Chapter 4 Staffing International Operations for Sustained Global

Chapter 4 Staffing International Operations for Sustained Global Growth IBUS 618 Dr. Yang 1

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: n Issues related to various approaches to staffing foreign operations; n Reasons for using international assignments: position filling, management development, and organizational development; (cont. ) IBUS 618 Dr. Yang 2

Chapter Objectives (cont. ) n Various types of international assignments: n n Standard assignments: Short-term, extended, and longer-term; Non-standard arrangements: Commuter, rotator, contractual, and virtual. n The role of expatriates and non-expatriates in supporting international business activities (Flexpriates) n The role of inpatriates in the corporate global strategy n Return on investment of international assignments n The role of the corporate HR functions IBUS 618 Dr. Yang 3

Approaches to Staffing n General staffing policy on key positions at headquarters and subsidiaries Ethnocentric Polycentric Geocentric Regiocentric n Constraints placed by host government n Staff availability IBUS 618 Dr. Yang 4

Ethnocentric n Strategic decisions are made at headquarters; n Limited subsidiary autonomy; n Key positions in domestic and foreign operations are held by headquarters’ personnel; n PCNs manage subsidiaries. IBUS 618 Dr. Yang 5

Polycentric n Each subsidiary is a distinct national entity with some decision-making autonomy; n HCNs manage subsidiaries who are seldom promoted to HQ positions; n PCNs rarely transferred to subsidiary positions. IBUS 618 Dr. Yang 6

Regiocentric n Reflects a regional strategy and structure; n Regional autonomy in decision making; n Staff move within the designated region, rather than globally; n Staff transfers between regions are rare. IBUS 618 Dr. Yang 7

Geocentric n A global approach - worldwide integration; n View that each part of the organization makes a unique contribution; n Nationality is ignored in favor of ability: Best person for the job; n Color of passport does not matter when it comes to rewards, promotion and development. n IBUS 618 Dr. Yang 8

Staffing a New International Venture n The company recently made n An Australian wine company has successful and growing exports in three markets: U. K. , U. S. , and Scandinavia; n Gained a global recognition for quality wine; n Assisted by technological improvements, and aggressive marketing; n Now the Board wants the company to “ride the Australian wave” and gain more market shares in the European continent. n n n an acquisition in France, its first time FDI: Which is a middle-level player in the Fench home market; With efficient operation in the French context; Modest profit margin; Limited sales to EU neighboring countries; The Broad believes there is room for improvement particularly in production techniques and marketing IBUS 618 Dr. Yang 9

How would you staff the new venture? n Staffing approaches to n Factors to consider: consider? n Strategic goal n Key positions to be filled: n Mode of entry n Degree of control n Managing Director, head of the new venture n French culture and labor law n Production Manager n EU works council n Marketing Manager n Competence transfer n Chief wine Technologist n HR Manager n Brands, the “Australian wave” n Chief Finance Manager IBUS 618 Dr. Yang 10

Table 4 -1 a Advantages and Disadvantages of Using PCNs IHRM Chapter 4 IBUS 618 Dr. Yang 11 11

Table 4 -1 b Advantages and Disadvantages of Using TCNs IHRM Chapter 4 IBUS 618 Dr. Yang 12 12

Table 4 -1 c Advantages and Disadvantages of Using HCNs IHRM Chapter 4 IBUS 618 Dr. Yang 13 13

Figure 4 -1 Determinants of Staffing Choices IHRM Chapter 4 IBUS 618 Dr. Yang 14 14

Reasons for International Assignments n Position filling, e. g. n Skills gap, launch of new endeavor, technology transfer n Management development n Training and development purposes, assisting in developing common corporate values n Organizational development n Need for control, transfer of knowledge, competence, procedures and practices IBUS 618 Dr. Yang 15

Types of International Assignments n Short term: up to 3 months n n n Troubleshooting Project supervision A stopgap until a permanent arrangement is found n Extended: up to 1 year n May involve similar activities as short-term assignments n Long term n n Varies from 1 to 5 years The traditional expatriate assignment IBUS 618 Dr. Yang 16

Non-standard Assignments n Commuter assignments n Rotational assignments n Contractual assignments n 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. IBUS 618 Dr. Yang 17

Table 4 -2 Differences between Traditional and Short-term Assignments IHRM Chapter 4 IBUS 618 Dr. Yang 18 18

Figure 4 -2 The Roles of an Expatriate IHRM Chapter 4 IBUS 618 Dr. Yang 19 19

The Role of Non-expatriates n People who travel internationally yet are not considered expatriates as they do not relocate to another country n Road warriors, globetrotters, frequent fliers n Much of international business involves visits to foreign locations, e. g. n n n Sales staff attending trade fairs Periodic visits to foreign operations, subcontractors, etc. Meeting with foreign agents, clients, distributors, suppliers, etc. IBUS 618 Dr. Yang 20

A Glamorous Life n International business travelers cite the positives as: Excitement and thrills of conducting business deals in foreign locations n Life style (top hotels, duty-free shopping, business class travel) n General exotic nature n IBUS 618 Dr. Yang 21

But a High Level of Stress! n Home and family issues n Frequent absence and separation n Work arrangements n Domestic side of position still has to be attended to n Travel logistics n Waiting in airports, etc. n Health concerns n Poor diet, lack of sleep, etc. n Host culture issues n Limited cultural training, lack of backup support IBUS 618 Dr. Yang 22

The Role of Inpatriates n As both knowledge senders and receivers n Share their local contextual knowledge with the HQ staff n Socialize in the HQ corporate culture and learn firm-specific routines and behaviors n Increasing the capabilities of organizations to “think global and act local” IBUS 618 Dr. Yang 23

Figure 4 -3 ROI Indicators for Calculating Intl Assignments IBUS 618 Dr. Yang 24 24

Steps to Calculate Expatriate ROI 1. Identify financial and non-financial costs and benefits. 2. Link the costs and benefits to the purpose of the long-term assignment. 3. Identify the appropriate antecedents from a system’s perspective. 4. Conduct the calculation at an appropriate time within the context of the assignment’s purpose. IHRM Chapter 4 IBUS 618 Dr. Yang 25 25

The Role of the Corporate HR Function n Can we manage our people like a global product, e. g. , the feasibility of: The concept of a global internal labor market n Standardization of work practices and HR activities n n What HR matters require central control and what can be decentralized? IBUS 618 Dr. Yang 26

Table 4 -3 Various roles of corporate HR IHRM Chapter 4 IBUS 618 Dr. Yang 27 27

Current Trends and Shifts in International Assignments Categories Types of the Assignments Expected Assignment Duration 1 -3 years (52%) 53% Permanent 20% Short-term (9%) 27% Under 6 months 13% 6 months to 1 year 14% Assignment completion On schedule 58% Extended 31% Less time 11% Companies Seeking Alternative Mobility Models Localization 57% Hiring HCNs 48% One way move 26% Short-term 39% Business travel 36% Source: adapted from Global Relocation Trends, GMAC-GRS 2002, 2005. IBUS 618 Dr. Yang 28

Chapter Summary This chapter has expanded on the role of IHRM in sustaining international business operations. We have: n 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. n Considered the reasons for using international assignments: position filling, management development and organization development. (cont. ) IBUS 618 Dr. Yang 29

Chapter Summary (cont. ) n 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. n 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 organization’s perspective. (cont. ) IBUS 618 Dr. Yang 30

Chapter Summary n Recognized that non-expatriates and inpatriate are also critical to international business operations. n 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. n Pointed out the importance to control costs and develop metrics to measure expatriate return on investment (ROI). n Looked at the role of the corporate HR function as the firm grows internationally, building on sections from Chapters 1 and 2. IBUS 618 Dr. Yang 31

Discussion Questions 1. Outline the main characteristics of the four approaches to international staffing. 2. Which factors determine the choice of a staffing approach? Would a MNE choose the same staffing approach worldwide? Place your arguments in the context of the model outlining determinants of staffing choices and pros and cons of using PCNs, TCNs, and HCNs. 3. What are the reasons for using international assignments? 4. What is the role of inpatriates? Do inpatriates guarantee a geocentric staffing policy? 5. Why is it important to measure return on investment of international assignments? Which indicators can be used? 6. As a newly appointed Project Manager of a research team, you consider that you will be able to manage the project virtually from your office in London, even though the other six members are located in Munich. This will solve your personal dilemma as your family does not want to be relocated. The project has a six-month deadline. What factors should you need to consider in order to make this virtual assignment effective? IHRM Chapter 4 IBUS 618 Dr. Yang 32 32