International HRM.ppt

KBS, Mumbai
Global
Human Resource Management

National Culture
and its effects on business and,
especially, on
practices
Focus of the module:

Module Structure
 the internationalization of business
 the role of HRM in an increasingly
international business environment
 Culture & Culture Change(?)
 how National Cultures differ (models and
dimensions of National Culture)
 relation of National Culture to business
practices
 operational strategies for multinational
corporations (MNCs)

Module Structure
 advantages & disadvantages of a culturally
diverse workforce
tactics for organizing work in multi-cultural
groups
 National Culture & HRM
the transferability of HRM systems and
practices across national borders

Module Structure
 the management of international
assignments
 sources of staff for international operations
 selection of staff for international assignments
 preparation of staff for international
assignments (Expatriation)
 repatriation of expatriates

Maximization of Learning Benefit
/Success in the Module
1. Class room Lecture
2. Suggested Readings
3. Case Participation
4. Textbook Reference

International

The internationalization of Business
and Organizations

competitive environment
internal
environment
organization
external
environment
Organizational Level

The External Environment consists of:
 Competitors
(e.g., number, quality, size)
 Physical conditions
(e.g., geography, legal practices, political
landscape)
 Cultural factors
(Daniels & Radebauch, 2001)

Internationalization of Business
 Resource Acquisition
 Diversification of Markets and Suppliers
 Reduction of competitive risk – need for
flexibility
Reasons
 Expansion of sales/revenues

Internationalization of Business
Examples of companies that derive
over 50% of their sales from
outside their home country:
BASF (Germany)
Nestle (Switzerland)
Gillette (United States)
Philips (The Netherlands)

Increasing Globalization
 Expansion of Technology
communications - transportation
Facilitating Factors
 Liberalization of cross-border movement
of both products (e.g., enactment of
WTO, 1995) & labour (e.g., European
Community)
 Supportive services (e.g., banking)

Multi-National Corporation (MNC)
or Multi-National Enterprise (MNE):
“a company that takes a global approach
to foreign markets and production”
“any company that has operations
in more than one country”
(Daniels & Radebauch, 2001)

Phases in the Development of
MNCs
Domestic
Global
Multinational
Phase 1 Phase 2 Phase 3 Phase 4
International
(Adler, 1991)

competitive environment
internal
environment
organization
external domestic
environment
external international
environment

cross-border
collaborations, mergers, acquisitions
Corporate Level
e.g., Daimler – Chrysler (1998)
Renault-Nissan (1999)
Air France – KLM (2004)
UBS – ABN AMRO (2006)
Alitalia with AirFrance-KLM ?

increasingly:
 multi-cultural societies and work-forces
 cross-border managerial and professional
movements and assignments
Individual level

Issues of Concern
 why some organizations outperform
others?
(e.g., Peters & Waterman, 1982)
 why some Nations achieve better
economic standards of living?
(Hofstede, McClelland, Porter)

Technology?
 Organizations in the same country have
access to the same technology
 Japan (and Korea later) lagged behind the
US and Western Europe in the 1960s and
early 1970s

Technology?
 Organizations in the same country have
access to the same technology
 Japan (and Korea later) lagged behind the
US and Western Europe in the 1960s and
early 1970s
“soft” factors
i.e., the human element or CULTURE
may be the answer
(e.g., Kanter, Hofstede, Peters & Waterman)

serious problems in many cross-border
collaborations, mergers and acquisitions
additional fact:
e.g., Daimler-Benz – Chrysler
DaimlerChrysler - Mitsubishi
reason:
inadequate consideration of the
cultural factor

serious problems in many cross-border
collaborations, mergers and acquisitions
additional fact:
e.g., Daimler-Benz – Chrysler
DaimlerChrysler - Mitsubishi
reason:
cultural factor
hence, we must take
CULTURE
into account

additional fact:
reason:
cultural factor
hence, we must take
CULTURE
into account

Culture is the product of human
civilisation,
and is inherent in every system that
relies on the interaction between
humans: that includes
Countries and Business organizations
therefore, culture must be taken into
account when we manage the human
element (or Human Resources) of
organizations

and the internationalization of the
Business Environment

application of principles of the
behavioural sciences to the
management of the work force
(Vecchio, 1995)
a hybrid discipline that aims at the development
of a set of inter-related practices and techniques
that enable the utilization of the work force in a
way that maximises its value-adding properties
for the organization
(Bozionelos, 2003)

organizations ask for:
Human resource Management
effort – performance - commitment

• Commitment
• Flexibility
• Quality
• Integration
(Guest, 1987)
revolves around four fundamental ideas:

does HRM really matter in practice?
(i.e., is there any empirical evidence?)

does HRM really matter in practice?
(i.e., is there any empirical evidence?)
Yes, there is…
e.g.,
Patterson et al., 1998 - Sheffield
Effectiveness Programme;
Huselid et al.; 1997 – study with 296
companies in the US

does effective HRM make a difference?
Sheffield Effectiveness Programme:
study with 100 manufacturing SME
companies
contribution to profitability
HRM 18%
R&D 8%
Technology 1%
Strategy 1%
Patterson et al. (1998)

does effective HRM make a difference?
Huselid et al. (1997) conducted a study with
293 publicly held companies in the US:
the effectiveness of HRM capabilities (esp.
Strategic HRM) were associated with
measures of organizational performance
including:
Cash flow
Market Value
Employee productivity

does effective HRM make a
difference?
condition for HRM effectiveness:
HRM practices are utilized in a
systematic, coherent and integrated manner
and not in a piecemeal way
(Ichniowski et al., 1996; Pfeffer, 1994;
Marchington & Wilkinson, 2000; Wood, 1995)

the traditionally dominant economic powers
(and the businesses/companies based in
them) have been being seriously challenged
since the 1970s
HRM and the changing global economic,
technological, and business environment

this increasingly fierce competition has
necessitated:
• improvements in efficiency
• cost-cutting
• increase in productivity
• innovativeness
• flexibility
in both the private and the public sector

this has led to measures and methods
including:
• downsizing, delayering, decentralization
• Lean production
• Total Quality Management
• Business Process re-engineering
• performance management
• (almost constant) culture change programmes

the increase in global competition has been
accompanied by technological advances,
esp. in the Information Communication
Technology (ICT) field
this combination has made the
pace of change, and the demands it
imposes to businesses and their employees,
even greater

this has also led to changes in the composition
of the workforce & the way work is organized:
• increase in the female/male ratio
• increase in part-time work
• increase in contractual/non-permanent /
temporary work arrangements
• shift from the traditional workplace (i.e., tele-
working)

this has also led to changes in the demands
from the workforce, which include:
 accelerated pace of learning
 adaptability to any form of change
 career-resilience
 Innovativeness
 “commitment”
 longer working hours

new forms of work and organization demand
new HRM strategies & practices
& also impose new HRM challenges
e.g., cases of worker exploitation
stress-related employee problems
the new “psychological contract”
(e.g., Redman & Wilkinson, 2001; Herriot & Pemberton, 1995)

 ability to manage Culture
 ability to manage Change
 understanding of Business
 knowledge of HR practices
most important competencies of
HR specialists
(Ulrich, 1998)

CULTURE
‘The collective programming of the mind
that distinguishes the members of one
category of people from those of
another’
(Hofstede & Bond, 1988)
acquired knowledge that people use to
interpret experience and generate
social behavior
(Luthans, 1997)

 Culture refers to the group
(e.g., friends, class, alumni, work group,
organization, Nation)
 Individuals learn and possess the cultural
characteristics of the group they belong to
Facts about Culture

erroneous assumption:
Culture is personality at group level
Personality is (mostly) inherited
(e.g., Jang et al., 1996)
but,
Culture is entirely learnt

phenomena regarding Culture
People are not aware of their own culture
People normally believe that their culture is
superior to other cultures
(“Ethnocentrism”)

characteristics of culture
values (second level)
implicit underlying assumptions (deep level)
(Schein, 1986)
surface
behavior(surface level)

Dominance of culture
dominant culture
sub-cultures
values common to all
or most members
values espoused by
certain groups/functions
(e.g., ethnic or cultural
minority groups)
(Morey & Luthans, 1985)

Strength of culture
strong cultures
are more likely to lead to
superior organizational performance
(Gordon & DiTomaso, 1992; Petty et al., 1995)
the degree to which the core values
of a particular culture are shared by
the members of the group

Strength of culture
strong cultures
are more likely to lead to
superior organizational performance
(Gordon & DiTomaso, 1992; Petty et al., 1995)
the degree to which the core values
of a particular culture are shared by
the members of the group
culture strength
is different from
culture dominance

organizational culture
A pattern of basic assumptions (e.g.,
concerning values, beliefs, attitudes) - invented,
discovered or developed in order the
organization to cope with problems of external
adaptation and internal integration - that has
worked well enough to be considered
valuable and, therefore, to be passed to new
group members as the correct way to
perceive, think, and feel in relation to these
problems.
[Adapted from Schein (1985, p. 9)]

characteristics
of organizational cultures
norms
rules
organizational climate
philosophy
dominant values
implicit assumptions
observable
behavioral
regularities
reflected in
products
and strategy

categorizing organizational
cultures
(e.g., Handy, 1986)
power person
task
role
mechanistic organic
difficult shift
change

National Culture mostly dominates over
corporate culture
(e.g., Seddon, 1985)
Organizational & National Culture

effects of National Culture on business:
organizations and their cultures are
embedded into national cultures
organizations in particular countries favour
particular ways of doing business because of
their national cultural background
employees in particular countries display
particular behaviour patterns and preferences
in the organization of work because of their
national cultural background

organizational Culture Change
 selection criteria for new members
 cultural unlearning of the old members
 adaptation of the reward system
 “removal” of members who espouse the
unwanted culture

organizational Culture Change
 selection criteria for new members
 cultural unlearning of the old members
 adaptation of the reward system
 “removal” of members who espouse the
unwanted culture
Question:
can this method be applied to
National Culture?

“laws” regarding Culture Change
Organizational culture may change, but with
the greatest of difficulty
(e.g., Apple Co., General Electric & IBM)
National cultures change only gradually
and cannot be imposed
(e.g., Chinese Cultural Revolution, 1967-1973
Russia and the Communist regime)

Determinants & Elements
of Culture

Determinants of Culture
Environment:
 Physical environment
e.g., motivation to work, to be reliable
 Political environment
e.g., social welfare systems
Language & Religion
facilitate cultural homogeneity
(e.g, English & Spanish speaking countries)

important cultural elements (1)
religion
 prohibits certain products or transactions
(e.g., mortgages in Muslim countries
McDonald’s in India)
 constrains business activities
(e.g., business only at certain weekdays)
 can cause political and military friction
 hence, economic stagnation

language/communication
 linguistic context
low context languages (e.g., English, German):
the full meaning is attached to the explicitly
transmitted part of the message
high context languages (e.g, Japanese, Arab):
most of the meaning is implied and not
attached to the explicit part of the message

language/communication
 descriptive accuracy
 body language & personal distance in
interpersonal interaction
(e.g., British, Japanese vs Latins)

perception of time
monochronism (USA, Northern Europe, Japan):
sequential (causal) relationships
VS
polychronism (Southern Europe, Latin America
Arab Countries):
simultaneous relationships
punctuality
(UK/USA vs Latins vs Arabs)

information processing
idealism (e.g., Southern Europe, South America)
consideration of general principles in an issue
vs
pragmatism (e.g., USA, UK):
consideration of (i.e., focus on) specific issues

space
public orientation (e.g., Far East, Arabs)
vs
private orientation (e.g., USA, Europe)

Parsimonious models of
Cultural Differences

Hofstede (1980, 1991, 2001)
1967 – 1973 employee attitudes survey
in 72 subsidiaries of I.B.M.

Hofstede’s Dimensions
1. Individualism - Collectivism
Individualism: the extent to which members
of the cultural group perceive themselves as
individuals rather than as members of
groups
Collectivism: the polar opposite of
individualism
the most well-researched dimension

relative positions
1965-85 1985-92 1993-2005
GDP/capita GDP/capita GDP/capita
PD I M UA CD growth rate growth rate growth rate
___________________________________________________________________________________
Hong Kong 15 37 18 49 1 6.1% 6.1% 4.0%
Taiwan 29 44 32 26 2 7.2% 6.5% 5.0%
Japan 33 22 1 7 3 4.7% 4.1% 1.1%
South Korea 27 43 41 16 4 6.6% 8.9% 5.3%
Singapore 13 40 28 53 8 7.6% 6.3% 6.4%
China 1 9.6% 9.9%
U.K. 43 3 9 47 15 1.6% 2.2% 2.9%
U.S.A. 38 1 15 43 14 1.7% 2.3% 3.3%
Australia 41 2 16 37 11 3.6% 2.8% 3.7%
Arab Countries 7 27 23 27 6.9% 5.0% 1.5%*
India 10 21 21 45 6 3.2% 5.4% 6.4%
France 16 11 36 13 2.9% 2.6% 1.9%
Sweden 48 11 52 50 10 2.3% 1.4% 2.7%
Germany 43 15 10 29 11 2.7% 2.8% 1.4%**
Hellas 27 30 19 1 5.1% 2.0% 3.2%

Kashima & Triandis (1985)
Individualistic vs Collectivistic countries
self-serving bias
internal attributions for success
but, external attributions for failure

Australians vs Japanese
stress in individual level decision-making
(Radford et al., 1993)

social loafing effect:
apparent reduction of individual effort in
group situations
(Earley, 1993)
the social loafing effect
in collectivistic countries (China, Israel)

in Collectivistic countries:
greater commitment to Goals
that serve the interests of the group
greater performance when
Goal-Setting is participative
(Aycan, 2000)

criteria for job performance:
(Aycan, 2000)
in Collectivistic countries: more emphasis on
relational and interpersonal elements
(e.g., loyalty, good nature, conformity)
in Individualistic countries:
more emphasis on task related elements
(e.g., productivity targets, quota)

Implications for Organization of Work:
in Collectivistic countries:
gainsharing, Teamwork
collective or consensus decision-making
in Individualistic countries:
pay-for-performance,
individual decision-making,
“traditional” work designs

2. Power Distance
the extent to which the less powerful
members of the cultural group accept
the unequal distribution of power in the
social system

low Power Distance cultures
may be more conducive for:
(Luthans, 2002)
modern organizational structures
(e.g., network, flat, flexible)
& contemporary work arrangements
(e.g., employee empowerment)
2. Power Distance

3. Masculinity - Femininity
the extent to which dominant values of the
society emphasize:
assertiveness and material rewards
(Masculinity) over
sensitivity and concern for others
(Femininity)
rule of thumb for Masculinity/Femininity:
distribution of gender roles in the culture

(Hofstede, 1997)
in Masculine countries:
• admiration for successful individuals
• no sympathy for the unfortunate
• motivation to ‘be the best’
• preference for ‘money and things’ over
people
• preference for performance and growth
over quality of life and the environment
• negativity towards women

point to be borne in mind:
high Femininity in a Society does not
necessarily mean “warmheartedness” and
“close” relationships or intimacy between its
members

4. Uncertainty Avoidance
the extent to which members of the
cultural group feel uncomfortable
with uncertain, ambiguous or
unstructured situations
rule of thumb: amount of “paperwork”
required in the society

illustration: number of days required for the
incorporation of an Ltd company:
0
5
10
15
20
25
30
35
UK
Germany
Ireland
Holland
Denmark
Sweden
Finland
Italy
France European
Union
average
3
7
12
35
17 12
Uncertainty Avoidance
24
Hellas

Uncertainty Avoidance
Employees in high UA countries prefer:
 long term employment
 Clearly described tasks and work
procedures
 ‘red tape’ at the expense of efficiency
 job security over risky advancement
(Hofstede, 1997)

National culture and Economic Growth
‘Five Dragons’
1965-85 1985-92 1993-2005
___________________________________________________________________________________
Hong Kong 15 37 18 49 1 6.1% 6.1% 4.0%
Taiwan 29 44 32 26 2 7.2% 6.5% 5.0%
Japan 33 22 1 7 3 4.7% 4.1% 1.1%
South Korea 27 43 41 16 4 6.6% 8.9% 5.3%
Singapore 13 40 28 53 8 7.6% 6.3% 6.4%
China 1 9.6% 9.9%
U.K. 43 3 9 47 15 1.6% 2.2% 2.9%
U.S.A. 38 1 15 43 14 1.7% 2.3% 3.3%
Australia 41 2 16 37 11 3.6% 2.8% 3.7%
Arab Countries 7 27 23 27 6.9% 5.0% 1.5%*
India 10 21 21 45 6 3.2% 5.4% 6.4%
France 16 11 36 13 2.9% 2.6% 1.9%
Sweden 48 11 52 50 10 2.3% 1.4% 2.7%
Germany 43 15 10 29 11 2.7% 2.8% 1.4%**
Hellas 27 30 19 1 5.1% 2.0% 3.2%

National Culture &
Economic Performance
Individualism
Economic
Growth
Economic
Growth
slows down

Could Western researchers
have been biased?

Chinese Values survey
(involved 22 countries)
could Westerns have been biased?
a fifth dimension of Culture
“Confucian Dynamism”
(Hofstede & Bond, 1988)

Confucian Principles (6-5th century BC)
1. the stability of society is based on unequal
relationships between people
2. the family is the prototype of all social
organizations
3. treat others as you yourself would like to be
treated
4. achieve virtue by: acquisition of education,
hard work, not spending more than
necessary, patience and perseverance

5. Confucian Dynamism
(Long-Term Orientation)
the extent to which the members of the
cultural group value: persistence, thrift,
hierarchy and having a sense of shame

values associated with Confucian Dynamism:
______________________________________
the relative the relative
importance of unimportance of
________________________________________
Persistence Personal steadiness
Ordering relationships Protecting one’s face
by status
Thrift Respect for tradition
Sense of shame Reciprocation of
greetings, favors & gifts
___________________________________________

‘Five Dragons’
Confucian Dynamism and Economic Growth
1965-85 1985-92 1993-2005
___________________________________________________________________________________
Hong Kong 15 37 18 49 1 6.1% 6.1% 4.0%
Taiwan 29 44 32 26 2 7.2% 6.5% 5.0%
Japan 33 22 1 7 3 4.7% 4.1% 1.1%
South Korea 27 43 41 16 4 6.6% 8.9% 5.3%
Singapore 13 40 28 53 8 7.6% 6.3% 6.4%
China 1 9.6% 9.9%
U.K. 43 3 9 47 15 1.6% 2.2% 2.9%
U.S.A. 38 1 15 43 14 1.7% 2.3% 3.3%
Australia 41 2 16 37 11 3.6% 2.8% 3.7%
Arab Countries 7 27 23 27 6.9% 5.0% 1.5%*
India 10 21 21 45 6 3.2% 5.4% 6.4%
France 16 11 36 13 2.9% 2.6% 1.9%
Sweden 48 11 52 50 10 2.3% 1.4% 2.7%
Germany 43 15 10 29 11 2.7% 2.8% 1.4%**
Hellas 27 30 19 1 5.1% 2.0% 3.2%

National Culture &
Economic Performance
Economic
Growth
relates to
Confucian
Dynamism
Conditions:
1. the Political Environment is conducive
2. there is a Market
(Hofstede & Bond, 1988; Yeh & Lawrence, 1995)

replications of Hofstede’s findings
Hofstede’s model was based on data
collected almost 40 years ago…
however, Hofstede’s model has been
replicated since

replications of Hofstede’s findings
Hofstede’s model: replications
 Hoppe (1993) with highly educated
individuals from 17 (western) European
countries, Turkey and the USA
 Helmreich & Merritt (1998, 2000) with
airline pilots from 23 countries - including
Cyprus (Hellenic population)
 De Mooij (1994) with members of the
general public from 15 countries

a 2nd model of
Cultural Dimensions
(Trompenaars, 1994)

Trompenaars (1994)
[15000 individuals; 28 Countries]
how people deal with each other
5 (five) Cultural Dimensions

Trompenaars’ (1994) Dimensions
rankings of some countries demonstrate
difference from Hofstede’s findings

2. Universalism - Particularism
Universalism: the belief that ideas and
practices are applicable across
situations without modification
Particularism: the circumstances dictate
the way to apply ideas and practices

3. Neutral - Affective
Neutral:
no acceptance of outward (i.e., public)
expression of emotions
affective:
outward expression of emotions is
accepted (and encouraged)

4. Specific - Diffuse
specific: clear distinction between
public and private space
diffuse: vague distinction between
public and private space
Rule of thumb: degree of separation between
private and professional life
(greater in “specific” countries)

4. Specific - Diffuse
in “specific” countries (e.g., USA):
 directly to the point of the business
 minimal use of titles
 play down achievements/skills that are not
related to the situation
in “diffuse” countries (e.g., China):
• respect other’s title, age, social connections
• tolerate evasiveness and indirect behavior
doing Business

Trompenaars (1994)
5. Achievement – Ascription
achievement: status is accorded according
to performance
ascription: status is accorded on the basis
of background characteristics (e.g., age,
tenure, social connections)

Trompenaars (1994)
ascriptive criteria
 age (e.g., Segalla, 1998:
layoffs in German and UK Banks)
 gender (e.g., Anglos & Scandinavians
vs
Far East & Arab countries)
 race
 religion

effects of National Culture at
Macro-level & organizational level

after tax profits paid as dividends
(Randlesome, 1990)
_____________________________
UK: USA:
Japan: Germany:
_____________________________
69% 51%
40% 40%
Individualism and Confucian Dynamism:
_________________________________

Laurent (1982)
________________________________________________________
% agreement
question JAPAN USA
________________________________________________________
“avoiding open conflict is a
major task of management”
“most conflict in a company
can be productive”
________________________________________________________
50 24
29 64

Nam & Mowday (1993)
Korean managers US managers
attribution & acceptance of
personal responsibility
for group failure
greater

Perlow & Weeks (2002)
Indian
vs software engineers
US
motivation to provide help to co-workers
willing to provide help
to anyone needing it
willing to provide
help only to whom they expected
they would need help in the future

Critical Points – Notes for Caution

point:
scores (and positions) for countries
represent average scores of
inhabitants from each country
e.g., collectivistic clusters within
individualistic countries (e.g., USA)

critical point:
the dimensions of National Cultures
are not entirely independent
Collectivism is related to
Confucian Dynamism
(Yeh & Lawrence, 1995)

critical point:
do not explain everything
(e.g., Hofstede, 1993; Smith et al., 2002)

example: collectivistic orientations differ
within collectivistic societies
Japan & Korea vs China, Mexico
collectivism
towards any
inner group
collectivism only
towards
blood relatives
affects:
motivation to work; opportunity structure;
nature of businesses & of the economy

critical point:
do not explain everything
Country- or Region- specific cultural
knowledge is required in order to develop an
exhaustive valid account of work and social
phenomena within the particular culture
e.g., Bozionelos, 2006, study on outcomes
of Mentoring in Hellenic banks

the Dynamics of Culture:
are National Cultures
entirely stable?

Dynamics of Culture
 Countries’ positions on Dimensions of
Cultural Difference are not “fixed”
 National Cultures may change gradually

Dynamics of Culture
examples
some differences between
Hofstede’s (1972, 1980) and Trompenaar’s
(1994) findings in countries positions on
the Individualism index:
e.g., former Soviet Union,
Mexico, Argentina

Dynamics of Culture
examples
some differences between
Hofstede’s (1972, 1980) and Trompenaar’s
(1994) findings in countries positions on
the Individualism index:
e.g., former Soviet Union,
Mexico, Argentina
evidence of cultural shift (?)

Dynamics of Culture
China’s apparent shift towards individualism
examples
(Chen, 1995) compared:
Employees from the PRChina & USA
• economic Goals &
• differentiated (i.e., individually based)
reward systems
valued more than their US counterparts

Dynamics of Culture
China’s apparent shift towards individualism
examples
(Ralston et al., 1999) compared
three generations of Chinese managers:
the “new” generation scored
higher on Individualism and
lower on Collectivism and Confucianism
than the “current” and the “older”
generations

Dynamics of Culture
early 1990s
USA’s shift towards collectivism
examples

Dynamics of Culture
cultural convergence because of
 globalization of markets/products
 diffusion of cultural information
 dominance of certain languages
but, mostly at the surface level yet

levels of culture
values (second level)
underlying assumptions (deep level)
surface
behavioral manifestations
convergence
?

furthermore,
the dominance of the dimensions within a
particular culture may change periodically
according to the priorities and goals of the
Society (Chen, 1995)
this type of change is easier and more
frequent than cultural shift
Dynamics of Culture
according to this view, the Culture of the
Society does not change, what changes is
the orientation of the Society

furthermore,
the dominance of the dimensions within a
particular culture may change periodically
according to the priorities and goals of the
Society
Dynamics of Culture
this, for example, can explain the current
emphasis of the Chinese Society towards
productivity and economic growth – instead
of social harmony and humanitarianism;
without having to invoke the “difficult”
explanation of permanent Culture change

Legalistic
Society
Economically
Cut-throat
Society
Permissive
Society
Repressively
Led Society
UNCERTAINTY
AVOIDANCE
Law-abiding
Society
INDIVIDUALISM
economically
competitive
Society
FEMININTY
Harmonious
society
POWER DISTANCE
Powerfully led society
__
+
+
__ +
__
_
+
Dynamics of Culture

(no Convergence but)
Crossvergence?

national cultures are shifting under the
pressure of
(Ralston et al., 1997)
Dynamics of Culture -
CrossVergence
 Cultural imperatives
and
Economic imperatives (which tend to be
similar around the globe)

hence, in the not very distant future
(Ralston et al., 1997)
CrossVergence
a universal culture will emerge with few
substantive differences across geographic
locations…

there is some empirical evidence that has
yielded findings that are supportive of the
Crossvergence view:
CrossVergence
Kelley et al. (2006)
compared cultural attitudes of middle
managers in the banking industry between
HK/Taiwan and the USA
for the years 1985 and 2000
and found evidence for cultural crossvergence

ANGLOS
(UK, USA, Australia, Canada)

Anglos
cultural and business characteristics:
risk-taking – entrepreneurs
employee empowerment
achievement orientation
material rewards instead of life quality
short to medium term planning
“role” and “task” organizational cultures
‘hard’ capitalism

USA
Cultural & business characteristics:
 ‘get down to business’ approach
 individualistic/low corporate loyalty
/money and profit driven
 status gained by achievement
 education & specialization
 punctuality & precision
 detailed planning

USA
per capita GDP: €31,600 ($47,330)

United Kingdom
characteristics:
• ‘get down to business’ approach
• money and profit driven
• emphasis on the individual
• punctuality
• low corporate loyalty
• education is not taken at “face value”
• emphasis on applications of knowledge
• few written rules
• loose planning

United Kingdom
per capita GDP: €31,250 ($46,740)

CONFUCIAN SOCIETIES
(Japan, China, Korea, Taiwan)
characteristics:
 long term planning
 entrepreneurs
 they highly value education
 management: benevolent paternalism
 commitment to the group

Business concepts as conceived in the USA
and Japan (Morayama, 1982)
__________________________________________________
Expression/term United States Japan
__________________________________________________
Company team in sport Family in village
Business goal to win to survive
Employees players in team children in family
Human relations functional emotional
Competition cut-throat co-operation or sin
_____________________________________

(continued) Business concepts are conceived in the USA
and Japan (Morayama, 1982)
__________________________________________________
Expression/term United States Japan
__________________________________________________
Promotion merit based tenure based
Work motivation individual benefit group
Promotion merit based tenure based
Payment is reward for service award for patience
and results and sacrifice
__________________________________________________

Japan
-4
-2
0
2
4
6
8
10
1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004
GDP Growth
per capita GDP: €26,100 ($38,930)

Japan
business characteristics
 government (long-term) planning
 company paternalism
 vague criteria for employee performance
 company specific unionization
 consensus decision-making (‘ringi sho’)
 ‘life time employment’ is largely a myth
 large networks of corporations (“Keiretsu”)

Japan
organizational form:
‘Keiretsu’
bank-centered, industrially linked, strategically
coordinated business alliances
typical Keiretsu structure:
a major bank; a life insurance company; a
trading company; a range of manufacturers,
subcontractors, suppliers and distributors

Japan
core
companies
suppliers
affiliates
Keiretsu
‘Keiretsu’ example:
‘Fuyo’: Fuji bank, Marubeni trading company,
Nippon Kokan steel, Oki electric machinery,
Canon camera, Nissan motors.

Japan
major capacities of the ‘Keiretsu’ structure:
 intra-alliance ‘friendly’ market
 access to information and technology / constant
organizational learning
 incentive for improvement due to ‘intra-
competition’
 collective risk sharing / ability to sustain loss
 e.g, Mazda in the early 1970s
 facilitation of just-in-time lean production
 sustained export market attack

Japan
case: Toyota Keiretsu: ‘Aisin fire’
Toyota
1st tier suppliers
2nd tier
suppliers
Toyota
Keiretsu
3rd tier &
affiliates
.
Aisin: P-valve producer
(Nishiguchi & Beaudet, 1998)

Japan: Keiretsu case
Aisin production:
(about 100 types of P-valves)
32,000 pieces per day
requirements:
highly specialized
production & quality control
machinery & skills

February 1 1997: FIRE with almost
complete destruction of Aisin’s plant
Toyota’s stock of P-valves:
2 days (just-in-time production)
prediction:
Toyota’s plants (and suppliers’) closure
FOR MONTHS

Feb. 4 (3 days after the fire):
production of P-Valves re-started…
Feb 10: all Toyota plants back to ‘normal’ with
production 13,000 vehicles per day
Feb. 17: full production 15,500 vehicles p.d.
OUTCOME

• no special purpose machinery
• no specialized skills
• no specialized quality control equipment
• Aisin’s “chaos” after the fire
Impediments:
HOW?

Co-ordinated effort from about 200 companies
 1st, 2nd and 3rd tier suppliers
 some independent suppliers
 and some belonging to other Keiretsus
62 of them started producing P-valves by
modifying their production facilities; the rest
provided supplies
none of them had specialization in P-valve
production; many of them had no relevance
(e.g., sewing machine manufacturers)
HOW?

 immediate solution dissemination to all
companies involved
 constant shortening of production cycle
(‘kaisen’)
 Flexibility in work-force deployment
- white-collar workers in the production line
- relaxation of bureaucratic procedures
- flow of employees between firms
HOW?

inter-dependency
‘interest’ (‘compulsion’)
Reasons
remarkable fact:
no pressure from Toyota over Aisin
[‘sense of shame’; Confucian Dynamism;
‘no requirement for immediate reciprocation’]

Other ‘remarkable’ facts
 no negotiation or agreement on:
technical proprietary rights
financial compensation
• Aisin fully reimbursed all participants
• Toyota rewarded for co-operation its 1st
tier supplies for the closure of plants
• 1st tier suppliers followed the example with
2nd tiers, who followed with 3rd tiers…
Japan:
Keiretsu case

Japan
Keiretsu structure: trade-offs/disadvantages
 over-investment in production capacity
 low operating profits
 short product life-cycle
 collaborative risk
(Tezuka, 1997)

Japan
Current situation:
 recovery after a long period of economic
stagnation
 business restructuring geared towards
improvements in efficiency
 (some) inflation again (after a long period of
deflation)
 ageing population

China
cultural characteristics
• Collectivism (towards the extended
family
• Confucian Dynamism
hence, patience & not loosing one’s face
(“Mianzi”) are very important
• Ascriptive society
hence, connections and position in the
society (“Guanxi”) are very important

China
business characteristics:
 strong emphasis on technical competence
 long-term perspective
 emphasis on (extended) family businesses
 power organizational cultures
 slow decision-making, fast
implementation of decisions
 “Guanxi” (good connections)
(Yi & Ellis, 2000; Tung, 1996)

China (without HK)
per capita GDP: € 2,000 ($2,960)

China
Issues to “watch” in the future:
 potential overheating of the Economy
 regional (e.g., rural vs urban) inequality in
the distribution of wealth
 demographic problem in the foreseeable
future

India
cultural characteristics:
 respect for knowledge and education
 thrift
 “caste” social system
 high power distance

India
 extensive bureaucracy in the public
sector
 family-oriented business approach
 (partially) emotionally-bound decision-
making
 strong human capital in the domains of
engineering and physical sciences
 good language skills (English)
 “flexible” workforce

India
Varma et al. (2005) compared
US and Indian line managers:
 in both groups interpersonal affect affected
their performance ratings to their
subordinates
 however, only in Indian managers positive
interpersonal affect (i.e., subordinate liking)
inflated the performance ratings of poorly
performing subordinates

India
-4
-2
0
2
4
6
8
10
1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004
GDP change
per capita GDP: €820 ($1,180)

India
critical current issues:
 rise in financial inequality between classes
(and between rural and urban areas)
 regional separation and heterogeneity
 the development of large competitive
indigenous corporations (?)

Northern Europeans
(Germany, Scandinavian Countries)
• emphasis on education and qualifications
• employee consultation & representation
• medium to long-term orientation
• product: attention to detail
• quality of work life/long-term employment
‘soft’ capitalism

Germany
-2
-1
0
1
2
3
4
5
6
1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004
GDP change
per capita GDP: €27,750 ($41,400)

Germany: organizational structure
board of directors
supervisory board
stakeholders: banks, suppliers,
customers, employees
business organization

Germany
current situation:
 largely manufacturing-based economy in a “high
quality services” era
 some rejuvenation of the economy – global demand
for high quality manufacturing products
 industrial Relations problems (friction with the
Unions)

Southern Europeans
(France, Italy, Spain, Hellas)
• emphasis on personal relationships
• family ownership - favoritism/nepotism
• emphasis on formal qualifications
• bureaucratic work organization/ ‘red tape’
• power inherent in formal position
• personal initiative to bypass the ‘red tape’
• strong unions
• relatively ‘low’ satisfaction with work

France
 education: emphasis on theory and
positive sciences
 elite (“cadre”) achievement system
 quality of life is of high importance

France
• personal acquaintance approach
• emphasis on logical structuring of
arguments
• innovativeness
• role cultures and tall structures, but
acceptance of rule breaking or bending
• respect for organizational authority
• relatively slow decision-making
• short working hours, but high productivity

France
per capita GDP: € 29,200 ($43,640)

France
Current situation:
 overloaded social welfare system (problems with
state debt)
 very strong Unions
 relatively high state intervention in employer-
employee relations
 rigid employment legislation
 problems with multi-cultural integration
 “heavy” bureaucracy

e.g., (Maurice, 1979; Maurice et al., 1980)
wage comparison between Germany &
France
ratio of top 1% & bottom 10% of wages
GERMANY FRANCE
________________________________________________________
_______________________________________________________
highest ratio 2.7/1 lowest ratio 3.7/1

Arab Countries
 mid- to low masculinity (sympathy for
the weak and the unfortunate)
 ascriptive criteria for status (e.g.,
family & connections)
 fatalism
 polychronism – loose perception of
time

Arab Countries
• emphasis on inter-personal trust
• face-to-face contact is very important
• personal connections are highly important
• low punctuality/respect for timeplan
• low privacy in business meetings
• sluggish administration and a lot of “red
tape”, which are highly respected though
• emotion-bound decision-making

Arab Countries
current issues:
 planned attempt to reduce dependency
on oil
 planned attempt to enhance the quality of
the domestic workforce
 conflict between what is imposed by the
religious parts of the State and what is
imposed by the demands of the modern
economy

Former Eastern Europe
• different cultures across countries
• under Communist regime:
- the term ‘manager’ did not exist
- emphasis on technical training and positive
sciences/engineering
- no knowledge of market economy
 currently:
- domination of Western subsidiaries with various
degrees of success
- adoption of Western management techniques

Russia
per capita GDP: € 6,700 ($10,010)

Russia
• written contracts and business laws do not
bear great importance
• emphasis on personal relationships and
face-to-face contact
• critical to have first-hand knowledge of
the business situation
• political Influence & Personal Connections
are highly valued by Russian managers
(e.g., Elenkov, 1998)
business characteristics

Russia
until about 15-20 years ago, Russians had
never experienced democracy and free
market economy…

Russia
current situation:
 substantial growth of the economy
 substantial improvement in the
international status/reputation of the
country
 the newly found energy reserves render
Russia (again) a major international player
 the friction between state leadership &
high-profile entrepreneurs seems to be
settling down
 very serious demographic problem (fast
population decline)

approaches to Multinational operations
1. Ethnocentric: deliberate ignorance of
cultural differences
Indicator: home country personnel in
key positions in the host-countries

Approaches to International
Operations
Module - 3

2a. Polycentric: decentralization of control to
the host country.
indicator: host-country personnel in key
positions
risk: attribution of all problems to cultural
idiosyncracies (e.g., American Express case)

2b. Regiocentric: similar to polycentric, with
the geographic or cultural region being the
focus.

3. Geocentric: equal treatment of the home
and host countries’ attributes and needs
(e.g., many European corporations)
requirement: extensive informed knowledge
of home and host-country situations.

and corporate performance
(Calof, 1991)
lowest highest
ethnocentric Polycentric/
regiocentric
geocentric

the importance of cultural sensitivity in
the various phases of MNC development
Domestic Global
Multinational
Phase 1 Phase 2 Phase 3 Phase 4
International
very low
importance
very HIGH
importance
Medium
importance
CRITICAL
importance
External
Cultural
Diversity
Internal
Cultural
Diversity
External &
Internal
Cultural
Diversity

managing in a
culturally diverse environment

advantages & disadvantages of
a culturally diverse workforce

fact: increasing cultural diversity within
single countries
[Domestic Multiculturalism]
e.g., USA, UK, Switzerland, Singapore
problems and benefits inherent in
a culturally diverse workforce

problems and benefits inherent in a
culturally diverse workforce
(Hodgetts & Luthans, 2003)
Group Multiculturalism
- homogeneous groups
- token groups
- bicultural groups
- multicultural groups
as group diversity increases the likelihood of
common perceptions decreases sharply

potential disadvantages of cultural diversity:
low cohesion among group members
because of:
- mistrust
- preconceived cultural stereotypes/biases
- inaccurate/ineffective communication

potential advantages of cultural diversity
 enhanced creativity
- greater number of ideas
- higher quality of ideas
 reduced incidence of groupthink
in decision-making

 enhanced creativity
- greater number of ideas
- higher quality of ideas
 reduced incidence of groupthink
in decision-making
Stahl et al. (2006), meta-analysis on
cultural diversity and team performance:
culturally diverse teams had
slight disadvantages in all other areas
,but they had a strong advantage in Creativity

managing a culturally diverse workforce
culturally diverse groups are more likely to
perform at high or low extremes
(Distefano & Maznevski, 2000)
hence, these teams must be
properly managed

cultural diversity is:
advantageous in problem solving, but
disadvantageous in solution
implementation
(Adler, 1991)

guidelines:
• select members on the basis of task-related
abilities not on ethnicity
• distribute power on the basis of ability,
not on ethnicity or cultural dominance
• appoint a “strong” impartial leader
• provide cultural education to group members
• provide proper, timely and consistent
feedback on process and output

the Transferability
of HRM practices and
principles across cultures
National Culture & HRM

the Transferability of HRM
direct transfer of HRM practices
is generally risky
even between countries within the same
cultural cluster (e.g., USA and UK)
at least some minimal consideration of
cultural (and other) factors is needed
available knowledge from relevant research is
still relatively limited and of piecemeal nature

Welsh, Luthans & Sommer (1993) studied the:
applicability of three US-tried techniques in
Russia (among factory workers):
 extrinsic rewards
 behavioural management
 employee participation
increased
performance
failed to
increase performance
example:

individually-based rewards for performance
e.g., performance related pay (PRP)
difficult to implement
in Collectivistic/Confucian countries or
in countries with strong tradition of
unionization
example:

individually-based rewards for performance
e.g., performance related pay (PRP)
difficult to implement
in Collectivistic/Confucian countries or
in countries with strong tradition of
unionisation
e.g., France
example:
e.g., China, Japan
• importance of group harmony
• importance of not loosing one’s face
(Sanger, 1993; Sergeant & Frenkel, 1998)
China:
• general distrust of performance appraisals

Example/Case
Bozionelos & Wang (2007) investigated
the extend of preference of Individually-
Oriented Performance-Related Reward Systems
(IOPRRSs)
in a food manufacturing company in the
North-West of China

Example/Case
Bozionelos & Wang (2007):
the Company had tried to introduce
Individually-oriented Performance-Related
Pay (IOPRP), but the system did not work as
expected
 for example, line managers would give
“satisfactory” or “very satisfactory”
performance ratings to the vast majority of
their subordinates

Example/Case
it was found that the workers had a
positive overall attitude towards IOPRRSs
(i.e., average score was above 4 in a 1-5 scale)
however,
specific cultural characteristics of
China – Guanxi & Mianzi – were impeding
the successful functioning of the IOPRP
system…

Example/Case
this phenomenon was more pronounced in
those functions (Accounts, Administration,
Logistics) where
performance criteria were subjective
and much less prevalent in those functions
(e.g., Sales) where objective performance
criteria carried substantial weight

Example/Case
this means that IOPRRSs could be
implemented with success in China
(provided that they are considered useful…)
, but
performance criteria/evaluations
must be adapted accordingly
and the whole workforce must be
extensively briefed

Work Motivation
across cultures:
in general, processes remain the same,
but the content changes
because it depends on values and
other circumstances
e.g., needs, desires, priorities, goals

self-actualization
esteem
belongingness
safety
physiological
Maslow’s hierarchy of needs
conceived and demonstrated
in the individualistic West (mainly the US)
example:

in general, the categories of Maslow’s Needs
have been replicated across a variety of
countries and cultural clusters
(i.e., Anglo, Nordic, Latin, Confucian)
(Haire, Ghiselli & Porter, 1966)
however, there probably are differences in
the order in which the Needs are arranged

self-actualization to Society
safety
physiological
belongingness to the group
for example,
Maslow’s hierarchy of needs
in Collectivistic & Confucian China:
(Nevis, 1983)

however,
there are important points to be borne in
mind:
(Hofstede)
1. there are sub-cultures within countries
2. job categories may be more important the
cultures themselves

job categories instead of cultures…
__________________________________________________________________________________________________________________
Maslow’s Needs ranked
as most important
____________________________________________________________________________
professionals & managers Higher order
clerical workers mid
unskilled workers lower
technicians & managers mix
__________________________________________________________________________________________________________________
(Hofstede, 1980)

Goal Setting theory (Locke)
key principles
 accepted goals are motivating
 difficult goals are more motivating than
easy goals
 specific goals are more motivating than
general/vague goals
 feedback is required for goal achievement

Goal Setting theory
 the most well validated theory of motivation
(e.g., Locke & Latham, 1990; Tubbs, 1986;
Mento et al., 1987)
 considered “the best” by eminent academics
and practitioners alike
 goal setting also improves performance
in non-traditional domains (e.g, creativity)
(Shalley, 1995)

Goal Setting theory
however, the vast majority of studies have
been conducted in the USA…
there may be differences across countries
for example,
employee participation in setting goals was
advantageous in the USA and Israel
(Erez & Earley, 1987)
but not in Norway or even the UK
(French et al., 1969; Earley, 2000)

Goal Setting theory
furthermore,
the nature of the accepted goals and the degree
of accepted difficulty may vary across cultures
for example,
in low UA countries employees may be
more willing to accept or set more difficult
goals

leadership
across cultures:
at this point, relatively limited
systematic research

leadership
commonly recognized leader styles:
authoritarian: work-centred to ensure task
accomplishment
paternalistic: work-centred combined with
protective employee-centred concern
participative: concern for people and task,
with high degree of delegation
Luthans & Hodgetts, 2003

dominant leadership approaches
across countries/regions
not an absolute rule: it also depends on
management level and organizational size
UK & Nordic cultures: Participative
Germanic & Southern Europeans:
authoritarian,
but with relatively limited amount of power

Confucian cultures: paternalistic
with participative elements
e.g., Lincoln et al. (1981) study with
Japanese managers in 28 Japanese MNCs
in the USA
Yoo & Lee (1987) study with Chaebols
in Korea
furthermore, there is strong belief in the
capacities of the subordinates (Haire et al., 1966)

very limited systematic information
on the rest of the world
[including India, Arab Nations, South
American countries, Africa]
however, although there are differences
across countries, there is some evidence
of a movement and preference towards
a participative style across the globe

Stephens (1981), comparative study of
leadership styles in three Peruvian and three US
textile plants:
 very little difference in the style (mainly
participative in both Peruvian and US plants)
 in fact, Peruvian managers were more inclined
to share information with subordinates
for example,

leadership across cultures
despite similarities between countries,
different leadership styles and behaviours
are certainly needed
across various locations in the world
point for caution
e.g., study by Brodbeck et al., (2000) across
22 European countries
Trompenaars & Hampden-Turner (1998)

leadership across cultures
transformational leadership
a universal approach to effective leadership?
and aspects of
transactional leadership
(e.g., Bass, 1985, 1998; Howell & Avolio, 1993)

motivating forces
 idealized influence
 intellectual stimulation
 inspirational motivation
 individual consideration
transformational leadership
shifting subordinates’
beliefs, values & needs

transactional leadership
uses the following motivating methods
 contingent reward
 active management by exception
 passive management by exception

Judge & Piccolo (2004) meta-analysed all relevant
studies on leadership. They found that
transformational leadership explained:
50% of employees differences in job satisfaction
30% of employees differences in work motivation
40% of difference in effectiveness between leaders
10% of differences between teams or organisations
in hard financial indices of performance

Judge & Piccolo (2004) meta-analysis:
also found that Contingent Reward alone
is almost as effective as transformational
leadership; as it explained:
45% of employees differences in job satisfaction
35% of employees differences in work motivation
30% of difference in effectiveness between leaders
Active Management-by-Exception also
improved outcomes by only marginally

the behaviours of transformational leaders
may be different across cultures but the
motivating principles/processes they use are
largely the same
(Avolio & Bass, 1998; Bass, 1996, 1997)
transformational & transactional
leadership appear to be effective across
cultures

transactional leadership lays the foundations on
which transformational leadership operates
transformational & transactional
leadership are compatible and complementary
and they are needed simultaneously
(e.g., Osland et al., 2001)
hence, we must lead with a combination of
Contingent Reward, Active Management-by-
Exception, and Transformational leadership
key point:

organization of work
Teamworking, Quality of Work Life
& Work Design

teamworking
need for very careful consideration of
cultural factors
Individualism,
Power Distance
Confucian Dynamism
can play a substantial role in the
success of teamwork practices

Collectivistic vs Individualistic countries
effort & performance in
individually oriented vs group oriented
training
higher in
Individualistic
countries
higher in
Collectivistic
countries
Earley (1993, 1994)
teamworking

teamworking
case example,
Levi Strauss in the late 1990s:
introduction of team work in US plants met
severe resistance & productivity decrease
that led to
return to individual-based production system
(The Wall Street Journal, 20 May 1998)

teamworking
however,
successful introduction of teamwork
is possible in Individualistic countries
with appropriate adaptation
& careful planning & implementation
e.g., “spaghetti” teamwork design
in Danish Oticon

Quality of Work Life & Work Design
[includes: pace of work, control over work
& control over working conditions]
substantial differences across
countries/cultures
for example,
Japan vs USA vs Sweden

Japan USA Sweden
• fast pace
• structured tasks
• low individual
risk taking
• top-down approach
• material rewards
• moderate pace
• open-ended tasks
• individual decisions
& risk taking
• democracy
• interpersonal relations

Japan USA Sweden
• fast pace
• structured tasks
• low individual
risk taking
• top-down approach
• material rewards
• moderate pace
• open-ended tasks
• individual decisions
& risk taking
• democracy
• interpersonal relations
low Individualism
high Masculinity
strong UA
moderate to high I
high Femininity
weak UA

consideration of both the nature of the job
and the national culture is needed
e.g., Japanese companies in the USA &
Sweden

however, it must always be born in mind that:
although preferences for work practices vary
across cultures,
the demand for Quality along with
Efficiency & Productivity is Universal
e.g., the case of Volvo who pioneered the
sociotechnical approach to work design

point for Caution:
it must also be kept in mind that
culture is not the explanation for every
difference across countries
for example, the average number of
working hours across countries
e.g, Japanese vs USA vs German employees
(Koretz, 2001; Strom, 1998, Greenhouse, 2001)

Management of International
Assignments
Module - 4

Sources of Human Resources for
International Assignments

Sources of Human Resources
1. Home-country nationals
(“Headquarters nationals” or Expatriates)
the norm at earlier stages,
esp. to fill key positions in the host country
(Groh & Allen, 1998)
but, with some differences between countries
e.g., European vs Japanese firms
(Tung, 1982)
Ethnocentric

1. Home-country nationals
(“Headquarters nationals” or Expatriates)
expatriates and home-country nationals
suit different circumstances
expatriates: most effective in large
subsidiaries or in subsidiaries with a marketing
theme similar to that of the home-country
host-country nationals: most effective in
developing countries subsidiaries or in
subsidiaries with a local customer base
(Richards, 2001)

reasons for using home-country nationals:
 starting up of operations
 technical expertise
 maintenance of financial control & facilitation
of co-ordination
 international experience for promising managers
 maintenance of the MNC’s foreign image
 host country’s multi-racial population
 ethnocentrism (some times)…
(Peterson et al., 2000; Phatak, 1989)

1. Home-country nationals (expatriates)
gradual decrease in utilization of expatriates
Beamish & Inkpen (1998):
study with 3200 Japanese subsidiaries
reasons:
 increase in the number of MNCs’ subsidiaries
 more competent managers in host countries
 high cost of expatriates
 decrease of ethnocentrism

2. Host-country (i.e., local) nationals
in most cases,
to fill middle and lower ranks
but, there are exceptions
reasons for using host-country nationals:
• host-country “expectations” & regulations
• not enough expatriates
• cost of expatriates
• local nationals’ knowledge of the host country
Polycentric

2. host-country (i.e., local) nationals
in most cases,
to fill middle and lower ranks
but, there are exceptions
policy differences between MNCs from various
countries
e.g., European vs US MNCs

reasons for using host-country nationals:
• host-country “expectations” & regulations
• not enough expatriates
• cost of expatriates
• public relations
• local nationals’ knowledge of
local language
local culture

differences between countries on reasons
for hiring host-country nationals:
e.g., European firms:
familiarisation with the culture
knowledge of language
Japanese firms:
qualifications for the job
(Tung, 1982)

3. third-country nationals
typically utilized by MNCs who are at advanced
stages of internationalization
reasons for using third-country nationals:
• expertise with the host-country or region
(e.g., US companies use of British
managers in ex-British colonies)
• qualifications for the job
(Reynolds, 1997)
Geocentric

3. Third-country nationals
qualities of third-country nationals:
• understanding of operations from the
perspective of the foreigner
• ability to bring different perspectives
• demonstration of global image by the MNC
(Reynolds, 1997)

4. Inpatriates
individiuals from a host-country or third-
country assigned in the home country
increasingly more common
e.g., Matsushita, Toshiba
(Harvey & Buckley, 1997)
reason: globalisation that requires competent
multi-lingual, multi-experienced managers
(Harvey & Noviceric, 2000; Smith, 1998)

Selection of Human Resources
for International assignments

for International Assignments
Selection criteria vary across
cultural clusters
e.g., Anglo-Saxon vs Germanic vs Latin
(Hoecklin, 1994)

Selection criteria vary across
cultural clusters
e.g., Anglo-Saxon vs Germanic vs Latin
(Hoecklin, 1994)
Competencies
Intelligence
Task performance
Technical
qualifications
Education
Fit into the group
Ability to network

most expatriates face cultural adaptation
problems,
which affect their success either
 Directly (e.g., premature return home)
or, especially,
 Indirectly (i.e., reduced work effort,
performance, commitment)
(Black et al., 1992; Harzing, 1995;
Harzing & Christensen, 2004)

the financial cost is magnified by the fact that
expatriate assignments cost multi-times more
than domestic assignments
(e.g., Gale, 2003; Joinson, 2002)
expatriate failure
Reasons for expatriate problems:
• over-emphasis on technical preparation
• ethnocentrism - lack of ‘cultural education’

U.S. vs Japanese
companies
(Tung, 1984)
more success in choosing
individuals for international
assignments

U.S. vs Japanese
companies
(Tung, 1984)
focus mainly on
technical knowledge
and qualifications
emphasis on
inter-personal skills

hence, nowadays most companies
consider both
technical expertise &
interpersonal/cultural skills
(Peterson et al., 2000)
the type of assignment also plays a role
i.e., technical vs managerial vs CEO posts

Selection Criteria
1. adaptability to cultural change
predictors/facilitators of adaptability:
 multi-cultural work experiences
 ability to adopt various points of view
 feeling comfortable with new challenges
 ability to interact with host-country
nationals outside work
 possessing the personality traits of
openness and extraversion
(Selmer, 1999; Caligiuri, 2000)

Selection Criteria
2. self-reliance
predictors/facilitators of self-reliance:
• special project of task force experience
• hobby/avocation that requires self-reliance
• prior field experience
(Blue & Haynes, 1977)

Selection Criteria
3. physical & emotional health
4. age, experience, education
best case: a mix of young and older more
experienced individuals with postgraduate
degrees in business from recognised
business schools

Selection Criteria
5. linguistic ability
language: a most effective indirect method of
learning about a country, its culture and its people
(Blue & Haynes, 1977)
differences between nations in
linguistic emphasis
i.e., Japan/Europe/South America vs Anglos
(Korn-Ferry International, 2001)

Selection Criteria
5. Motivation for international assignment
strong belief in the importance of the job
acceptable reasons for the desire to go abroad:
- desire for adventure
- ambition to advance in the corporation

Selection Criteria
5. Motivation for international assignment
strong belief in the importance of the job
important point:
simply lack of satisfaction with current
situation at home negatively predicts
performance in international assignments

Selection Criteria
6. family-related issues
Shafer et al. (2001): 324 expats in 46 countries:
interference of Work with Family life
strongly influences the desire to stay abroad
most expats place their family above their careers
Tung (1997)

Selection Criteria

Selection Criteria
adaptability screening

Selection Criteria
7. leadership ability

preparation of staff for
international assignments

increases:
probability of good performance by 71%
probability of good adjustment by 74%
in international (ex-patriate) assignments
(Deshpande & Viswesvaran, 1992)
Preparation for International assignments
Cross-Cultural Training

& must include
both the expatriate and one’s family
must take place:
pre-Departure &
periodically during the assignment
ideally

the periodic training
must include
 adjustment
assessment
 updating
must include:
• language training
• sensitivity training
• history
• current events
• economic briefings
• cultural values and practices
ideally

Sun Microsystems Inc. reduced
expatriate failure rate from 62% to 13%
saving in direct costs between
$95,000 to $190,000 per expatriate
with a combination of cross-cultural training
and pre-departure preparation

Systematics Information Services Inc.
reduced expatriate failure rate
from 20% to almost zero
saving in direct costs
between $30,000 to $67,000 per expatriate
with a combination of cross-cultural training
and pre-departure preparation

general skills for international
business assignments
 ‘hide’ ethnocentrism (i.e., feeling of
superiority)
 ‘learn’ basic cultural facts
 be ‘tolerant’ & ‘flexible’
 be able to communicate in a common
language (e.g., English)
 keep in mind that the locals can be irritated
by your “‘correct’ way of doing business”
as much as you are by theirs

Re-patriation
of those who have been into
International Assignments

• failure in the assignment (under-performance)
(Kraimer et al., 2001; Tobriorn, 1982;
Zeira & Banai, 1981)
reasons for returning
• end of fixed-term assignment
• family reasons – education of children
Re-patriation
• failure to adjust to the foreign culture, due to
either lack of company support
or family inability to adapt

in many cases
company uncertainty regarding how
to utilize the returning ex-patriates…
Abueva (2000): study with returning expatriates
in medium and large size companies:
• 75% perceived that they had been demoted
• 60% perceived that their acquired foreign
experience was not utilized or appreciated
• 60% believed that the company had misled
them on their roles when they return
Re-patriation

moreover,
25% left their company
within one year of returning…
(Abueva, 2000)
Re-patriation
furthermore,
a substantial time period is normally
required until the re-patriate reaches
minimal acceptable performance levels
(Adler, 1991)

Re-patriation
in general,
the longer the duration of the foreign
assignment the greater the difficulties of
re-absorption to the home office and re-
adjustment to the home country.
(Tung, 1988)

Re-patriation
reasons for problems in re-absorption:
• organizational changes while abroad
• technological advances in home country
while abroad
(Tung, 1988)
reasons for problems in personal re-adjustment:
• loss of fringe and other benefits
• loss of certain privileges
• “demotion” in the cultural lifestyle

Re-patriation
fewer re-adjustment problems and better
performance when:
• general expectations regarding the situation
back home were met
• less job constraints back home than expected
• greater than expected job demands in the new
position at home
(Black, 1992: re-patriates from large US MNCs)

Re-patriation
strategies & systems for better adjustment
of re-patriates:
• re-patriation agreements (before going abroad)
• sponsorship/mentoring of individuals when
still abroad by senior managers at home
• maintenance of constant contact between
home office and ex-patriate
• a dedicated HR unit to ex-patriates/re-
patriates
(Phatak, 1989; Tung, 1988; Wong & Law, 1999)

Re-patriation
some guidelines for the smooth adjustment of
re-patriates:
• interest in re-patriate’s knowledge, experience
and new competencies
• identification of knowledge and competences that
need improvement
• support for family re-integration into the home
country
• two-way communication of expectations before
re-patriation
(Hammer et al., 1998; Solomon, 1995)

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