Module 14: Managing Human Resources in an International Context

Claudia Yefremian IB-300

What are the Main Challenges Faced by International Companies?

1. Attracting and retaining talent

2. Developing talent in the firm 

Factors Impacting the Global Supply and Demand of Talent

• Size of workforce

• aging of populations

• urbanization of the workforce

• immigration labor

• guest workers

• labor unions

Size of the Workforce

1. Developing countries typically have larger and younger populations compared to developed economies

2. Countries with large populations (China, India, Brazil) offer not just vast domestic markets but also significant human capital for manufacturing, services, and tech sectors

3. High growth countries (particularly in Sub-Saharan Africa and South Asia) are expected to contribute most to global labor force expansion over the next decades

**tip for MNCs: need to evaluate not only current labor availability but also where future talent pipelines will emerge

Aging of Populations

• aging is more pronounced in developed countries

• creates implications for labor size and skill, political policies on immigration, and economic growth 

  

Urbanization of the Workforce

• more than half of world’s population now lives in urban areas

• rate of urbanization nearly eight times faster in developing countries from 1970 to 2020

• urbanization often creates a pool of low-cost, low-skill workers

Immigrant Labor

• Labor mobility is the movement of people from country to country or area to area seeking jobs

  • move to secure better economic situations

  • 2/3 of world’s migrants live in developed countries

  • US has 4% of world’s population but over 18% of world’s migrants

  • many migrants involved in “3-D” jobs: dirty, dangerous, and degrading 

Guest Workers

• people who go to a foreign country legally for certain types of jobs, on a temporary basis

• when economies slow, fewer workers are needed, unemployment increases among the nation’s citizens and guest workers are either not renewed or are deported 

Brain Drain & Reverse Brain Drain 

• loss by a country of its most intelligent and best-educated people

• Reverse brain drain occurs with the return home of highly skilled immigrants who have contributed to their adopted country

• Beijing’s Thousand Talents Program attempts to recapture talent that has emigrated from China

Four Strategic Approaches to IHRM

• Ethnocentric: a policy of hiring and promoting based on the parent company’s home-country cultural frame of reference

• Polycentric: a policy of hiring and promoting based on the specific local context in which the subsidiary operates

• Regiocentric: a policy of hiring and promoting based on the specific regional context i which the subsidiary operates

• Geocentric: a policy of hiring and promoting based on ability and experience without considering race or citizenship 

Three Employee Classifications

• Parent-country national (PCN): employee who is a citizen of the nation in which the parent company is headquartered; also called home-country national

• Host-country national (HCN): employee who is a citizen of the nation in which the subsidiary is operating which is different from the parent company’s home nation

• Third-country national (TCN): employee who is a citizen of neither the parent company nation nor the host country 

Ethnocentric Staffing Policy

• Companies with primarily international strategic orientation use home-country citizens (PCNs) for key posts

• low pressures for cost reduction and local responsiveness

• decisions made at HQ using home country’s frame of reference

• can be expensive to use employees from home country 

Polycentric Staffing Policy

• Companies with primarily multidomestic strategic orientation use local staffing for host-country operations

• low pressures for cost reduction and high pressures for local responsiveness

• HCNs understand local customs, cultures, and language

• HCNs may require considerable training

• Can be a conflict between loyalty to host country and employer

Regiocentric Staffing policy

• companies with primarily regional strategic orientation use both HCNs and TCNs to meet staffing needs

• higher pressures for cost reduction and lower pressures for local responsiveness

• cost savings not assured when using TCNs

Geocentric Staffing Policy

• companies with primarily transnational strategic orientation staff using worldwide staffing pools

• higher pressures for cost reduction and local responsiveness

• best person for job without consideration of national origin

• HRM tends to be consistent across all subsidiaries 

• difficulty of hiring and retaining employees with strong skill sets can increase costs 

International Staffing (Expatriates and Flexpatriates definition)

• Expartiates: employees who are relocated to the host country from the home country or a third country

  • typical assignment is 2-5 years

  • average age of expatriates is declining

  • growing proportion of expatriates are women

• Flexpartriates: home or third country employees on short-term assignments

Expatriates (cost and what they bring to the table)

• can bring scarce technical or managerial skills to the host country

• expat experience develops skills for promotion to leadership positions within company

• costs of expatriates are substantial, and failure rates are high

  • ¼ leave the company during the assignment 

Culture Shock & Reverse Culture Shock

• Anxiety people often experienced when they move from a culture that they are familiar with to one that is entirely different

• Reverse Culture shock occurs when the expat returns home

Three Dimensions of Cross-Culture Adjustment

• work context, including extent of job clarity

• reacting to differences in housing, food, education, health, safety, transportation

• interaction with local nationals 

The Expatriate’s Family

• as many as 90% of expatriates failures are family related

• more than 75% who decline relocations cite family concerns

• cultural adaptation pressures particularly high for spouse—leading to challenges regarding personal identify

• only about one in five companies require cross-cultural training for expats of their families 

Language Training

• foreign language skill is a critical factor influencing effective adjustment of expatriate and their family

• may help establish trust and good working relationship