Dowling, Festing & Egnle, Sr.:
International Human Resource Management
University of Applied Sciences Utrecht
Summary by: Viktória Dévényi (2017)
, Table of Contents
CHAPTER 1 – Introduction ................................................................................................. 6
Defining international HRM ........................................................................................................... 6
Differences between domestic and international HRM .................................................................. 7
More HR activities .............................................................................................................................. 7
The need for a broader perspective .................................................................................................... 7
More involvement in employees’ personal lives ................................................................................. 7
Changes in emphasis as the workforce mix of expatriates and locals varies ................................... 8
Risk exposure ...................................................................................................................................... 8
Broader external influences ............................................................................................................... 8
Variables that moderate differences between domestic and international HRM ........................... 9
The cultural environment ............................................................................................................... 9
Industry type ................................................................................................................................... 9
Extent of reliance of the multinational on its home-country domestic market ............................. 10
Attitudes of senior management to international operations ........................................................ 10
Applying a strategic view of IHRM .............................................................................................. 10
The changing context of IHRM .................................................................................................... 10
CHAPTER 2 – The Cultural Context of HRM ....................................................................11
Introduction .................................................................................................................................. 11
Introduction to cross-cultural management research ..................................................................... 11
Definition of culture ......................................................................................................................... 11
Schein’s concept of culture .............................................................................................................. 12
Cross-cultural management studies ................................................................................................. 12
CHAPTER 4 – IHRM in Cross-Border Mergers & Acquisitions, International Alliances
and SMEs .............................................................................................................................21
Cross-border alliances .................................................................................................................. 21
Cross-border mergers and acquisitions ........................................................................................ 21
M&A phases and HR implications ................................................................................................... 23
Strategic HRM and the role of the HR function in M&As.............................................................. 23
The role of expatriates in M&As ...................................................................................................... 24
A comparative approach to HRM in M&A processes...................................................................... 24
International equity joint ventures ............................................................................................... 24
IJV development stages and HRM implications .............................................................................. 25
The top management team and the role of expatriates in IJVs ....................................................... 26
International SMEs ....................................................................................................................... 26
SMEs: strategic importance and barriers to internationalization ................................................... 26
IHRM features in SMEs ................................................................................................................... 27
CHAPTER 5 – Sourcing Human Resources for Global Markets: Staffing, Recruitment and
Selection ...............................................................................................................................28
Approaches to staffing .................................................................................................................. 28
Ethnocentric...................................................................................................................................... 28
Polycentric ........................................................................................................................................ 28
Geocentric ......................................................................................................................................... 29
Regiocentric ...................................................................................................................................... 29
A philosophy towards staffing .......................................................................................................... 30
Viktória Dévényi – IBMS HU 2017 2
, Determinants of staffing choices ...................................................................................................... 30
Transferring staff for international business activities ................................................................. 31
Organizational reasons for international assignments ................................................................... 31
Types of international assignments .................................................................................................. 31
The roles of an expatriate ............................................................................................................. 32
The expatriate as an agent of direct control .................................................................................... 32
The expatriate as an agent of socialization ...................................................................................... 32
Expatriates as network builders ....................................................................................................... 32
Expatriates as boundary spanners ................................................................................................... 32
Transfer of competence and knowledge ........................................................................................... 33
The role of non-expatriates ........................................................................................................... 33
The role of inpatriates ................................................................................................................... 34
Recruitment and selection of international managers .................................................................. 34
Expatriate failure and success ...................................................................................................... 35
What do we mean by expatriate failure? .......................................................................................... 35
What is the magnitude of the phenomenon we call expatriate failure? .......................................... 35
What are the costs of failure?........................................................................................................... 35
Reasons for expatriate failure – and what about expatriate success? ............................................ 35
Selection criteria ........................................................................................................................... 36
Technical ability ............................................................................................................................... 36
Cross-cultural suitability: competence, adjustment and other indicators ....................................... 36
Family requirements ......................................................................................................................... 37
Country/Cultural requirements ........................................................................................................ 37
MNE requirements ........................................................................................................................... 37
Language .......................................................................................................................................... 38
Expatriate selection processes in practice ..................................................................................... 38
Formal selection procedures ............................................................................................................ 38
Dual career couples ....................................................................................................................... 39
CHAPTER 6 – International Performance Management ....................................................40
Introduction .................................................................................................................................. 40
Multinational performance management ..................................................................................... 40
Whole versus part ............................................................................................................................. 41
Non-comparable data ....................................................................................................................... 41
Volatility in the global business environment .................................................................................. 41
Separation by time and distance ....................................................................................................... 41
Variable levels of maturity across markets: the need for relevant comparative data ..................... 41
Control and performance management ........................................................................................ 42
Performance management of international employees ................................................................. 42
Expatriate performance management .............................................................................................. 42
A cross-cultural context for performance management .................................................................. 44
Performance management of non-expatriates ................................................................................. 44
Performance appraisal of international employees....................................................................... 45
Performance criteria ......................................................................................................................... 45
Who conducts the performance appraisal?...................................................................................... 46
Standardized or customized performance appraisal forms ............................................................. 46
Frequency of appraisal ..................................................................................................................... 46
Performance feedback ...................................................................................................................... 46
Viktória Dévényi – IBMS HU 2017 3
, Appraisal of HCN employees ........................................................................................................... 47
CHAPTER 7 – International Training, Development and Careers .....................................48
Introduction .................................................................................................................................. 48
The role of expatriate training ......................................................................................................... 48
Components of effective pre-departure training programs .......................................................... 49
Cultural awareness programs .......................................................................................................... 49
Preliminary visits .............................................................................................................................. 50
Language training ............................................................................................................................ 50
Practical assistance ........................................................................................................................... 51
Security briefings .............................................................................................................................. 51
Training for the training role ........................................................................................................... 51
TCN and HCN expatriate training ................................................................................................... 51
Provision of training for non-traditional expatriate assignments ................................................... 51
Short-term and non-standard assignments ...................................................................................... 51
International business travelers ....................................................................................................... 52
The effectiveness of pre-departure training .................................................................................. 52
Developing staff through international assignments ..................................................................... 52
Individual development .................................................................................................................... 53
Developing international teams........................................................................................................ 53
Trends in international training and development ....................................................................... 54
Re-entry and career issues ............................................................................................................ 54
The repatriation process ............................................................................................................... 55
Re-entry and repatriation problems ................................................................................................. 55
Individual reactions to re-entry .................................................................................................... 55
Responses by the MNE ................................................................................................................. 56
Staff availability and career expectations ........................................................................................ 56
ROI .................................................................................................................................................... 57
Knowledge transfer ........................................................................................................................... 57
Designing a repatriation program ................................................................................................ 58
CHAPTER 8 – International Compensation .......................................................................59
Introduction .................................................................................................................................. 59
Objectives of international compensation ........................................................................................ 59
Key components of an international compensation program for expatriates ............................... 60
Base salary ........................................................................................................................................ 60
Foreign service inducement and hardship premium ....................................................................... 60
Allowances ........................................................................................................................................ 60
Benefits ............................................................................................................................................. 61
Approaches to international compensation of expatriates ............................................................ 61
The Going Rate Approach ................................................................................................................ 61
The Balance Sheet Approach ........................................................................................................... 62
A third emerging approach to compensation: ‘Local Plus’ ............................................................ 62
Taxation ............................................................................................................................................ 64
International living costs data .......................................................................................................... 64
Differentiating between PCNs and TCNs ........................................................................................ 64
Tentative conclusions: patterns in complexity, challenges and choices ........................................ 64
Viktória Dévényi – IBMS HU 2017 4
,CHAPTER 10 – IHRM Trends and Future Challenges ......................................................66
Introduction .................................................................................................................................. 66
External factors: international business ethics and HRM .............................................................. 66
New global developments on the criminalization of bribery ........................................................... 66
Ethics-related challenges for the HR function of the multinational enterprise ............................. 67
Organizational factors: structure, strategy and IHRM ................................................................... 67
Non-government organizations (NGOs) .......................................................................................... 67
External factors: challenges in an uncertain world – safety, security and counterterrorism ........ 67
The evolving field of IHRM.............................................................................................................. 68
Viktória Dévényi – IBMS HU 2017 5
, CHAPTER 1 – Introduction
Defining international HRM
HRM: those activities undertaken by an organization to effectively utilize its human resources.
• Human resource planning
• Staffing (recruitment, selection, placement)
• Performance management
• Training and development
• Compensation (remuneration) and benefits
• Industrial relations
Morgan presents IHRM on three dimensions:
1. The broad human resource activities of procurement, allocation and utilization – these three
broad activities can be expanded into the six HR activities listed above.
2. The national or country categories involved in IHRM activities:
a. The host-country where a subsidiary may be located
b. The parent-country where the firm is headquartered
c. Other countries that may be the source of labor, finance and other inputs
3. The three categories of employees of an international firm:
a. Host-country nationals (HCNs)
b. Parent-country nationals (PCNs)
c. Third-country nationals (TCNs)
Morgan’s definition of IHRM: the interplay among the three dimensions of human resource
activities, type of employees and countries of operation.
Expatriate: an employee who is working and temporarily residing in a foreign country. Many
firms prefer to call such employees ‘international assignees’. PCNs are always expatriates.
Inpatriate: the transfer of subsidiary staff into the parent country (headquarters) operations. HCNs
only become ‘inpatriates’ when they are transferred into the parent-country operations as
expatriates. Some firms now use the term ‘inpatriate’ for all staff transferred into a country.
Stahl, Björkman and Morris’s definition of IHRM: “we define the field of IHRM broadly to cover
all issues related to managing the global workforce and its contribution to firm outcomes.
Hence, our definition of IHRM covers a wide range of human resource issues facing MNEs in
different parts of their organizations. Additionally we include comparative analyses of HRM in
different countries.”
Viktória Dévényi – IBMS HU 2017 6
,Differences between domestic and international HRM
The complexity of HR can be attributed to six factors:
• More HR activities
• The need for a broader perspective
• More involvement in employees’ personal lives
• Changes in emphasis as the workforce mix of expatriates and locals varies
• Risk exposure
• Broader external influences
More HR activities
To operate in an international environment, an HR department must engage in a number of
activities that would not be necessary in a domestic environment:
• International taxation – tax equalization policies must be designed to ensure that there
is no tax incentive or disincentive associated with any particular international assignment.
• International relocation and orientation – activities involved:
o Arranging for pre-departure training
o Providing immigration and travel details
o Providing housing, shopping, medical care, recreation and schooling information
o Finalizing compensation details such as delivery of salary overseas, determination
of various overseas allowances and taxation treatment
• Administrative services for expatriates – providing these services can often be a time-
consuming and complex activity because policies and procedures are not always clear-cut
and may conflict with local conditions. Ethical questions can arise.
• Host-government relations – important activity for the HR department, especially in
developing countries where work permits and other important certificates are often more
easily obtained when a personal relationship exists between the relevant government
officials and multinational managers.
• Language translation services – if the HR department is the major user of language
translation services, the role of this translation group is often expanded to provide
translation services to all foreign operation departments within the MNE.
The need for a broader perspective
Because HR managers working in an international environment face the problem of designing and
administering programs for more than one national group of employees, they need to take a broader
view of issues. Complex equity issues arise when employees of various nationalities work together,
and the resolution of these issues remains one of the major challenges in the IHRM field.
More involvement in employees’ personal lives
More involvement in employees’ personal lives is necessary for the selection, training and
effective management of both PCN and TCN employees. The HR department needs to ensure that
the expatriate employee understands housing arrangements, health care, and all aspects of the
Viktória Dévényi – IBMS HU 2017 7
,compensation package provided for the assignment. In a sense the ‘psychological contract’ is
between the MNE and the entire immediate family of the international assignee.
Changes in emphasis as the workforce mix of expatriates and locals varies
As foreign operations mature, the emphasis put on various HR activities change. For example, as
the need for PCNs and TCNs 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 local staff selection, training and management development.
Risk exposure
• Frequently the human and financial consequences of failure in the international arena
are more severe than in domestic business. For example, expatriate failure (the premature
return of an expatriate form an international assignment) and under-performance while on
international assignment is a potentially high-cost problem for MNEs.
• Most major MNEs must now consider political risk and terrorism when planning
international meetings and assignments and spending on protection against terrorism is
increasing. Terrorism also clearly had an effect on the way in which employees assess
potential international assignment locations.
Broader external influences
Major external factors that influence IHRM:
• The type of government
• The state of the economy
• Generally accepted practices of doing business
In developed countries, labor is more expensive and better organized than in less-developed
countries and governments require compliance with guidelines on issues such as labor relations,
taxation and health and safety. These factors shape the activities of the subsidiary HR manager to
a considerable extent.
In less developed countries, labor is cheaper, less organized and government regulation is less
pervasive, so these factors take less time. The subsidiary HR manager must spend more time,
however, learning and interpreting the local ways of doing business and the general code of
conduct regarding activities such as gift giving and employment of family members.
Viktória Dévényi – IBMS HU 2017 8
,Variables that moderate differences between domestic and international HRM
The cultural environment
Culture: a term used to describe a shaping process over time. This process generates relative
stability, reflecting a shared knowledge structure that attenuates (reduces) variability in values,
behavioral norms and patterns of behavior. An important characteristic of culture is that it is so
subtle that one is not always conscious of its relationship to values, attitudes and behaviors. One
usually has to be confronted with a different culture in order to fully appreciate this effect.
• Culture shock: a phenomenon experienced by people who move across cultures. The new
environment requires many adjustments in a relatively short period of time, challenging
people’s frames of reference to such an extent that their sense of self, especially in terms
of nationality, comes into question.
Because international business involves the interaction and movement of people across national
boundaries, an appreciation of cultural differences and when these differences are important is
essential. An awareness of cultural differences is essential for the HR manager at corporate
headquarters as well as in the host location. Activities such as hiring, promoting, rewarding and
dismissal will be determined by the legal context and practices of the host country and usually are
based on value system relevant to that country’s culture.
Industry type
Porter suggests that the industry in which a MNE is involved is of considerable importance because
patterns of international competition vary widely from one industry to another. At one end of the
continuum of international competition is the multidomestic industry, one in which competition
in each country is essentially independent of competition in other countries – e.g. retailing,
distribution, insurance. At the other end of the continuum is the global industry, one in which a
firm’s competitive position in one country is significantly influenced by its position in other
countries – e.g. commercial aircraft, semiconductors, copiers.
Viktória Dévényi – IBMS HU 2017 9
, Extent of reliance of the multinational on its home-country domestic market
A very large domestic market influences all aspects of how a multinational organizes its activities.
A large domestic market will also influence the attitudes of senior managers towards their
international activities and will generate a large number of managers with an experience base of
predominantly or even exclusively domestic market experience.
Attitudes of senior management to international operations
It is likely that if senior management does not have a strong international orientation, the
importance of international operations may be underemphasized (or possibly even ignored) in
terms of corporate goals and objectives. In such situations, managers may tend to focus on
domestic issues and minimize differences between international and domestic environments. The
failure to recognize differences in managing HR in foreign environments frequently results in
major difficulties in international operations.
Applying a strategic view of IHRM
De Cieri and
Dowling’s framework
assumes that MNEs
operate in the context
of worldwide
conditions, including
the influences of
industry, reginal,
national, and local
markets that include
geopolitical, legal,
socio-cultural, and
economic
characteristics.
*According to Gray: asymmetric events are threats that political, strategic, and military cultures
regard as unusual.
The changing context of IHRM
International firms compete in an increasingly complex environment where the level of challenge
of doing business can be highly variable. Internationalizing firms rely on having the right people
to manage and operate their businesses and good IHRM practices that are appropriate to the context
in which they occur. This combination of appropriate people and HR practices has been a constant
critical success factor in international business ventures.
Viktória Dévényi – IBMS HU 2017 10
