affiliated world
company managers all have the same basic experiences, attitudes, and beliefs about
how to manage operations. Many Japanese firms follow this practice.
2. A polycentric MNC places local nationals in key positions and allows these
managers to appoint and develop their own people. MNC headquarters gives the
subsidiary managers authority to manage their operations just as long as these
operations are sufficiently profitable. Some MNCs use this approach in East Asia,
Australia, and other markets that are deemed too expensive to staff with expatriates.

3. A regiocentric MNC relies on local managers from a particular geographic region

to handle operations in and around that area. For example, production facilities in
France would be used to produce goods for all EU countries. Similarly, advertising
managers from subsidiaries in Italy, Germany, France, and Spain would come
together and formulate a “European” advertising campaign for the company’s
products. A regiocentric approach often relies on regional group cooperation of
local managers. The Gillette MNC uses a regiocentric approach.
4. A geocentric MNC seeks to integrate diverse regions of the world through a global
approach to decision making. Assignments are based on qualifications, and all
subsidiary managers throughout the structure are regarded as equal to those at
headquarters. IBM is an excellent example of an MNC that attempts to use a
geocentric approach.
 All four of these philosophical positions can be found in the multinational arena, and
each puts a different type of training demand on the MNC. 81 For example, ethnocentric
MNCs will do all training at headquarters, but polycentric MNCs will rely on local managers
to assume responsibility for seeing that the training function is carried out.

The impact of Different Learning Styles on Training and Development

Another important area of consideration for development is learning styles. Learning

is the acquisition of skills, knowledge, and abilities that result in a relatively permanent
change in behavior. Over the last decade, growing numbers of multinationals have tried to
become “learning organizations,” continually focused on activities such as training and
development. In the new millennium, this learning focus applied to human resource
development may go beyond learning organizations to “teaching organizations.” For example,
Tichy and Cohen, after conducting an analysis of world-class companies such as General
Electric, PepsiCo, AlliedSignal, and Coca-Cola, found that teaching organizations are even
more relevant than learning organizations because they go beyond the belief that everyone
must continually acquire new knowledge and skills and focus on ensuring that everyone in the
organization, especially the top management personnel, pass their learning on to others. Of
course, the way in which training takes place can be extremely important those responsible
for training programs must remember that even if learning does occur, the new behaviors will
not be used if they are not reinforced. For example, if the head of a foreign subsidiary is
highly ethnocentric and believes that things should be done the way they are in the home
country, new managers with intercultural training likely will find little reward or
reinforcement for using their ideas. This cultural complexity also extends to the way in which
the training is conducted.

Reasons for Training

Training programs are useful in preparing people for overseas assignments for many reasons.
These reasons can be put into two general categories: organizational and personal.

Organizational Reasons

Organizational reasons for training relate to the enterprise at large and its efforts to
manage overseas operations more effectively. One primary reason is to help overcome
ethnocentrism, the belief that one’s way of doing things is superior to that of others.
Ethnocentrism is common in many large MNCs where managers believe that the home
office’s approach to doing business can be exported intact to all other countries because this
approach is superior to anything at the local level. Training can help home-office managers
 to understand the values and customs of other countries so that when they are transferred
overseas, they have a better understanding of how to interact with local personnel. This
training also can help managers to overcome the common belief among many personnel that
expatriates are not as effective as host-country managers. This is particularly important given
that an increasing number of managerial positions now are held by foreign managers in U.S.
MNCs.

Another organizational reason for training is to improve the flow of communication

between the home office and the international subsidiaries and branches. Quite often,
overseas managers find that they are not adequately informed regarding what is expected of
them although the home office places close controls on their operating authority. This is
particularly true when the overseas manager is from the host country. Effective
communication can help to minimize these problems. Finally, another organizational reason
for training is to increase overall efficiency and profitability.

Personal Reasons

The primary reason for training overseas managers is to improve their ability to
interact effectively with local people in general and with their personnel in particular.
Increasing numbers of training programs now address social topics such as how to take a
client to dinner, effectively apologize to a customer, appropriately address one’s overseas
colleagues, communicate formally and politely with others, and learn how to help others
“save face.” These programs also focus on dispelling myths and stereotypes by replacing them
with facts about the culture. Another growing problem is the belief that foreign language
skills are not really essential to doing business overseas. Effective training programs can help
to minimize these personal problems.

Training can be useful in improving overall management style. Research shows that
many host-country nationals would like to see changes in some of the styles of expatriate
managers, including their leadership, decision making, communication, and group work. In
terms of leadership, the locals would like to see their expatriate managers be more friendly,
accessible, receptive to subordinate suggestions, and encouraging to subordinates to make
their best efforts. In decision making, they would like to see clearer definition of goals, more
involvement in the process by those employees who will be affected by the decision, and
greater use of group meetings to help make decisions. In communication, they would like to
see more exchange of opinions and ideas between subordinates and managers. In group work,
they would like to see more group problem solving and teamwork.
Types of Training Programs

There are many different types of multinational management training programs. Some
last only a few hours; others last for months. Some are fairly superficial; others are extensive
in coverage. Figure shows some of the key considerations that influence development of these
programs. There are nine phases. In the first phase the overall objective of the program to
increase the effectiveness of expats and repatriated executives is emphasized
the second phase focuses on recognition of the problems that must be dealt with in

order to reach the overall objective. The third phase is identification of the developmental
 objectives. The fourth phase consists of determining the amount of development that will be
needed to achieve each objective. The fifth phase entails choosing the specific methods to be
used in the development process-from types of predeparture training to language instruction
to reentry training. The sixth phase is an intermediate evaluation of how well things are going
and the institution of any needed midstream corrections. The seventh phase is an evaluation of
how well the expat managers are doing, thus providing evaluation feedback of the
developmental process. The eighth phase is devoted to reentry training for returning expats.
The ninth, and final, phase is an evaluation of the effectiveness of the executives after their
return. By carefully laying out this type of planning model, MNCs ensure that their
development training programs are both realistic and productive. In this process they often
rely on both standardized and tailor-made training and development approaches.

Standardized vs. Tailor-Made

Some management training is standard, or generic. For example, participants often are
taught how to use specific decision-making tools, such as quantitative analysis, and regardless
of where the managers are sent in the world, the application is the same. These tools do not
have to be culturally specific. Research shows that small firms usually rely on standard
training programs. Larger MNCs, in contrast, tend to design their own. Some of the larger
MNCs are increasingly turning to specially designed video and PowerPoint programs for their
training and development needs.

Tailor-made training programs are created for the specific needs of the participants.
Input for these offerings usually is obtained from managers who currently are working (or
have worked) in the country to which the participants will be sent as well as from local
managers and personnel who are citizens of that country. These programs often are designed
to provide a new set of skills for a new culture. For example, MNCs are now learning that in
managing in China, there is a need to provide directive leadership training because many local
managers rely heavily on rules, procedures, and orders from their superiors to guide their
behaviors. So training programs must explain how to effectively use this approach. Quite
often, the offerings are provided before the individuals leave for their overseas assignment;
however, there also are postdeparture training programs that are conducted on-site. These
often take the form of systematically familiarizing the individual with the country through
steps such as meeting with government officials and other key personnel in the community;
becoming acquainted with managers and employees in the organization; learning the host-
country nationals’ work methods, problems, and expectations; and taking
 on-site language training. Training approaches that are successful in one geographic region of
the world may need to be heavily modified if they are to be as effective elsewhere

In the final analysis, the specific training program to be used will depend on the needs
of the individual. Tung, after surveying managers in Europe, Japan, and the United States,
found that there are six major types of cross-cultural training programs:

1. Environmental briefings used to provide information about things such as geography,

climate, housing, and schools.
2. Cultural orientation designed to familiarize the individual with cultural institutions and
value systems of the host country.
3. Cultural assimilators using programmed learning approaches designed to provide the
participants with intercultural encounters.
4. Language training.
5. Sensitivity training designed to develop attitudinal flexibility.
6. Field experience, which sends the participant to the country of assignment to undergo
some of-the emotional stress of living and working with people from a different
culture.

International Compensation Management

Designing and developing a better compensation package for HR professionals for the
international assignments requires knowledge of taxation, employment laws, and foreign
currency fluctuation by the HR professionals. Moreover, the socio-economic conditions of the
country have to be taken into consideration while developing a compensation package. It is
easy to develop the compensation package for the parent country national but difficult to
manage the host and third country nationals. When a firm develops international
compensation policies, it tries to fulfills some broad objectives:

1. The compensation policy should be in line with the structure, business needs and
overall strategy of the organization.
2. The policy should aim at attracting and retaining the best talent.
3. It should enhance employee satisfaction.
4. It should be clear in terms of understanding of the employees and also convenient to
administer.
 The employee also has a number of objectives that he wishes to achieve from the
compensation policy of the firm

1. He expects proper compensation against his competency and performance level.

2. He expects substantial financial gain for his own comfort and for his family also.
3. He expects his present and future needs to be taken care of including children’s
Education, medical protection and housing facilities.
4. The policy should be progressive in nature.

Maior aspects of an international compensation package. The following are the major
components of an international compensation package.

Base Salary

This term has a slightly different meaning in an international context than in a

domestic one. In the latter case, it denotes the amount of cash compensation that serves as a
benchmark for other compensation elements like bonus, social benefits. For the expatriate, it
denotes the main component of a package of allowances directly related to the base salary and
the basis for in-service benefits and pension contributions. Base salary actually forms the
foundation block of the international compensation.

Foreign Service Inducement Premium

This is a component of the total compensation package given to employees to

encourage them to take up foreign assignments. This is with the aim to compensate them for
the possible hardships they may face while being overseas. In this context, the definition of
hardship, the eligibility criteria for premium and the amount and timing of this payment are to
be carefully considered. Such payments are normally made in the form of a percentage of the
salary and they vary depending upon the tenure and content of the assignment. In addition,
sometimes other differentials may be considered. For instance: if a host country’s work week
is longer that of the home country, a differential payment may be made in lieu of overtime.

Allowance

One of the most common kinds of allowance internationally is the Cost of Living
Allowance (COLA). It typically involves a payment to compensate for the differences in the
 cost of living between the two countries resulting in an eventual difference in the expenditure
made. A typical example is to compensate for the inflation differential.
COLA also includes payments for housing and other utilities, and also personal income tax.
Other major allowances that are often made are:

➢ Home leave allowance

➢ Education allowance
➢ Relocation allowance
➢ Spouse assistance (compensates for the loss of income due to spouse losing their job)

Thus, multinationals normally pay these allowances to encourage employees to take

up international assignments to make sure that they are comfortable in the host country in
comparison to the parent country.

Benefits

The aspect of benefits is often very complicated to deal with. For instance, pension
plans normally differ from country to country due to difference in national practices. Thus all
these and other benefits (medical coverage, social security) are difficult to imitate across
countries.

Thus, firms need to address a number of issues when considering what benefits to give
and how to give them. However, the crucial issue that remains to be dealt with is whether the
expatriates should be covered under the home country benefit programmes or the ones of the
host country. As a matter of fact, most US officials are covered by their home country benefit
programmes. Other kinds of benefits that are offered are:

➢ Vacation and special leaves ➢

Rest and rehabilitation leaves
➢ Emergency provisions like death or illness in the family

These benefits, however, depend on the host country regulations.

Incentives

In recent years some MNC have been designing special incentives programmes for
keeping expatriate motivated. In the process a growing number of firms have dropped the
ongoing premium for overseas assignment and replaced it with on time lump-sum premium.
 expatriates realize that they are paid this only once and that too when they accept an overseas
assignment. So the payment tends to retain its motivational value. Second, costs to the
company are less because there is only one payment and no future financial commitment.
This is so because incentive is separate payment, distinguishable for a regular pay and it is
more readily for saving or spending.

Taxes

The final component of the expatriate’s relates to taxes. MNCs generally select one of
the following approaches to handle international taxation.

1. Tax equalization: - Firm withhold an amount equal to the home country tax
obligation of the expatriate and pay all taxes in the host country.
2. Tax Protection:- The employee pays up to the amount of taxes he or she would pay
on remuneration in the home country. In such a situation, The employee is entitled to
any windfall received if total taxes are less in the foreign country then in the home
country.

Approaches to International Compensation

There are two main options in the area of international compensation-the

Market Rate Approach and the Balance Sheet Approach. The following are the advantages
and disadvantages of each of the two approaches.

Market Rate Approach

Under this, the base salary is linked to the structure in the host country. The
multinational obtains information from local compensation surveys and decides whether local
employees, expatriates of different nationalities will be the points of reference for
benchmarking the compensation. For instance, an American bank operating in India would
decide whether its reference point would be local Indian salaries or that of other American
competitors in India, or all foreign banks operating in India. This approach has the following
advantages:

1. It is a simple approach to follow

2. Identification with the host country is possible
3. Equality with local nationals
4. Equity amongst people of different countries
 There are certain disadvantages of such an approach:

1. There is a possibility of variation in the compensations offered to expatriates from the

same country in different countries. As a result it can lead to rivalry for international
assignments for a particular country.

2. It can pose problems when the expatriate is repatriated back to his country where the
salary structure is lower than that in the host nation. This will create dissatisfaction.

3. There is also a danger of variation between assignments for the same employee. For
instance, variations between operating in a developed economy, a developing one and
underdeveloped one.

Balance Sheet Approach

This approach tries to maintain relativity to parent country employee colleagues and
compensating for the costs of an international assignment. The key assumption of this is that
employees going for foreign assignments should not suffer any kind of tangible loss due to
working in a new environment. Reynolds (1986) explained balance sheet approach as a
system designed to equalize the purchasing power of employees at comparable position levels
living abroad and in the home country, to provide incentives to offset qualitative differences
between assignment locations. Under this approach, four main categories of expenditure
incurred by expatriates are covered:

1. Goods and services-home country outlays for food, personal care, clothing, household
furnishing, recreation, transportation and medical care
2. Housing-cost associated with housing in the host country
3. Income tax-host country and parent country taxes
4. Reserves-contributions to savings, payments for benefits, pension contribution,
investment, education expenses, social security taxes, etc.

The advantages of the balance sheet approach are:

1. Equity between foreign assignments and between expatriates of the same country

2. Repatriation of expatriates is facilitated by the emphasis on equity with the parent

country since the expatriate’s compensation is fixed to the parent country
 On the other hand, this approach also has a few disadvantages:

1. It is quite complicated to administer and therefore involves high costs, especially in

the areas of taxation and living costs in different.

2. This can result in huge disparities between expatriates of different nationalities and
between expatriates and locals in different countries. For instance, if foreign
employees are paid more than the locals for performing essentially the same task,
problems may arise.

3. It has been observed that the balance sheet approach not only produces disparities, but
also may act as a barrier to staff acceptance of international assignments.

Keeping in view the fact that compensation policy in an international context becomes
much more uncertain and less precise, it has been said that strategic flexibility (Milkovich &
Bloom, 1998) is important in international compensation. The strategic flexibility model of
international compensation groups forms of total compensation into three sets: core, crafted
and choice.

Specific practices in the core section may vary according to the market and local
conditions. The crafted set of compensation elements assume that regional managers have
discretion to choose from a list of forms of compensation. Finally, the alternatives in the
choice set offer flexibility for employees to select among various forms of compensation.

It is quite clear that such a strategic flexibility model has the potential to overcome
some of the problems identified in the two approaches of market rate and the balance sheet
because firms may be able to utilize aspects of both the approaches under this model.

Repatriation of Expatriates

Repatriation means the return to one’s home country from overseas management
assignment. For most overseas managers, repatriation, the return to one’s home country,
occurs within five years of the time they leave. Few expatriates remain overseas for the
duration of their stay with the firm. When they return, these expatriates often find themselves
facing readjustment problems and some MNCs are trying to deal with these problems through
use of transition strategies.
Reasons for Returning

The most common reason that expatriates return home from overseas assignments is
that their formally agreed-on tour of duty is over. Before they left, they were told that they
would be posted overseas for a predetermined period, often two to three years, and they are
returning as planned. A second common reason is that expatriates want their children
educated in a home-country school, and the longer they are away, the less likely it is that this
will happen.

A third reason why expatriates return is that they are not happy in their overseas
assignment. Sometimes unhappiness is a result of poor organizational support by the home
office, which leaves the manager feeling that the assignment is not a good one and it would be
best to return as soon as possible.

A fourth reason that people return is failure to do a good job. Such-failure often spells
trouble for the manager and may even result in demotion or termination.

Readjustment Problems

Many companies that say that they want their people to have international experience
often seem unsure of what to do with these managers when they return.

A study by Tung found that, in general, the longer the duration of an off-shore
assignment, the more problem the expatriate has being reabsorbed into the home office. Here
are the major reasons:

1. The “out of sight, out of mind” syndrome is common.

2. Organizational changes made during the time the individual was abroad may make his
or her position in the parent headquarters redundant or peripheral.
3. Technological advances in the parent headquarters may render the individual’s
existing skills and knowledge obsolete.

Still another problem is adjusting to the new job back home. It sometimes takes from
six months to a year before managers are operating at full effectiveness.

Other readjustment problems are more personal in nature. Many expatriates find that
the salary and fringe benefits to which they have become accustomed in the foreign
assignment now are lost, and adjusting to this lower standard of living is difficult. In
 addition, those who sold their houses and now must buy new ones find that the monthly cost
often is much higher than when they left. The children often are placed in public schools,
where classes are much larger than in the overseas private schools. Many also miss the
cultural lifestyles, as in the case of an executive who is transferred from Paris, France, to a
medium-sized city in the United States, or from any developed country to an underdeveloped
country. Additionally, many returning expatriates have learned that their international
experiences are not viewed as important. Many Japanese expatriates, for example, report that
when they return, their experiences should be downplayed if they want to “fit in” with the
organization. In fact, reports one recent New York Times article, a substantial number of
Japanese expatriates “are happier overseas than they are back home.”

Transition Strategies

To help smooth the adjustment from an overseas to a stateside assignment, some

MNCs have developed transition strategies, which can take a number of different forms.
One is the use of repatriation agreements, whereby the firm tells an individual how long she
or he will be posted overseas and promises to give the individual, on return, a job that is
mutually acceptable. This agreement typically does not promise a specific position or salary,
but the agreement may state that the person will be given a job that is equal to, if not better
than, the one held before leaving.

A proactive strategy that provides an effective support system to allay expatriate

concerns about career issues while serving abroad may work best. Tung found that the
successful U.S., European, Japanese, and Australian MNCs that she studied had (1) mentor
programs (one-on-one pairing of an expatriate with a member of home-office senior
management); (2) a separate organization unit with primary responsibility for the specific
needs of expatriates; or (3) maintenance of constant contacts between the home office and the
expatriate.

Some of the main problems of repatriation identified include

1. Adjusting to life back home.

2. Facing a financial package that is not as good as that overseas.
3. Having less autonomy in the stateside job than in the overseas position
4. Not receiving any career counseling from the company.

To the extent that the MNC can address these types of problems the transition will be
smooth, the expatriate’s performance effectiveness once home will increase quickly. Some
1. Arrange an event to welcome and recognize the employee and family, either
formally or informally.
2. Establish support to facilitate family reintegration.
3. Offer repatriation counseling or workshops to ease the adjustment.
4. Assist the spouse with job counseling, resume writing and interviewing techniques
5. Provide educational counseling for the children
6. provide the employee with a thorough debriefing by a facilitator to identify
new knowledge, insights and skills and to provide a forum to showcase new
competencies
7. Offer international outplacement to the employee and reentry counseling to the
entire family if no positions are possible.
8. Arrange a post assignment interview with the expatriate and spouse to review
their view of the assignment and address any repatriation issues.
 Unit 4
Training at international level

Training isn’t always easy, though. The goal is not to help someone learn a language or
cultural traditions but to ensure they are immersed in the sociocultural aspects of the new
culture they are living in. Roger N. Blakeney (Blakeney, 2006), an international business
researcher, identifies two main pathways to adapting to a new culture. First, people adjust
quickly from the psychological perspective but not the social one. Blakeney argues that
adjusting solely from the psychological perspective does not make an effective expatriate.
Although it may take more time to adjust, he says that to be fully immersed and to fully
understand and be productive in a culture, the expatriate must also have sociocultural
adaption. In other words, someone who can adjust from a sociocultural perspective ends up
performing better because he or she has a deeper level of understanding of the culture.
Determining whether your candidate can gain this deeper level would figure in your selection
process.
Figure 14.4 Blakeney’s Model of Psychological versus Sociocultural Adaption

Source: Roger Blakeney, “Psychological Adjustment and Sociocultural Adaptation: Coping

on International Assignments” (paper, Annual Meeting of Academy of Management, Atlanta,
GA, 2006).
 One of the key decisions in any global organization is whether training should be performed
in-house or an outside company should be hired to provide the training. For example,
Communicaid offers online and on-site training on a variety of topics listed. Whether in-
house or external training is performed, there are five main components of training someone
for an overseas assignment:

1. Language
2. Culture
3. Goal setting
4. Managing family and stress
5. Repatriation

Training on languages is a basic yet necessary factor to the success of the assignment.
Although to many, English is the international business language, we shouldn’t discount the
ability to speak the language of the country in which one is living. Consider Japan’s largest
online retailer, Rakuten, Inc. It mandated that English will be the standard language by March
2012 (Thregold, 2010). Other employers, such as Nissan and Sony, have made similar
mandates or have already implemented an English-only policy. Despite this, a large
percentage of your employee’s time will be spent outside work, where mastery of the
language is important to enjoy living in another country. In addition, being able to discuss
and negotiate in the mother tongue of the country can give your employee greater advantages
when working on an overseas assignment.

In the United States, we place our palm upward and use one finger to call someone over. In
Malaysia, this is only used for calling animals. In much of Europe, calling someone over is
done with palm down, making a scratching motion with the fingers (as opposed to one finger
in the United States). In Columbia, soft handclaps are used.
 In many business situations in the United States, it is common to cross your legs, pointing the
soles of your shoes to someone. In Southeast Asia, this is an insult since the feet are the
dirtiest and lowest part of the body.
 Spatial differences are an aspect of nonverbal language as well. In the United States, we tend
to stand thirty-six inches (an arm length) from people, but in Chile, for example, the space is
much smaller.
 Proper greetings of business colleagues differ from country to country.
 The amount of eye contact varies. For example, in the United States, it is normal to make
constant eye contact with the person you are speaking with, but in Japan it would be rude to
make constant eye contact with someone with more age or seniority.

The goal of cultural training is to train employees what the “norms” are in a particular
culture. Many of these norms come from history, past experience, and values. Cultural
training can include any of the following topics:

1. Etiquette
2. Management styles
3. History
4. Religion
5. The arts
6. Food
7. Geography
8. Logistics aspects, such as transportation and currency
9. Politics

Cultural training is important. Although cultural implications are not often discussed openly,
not understanding the culture can harm the success of a manager when on overseas
assignment. For example, when Revlon expanded its business into Brazil, one of the first
products it marketed was a Camellia flower scented perfume. What the expatriate managers
didn’t realize is that the Camellia flower is used for funerals, so of course, the product failed
in that country (Roy, 1998). Cultural implications, such as management style, are not always
so obvious. Consider the US manager who went to Mexico to manage a production line. He
applied the same management style that worked well in America, asking a lot of questions
and opinions of employees. When employees started to quit, he found out later that
employees expect managers to be the authority figure, and when the manager asked
questions, they assumed he didn’t know what he was doing.

Training on the goals and expectations for the expatriate worker is important. Since most
individuals take an overseas assignment to boost their careers, having clear expectations and
understanding of what they are expected to accomplish sets the expatriate up for success.

Because moving to a new place, especially a new country, is stressful, it is important to train
the employee on managing stress, homesickness, culture shock, and likely a larger workload
than the employee may have had at home. Some stress results from insecurity and
homesickness. It is important to note that much of this stress occurs on the family as well.
The expatriate may be performing and adjusting well, but if the family isn’t, this can cause
greater stress on the employee, resulting in a failed assignment.

The term “cross-cultural training” refers to a variety of different training courses. Each in
essence aims to develop awareness between people where a common cultural framework
does not exist. In general, cross cultural training has two parallel strands
– cross-cultural awareness training and culture/country specific training. Cross-cultural
awareness training deals with the manifestations of culture in the workplace and has
many applications. Its main purpose is to evaluate and constructively tackle the
challenges cross cultural differences can bring to the workplace. When organisations
become cross-border entities, cross-cultural factors start affecting every aspect of the
business. Whether in multi-cultural teams or in business interactions, the variants of
cultural nuances eventually end up affecting the business. Cross-cultural training is
conducted by many Indian IT organisations to equip their employees with skills to do
business in a global environment. But there is much more to cross-cultural training than a
crash course in etiquette or learning how to order a five-course meal; it is about a deeper
understanding of the values and ethos that define a culture. However, this starts by
understanding one’s own culture and then graduating to understanding and appreciating
the differences of another. Misinterpretations and misconceptions are common when the
same situation is viewed differently by people from different cultures. The basis of inter-
cultural relations are not about changing other people, but adapting oneself to another
culture. In India, while earlier the focus was on training professionals working with
software companies on international assignments, today it is an integral part of BPO
culture for those personnel who have to interact with overseas clients.

The various cross-cultural training methods can be explained as follows (as described by
Bhawuk and Brislin, 2000):
1. Cultural assimilator: The cultural assimilator is a tool that consists
of a number of real life scenarios describing puzzling cross-cultural
interactions and expectations. The scenarios here can be defined as
critical incidents which describe interactions between host and
expatriates which involve misunderstanding related to cultural
differences.
2. Contrast American method: This method involves demonstration
of behaviors that are completely opposed to what is seen in the
current context of culture. This was used by Stewart in America to
train people going abroad hence was named contrast American.
3. Self reference criterion (SRC): Unconscious reference to one’s own
cultural values in communication with people who are from other
cultures. This method was developed by Lee (1966), who proposed 4
step procedures to overcome self reference criteria. The first step
involves defining any problem of situation in terms of the
expatriate’s own culture, followed by definition in the terms of host
culture. The bias created by SRC is analyzed and removed in third
stage which is followed by solution of the simplified business
problem.
4. Area simulation: The simulation is creating natural situation of
interaction with people from other culture. This can be achieved
using some actors who will interact with the trainee according to
some predefined script.
5. Cultural self awareness model: The cultural awareness model
includes usage of video tapes with themes and role plays. If the
trainee is able to understand how his culture is different he would be
able to accept the differences encountered in the real life
interactions in a better manner.
Why Global Training?

Transnational companies believe that their distinctive competency is

determined by the mindset and talent of their human resources rather than by
other resources/ factors. As such TNCs and MNCs attract different
 categories of expatriates in order to acquire global talent. In addition, they
also attract employees on long-term basis as well short-term basis as certain
categories of expatriates possessing of critical skills prefer only short-term
assignments.(See Box 4.11).

Why Cross-cultural Training for Expatriates?

As discussed, success of expatriates mostly depends on the cultural

adjustment of expatriate employees and their family members to the host
country’s culture. In fact, most of the cases human resources failure in
MNCs is owing to the failure of expatriates (parent country nationals as well
as third country nationals). In fact, one of the critical reasons responsible for
the failure of expatriate employees and their family members is the inability
of expatriates to adjust to the host country’s culture as well as the
organizational culture of MNCs and their subsidiaries. This, cross-cultural
adjustment is a critical factor in the global human resource management.
Need for Cross-cultural Training for HCNs

Cross-cultural adjustment is critical not only for the expatriates and their family
members, but also for the host country nationals. Host country national interact with the
expatriates both at the work settings as well as at the social settings. Host country
national should understand at least a part of the expatriates’ culture as the expatriates of
different countries either exhibit or immersed in their culture while interacting with the
host country subordinates or superiors or colleagues. In fact, expatriates have to
understand and adapt to the host country’s culture to a greater extent, but the host
country nationals have to understand and adapt at least to the core cultural aspects of
cultures of those countries from where expatriates are drawn up. Therefore, TNCs and
MNCs have to exert their resources and energies in providing multi-cultural or cross-
cultural aspects to all their HCN employees also, through cross- cultural training. Thus,
cross-cultural training is distinctive imperative under global human resource
management.

Why Job Training?

In addition to cross-cultural training, TNCs also provide training in technical and

functional aspects of the job, though mostly expatriate posses them. This is mostly due
to the changing technology as well as shifting job priorities, job description,
specification, team specifications and varying systems and procedures in subsidiaries and
headquarters. Added to this, host country nationals need to be trained in technical and job
aspects from time to time. Therefore, MNC provide training in technical and functional
aspects, though their magnitudes differ widely from that of cross-cultural training.

Functional Training
 Expatriates are employed in functional jobs like accountants, lawyers, lecturers,
professors, production specialists, managers and sales personnel whenever and wherever
there is shortage for such professions. Expatriates normally posses required functional
skills before joining the MNC. But, such skills may not exactly suit to the functional job
requirements. MNCs need to train the expatriates to provide such skills in order to plug
such gaps. In addition, expatriates work on long-term basis need training at a latter stage
as and when there would be changes in organizational structure, systems and procedures.

MNCs should train host country nationals in functional skills on continuous basis.
Thus, MNCs provide functional training.

Strategic Management Skills Training

MNCs prefer expatriates for strategic level positions in view of their exceptional
skills initially. However, MNCs aim at developing the host country nationals even for
strategic management positions, in due course. Strategic managers are core and critical
managers of MNCs and they are viewed as critical strategic assets of the organizations.
These employees have to acquire comparatively recent and competitive skills to be ahead
of the customer expectations as well as competitors’ moves. Therefore, MNCs train and
develop these employees on priority basis in internationally reputed institutions. Though
the expatriates possess certain strategic management skills, MNCs still train and develop
them in view of the significance of these positions.

Team Management
Training Development

Technical
Training
On-the-job training
assignments

Functional
Training
Pre-departure
Training
Areas of
Global Strategic Management Skills
Training Training

Expatriate
Training

Soft skills
Training

Language
Training
Cross-cultural
Training
Global Mindset
Training
Human Relations/Soft Skills Training

Human relations skills or soft skills refer mostly to interpersonal skills

like interpersonal communication, leadership skills, motivational skills,
commitment skills, transactional analysis, team building and skills of working
in teams, emotional balance skills, skills of influencing others, social skills
and the like. These skills’ requirement and response of the host country
employees to the soft skills of expatriates vary from one category to other
category of employees.

MNCs train both expatriates as well as host country employees in all

kinds of soft skills in order to enhance the human relations skills of
managers under multi- cultural environment.

Cross-cultural Training

Cross-cultural Training is most significant and critical one among the

areas of global training. Therefore, most of the MNCs follow the training
procedure systematically to conduct cross-cultural training. MNCs follow
different approaches to train expatriates, nationals of the subsidiaries and
employees of joint venture partners.

Who are the Trainees for Cross-cultural Training?

The quick response to this question is all kinds of expatriates. But, the
cross- culture is emerged out of the interaction among all cultures from
which all categories of employees including HCNs are drawn up as well as
that of other stakeholders. All categories of employees have to adapt to the
others’ culture in order to interact and work with them efficiently. Therefore,
all categories of employees need to be provided with cross-cultural training
for cultural adaptability. Thus, the trainees of cross-cultural training include:
 Parent country nationals,
 Host country nationals of subsidiaries
 Third country nationals
 Other kinds of expatriates
 Employees of all partners of joint ventures.
Thus, all kinds of employees need to be training, in cross-cultural training.

Process of Cross-cultural Training

MNCs follow detailed process in cross-cultural training due to its vitality

in global human resource management. Fig. 4.9 presents the process of cross-
cultural training.
 The process of cross-cultural training include:
 Analysis of organizational requirements
 Analysis of individual employees culture
 Analysis of employee assignment
 Crafting cross-cultural training goals
 Designing cross-cultural training
 Deliver the program
 Evaluate the program
 Link cross-cultural training with the HRM practices.

Analysis of Organizational Requirements

Organizational requirements from the cross-culture point of view depend upon

organisation’s strategies, structure, culture, power and politics. This analysis aims to
identify organizational requirements in terms of employee behaviour, employee values,
norms, attitudes, aptitudes and beliefs that contribute to organizational strategies.
Further, this analysis tries to identify the required training instruments to impart required
skills to understand the required organizational culture and change or modify one’s own
culture in accordance with the organizational culture and strategic requirements. In
addition, organizational analysis also includes understanding, respecting, considering
others’ culture in practicing one’s own culture.

Analysis of Employees and their Families

MNCs analyse the individual employees–both expatriates and nationals of the

country where the headquarters or subsidiary or branch is located. As indicated earlier,
host country nationals should also be trained as they interact with the employees of
different cultures. So MNCs, have to analyse all categories of employees, in terms of
their cultural backgrounds, behavioural requirements during the course of their
interaction with other employees with varying cultural backgrounds and cultural
behavioural requirements of the organizational strategies. Further, MNCs should
consider the employee’s prior knowledge and experience of working in cross-cultural
environment as well as living in foreign countries. MNCs also consider the expatriates’
perceptions towards cross-cultural communication style, cross-cultural leadership style,
motivational techniques, abilities to work in team environments. For example, an
analysis of Pacific Islands culture indicates that network among employees and their
social groups’ proceeds over organizational priorities. Expatriates of MNCs in these
countries should understand this aspect of the culture and balance it with organizational
requirement in the course of activities.
In addition, MNCs should also analyse the cultural background of expatriates’
family members and cultural expectations of the society from them. This analysis helps
to identify the gaps and design the content of the training program to plug these gaps.
 The next one is the analysis of the assignment or the job of an employee.

Assignment/Job Analysis: Assignment/job analysis, in addition to tasks, duties and

activities indicate cross-cultural knowledge and behavioural skills required to perform
the activities most effectively. In fact, each foreign assignment needs to be performed
under different cultural set ups and as such requires different cross-cultural knowledge
and skills. Therefore, cross-cultural training should be provided based on the assignment
requirements.
The next step is to formulate training goals.

Formulating Cross-cultural Training Goals

MNCs have to formulate the cross-cultural training goals clearly after analyzing
and identifying the training needs. MNCs should conduct cross-cultural training for
short-term and long-term assignees separately. Generally, the goals of cross-cultural
training include:
 Aligning the cultures of different categories of employees with that of
cultural requirements organizational strategies.
 Balancing the cultural variations and conflicts of various cultures.
 Imparting cross-cultural knowledge to employees and skills to mould
the own culture in accordance with the cultural requirements of other
societies.

 Short-term training goals are to bring about cognitive, affective and behavioural
changes. Cognitive goals are to provide the knowledge of cultural values to
expatriates on behaviour in the host/destination country
 Specific cognitive goals include understanding the values of assignments,
awareness of norms required to interact with nationals effectively.
 Specific affective goals are to help expatriates to manage their attitude towards new
culture and manage emotions. They also include: modify the expatriates’
perception about the host country’s culture, enhance the self-confidence of the
expatriates to communicate with the people of different cultural backgrounds.
 Behavioural goals help expatriates to modify their behaviour in accordance with
the cultural and behavioural requirements of other nationals.
 Cross-cultural training for technical employees aim at providing social and
cultural information of the country concerned.
 Cross-cultural training for strategic and managerial employees aim at modifying
their behaviour.
 Forming and developing a common culture by incorporating the best of all
cultures that fits with the organizational culture and cultural requirement of
strategies.
 Now, we shall study how to design and deliver cross-cultural training.

Design and Deliver Cross-cultural Training

The analysis of cross-cultural training needs in terms of organizational analysis,

assignment analysis, and employee cultural background analysis, helps to identify
cultural skill and knowledge gap and design the training program. The content of the
program and sequencing the content are based on the new cultural skill and knowledge
required for different kinds of employees to implement the strategies efficiently.
Sequencing the content is based on the nature of the content, relevance and inter-
linkage of one culture with other cultures and time frame for strategy implementation.

Further, the content of the training program is based on the approaches of the
MNCs, viz., ethno-centric approach, polycentric approach, regiocentric and geocentric.
MNCs that follow ethnocentric approach prefer their headquarters to design, deliver and
evaluate the training programs for all their subsidiaries with a view to integrate all
subsidiaries culture with that of headquarters. For example, General Electric followed this
approach, with it acquired Generale de Radiologie of France. IBM established a
subsidiary in Japan and designed and delivered training content and total program like
any other large Japanese firm along with other HRM functions like selection,
compensation and career development. As such IBM-Japan’s employees view this
company as a Japanese company rather than a USA company. Such an approach towards
training and other HR activities helped IBM-Japan to acquire competitive strength in
Japan to employ best university graduates of Japan and retain them.

In contrast to IBM-Japan, another USA’s MNC provided the same training to all its
subsidiaries’ employees world-wide. Employees of UK and Scandinaviane subsidiaries
appreciated the idea whereas employees of France, Italy and Latin American
subsidiaries criticised the idea and those of Asia failed to implement the training
outcome.

It is often felt that ethnocentric approach to training, i.e., designing and

delivering the uniform training by headquarters to all its subsidiaries won’t
produce desired results due to:
 Non-compatibility of the content to subsidiaries of various countries;
 Language problem/issues in deliver
 Badly interpreted material
 Organisational politics
 Employees may not adjust to the way the training program is delivered.
Integrative Training: Integrative training is provided in order to
integrate the expatriate with the host country culture as well as
organizational culture and culture of other expatriates those work in/join the
 same subsidiary. This training is essential as new expatriates with different
cultures arrive and the employee deeply involve in the work culture as well
as with the personal and private lives of other employees that affect their
work as well as performance.

Training manager has to sequence these three programs and the content
of each program with the content of other programs. The order of the
sequencing the information and skills can be in the following format:

Program Information/Skill
 Pre-Departure Basic cultural knowledge, broad about
Training: the location, climate, current, banking,
marketing, education, health,
transportation, hotels, recreational, etc.

Values, beliefs, perceptions, attitudes,

 Post-Arrival Training: specific behaviours at the eating places,
educational institutions and with
superiors, subordinates, colleagues and
other stakeholders.
 Integrative Training:
Deeper involvement in personal and
family lives of superiors, subordinates,
colleagues and other stakeholders that
affect work culture. Habits, priorities,
preferences and specific behaviours of
various cultures. Infuse the value that ‘all
cultures are good and follow the give
and take and accommodative
approach’.
Therefore, training managers should adapt geocentric approach like IBM-
Japan in designing training program, developing training material and
delivering the program.

Training duration is to be determined based on the content to be

delivered, sequencing of the content, degree of difficulty in understanding
the content and the variety of pedagogy to be adapted. The time of the
training program should be the stage that the cultural issues are mild over
technical issues of the job.

Training for Expatriates

We know the reasons for expatriate failure. The analysis indicates that the failure of
expatriate’s spouse and other family to adjust to physical environment and cultural
environment of the foreign country is the important reason for the failure of expatriates
in the foreign assignment. The other reasons include:
 The employee’s inability to adapt to social and cultural environment and
physical factors in foreign countries;
 Employee’s immature personality factors and less emotional intelligence;
 Employee’s inability to cope-up with the responsibilities and challenges of
foreign assignment
 Employee’s lack of technical competence; and
 Employee’s lack of motivation to work in foreign countries.
Providing training for expatriates and their family members is a significant measure to
avert and (or reduce the expatriate failure) and enhance expatriate’s success on the
foreign assignment. Training programs may differ from country to country and from one
MNC to the other. However, they often consist of the following:
 Language Training
 Cross-cultural Training
 Field Experience
 In-house training programs
 Training by outside agencies.

We have already discussed the language training and cross-cultural training. Under
the cross-cultural training, trainees are exposed to factual information about the
historical, social, cultural, political, economic, and religious factors that shape the
mentality and behaviour of the people in a given country and region. The purpose of this
training is to help the expatriates and their family members to behave in a particular way
in the foreign social and work set up.
Training is provided through a mix of pedagogical tools like lectures, audio- visual
presentations, discussion with the speakers etc.
Field Experience: MNCs depute the prospective employees for a six months
period to the foreign subsidiary to observe and learn the culture, job related skills and
knowledge. The employees returns to the home country, prepares his/her family
members and then take-up the foreign assignment.
In-house Training Programs: In addition to cultural training and languages training,
MNCs train the employees in foreign exchange, international economics, international
trade and other related areas in order to provide managerial skills, job knowledge and
jobs skills. Japanese MNCs realized the significance of developing managerial skills to
expatriates in order to prepare them for added responsibilities in overseas assignments.
In fact, Japanese expatriates have to operate on their own in the foreign job without
much interaction or direction from the home. MNCs conduct in-house training programs
in order to develop managerial skills, technical skills and other job related skills.

Outside Agencies: A number of outside agencies and consultants throughout the

 world offer training programs to the expatriates to prepare them for foreign jobs, in
addition to in-house training. MNCs engage these outside agencies to provide training to
their expatriates. These agencies provide specialist training in technical skills,
managerial skills, advanced management knowledge, international politics, international
relations, foreign exchange etc.

On-the-Job Training Assignments

MNCs provide cross-cultural as well as language training though pre-departure

training as well as post-arrival training. Expatriates after adjusting to the physical
conditions as well as the general culture of the foreign countries should acquire specific
cultural skills, inter-personal skills and technical skills relating to the work place and the
job. MNCs can also provide these skills through on-the-job assignments. In fact,
employees acquire these skills most efficiently through on the job assignments.

On-the-job assignments provide employees an opportunity of interacting with

colleagues, superiors, subordinates and other stakeholders in the midst of the culture and
physical conditions and learn/acquire skills from the reality. Other opportunities of on-
the-job assignment include:
 Coaching from the Superiors: Employees acquire critical skills, tactics and
crucial knowledge relating to human behaviour, sensitive issues of foreign culture
like values and interpersonal norms, ethnical issues and functional aspects
through face-to-face coaching by the superiors and some times by the
colleagues as well as subordinates.
 Understudy: On-the-job assignments enable the employees to observe, and
study the superiors with regard to interpersonal skills, adapting to the culture,
decision-making, motivating, leadership and functional skills and develop
his/her own skills in these areas and mould his/her own personality to suit to the
foreign assignment.
 Multiple Management Skills: On-the-job global assignments to different jobs
in different departments of the MNC enable the employees to acquire the skills
in human resource management, financial management, marketing management
and operations management, in addition to cultural and specific behavioural skills.
Thus, on-the-job assignments enable the trainees to acquire multiple management
skills.
 Development of Global Mind-set: On-the-job assignment to different countries
with varied and conflicting cultures, social, political and economic systems and
behavioural backgrounds endure the employee to learn, slash the pre-conceived
mind-set and develop new mind-set that accepts and appreciate various cultures
and systems. Thus, global mind-sets that suits the MNCs is evolved and
developed through on-the-job assignments.
International Team Training

Team work is regarded as a distinctive characteristic of Japanese companies.

Employees view themselves as members of team community rather than
just employees. Team is a group of employees with complementary skills. In
fact, most of the MNCs, of late started designing and building teams for
enhanced organizational performance as it is widely established that team
performance is superior to that of individual.

Working in team is rather difficult than that as individual as the former

requires understanding and adapt to culture, values, norms and other
behavioural aspects of other members of the team. In turn, team as a whole
has to tune its behaviour towards the behavioural requirements of the team
project/task and the organization. Teams in MNCs are comprised of the
employees drawn from conflicting cultures and hence values, norms and
behaviours in addition to varied technical and functional skills. Hence,
MNCs train the employees in team building and team work skills.

Advantages of International Team Training

International team training offers a number of advantages to the MNCs like:

 Sharing and exchanging of technical skills, functional knowledge and
cultures across the nations;
 Developing global mind-set and preparing the employees for
effective international assignments;
 Creating challenge and competition among employees and thus
provides an opportunity to realize highest potential of international
employees;
 Realisation of highest human potential results in innovation and
creation;
 Developing problem solving skills, crisis management skills and
conflict management skills; and
 Developing organisational learning, global culture and global
human resources.
Process of International Team Training

International job assignments for employees from different countries on

a single project provides an opportunity to work together and share and
exchange their skills, culture and behaviours. Initially team members may
experience conflicts of understanding their cultures and behaviour and
adapting to each other’s culture as well as team culture. Once this storming
 stage is over, they learn from each other with regard to technical and
functional skills, which in turn multiplies their skills and lead to significant
human resource development. Further, it also results in global mind-set of
employees. These stages of the process ultimately result in the development
of competent global human resource that creates distinctive competency to
MNC and ultimately lead to organization development.

MULTINATIONAL PERFORMANCE
MANAGEMENT: CHALLENGES

International human resource managers as well as

the managements of MNCs face a variety of
challenges and difficulties in managing the
performance of different types of employees. These
challenges include:

 Total Company versus Parts of it

 Standard Format versus Customized format
  Uniformity of Data of Performance
 Environmental Variations
 Validity of Performance Criteria
 Time and Distance Variations
 Varied Levels of Maturity
 Rater’s Competence
 Rater Bias
 Host Environment
 Cultural Adjustments
Fig. 4.12 presents the challenges of performance appraisal in international
human resource management.

Standard Format versus customized format

Total company versus parts

Environmental Variations

Cultural Adjustments Performance Management Challenges Validity of performance criteria

Time and Distance Variations

Host Environment

Rater Bias Varied Levels of Maturity

Rater competence

Fig. 4.12: Challenges of Performance Appraisal in International

Human Resource Management
Total Company versus Parts of It

MNC consists of headquarters, subsidiaries and its various alliance companies. Making
different types of appraisals using different performance appraisal techniques is critical and
conflicting in MNC as the decision affects various organs of the MNC differently. In
addition, even the implementation process of the decision results in contrasting outcomes.
For example, alliance between Coca-Cola Limited and Pepsi- Cola Limited would be a
viable proposition in small countries like Papua New Guinea from the cost as well
operational points of view. But this alliance would negatively affect both Coca-Cola and
Pepsi-Cola in other countries. So, the dilemma is which decision would be appropriate?

The best practices from the point of view of a subsidiary need not be the same from the total
MNC and vice-versa is also true. However, it is viewed that the decision/ action that helps the
major parts of the MNC is appropriate than the one that helps a few parts/subsidiaries of
MNC. Similarly, the decision/action that helps the MNC in the long-run would be
appropriate though it would result in a loss in the short-run.
Standard Format versus Customized Format

Generally common performance criteria/performance factors are applied for a group of

employees belong to the same level and kind. Some companies apply quantitative factors
like profits, return on investment, cash flows, productivity, market share, sales per
employee, production cost per employee, operating costs per employee, punctuality and
rate of customer complaints. Some MNCs apply qualitative factors like innovation,
leadership, value creation, value addition, inter-personal relations, motivation, initiative,
judgement, adaptability, attitude and friendliness.

Challenge in performance appraisal is that should the headquarters and subsidiaries adapt the
same and standard criteria/performance factors or different criteria? Environmental factors of
the country concerned, also affect the performance criteria. Therefore, MNCs prefer to use
different criteria for different subsidiaries. However, this would affect the uniformity of
performance rating within the company

Uniformity of Data

MNCs and their subsidiaries operate in several countries under varying environmental
influence. In addition, they carry-out different kinds of business including manufacturing,
trading, dealing in services, construction projects and the like. Even in manufacturing sector,
they manufacture a variety of products. Therefore, providing data in terms of uniform data in
physical units would not be possible. However, variations in measurement of scale pose a
problem, though it is minor. Therefore, measurement of employee performance of different
subsidiaries in terms of physical productivity on a uniform scale is rather difficult
AREAS TO BE APPRAISED
Areas to be appraised vary from one type of the employee to other type of the employee
like parent country national, host country national and third country national. In addition, it
also varies based on the purpose/assignment for which an expatriate is sent to the host
country.

R. Hays identified four types of assignments. They are:

The Chief Executive Officer is the one who manages the entire operations of a subsidiary;

The Structure Producer is the one who reproduces the structure. He/she is familiar with
that in the parent company or in another subsidiary. The structures include marketing
framework, establishing plant, introduction of a new product, introduction of a new
education/ training program or introduction of a new service;

The trouble shooter is the one who diagnoses, analyses and solve a specific operational
problem; and

The operative is the one who performs functional job in the existing operational structure.

In addition to the above four types of assignments, there are four more foreign
assignments. These include:
The Strategist: The strategist is the one who studies the environment under which the
subsidiary operates, identifies the opportunities for new products/ services and new
markets, identifies the possible threats, analyses the related strengths and possible
weakness and formulates the best strategy based on SWOT(strengths, weaknesses,
opportunities and threats) analysis to achieve the subsidiary goals. He/she stays in the host
country for short duration in different intervals to formulate the strategy and oversee the
implementation of the strategy.

The Consultant: The consultant is the one who is assigned with a specific task of
providing advice on an operational issue or a new business.

The Innovator: The innovator is the one who is assigned with a task of innovating a new
product/service based on the resources and/or market of the host country or creating new
markets or opportunities for new markets

Skills Transferor: Skills transfer is the one who is assigned with task of developing the
host country national employees of the subsidiary. He/shestays in the host country for a
short duration and trains the host country nationals to take up and perform the jobs on
their own.
The following figure presents types of employees of MNCs based on assignments.

Chief Executive Officer

Structure Producer
Innovator

Skills Transferee MNCS Trouble Shooter

Employees

Strategist Operative

Consultant

Organizational Role Expectations

Parent companies predetermine the roles and expectations of these

roles from the parent country nationals before departure for the
subsidiary. American expatriates working in Hong Kong exhibited
their previous managerial behaviour in Hong Kong. This was due to
the failure of the parent company in providing cross-cultural training.
Therefore, it is viewed the parent company has to provide cross-cultural
training along with informing the parent country nationals of the role
expectations.

The parent company, parent country national and subsidiary

should have the common role conception. Role conception is an
interactive output of parent company expectations, subsidiary
expectations, organizational norms of the subsidiary and cross-
cultural norms of the parent country and the host country as
presented in Fig. 4.14.

Role conception of the third country national would be more

critical. Parent company’s expectations, role perception of the
TCN, subsidiary company’s expectations, organizational culture
of the parent company, and subsidiary company, culture of
organizations where TCN worked previously, country culture of
the third country national and host country culture influence the
role content of the third country national. Fig. 4.15 present the role
content of the third country national.
 Thus, the interaction of various factors produces the role content of the TCNs. The
role for the PCN as well as TCN is defined by the parent company, but it is performed
in the subsidiary and host country environment. The role performance of the TCN may
be deemed inappropriate by both the headquarters as well as subsidiary. For example, a
Korean working for a French Multinational in South Africa is viewed inappropriate by
the French Company as well as the subsidiary in South Africa. Torbiorn describes that
the task of PCN manager is psychological close to parent company and physically close
to subsidiary. In other words, it is physically distant to parent company and
psychologically distant from the subsidiary. PCN has to meet the role expectations of
both psychologically and physically close as well as distant environments. TCN is
physically and psychologically distant from both parent company as well as subsidiary.
Thus, he/she is in disadvantageous position from both the environments.

The critical aspect of the role is the task performance. However, task performance
does not take place on its own. In fact, the host country environment, and the parent
company’s expectations influence the task performance. For example, the employee
who is successful in performing a task in parent company need not be successful in
doing the same/similar job in the subsidiary. The vice-versa is also true. This is because; the aspects
of the role other than task impose complications in task performance. In contrast certain employees
perform their jobs in the host country setting better than that in the parent company. This is mostly
due to the best fit of the employee to the host country environment compared that in the parent
country. For example, the task performance of most of the Indian employees working in foreign
environment is superior to that in the home environment. This is because some employees may not
be comfortable to the political and cultural environment of India, but they feel more comfortable
with the foreign environments. This is true with most of the developing countries, thus contributing to
the brain drain from developing countries to the advanced countries.

Thus performance appraisal of the foreign employees should consider the role rather than just
task. Role is broader than the task. Role includes task and various other factors like leadership skill,
inter-personal relations, team building skills, understanding and adapting towards organizational
culture and culture of the host country at work place, unlearning the parent country and other
countries’ culture that is unacceptable in the host country, motivational skills, emotional balance and
stability skills, managing environmental influences, maintenance of integrity, and meeting the
conflicting interests of parent company and subsidiary. Fig. 4.16 presents various aspects, of role of
foreign employees. Various aspects of the role are interconnected and interact among themselves.
The interactive output of these aspects is the role performance of the foreign employee. The role
performance of the employee can be measured in terms of task output, relationship output and the
satisfaction level of the stakeholders concerned.
 Meeting Conflicting Needs
Leadership

Team Building Interpersonal Relationship skills

Job Tasks Parent company and subsidiary Expectation
Cultural Issues of various countries
Understanding and Adapting towards organizational

cultureMotivational Skills Skills of Managing Environmental Influences

Integrity

Fig. 4.16: Role Aspects of Performance of Foreign Employees

Task: Job tasks are core of employee’s foreign assignment. Job tasks include duties and
responsibilities of the job incumbent. For example, the job of the project manager includes carrying
out the project planning activities, project implementation, providing conducive climate for speedy
and efficient project implementation, project evaluation and control.
Leadership: Leadership aspects of the role include leading the subordinates,
inspiring the junior employees for higher level targets, innovations and to realize their
potentialities.

Meeting Conflicting Needs: The needs of the parent company and subsidiary
vary basically. Parent company needs profits to be transferred to the parent company
while the subsidiary emphasizes on the reinvestment of the profits for its sustainability,
growth and development. Expatriate’s performance can be measured based on the
degree at which the conflicting needs/expectations are balanced.

Interpersonal Relationship Skills: Maintenance of interpersonal relations among the

employees and stakeholders connected to the overall job performance determines the
performance of the expatriate.

Cultural Issues: The best fit culture to the efficient performance of task depends
upon adapting the culture of the host environment rather than the culture with which
the expatriate is familiar with.

Integrity: Integrity should be the binding factor of task performance from the long
run from the point of view of the stakeholders concerned. Therefore, the performance of the
expatriate should be measured from the integrity aspect of the task rather than the
immediate gains the task produces.

Managing Environmental Influences: Both internal and external environmental

factors influence the job performance of foreign employees. The skills of foreign
employee in converting the environmental influences in favour of the job enhance the
employee performance. Therefore, employee skills in this regard should be considered in
appraising performance.
 Motivational Skills: Cultures of certain countries like Pacific Island countries
make the employees inhibitive of their skills, talents and potentialities. The motivational
and inspirational skills of foreign employees help them in motivating the national
employees that enhances the job performance.

Organization Culture: Organizational culture, sometimes, determines the mode of

carrying the activities. In fact, some employees, though they possess required job skills,
fail to perform the job due to their inability to adapt themselves to the organization
culture.

Team Building: Team building skills of foreign employees invariably enhances

their job performance. These skills include work along with others, carrying with others,
understanding the cultures and the way others do the work, adjust one’s own traits and
the way of doing the work towards others and the way they do the work, skills of
collaborating with other ideas and talents.

Conclusion: As such, these role factors should be taken into account in deciding the
areas to be appraised of a foreign employee. In addition to the organizational role, the
foreign employee’s family roles like spouse and parent influences on job performance
should also be considered. Now, we discuss the family roles of foreign employees.
Family Roles

Employee’s roles like spouse and parent also influence employee’s job performance.
Employee’s performance to some extent depends upon the degree of adjustment of his/her spouse to
the host country’s culture, facilities and the institutions. The process of adjustment of the spouse can
be smoothened and fastened, if the employee takes initiative and interest in his/her spouse’s
adjustment. Similarly, the adjustment of employee’s children to the various institutions like schools
and facilities also influences the employee’s job performance. Employee’s initiative and
encouragement of his/her children would soften the process of his/her children adjustment.

Therefore, employee’s skills in initiating and helping the spouse and children in the adjustment
process should also be considered in appraising foreign employee performance.
Implications

Areas to be appraised for foreign employees should include a variety of aspects unlike the
employees of a domestic company. These areas in addition to job tasks and job duties include
various organizational role aspects as well as family roles. Thus, a number of aspects are to be
included in the areas of performance appraisal of foreign employees.
Areas to be appraised for HCNs

Measuring performance of host country nationals is relatively difficult compared to that of

employees of a domestic company as the host country nationals work with employees of varied
cultures like parent country nationals’ cultures and third country nationals’ cultures. Host country
nationals have to understand the cultures and predict the behaviour of parent country nationals and the
third country nationals and accordingly adjust their interpersonal behaviour.

Therefore, areas to be appraised of the host country nationals include, skills of understanding
varied cultures and behaviours, cultural adaptability and behaviour modification based on others’
cultures, behaivour and situations in addition to job tasks. Fig. 4.17 presents the role content of the
Host Country National (HCN).
 SYSTEM OF PERFORMANCE APPRAISAL
Performance appraisal for international employees is a 12-step process, viz.,
(i) Establish performance standards based on job description, job specifications, cultural requirements
and adaptability to foreign environment, talents in enabling family members to adjust to foreign
environment.
Separate performance standards should be established for each category of employees of MNCs like
PCNs, TCNs and nationals, short-term assignees, long-term assignees, immigrants and returnees.
(ii) Communicate standards/expectations to employees as well as evaluators.
(iii) Deciding upon the performance appraisal format: Different appraisal formats are based on
various appraisal techniques. Appraisal format covers the areas based on the appraisal techniques
adapted. Traditional techniques like graphic rating scales, ranking method, forced distribution
methods, and checklist methods emphasize on traits. Thus, format based on traditional methods
contains traits. Modern techniques of appraisal like critical incident method, behaivourally anchored
rating scales, assessment centres and management by objectives emphasize on achievement of
objectives/results. Thus, format based on modern techniques contain achievement of objectives/
results.
MNCs may use either standard format or customize formats for each subsidiary. Some of the US
MNCs tend to use the standard formats for parent country nationals as well as third country
nationals and all other types of foreign employees. Using standard format may reduce the workload
of human resource department in appraisal forms, but it creates a number of problems for the
evaluators as well as appraisees due to variations in culture, factors of adaptability, language
variations and systematic variations. Therefore, MNCs should not use the appraisal forms developed
for domestic purposes/employees to foreign situations as well as employees. In other words, they
should develop customized forms by incorporating the cultural aspects, environment adaptability
aspects, language and systematic aspects concerning the group of appraisees.
(iv) Measuring actual performance by following instructions by the evaluators through
observation, interviews, records and reports.
(v) Frequency of appraisal: Normally appraisals are conducted once in a year or in a six months
interval. But, the problem in once in a year appraisal is the recency effect. The raters generally
remember the recent actions of appraisee and rate on the basis of recent action/performance–
favourable or unfavourable–rather than on the total activities. This is because, the raters “… often
forget the details of what they have observed and they reconstruct the details on the basis of their
existing mental categories.”
Too frequent appraisals may not be appropriate for certain types of foreign assignments like project
assignments, consultancy assignments and training assignments. These assignees expect the
feedback at the end of the total activity. In addition, the purposes of appraisals are for compensation
package revision, employment contract renewal and need-assessment of appraisal’s training and
development. Quite frequent appraisals are not necessary to meet these purposes of appraisal. Added
to this, frequent appraisals and feedback disturb the employee in his/her work direction and
programming. Therefore, appraisal and feedback to employee can be once in year or six months or
at the end of the assignment whichever is earlier.
(vi) Adjust actual performance due to environmental influence: As discussed earlier,
environmental factors and particularly cultural factors affect the actual performance. Therefore, the
rater has to adjust the performance considering the nature and degree of environmental influences,
had these factors are not in built in the appraisal form and mechanism

(vii) Compare the adjusted performance with that of others and previous: Comparing the adjusted
performance with that of others as well as previous performance ratings gives an idea of where the
employee stands. If performance of all employees is ranked either too high or too low, there would be
something wrong with the standards or job tasks or the rater.

(viii) Compare the actual performance with standards and find out deviations, if any: Deviations may
be positive or negative. If the actual performance is more than the standards, it is positive deviation and
vice- versa is negative deviation. This exercise helps for adjustment of standards, if necessary.

(ix) Feedback to the appraise: The appraiser have to communicate the actual performance to the
employee concerned, listen to him/her with regard to their reasoning and adjust the performance rating
either of the sides of the scale, if employee’s reasoning provides additional input. Mutual discussion of
the appraiser and appraisee makes the appraisal close to perfectness and ratings.

(x) Suggest changes in job analysis and standards, if any: Based on the employee’s feedback and
explanation to the rating, as well as considering the cultural and environmental factors, the evaluator
should suggest the changes in job description, job specification and standards of appraisal.

(xi) Consider the appraisal results for contract renewal and promotion: MNCs should consider
performance appraisal ratings for contract renewal of employment, and also for promotion. In addition,
MNCs can also plan promotion as well as career planning and development based on performance
ratings.

(xii) Plan for employee training and development: MNCs should consider the performance appraisal
information for employee training and development. MNCs, in doing so, should analyze the information
very carefully as the performance ratings, sometimes, keep the cultural and other issues outside the
purview of the ratings. Consequently, highly potential candidates may fail to produce high performance
results. MNCs should consider various issues like:

 Demonstration of initiatives,

 Realization of potentiality

 Presentation of commitment behaviours

 Exhibiting interpersonal relations

 Proof of intelligence

 Show causing distinctive capabilities and talents.

MNCs should consider the culture and environment of the country in deciding upon these factors as
intelligence, behaviours, talent etc., are determined differently in different cultures. For example seeing
eye-to-eye with the superiors is treated as arrogance in Japan and its is treated as normal and essential
factor for job performance in USA. Similarly culture affects the communication style, group and team
orientation and hierarchies in organizational structures. Therefore, MNCs should consider all these
factors in assisting the training and development needs based on performance appraisal information.

PROBLEMS OF PERFORMANCE APPRAISAL

, Performance appraisal of international employees is critical and challenge due to the following
reasons:

 Content Bias: Most of the MNCs view the international performance management equal to that
of domestic performance management and as such, they include only task factors in the content to be
appraised by ignoring the culture and environmental factors, where the latter play a dominant role in the
performance of international employees. In fact, almost all the employees selected for international
assignments would be competent for doing the job for which they are selected.

 Ineffective Raters: MNCs use the multiple raters for appraising the performance. However,
ratings of the superior in the parent company are mostly considered for all significant decisions like
contract renewal, promotion, revision of compensation package and identifying training and
development needs.

But the significant lacuna in this mechanism is that the superiors in the parent company, in most cases,
do not have the experience of working in a foreign country or in a subsidiary environment. They lack
the knowledge of organization culture of the subsidiary. In addition, they are blind of economic system
and political factors that influence the job performance of a foreign employee to a greater extent. Thus,
the rater of the parent company would not be effective in most cases in appraising an employee in an
environment which is mostly strange for him/her.

In addition, the rater in the host country though familiar with the culture and environment of the
country, may not be aware of employee’s culture. Thus, the raters would be mostly in effective.

 The Recency Effect: The raters generally remember the recent actions of the employee at the
time of rating and rate on the basis of these recent actions – favourable or unfavourable rather than on
the whole of activities.

 Distant Work Places: Foreign employees who work on projects can’t be directly observed by
even the host country supervisor. Similarly, the performance of other employees working in the filed at
different places cannot be directly observed by the raters. Added to this, the parent country superior who
never observes the employee at work rates the performance.

 Appraisal Forms: Majority of the MNCs tend to use the same standard appraisal forms for both
the domestic employees as well as all kinds of foreign employees like PCN, TCN, long term assignees,
short-term assignees, project managers, consultant, skills transfers etc. These forms would not be
suitable for different types of employees and countries due to cultural and environmental variations.(See
Box 4.17).

 Failure of the Superiors in Conducting Appraisal Interviews: Raters of the parent company
rarely conduct appraisal interviews, due to absence of physical proximity and lack of knowledge of
work activities as well as cultural aspects of the appraisers.

Use of Performance Data: Some of the MNCs make the contract renewal, promotion,
compensation package and employee training and development decisions based on factors
other than performance appraisal data and information like personal network, personal
prejudice, and favouritisms. In other words, they do not use the performance appraisal data
for which it is meant. Thus, performance appraisal would be a routine and ritual function.

Unit-5

Introduction

It is difficult to compare industrial relations systems and behaviour across

national boundaries; a labour relations concept may change considerably when
translated from one industrial relations context to another. The concept of
collective bargaining in the United States means negotiations between a labour
union local and management; in Sweden and Germany it refers to negotiations
between an employers’ organisation and a trade union at the industry level.
Cross-national differences also emerge as to the objectives of the collective
bargaining process and the enforceability of collective agreements.

Human resource management practices result in creation of relations among

employees, management and trade unions. Such relations are called industrial
relations. Similarly the HRM policies and practices of international business
with regard to different country nationals (PCN, TCN and HCN) result in
relations among management of multinational corporations and other kind of
employees. Such relations are called international industrial relations. These
relations play a crucial role in strategy formulation and implementation in
international business either by enabling or disabling MNCs in the process of
doing business in various countries.
 Trade Unions and International Industrial Relations

Before moving to trade unions and International industrial relations, let us first the basics of industrial
relations. ILO defines industrial relations, “Industrial relations deal with either the relationship between
the state and employers’ and workers’ organisations or the relation between the occupational
organisations themselves”. International industrial relations deals with the complex relationships among
employers employing foreign national, employees of different nationalities, home and host country
governments and trade unions of the organisations operating in various countries and their national and
international federations.

Factors that Influence Industrial Relations

Factors influencing the industrial relations are as follows:

Institutional factors: Home and host country government policy, labour legislation, voluntary courts,
collective agreement, employee courts, employers’ federations, social institutions like community, caste,
creed, system of power status etc. in various countries form Institutional factors.

Economic factors: Include economic organisation, like capitalist, communist, mixed etc. , the structure
of labour force, demand for and supply of labour force etc.

Technological factors: Include mechanisation, automation, rationalisation, computerisation, information

technology etc.

Social and Cultural factors: Include population, religion, customs and traditions of people, ethnic
groups, cultures of various groups of culture etc.

Political factors: Include political system in the country, political parties and their ideologies, their
growth, involvement in trade unions etc.

Governmental factors: Include host and home country governmental policies like globalisation policies,
industrial policy, economic policy, labour policy, export policy, migration and immigration policies etc.

Example: Globalisation policies in countries like Bulgaria brought

dramatic changes in MNCs in that country.

Early involvement of Trade Unions is advised when MNCs plan to take over
earlier Public enterprises where there is a tradition of trade unions.

Actors of Industrial Relations

Industrial societies necessarily create industrial relations defined as the
complex of interrelations among workers, management and the government.
 Three major participants or factors of industrial relations, thus, are workers and
their organisations, management and the government.

1.Workers and their organisations: The total worker plays an important role in industrial relations. The
total worker includes working age, educational and family background, psychological factors, social
background, culture, skills, attitude towards others’ work etc. Workers’ organisations, prominently
known as trade unions, play major role in industrial relations. The main purpose of trade unions is to
protect the workers’ economic interests through collective bargaining and by bringing pressure on the
management through economic and political tactics. Trade union factors include leadership, finances,
activities etc.

2. Employers and their organisations: Employers employ expatriates, pay salaries and
various allowances, provide a variety of benefits, regulate the working relations through
various

policies, rules and regulations and by enforcing labour laws of the

country. They expect workers to follow rules and regulations, contribute
their resources to the maximum to achieve organisational goals and
mission. The difference between demands of the workers and employers
results in industrial conflict. Normally employers’ power is higher than
that of their workers. But their power is undermined when compared to
that of trade unions. Employers form their organisations to equate (or
excel) their bargaining power with that of the trade unions. These
organisations protect the interest of the employer by pressurising the trade
union and the government.

Government: Government plays a balancing role as a custodian of the

nation. Government exerts its influence on industrial relations through its
labour policy, industrial relations policy, implementing labour laws, the
process of conciliation adjudication by playing the role of a mediator etc.
It tries to regulate the activities and behaviour of both employees’ and
employers’ organisations, individual and group organisations.

Definition of Trade Union

A trade union is a continuing long term association of employees, formed and

maintained for the specific purpose of advancing and protecting the interests of
the members in their working relationship. Some argue that it also covers
employers’ organisations and friendly societies.

Factors for Differences in Trade Unions Structure

Several factors are identified that may underlie the historical differences in the
structure of the trade unions in various countries:

The mode of technology and industrial organisation at critical stages of union development;

Methods of union regulation by government;

Ideological divisions within the trade union movement;

The influence of religious organisations on trade union development; and

Managerial strategies for labour relations in large corporations.

Table 10.1: Trade Union Structure in Western Societies

Australia general, craft, industrial, white-collar

Belgium industrial, professional, religious, public sector

Canada industrial, craft, conglomerate

Denmark general, craft, white-collar

industrial, white-collar, professional and

Finland technical

Germany industrial, white-collar

general, craft, industrial, white-collar, public

Great Britain sector

Japan enterprise

The Netherlands religious, conglomerate, white-collar

Norway industrial, craft

Sweden industrial, craft, white-collar and professional

Switzerland industrial, craft, religious, white-collar

United States Industrial, craft, conglomerate, white-collar

Union structures differ considerably among Western countries. These include industrial
unions, which represent all grades of employees in an industry; craft unions, which are based
on skilled occupational grouping across industries; conglomerate unions, which represent
members in more than one industry; and general unions, which are open to almost all
employees in a given country. Enterprise unions are common in Asia-Pacific nations, although
there are national variations in their functions, and in the proportion of enterprise unions to
total unions.
The lack of familiarity of multinational managers with local industrial and political conditions has
sometimes needlessly worsened a conflict that a local firm would have been likely to resolve.
Multinationals are recognising this shortcoming and admitting that industrial relations

policies must be flexible enough to adapt to local requirements.

Caution Trade unions limit the strategic choices of multinationals in three
ways:
1. By influencing wage levels to the extent that cost structures may
become uncompetitive.
2. By constraining the ability of multinationals to vary employment levels
at will.
3. By hindering or preventing global integration of the operations of
multinationals.

Let us explore in detail, how trade union limits on MNC’s strategic choices:

1. Influencing Wage Levels: Although the importance of labour costs

relative to other costs is decreasing, labour costs still play an important
part in determining cost competitiveness in most industries. The influence
of unions on wage levels is important. Multinationals that fail to
successfully manage their wage levels will suffer labour cost
disadvantages that may narrow their strategic options.

2. Constraining the Ability of MNCs to Vary Employment Levels at Will:

For many MNCs operating in Western Europe, Japan, and Australia, the
inability to vary employment levels at will is more serious problem than
wage levels. Many countries now have legislation that limits considerably
the ability of firms to carry out plant closure, redundancy, or layoff
programmes unless it can be shown that structural conditions make these
employment losses unavoidable. Plant closure or redundancy legislation
in many countries also frequently specifies that firms must compensate
redundant employees through specified formulae such as two weeks’ pay
for each year of service. In many countries, payments for involuntary
terminations are rather substantial, especially in comparison to those in
the United States.

Unions influence this process in following two ways:

(a) By lobbying their own national governments to introduce redundancy
legislation,
 (b) By encouraging regulation of MNCs by international organisations
such as the Organisation for Economic Cooperation and
Development (OECD).

Multinational managers who do not take these restrictions into account in

their strategic planning may well find their options severely limited.

3. Preventing Global Integration of MNC Operations: MNCs make a

conscious decision not to integrate and rationalise their operations to the
most efficient degree because to do so could cause industrial and political
problems.

Example: General Motors is an example of this “sub-optimising of

integration.” GM was alleged in the early 1980s to have undertaken substantial
investments in Germany (matching its new investments in Austria and Spain)
at the demand of the German metalworkers’ union (one of the largest industrial
unions in the Western world) in order to foster good industrial relations in
Germany.

Union influence delays the rationalisation and integration of MNCs’

manufacturing networks and increases the cost of such adjustments. But
in automobiles industries at least, it permanently reduces the efficiency of
the integrated MNC network.

Therefore, treating industrial relations as incidental and relegating them to

the specialists in various countries, is inappropriate. In the same way as
government policies need to be integrated into strategic choices, so do
industrial relations.

Key Issues in International Industrial Relations

Because national differences in economic, political, and legal systems, there

are different industrial relations systems across countries, so, MNCs delegate
the management of industrial relations to their foreign subsidiaries. A policy of
decentralisation does not keep corporate headquarters from exercising some
coordination over Industrial relations strategy. Corporate headquarters will
become involved in or oversee labour agreements made by foreign subsidiaries
because these agreements may affect the international plans of the firm and/or
create precedents for negotiations in other countries.

Example: The U.S. firms are less to recognise trade unions, preferred not
to join employers associations, had more highly developed and specialised
personnel departments at plant level, and tended to pay higher wages and offer
more generous employee fringe benefits than local firms.
Multinational headquarters involvement in industrial relations is influenced by several factors
as detailed below:
The Degree of Inter-subsidiary Production Integration: A high degree of
1. integration was
found to be the most important factor leading to the centralisation of the
Industrial relations
function within the firms. Industrial relations throughout a system become
of direct
importance to corporate headquarters when transnational sourcing
patterns have been
developed; that is, when a subsidiary in one country relies on another
foreign subsidiary
as a source of components or as a user of its output. A coordinated
industrial relations
policy is one of the key factors in a successful global production strategy.
Nationality of Ownership of the Subsidiary: There are differences
2. between European and
U.S. firms in terms of headquarters involvement in industrial relations.
U.S. firms tend to
exercise greater centralised control over industrial relations than do
British or other
European firms. U.S. firms tend to place greater emphasis on formal
management controls
and a close reporting system to ensure that planning targets are met. The
foreign-owned
multinationals in Britain prefer single-employer bargaining and are more
likely to assert
managerial prerogative on matters of labour utilisation. U.S. – owned
subsidiaries to be
much more centralised in industrial relations decision-making than
British-owned. This
is due to the more integrated nature of U.S. firms and the more
ethnocentric managerial
style of U.S. firms.
International Human Resource Management Approach: The various
3. international human
 resource management approaches utilised by multinationals have
implications for
international labour relations. An ethnocentric predisposition is more likely
to be associated
with various forms of industrial relations conflict. A geocentric firm will
bear more
influence on host-country industrial relations systems, due to their greater
propensity to
participate in local events.
MNC Prior Experience in Industrial Relations: European firms have
4. tended to deal with
labour unions at industry level rather than at firm level. The opposite is
more typical for
U.S. firms. In the United States, employer associations have not played a
key role in
industrial relations system and firm-based industrial relations policies are
the norm.
Subsidiary Characteristics: A number of subsidiary characteristics to be
5. relevant to
centralisation of industrial relations:

(a) Subsidiaries that are formed through acquisition of well established

indigenous firms tend to be given much more autonomy over
industrial relations than are greenfield sites set up by a multinational
firm.

(b) Greater intervention would be expected when the subsidiary is of key

strategic importance to the firm and the subsidiary is young.

(c) Where the parent firm is a significant source of operation or

investment funds for the subsidiary, that is, where the subsidiary is
more dependent on headquarters for resources, there will tend to be
increased corporate involvement in industrial relations and human
resource management.

(d) Poor subsidiary performance tends to be accompanied by increased

corporate involvement in industrial relations. Where poor performance is
due to industrial relations problems, multinationals tend to attempt to
introduce parent-country industrial relations practices aimed at reducing
industrial unrest or increasing productivity.

6. Characteristics of the Home Product Market: An important factor is the extent of the
home product market. If domestic sales are large relative to overseas operations, it is
more
 likely that overseas operations will be regarded by the parent firm as an
extension of domestic operations. Lack of a large home market is a strong
incentive to adapt to host-country institutions and norms. Since the
implementation of the Single European Market in 1993, there has been
growth in large European-scale companies that centralise management
organisation and strategic decision-making.

Management Attitudes towards Unions: Knowledge of management

attitudes concerning unions may provide a more complete explanation of
multinational industrial relations behaviour than could be obtained by
relying solely on a rational economic model. Thus, management attitudes
should also be considered in any explanation of managerial behaviour
along with such factors as market forces and strategic choices. This is of
particular relevance to U.S. firms, since union avoidance appears to be
deeply rooted in the value systems of American managers.

Worldwide trade union membership has fallen over the past decade due to
economic factors such as reduced public sector employment, reduced
employment in manufacturing industries as a share in total employment, and
increased competition. It is also associated with decentralisation of industrial
relations to business unit level, changes in governance, and legislative changes.

Example: The sharpest drop in union density (almost 36% over the past
decade) has been in central and eastern Europe, and may be explained by
political and economic changes associated with the dissolution of the Soviet
bloc and the end of compulsory union membership. Union membership decline
is also linked to the introduction of new forms of work organisation,
globalisation of production, and changes in workforce structure.

Industrial disputes is the another key issue in international industrial relations.

Strike-proneness was measured via three variables – strike frequency, strike
size, and strike duration. There was no difference across the two groups of
firms with regard to strike frequency, but multinational subsidiaries did
experience larger and longer strikes than local firms. This difference indicates
that foreign-owned firms may be under less financial pressure to settle a strike
quickly than local firms – possibly because they can switch production out of
the country.

International industrial relations are influenced by a broad range of factors.

General statements cannot be applied to the organisation of the industrial
relations function within MNCs. Rather, different MNCs adopt different
industrial relations strategies in relation to the environmental factors peculiar
to each firm.
 Response of Trade Unions to Multinational, Regional Integration

Trade union leaders consider the growth of multinationals as a threat to the bargaining power of labour
because of the considerable power and influence of large multinational firms. MNCs are neither
uniformly anti-union nor omnipotent and monolithic bureaucracies, their potential for lobbying power
and flexibility across national borders create difficulties for employees and trade unions endeavouring to
develop countervailing power.

There are several ways in which MNCs have an impact on trade union and employee interests.
Following are the seven characteristics of MNCs as the source of labour unions’ concern about
multinationals:

Formidable financial resources: This includes the ability to absorb losses in a particular foreign
subsidiary that is in dispute with a national union and still an overall profit on worldwide operations.
Union bargaining power may be threatened or weakened by the broader financial resources of a
multinational. It is true when multinational has adopted practices of transnational sourcing and cross-
subsidisation of products or components across different countries. The economic pressure which a
nationally based union can exert upon a multinational is certainly less than would be the case if the
company’s operations were confined to one country.

Alternative sources of supply: This may take the form of an explicit

“dual sourcing” policy to reduce the vulnerability of the multinational to a
strike by any national union. Also,
 temporary switching of production in order to defeat industrial action has been
utilised to
some extent in the automotive industry.

Ability to move production facilities to other countries: For employees

and trade unions, job security may be threatened if a multinational seeks
to produce abroad what could have, or previously has been manufactured
domestically. National relative advantages provide MNCs with choice as
to location of units.

Example: Within the EU, multinational management is locating skill-

intensive activities in countries with national policies promoting training and
with relatively high labour costs. Conversely, semi-skilled, routine activities
are being located in countries with lower labour costs.

Threats by MNCs to reorganise production factors internationally with the

accompanying risk of plant closure or rationalisation will have an impact
on management–labour negotiations at a national level. The technical and
economic investments would reduce a multinationals propensity to
relocate facilities.

Remote locus of authority: It refers to the corporate head-office

management of a multinational firm. While many multinationals report
decentralisation and local responsiveness of HRM and industrial relations,
but trade unions and works councils have reported that the multinational
decision-making structure is opaque and the division of authority
obscured. Employee representatives may not be adequately aware of the
overall MNC organisational strategy and activities.

Production facilities in many industries: Most multinationals operate in

many product lines to diversify their risk and production facilities.

Superior knowledge and expertise in labour relations.

The capacity to stage an “investment strike”: When the multinational

refuses to invest any additional funds in a plant, thus ensuring that the
plant will become obsolete and economically uncompetitive.

Trade unions claim that they have difficulty accessing decision-makers located
outside the host country and obtaining financial information. Misinformation
has been central to the management strategy of using potential investment or
disinvestment in seeking changes in certain organisations.
 Example: In companies such as Heinz, Ford, Gillette, and General
Motors, workers have established that they had on occasions been
misinformed by management as to the nature of working practices in other
plants.

Response of trade unions to multinationals has been threefold:

To form International Trade Secretariats (ITSs)

To lobby for restrictive national legislation

To try and achieve regulation of multinationals by international organisations.

International Trade Secretariats (ITSs): There are fifteen ITSs, which

function as loose confederations to provide worldwide links for the
national unions in a particular trade or industry (example, metals transport
and chemicals). The secretariats have mainly operated to facilitate the
exchange of information.

One of the fastest growing of the ITSs is the International Federation of Commercial,

Clerical, Professional, and Technical Employees (generally known by its

French initials,

FIET), which is focused on the service sector. The long-term goal of each
ITS’ is to achieve

transnational bargaining with each of the multinationals in its industry.

Each ITS’ has

followed a similar programme to achieve the goal of transnational bargaining. The elements

of this program are:

(a) Research and information

(b) Calling company conferences

(c) Establishing company councils

 (d) Companywide union-management discussions

(e) Coordinated bargaining

Overall, the ITS have met with limited success the reasons for which
attribute to:

The generally good wages and working conditions offered by

multinationals.

Strong resistance from multinational firm management.

Conflicts within the labour movement.

Differing laws and customs in the industrial relations area.

Lobbying for Restrictive National Legislation: On a political level, trade

unions have for many years lobbied for restrictive national legislation in
United States and Europe. The motivation for trade unions to pursue
restrictive national legislation is based on a desire to prevent the export of
jobs via multinational investment policies.

Example: In the United States, the AFL-CIO has lobbied strongly in this
area. A major difficulty for unions when pursuing this strategy is the reality of
conflicting national economic interests. In times of economic downturn, this
factor may become an insurmountable barrier for trade union officials.

Regulation of MNCs by International Organisation: Trade unions exert

influence over multinationals via international organisations and they
have met with some success. Through trade union federations such as the
European Trade Union Confederation (ETUC) and the International
Confederation of Free Trade Unions (ICFTU), the labour movement has
been able to lobby the International Labour Organisation (ILO), the
United Nations Conference on Trade and Development (UNCTAD), the
Organisation for Economic Cooperation and Development (OECD), and
the European Union (EU). The ILO has identified a number of
workplace-related principles that should be respected by all nations:

Freedom of association,

The right to organise and collectively bargain,

Abolition of forced labour, and

Non-discrimination in employment.
In 1977, the ILO adopted a code of conduct for multinationals which
influential in the drafting of OECD guidelines for multinationals. These
voluntary guidelines cover disclosure of information, competition,
financing, taxation, employment and industrial relations, and science and
technology.

WORKERS PARTICIPATION IN MANAGEMENT

I) INTRODUCTION AND MEANING

Workers participation in management refers to the participation o f non-

managerial
employees in the decision-making process of the organisation. Workers
participation
gives employees the mental and psychological satisfaction and thereby
increase their
involvement in the affairs o f the organization. Workers participation in
management is
the most accepted principle of industrial relations in modern industry
throughout the
world and in India too. In the words of Keith Davis “Participation is a
mental and
emotional involvement of a person in a group situation which encourages
to contribute to
group goals or objectives and share responsibilities.”
According to the British Institute of Management Workers participation in
management

is the practice in which employees take part in Management decisions and

it is based on

the assumption o f commonality of interest between employer and

employee in furthering

the long term prospects of the enterprise and those working in it.

Sawtell defined participation as any or all the processes by which the

employees other

than managers contribute positively towards the reaching o f managerial

decisions which

affect their work.

Workers participation is a system where the workers get the rights to

participate in
decisions on issues which are of concern to the workers like wages,
working conditions,

safety, welfare, sharing o f gain, production related aspects, incentives and

allowances

were considered to be legitimate areas of workers concern and therefore

workers should

be consulted when these are determined.

Workers participation in management is one of the important aspects of

industrial

democracy. It is distribution of social power in industry so that the power

is shared

among all those who are engaged in work rather than power being
concentrated only in

the hands o f a few managers. Participation is a system of communication

and

Participation has to be done at different levels o f management.

a) At the shop floor level.

b) At the department level and

c) At the board level.

II) OBJECTIVES OF WORKERS PARTICIPATION IN

MANAGEMENT

The objectives o f workers participation in management may vary from

country tocountry, state to state, and from industry to industry depending
upon the quality ofmanpower, level o f technology, level o f competition
socio-economic status, politicalphilosophy, attitude of the working class
and the industrial relations scene. Though thereare so many factors
governing the objectives of workers participation some common
objectives are:

1. To prevent workers from exploitation by the management or by the

owners of the organisation.

2. To have democracy in the organization.

3. To have proper development of the working class.

4. To resolve conflicts and differences between management and

employees in a democratic manner.

5. To create in employees a sense of participation in industry.

6. To encourage suggestions from employees.

 7. To improve the working and living conditions of employees.

8. To promote better understanding between labours and management on

the various

issues o f the organisations.

9. To give employees a better understanding o f their role in the working

of the industry.

10. To give the employees an opportunity for self expression leading to

industrial peace,

good relations and increased co-operation.

Quality Circles
A quality circle is a volunteer group composed of workers , usually under the leadership of their
supervisor , who are trained to identify, analyze and solve work-related problems and present their
solutions to management in order to improve the performance of the organization, and motivate and
enrich the work of employees. When matured, true quality circles become self-managing, having gained
the confidence of management. Quality circle
Participative management technique within the framework of a company wide quality system in which
small teams of (usually 6 to 12) employees voluntarily form to define and solve a quality or performance
related problem. In Japan (where this practice originated) quality circles are an integral part of enterprise
management and are called quality control circles.
Quality Circles (QC) or Quality Control Circles (QCC) : History

 Pioneered by Japanese.
 Japanese nomenclature: Quality Control Circles (QCC), generally now known as Quality
Circles (QC) or some call it as Small Group Activity (SGA).
 1962: First QC Circle was registered with QC Circle Head Quarters in Japan.
 1974: Lockheed Company, USA started Quality Circle movement.
 1977: International Association of Quality Circles (IACC) was formed in USA.
 1980: BHEL, Hyderabad first in India to start Quality Circles.
 1982: Quality Circle Forum of India (QCFI) was founded.
Objectives of Quality Circle
The perception of Quality Circles today is 'Appropriateness for use1 and the tactic implemented is to
avert imperfections in services rather than verification and elimination. Hence the attitudes of employees
influence the quality. It encourages employee participation as well as promotes teamwork. Thus it
motivates people to contribute towards organizational effectiveness through group processes. The
following could be grouped as broad intentions of a Quality Circle:


1. To contribute towards the improvement and development of the organization or a
department.
2. To overcome the barriers that may exist within the prevailing organizational structure so
as to foster an open exchange of ideas.
3. To develop a positive attitude and feel a sense of involvement in the decision making
processes of the services offered.
 4. To respect humanity and to build a happy work place worthwhile to work.
5. To display human capabilities totally and in a long run to draw out the infinite
possibilities.
6. To improve the quality of products and services.
7. To improve competence, which is one of the goals of all organizations.
8. To reduce cost and redundant efforts in the long run.
9. With improved efficiency, the lead time on convene of information and its subassemblies
is reduced, resulting in an improvement in meeting customers due dates.
10. Customer satisfaction is the fundamental goal of any library. It will ultimately be
achieved by Quality Circle and will also help to be competitive for a long time.

BENEFITS OF QUALITY CIRCLES

There are no monetary rewards in the QC’s. However, there are many other gains, which largely benefit
the individual and consecutively, benefit the business. These are:

 Self-development: QC’s assist self-development of members by improving self-
confidence, attitudinal change, and a sense of accomplishment.
 Social development: QC is a consultative and participative programme where every
member cooperates with others. This interaction assists in developing harmony.
 Opportunity to attain knowledge: QC members have a chance for attaining new
knowledge by sharing opinions, thoughts, and experience.
 Potential Leader: Every member gets a chance to build up his leadership potential, in
view of the fact that any member can become a leader.

 Enhanced communication skills: The mutual problem solving and presentation before the
management assists the members to develop their communication skills.
 Job-satisfaction: QC’s promote creativity by tapping the undeveloped intellectual skills of
the individual. Individuals in addition execute activities diverse from regular work, which
enhances their self-confidence and gives them huge job satisfaction.
 Healthy work environment: QC’s creates a tension-free atmosphere, which each
individual likes, understands, and co-operates with others.
 Organizational benefits: The individual benefits create a synergistic effect, leading to cost
effectiveness, reduction in waste, better quality, and higher productivity.
All these benefits are lasting in nature, which bring about progress over a period of time.

United States: Industrial relations profile

The United States has been shaped by its experience with mass
immigration. According to the United Nations, 14% of the US population
are immigrants, more than four times any other country. According to the
International Labour Organization, Americans typically work 10 more
weeks each year than their European counterparts. As the world’s largest
economy, the US economy is distinct from other advanced economies in
that it has limited central government intervention in favour of a free
market, private enterprise system. The US labour movement is still
divided between industrial and craft unions. And US companies do not
typically use employer organisations to advance their interests in dealing
with workers.
 Three characteristics of American industrial relations stand out no matter
what country is compared with the United States:

(1) the relatively high development of local unions including a

considerable degree of local autonomy;

(2) the prevalence of local or company bargaining rather than industry-

wide bargaining;

(3) the considerable degree to which the rights of workers are prescribed
by terms of agreements between unions and employers.

These differences are particularly marked if one compares industrial

relations in the United States with industrial relations in continental
countries where the development of local unions has not gone very far.
These points of difference, however, also impressed union visitors from
Great Britain where unions are much more like American unions than are
the unions on the continent. A team of ten union officers was sent to the
United States by the General Council of the British Trades Union
Congress in 1949. Of local unions in the United States the British team
said: The essential difference between American Locals and British trade
union branches is the degree of autonomy exercised by the former. They
often have their own officers and full-time clerical staffs, do their own
administration, handle disputes and grievances insofar as they are able,
and frequently conduct negotiations with "their" companies.

WORKERS' PARTICIPATION IN THE UNITED STATES

The last few years have seen substantially increased American interest in
various forms of workers' participation in management . While it is too
soon to say how much of this current interest will have lasting results,
change is occurring more rapidly than seemed likely a few years ago
(Strauss, 1979), and it is occurring on a wide variety of fronts. Indeed the
1980's have turned out to be a period of great flux in labor-management
relations and in management generally, with a great deal of
experimentation occurring, particularly in large organizations.

Forms of WPM in USA

Direct Shop-floor Participation

Recently managerial interest has switched to formal direct shop-floor participation programs. These go
under a number of names: job redesign, Quality Circles (QCs), Employee Involvement (El), Labor-
Management Participation Teams, and fall under the general umbrella concept of Quality of Working
Life (QWL). For convenience, we shall group them under three heads: job redesign, QCs-EI, and the
Scanlon Plan. In doing so, we should emphasize that in practice the three forms overlap greatly.

Job redesign
 Work teams have been given responsibility for developing relations with vendors, determining which
operations can be handled individually and which by the group as a whole, setting work pace
(sometimes fast in the morning and slow in the afternoon), training new employees, and at one company
(Malone, 1975), even keeping financial records. Sometimes work team members serve in roles normally
reserved for staff personnel or supervisors: chairing the plant safety committee, redesigning work
equipment, or troubleshooting customers' problems. At times the job of foreman is rotated among
members of the group. When the G.M. Saturn plant opens, "councilors" (first-line supervisors) are to be
elected by the workers.

Quality circles and employee involvement programs

Quality circles and employee involvement programs (QC-EI) are the latest American fad and, in one
form or another, they have been widely adopted, often with considerable fanfare. The two programs are
much alike. In some cases they operate like autonomous work groups in that employees are permitted to
implement their own decisions. More frequently their function is to recommend changes which
management may implement if it wishes.

Despite their name, QC-EIs often deal with subjects other than quality, for example work flow,
productivity, safety, and workers' welfare generally. Often such committees start with housekeeping
issues, and then, as their members gain confidence in working with each other, they progress to
questions relating to productivity. Sometimes team members visit suppliers to check on quality

Workers’ participation in the United Kingdom

Workplace participation in the United Kingdom refers to the structures that people at work have to
participate in the way their organisation is managed. UK labour and company law generally leaves this
up to the management of the company, appointed by shareholders and banks, to determine, and in
contrast to most European jurisdictions requires only a minimum participation practices. Workers have
the right to,

 organise a works council which must be informed and consulted on major business changes,
particularly redundancies
 organise a health and safety committee, with the right to input on workplace health and safety
practices
Otherwise UK workers participate outside a firm's own structure through self-organisation of trade
unions, which can pressure management to enter into a collective agreement through the threat
of industrial action. Businesses are free in UK law to voluntarily grant employees participation rights, or
to reach a collective agreement with the trade union, to be members in the general meeting, or the right
to elect specific board members, though orthodox companies do not do this.

Workplace participation
New workplace participation practices have been emerging for larger companies, mostly through
initiatives led by the European Union, supported by the British Government.
Information and consultation
Under the Information and Consultation of Employees Regulations 2004 companies with more than fifty
employees must inform their workforce about major economic issues in their enterprise, and should
consult about major changes, particularly redundancies.
Cross border companies
Under the Transnational Information and Consultation of Employees Regulations 1999, companies with
over 1000 employees in more than one EU member state establish works councils to consult through the
course of business. But beyond this model of encouraging "dialogue" the channels for employee
participation in companies are limited to traditional systems of trade union collective bargaining and, as
a final resort, industrial action or strikes.