Chapter 11—Strategic International HRM Strategic Human Resources Planning, 7e

CHAPTER 11
Strategic International HRM

Student Study Notes

When entering new markets, organizations are confronted with a wide range of challenges, mostly
related to socioeconomic, political, and technological aspects.

Key Challenges Influencing HR Practices and Processes within an International Context

Workforce Diversity
• Integration and accommodation of an increasing number of older workers, individuals with
disabilities, LGBT (lesbian, gay, bisexual, transgender) individuals, or workers with ethnic and
cultural differences.
• The complexity of workforce diversity grows with each foreign market organizations enter.
• Employers benefit from a diverse labour force and tailor international HR policies and practices
accordingly.

Employment Legislation
• HR managers are faced with a complex legislation framework.
• When crossing national borders, Canadian HR managers face placement country employment
legislation.

Security
• Afghanistan and Iraq are known for unsafe business environments.
• Social upheavals have occurred in Egypt, Bahrain, Tunisia, Algeria, Libya, and Syria.
• All raise concerns about expatriate employees’ security and safety, including risk assessment,
precautions and contingency planning.
• Organized crime and kidnappings have increased in Venezuela, Mexico, Honduras, Nigeria,
Somalia, and Sudan.
• HR can help support employee security and safety, including risk assessments, precautions,
safety procedures, and contingency planning for employees and their families.
• Establishing relationships with Canadian government representatives in embassies, chambers of
commerce, consulates and high commissions, is essential, etc.

Strategic International Human Resources Management

Strategic international HR planning: projecting global competence supply, forecasting global

needs, and developing a blueprint to establish global competence pools within companies

Management issues, functions, policies, and practices that result from the strategic activities of
multinational enterprises and that affect the international concerns and goals of those enterprises.

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Chapter 11—Strategic International HRM Strategic Human Resources Planning, 7e

Student Study Notes

• HR departments are often understaffed, underfunded, and limited to a supporting role with little
key decision-making power.
• Employment legislation and socioeconomic and technological differences in local markets
demand sophisticated SIHRM systems.

The Domestic Stage and Strategy

Domestic strategy: internationalizing by exporting goods abroad as a means of seeking new

markets.

Multidomestic strategy: a strategy that concentrates on the development of foreign markets by

selling to foreign nationals.

• HRM systems for foreign subsidiaries that will be consistent with the local economic, political,
and legal environment.
• Companies are striving to introduce culturally sensitive products at the lowest cost.
• Resources and materials within regional branches are reallocated globally to make quality
products at the least cost.
• Company management at this stage takes a geocentric perspective.

Domestic Strategy
• The firm is focusing on domestic markets and exporting its products without altering them for
foreign markets.
• An export manager may be assigned to control foreign sales.

Multinational strategy: standardizing the products and services around the world to gain efficiency.

Exportive IHRM approach: transferring home HRM systems to foreign subsidiaries without
modifying or adapting to the local environment.

Global strategy
Introducing culturally sensitive products in countries with the least amount of cost.
As a firm develops expertise in international markets, the foreign market grows in importance.

Integrative IHRM approach: combining home HR practices with local practices and selecting the
most qualified people for the appropriate positions no matter where they come from.
• Also need to be culturally sensitive and move HR resources strategically around subsidiaries
and headquarters.
• Disadvantage is that the complexity is great and, in difficult economies, political persuasion
might still prevail.

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Chapter 11—Strategic International HRM Strategic Human Resources Planning, 7e

Student Study Notes

Key HR Practices and Processes Within an International Context

International Assignments

Purpose of International Assignments

• Strategic control—This category of assignment is intended to retain the culture, structure, and
decision processes of the home country.

• Transfer of knowledge and skills—As described earlier in the Life Time Fitness example, the
firm uses this type of assignment to bring necessary skills to the host country firm.

Types of International Assignments:

• Frequent flyers
• International commuters
• Short-term assignment
• Expatriate assignment
• Permanent transfer

International Human Capital Demand and Supply

• Labour market data

• External human capital demand and supply
• Tthe environment
• Flexible labour strategies

International Recruitment and Selection

Home-country nationals (HCNs): Individuals from the subsidiary country who know the foreign
cultural environment well.

Parent-country nationals (PCNs): Individuals from headquarters who are highly familiar with the
firm’s products and services, as well as its corporate culture.

Third-country nationals (TCNs): Individuals from a third country who have intensive international
experience and know the corporate culture from previous work experience with corporate branches
in a placement country.

Determine if internal or external recruitment will be used.

Will HCNs, PCNs, or TCNs be recruited?

Prior to adapting to the local environment:

• MNCs will have standardized HR systems across subsidiaries all over the world.

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Chapter 11—Strategic International HRM Strategic Human Resources Planning, 7e

Student Study Notes

• Transaction costs are reduced, corporate policies are consistent, and control over subsidiaries is
maintained.
• Advantage is that the HR managers at headquarters have a “tried and true” HR system the firm
can readily implement at subsidiaries across the world.

Integrative IHRM Approach

• Combining home HR practices with local practices and selecting the most qualified people for the
positions no matter where these candidates come from.
• The best HR policies and practices will be chosen for foreign subsidiaries.
• HR practices will be transferred to subsidiaries.
• Decision making regarding HR policies and practices will be performed by headquarters and
foreign subsidiaries.
• A disadvantage is that the local environment will not have been considered in the HR system
and fit with the local system of the relocation country.

Compensation

1. Home-based policy—Links the TCN’s base salary to the salary structure of the individual’s
relevant home country.

2. Host-based policy—Links the base salary to the salary structure of the placement country but
retains the home-country salary structure for other international supplements such as housing
and schooling.

3. Region-based policy—Compensates expatriates working in their home regions at somewhat

lower levels than those who are working in placements far from home.

Special Considerations
• The extent of interaction that the position requires—the more interaction required, the stronger
the expatriate’s cross-cultural skills need to be.
• The expected financial performance of the subsidiary.
• The volatility of the foreign labour market, for example, labour costs or education and skill
levels of HCNs.
Note: International employees and their families should understand that telecommunication and
transportation infrastructures are severely lacking in many placement countries.

Pre-Assignment Training
The researchers found that effective training should emphasize five points:
• Assess and evaluate training needs for expatriates.
• The purpose and relevant goals of training applicable to participants’ daily activities.
• Plan and design the training programs to meet training goals.
• Implement the training plan.
• Use several techniques to increase the effectiveness of training programs.

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Chapter 11—Strategic International HRM Strategic Human Resources Planning, 7e

Student Study Notes

Typically, cultural training involves the following:

• Area studies program that includes environmental briefings and cultural orientations.
• Culture assimilators—essentially multiple-choice questions about cultural characteristics.

1. Language training.

2. Sensitivity training (which could include role-playing exercises and behavioural modelling
videos designed to raise awareness of cultural differences in behaviour).

3. Field experiences, such as visits to the restaurants of the nationality or actual visits to the
placement country itself. These activities are not only useful for the global managers but also
helpful for their spouses and children.

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