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Chapter 3

IHRM: Sustaining International Business Operations

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Chapter Objectives
The previous two chapters have concentrated on the global environment and organizational contexts. We now focus on the managing people aspect. The aim is to establish the role of HRM in sustaining international business operations and growth. We will cover the following:
Issues related to various approaches to staffing foreign

operations; Reasons for using international assignments: position filling, management development and organizational development; (cont.)
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Chapter Objectives (cont.)


Various types of international assignments:
Standard assignments: Short-term, extended, and longer-term; Non-standard arrangements: Commuter, rotator, contractual, and virtual.

The role of expatriates and non-expatriates (international business travellers) in supporting international business activities The role of the corporate HR functions
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Pendekatan Staffing
Faktor yang mempengaruhi proses staffing
Ketentuan-ketentuan umum pada posisi kunci di HQ (Headquarters/Induk Perusahaan) dan subsidiary (cabang/anak perusahaan) Kebijakan-kebijakan dari pemerintah tuan rumah Ketersediaan staff
Ethnosentris Polysentris Geosentris Regiosentris
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Ethnosentris
Keputusan strategis dibuat oleh HQ; Anak perusahaan memiliki otonomi yang terbatas; Posisi kunci ditempati oleh orang-orang dari induk perusahaan; Anak perusahaan dikendalikan oleh PCN.

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Polysentris
Each subsidiary is a distinct national entity with some decision-making autonomy; Orang-orang HCN yang menangani anak perusahaan jarang dipindahkan ke PCN; Orang-orang dari PCN jarang ditransfer ke anak perusahaan.

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Geosentris
Pendekatan Global terintegrasi dengan seluruh dunia; Masing-masing bagian daro organisasi memiliki kontribusi yang unik; Tidak memandang kebangsaan dan mementingkan kemampuan:
Best person for the job; Warna passport tidak mempengaruhi penghargaan promosi dan pengembangan karyawan.
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Ketentuan Staffing Geosentris

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Regiosentris
Cerminan dari struktur dan strategi regional; Otonomi regional untuk mengambil keputusan; Perpindahan karyawan hanya terjadi terjadi didalam regional; Perpindahan staff antar regional sangat langka.

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Ethnocentric Approach
Advantages:
To ensure new subsidiary complies with overall corporate objectives and policies Has the required level of competence Assignments as control

Disadvantages:
Limits the promotion opportunities of HCNs, leading to reduced productivity and increased turnover among the HCNs Longer time for PCNs to adapt to host countries, leading to errors and poor decisions being made High cost Considerable income gap, high authority, and increased standard of living may relate to lack of sensitivity

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Polycentric Approach
Advantages:
Employment of HCNs eliminates language barriers, avoids adaptation of PCNs, reduces the need for cultural awareness training programs Employment of HCNs allows a multinational company to take a lower profile in sensitive political situations Employment of HCNs is less expensive Employment of HCNs gives continuity to the management of foreign subsidiaries (lower turnover of key managers)

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Polycentric Approach
Disadvantages:
Difficult to bridge the gap between HCN subsidiary managers and PCN managers at headquarters ( language barriers, conflicting national loyalties, cultural differences) HCN managers have limited opportunities to gain experience outside their own country PCN managers have limited opportunities to gain international experience Resource allocation and strategic decision making will be constrained when headquarter is filled only by PCNs who have limited exposure to international assignment
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Geocentric Approach
Advantages:
Ability of the firm to develop an international executive team Overcomes the federation drawback of the polycentric approach Support cooperation and resource sharing across units

Disadvantage:
Host government may use immigration controls in order to increase HCNs employment Expensive to implement due to increased training and relocation costs Large numbers of PCNs, HCNs, and TCNs need to be sent across borders Reduced independence of subsidiary management

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Regiocentric Approach
Advantages:
Allow interaction between executives transferred to regional headquarters from subsidiaries in the region and PCNs posted to the regional headquarters Provide some sensitivity to local conditions Help the firm to move from a purely ethnocentric or polycentric approach to a geocentric approach

Disadvantages:
Produce federalism at a regional rather than a country basis and constrain the firm from taking a global stance Staffs career advancement still limited to regional headquarters, not the parent country headquarters

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Parent-Country Nationals
Advantages
Organizational control and coordination is maintained. Rising stars are given international experience. PCNs may be the best people for the specific job due to special skills and experience. An assurance that the subsidiary will comply with company objectives & policies.

Disadvantages
Promotional opportunities of HCNs are limited. Time and performance costs associated with adaptation to the host country. PCNs may impose an inappropriate HQ style. Compensation for PCNs and HCNs may differ.

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Host-Country Nationals
Advantages
Language and other barrier eliminated Reduced hiring costs Continuity of management Government policy may require hiring HCNs Possible increased morale because of increased career potential

Disadvantages
Hiring of HCNs may encourage a federation of national rather than global units HCNs have limited career opportunity outside the subsidiary Control and coordination of HQ may be impeded Hiring HCNs limits opportunities for PCNs to gain foreign experience

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Third-Country Nationals
Advantages
Salary and benefit requirements may be lower than for PCNs. TCNs may be better informed than PCNs about host-country environment.

Disadvantages
Transfers must consider national animosities. Host government may resent hiring TCNs. TCNs may not want to return to their own countries after assignment.

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Determinants of IHRM Approaches and Activities

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Reasons for International Assignments


Position filling, e.g.
Skills gap, launch of new endeavor, technology transfer

Management development
Training and development purposes, assisting in developing common corporate values

Organizational development
Need for control, transfer of knowledge, competence, procedures and practices
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Types of International Assignments


Short term: up to 3 months
Troubleshooting Project supervision A stopgap until a permanent arrangement is found

Extended: up to 1 year
May involve similar activities as short-term assignments

Long term
Varies from 1 to 5 years The traditional expatriate assignment
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Non-standard Assignments
Commuter assignments Rotational assignments Contractual assignments Virtual assignments
Some of these arrangements assist in overcoming the high cost of international assignments but are not always effective substitutes for the traditional expatriate assignment.
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Factors Influencing Virtual Assignments

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Roles of an Expatriate
Agent of direct control Agent of socialization Network builder Boundary spanner Language node Transfer of competence and knowledge
A Simple Management Network

G C

D F

Informal contacts between managers within a MNE

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Peran Non-expatriates
Orang yang belum bepergian keluar negeri tidak dapat dianggap sebagai expatriat karena mereka belum pernah menetap dinegara lain
Road warriors, globetrotters, frequent fliers

Much of international business involves visits to foreign locations, e.g.


Sales staff attending trade fairs Periodic visits to foreign operations
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Kehidupan Glamor
Pelaku bisnis internasional menyebutkan sisi positif dari kegiatan mereka:
Sesuatu yang luar biasa ketika mengadakan perjanjian bisnis ditempat asing Life style (hotel berkelas, bebas berbelanja, travel kelas bisnis) Pemandangan alam eksotis

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Tingginya Angka Stres


Persoalan rumah dan keluarga Work arrangements
Sering absen
Domestic side of position still has to be attended to kemacetan, dll.

Transportasi dan logistik


Kesehatan

Masalah budaya setempat


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Tidak cocok dengan makanan lokal, kurang tidur, dll. Pelatihan kebudayaan terbatas
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Various Roles of Corporate HR


Centralized HR Companies
Large well-resourced

Decentralized HR Companies
Small HR

Transition HR Companies
Medium-sized HR

HR departments
Key role: Managing all

departments
Key role: Managing

departments
Key role: Management

high-grade management positions worldwide


Key activities:

elite corporate managers


Key activities:

and development of senior managers and expatriates


Key activities:

Planning international assignments and performance management globally, identifying high-potential staff

Influencing operating units to support international assignments, supporting decentralized HR

Persuading divisional managers to release key staff using informal and subtle methods, strategic staffing.

Source: Based on H. Scullion and K. Starkey, in Search of the Changing Role of the Corporate Human Resource Function in the International Firms, International Journal of Human Resource Management, V 11, N 6 (2000) pp. 1061-1081.

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The Role of the Corporate HR Function


Dapatkah kita me-manage orang seperti produk global, e.g., kemungkinan yang bisa dilakukan adalah:
The concept of a global internal labor market Standardization of work practices and HR activities

What HR matters require central control and what can be decentralized?


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Chapter Summary
This chapter has expanded on the role of IHRM in sustaining international business operations. We have:
Looked at the various approaches to staffing

international operations ethnocentric, polycentric, geocentric and regiocentric examining their advantages and disadvantages and factors that may determine the choice of these options. Considered the reasons for using international assignments: position filling, management development and organization development.
(cont.)
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Chapter Summary (cont.)


Discussed the various types of international assignments: short,

extended and long-term (traditional); and non-standard forms such as commuter, rotational, contractual and virtual assignments. Examined the various roles of the expatriate: as an agent for direct control, as an agent for socialization, as network builders, as boundary spanners and as language nodes. These various roles of the expatriate help to explain why expatriates are utilized and illustrates why international assignments continue to be an important aspect of international business from the organizations perspective.
(cont.)
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Chapter Summary (cont.)


Recognized that non-expatriates are also critical to

international business operations. International business travellers present their own challenges, such as the effect of frequent absences on family and home life, the possible negative health effects and other stress factors. The management of such individuals, however, does not appear to fall within the domain of the HR department. Looked at the role of the corporate HR function as the firm grows internationally, building on sections from Chapters 1 and 2.

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