Unit 3:

International
Human Resource
Management
Meaning & Definitions
 International HRM includes all HRM functions i.e. recruitment,
selection, training and development, performance appraisal and
dismissal to be done at international level . Additional activities
such as global skills management, multiculturalism management
etc. are also included in it. Needless to say, as corporations
globalize, HRM activities like HR-planning, staffing, developing,
and retaining employees go far beyond a national scope.
 Thus, International Human resource management is ‘the process
of managing people in international settings.’
Definitions
 Scyllion (1995) defined IHRM as “the HRM issues and problems
arising from the internationalization of business, and the HRM
strategies, policies and practices which firms pursue in
response to the internationalization process”.
 According to Taylor, Beechler et al. 1996, IHRM is “The set of
distinct activities, functions and processes that are directed at
attracting, developing and maintaining an MNC's human
resources. It is the aggregate of the various HRM systems used
to manage people in the MNC, both at home and overseas"
 Broadly defined, the field of IHRM is the study and application of all human
resource management activities as they impact the process of managing human
resources in enterprises in the global environment.
 It is concerned with the following activities:
1. Human resource planning
2. Staffing (recruitment, selection, out-placement)
3. Performance management by Supervising the work.
4. Training and development : Ensure high performance.
5.Compensation (remuneration) and benefits : Manage employee payroll, benefits
and compensation and Ensure equal opportunities.
6. Manage employee relations, unions and collective bargaining.
7. Prepare employee records and personnel policies.
8. Ensure that human resource practices confirm to various regulations.
9. Motivate employees
International HRM dimensions
 P.V. Morgan defines International HRM as the interplay
among the three dimensions:
 HR Activities
 Types of Countries
 Types of Employees
 HR activities

 HR activities performed under IHRM are almost same

as that performed under domestic HRM i.e. selection
training, development , compensation.
 The key variable that differentiates domestic HRM
activities from international HRM activities such as
global skills management is complexity involved in
operating in different countries and employing
different categories of employees from different
nations.
 Example
Types of Countries
If a company like Samsung
(headquartered in South Korea)
 The three nations or country opens a manufacturing plant in
categories involved in IHRM activities Vietnam, then:
are: Host Country, Parent Country and
Other Third Countries. •Parent Country: South Korea
-
(where Samsung is
Host country is the country where the
subsidiary company of MNC is located.
headquartered).
- Parent country is the country where •Host Country: Vietnam (where
the headquarters of the MNC is the manufacturing plant is
located. located).
- Third countries are other countries •Third Country: A country like
that may be the source of labour, India, where Samsung might
finance and other inputs.
source some components for its
Vietnamese production, but
 Types of Employee
 Domestic HRM involves employees with only one
national boundary.
 IHRM deals more and more with a multicultural
workforce.
 The types of employees of an international
organisation can be broadly categorized into parent
country national, host country national and Third
country national. It is the nationality of the employee
which determines the person’s category as PCN, HCN
or a TCN.
Parent Country National (PCN) or
the Home Country National
Advantages of employing a PCN to Disadvantages of employing a PCN to the firm:

the firm:  It is difficult for a PCN to adapt to the foreign

language, culture, socio-economic, political
 A PCN is better familiar with the and legal environment.
goals, objectives, policies,  It is too costly for the firm to send him and his
systems, procedures and practices family to the subsidiaries.
of the headquarters.  Compensation differences between PCN and
HCN may create problems.
 He can more effectively
 The host countries' nationals lose jobs when
communicate and maintain liaison
the PCN are transferred to the subsidiaries.
with home-office personnel.
 PCNs may not be able to adjust to a new
 He can easily exercise of control country and hence may even fail to perform
their duties effectively.
over the subsidiary's operations.
Host Country National or HCNs
Advantages of HCNs Disadvantages
 A HCN is familiar with the cultural, social
 Difficulties in exercising
and political factors and business practices
in the host country and can respond effective control over the
effectively to the demands for localization
of the subsidiary's operations if required.
subsidiary's operations.
 A HCN costs less to a company compared  It is difficult for a HCN to
to a PCN or TCN. communicate with the
 An MNC arranges for training and
headquarters compared to
development of employees and provides
them opportunities for growth which leads PCN.
to increase in their commitment and 
motivation.
HCN gets less opportunity for
 No need to obtain work permit to employ gaining international and
them. cross-cultural experience.
Third country nationals or TCNs
Advantages Disadvantages
  Host countries may be
TCN are usually career
international business sensitive with respect to
managers. nationals of specific countries.
 Local nationals are prevented
 TCN are less expensive to
in their efforts to upgrade
employ than PCN.
their own ranks and assume
 TCN may be better exposed responsible positions in the
about the host environment multinational subsidiaries.
than PCN.
Locally Responsive: By employing the human resources, the firm can better respond to the
local needs of the people. Mac Donald’s known for their beef burgers entered the Indian
markets in 1996 .But cow is a holy animal for Indians. They introduced Aloo Tikki burgers and
chicken burgers for the Indian markets. This business model is called Glocalisation.
Emphasis on Core Competency: Core competency is about focusing on the strengths and
develop them as much as possible and to switch away from the area of weakness and out
sourcing the other activities. Many organizations have started focusing on their core
competence and businesses are being organized around that. But what is most important here
is to identify the areas of the core competence out of the areas where company can do
reasonable well and for this, more emphasis has been given to human factor.
Reorganization: With the change in business environment, the organization structures have
also undergone a sea change. Span of control has become wider, the organizational structures
have become flatter compared to tall structures. The traditional organizational structures such
as simple, functional and divisional have been replaced by team, matrix and network,
structures. For this reorganization, skillful human talent is required either through new
appointments or by developing the existing human resources. For these activities IHRM
Competition for Human Resources: Firms operating in service sector need highly talented
people for their functioning. Foreign firms, particularly those operating in sector such as
consultancy, merchant banking, investment banking, etc. have put a lot of competition for
acquiring managerial talents. Retaining talent has become a challenge which can be coped up
with proper HR policies.
Technological Changes: To handle new and sophisticated technologies, additional skills are
required which requires for arranging the training of the old employees and acquiring new talent
as well. For this, HR departments have to be more active.
Need for Workforce Empowerment: HRM has a crucial role to play in empowering the
workforce. Empowering the workforce means giving them authority matching their
responsibilities. With the increasing role of human resources and their management,
organizations have accorded HRM a higher status than what it previously was.
Commitment: Good management of human resources enhances the image of the company
world over. It also attracts talented people to the organization. It also promotes the sense of
commitment in the employees towards the organization.
Cost Effectiveness: The importance of Expatriates in International Business has been growing.
Good HR practices are required to manage the performance of expatriates. Their poor
performance may damage the image of the company and can affect its market share as well.
Competence: To achieve global competitiveness and for the implementation of global strategy
effective management of human resources is desirable. The success or failure of business
whether operating domestically or globally is based on the quality of HR. IHRM ensures that
organization has talented , skilled and competent people that it needs.
Helps in developing good work culture within an organization.
Helps organization achieve its objectives by developing and implementing HR strategies
that are integrated with business strategy.
Limitations in IHRM
 There are no universal HR practices which can be applied as
a rule of thumb for management of Human resources in the
business.
 HR procedures in one culture are not same for the another
culture.
 HRM and industrial relations practices differ across countries.
 Influence of local culture can never be taken lightly or
ignored.
Drivers of
Globalization /
Motivations to
International Business
 Difference in the cultural, legal, political
factors make it difficult to understand the
foreign markets. Moreover, each country
has its own cultural, political and legal
system which adds to the complexity.
Increasingly companies are choosing or
are being forced to sell their products in
markets other than their domestic
markets. It has become imperative for
most companies to compete in foreign
markets because of the following reasons:
1. Increase sales: Companies prefer to go global to increase their sales when the domestic

markets are small or get saturated or the growth rate of domestic market is slow.

Companies have to move out of their domestic markets to explore the foreign market

potential.

2. Locating cheap raw material and labour: Developed markets have high cost structures

and companies may move their operations to regions and countries where costs of

production are lower.

3. Goodwill: A multinational company enjoys more goodwill than a domestic company.

Extended customer base also helps finance the new product development.

4. Competitors strike: Some companies move out of their domestic markets as a reaction to

their competitors move to maintain their market share. The competitor could get a
5. Diversification: In order to spread out the risk of operating in one country, companies
diversify to different markets which are least correlated with the domestic market conditions.
This results in hedging their risk. Thus, business becomes less prone to the fluctuations in the
domestic economy. For example, if domestic market is going through prolonged recession, the
company might be able to sustain itself through sales in foreign market sales which are at
different stage of business cycle.
6. To compete successfully in Domestic Market: Even if a company decides to
concentrate on its domestic market, it will not be allowed to pursue its goals unhindered.
Multinational companies will enter its market and make a dent in its market share and profit.
The company has no choice but to enter foreign markets to maintain its market share and
growth.
7. Government incentives: Another reason why firms enter in the international market is
the government incentives. The govt. provides may incentives like subsidies, tax concessions,
tax holiday etc. to companies to export so that the country can earn foreign exchange. This
prompts many companies to enter the international markets which would otherwise not have
Ways
to go
global
1. Exporting: Exporting refers to selling an item produced in domestic market abroad. It is the
easiest way to enter into a foreign market. Exports increase the sales volume and helps
companies reap benefits of economies of scale. It requires low investment and is least risky. At
the darker side, because of less knowledge about foreign markets, exports may not click.
2. Licensing: Under licensing, the manufacturer leases his intellectual property rights i.e., to a
foreign manufacturer for a certain fee. Licensing involves very low financial risk for the licensor
and can provide good returns on very less investment . Licensor bears no risk of product failure
but under licensing opportunities for both the licensor and licensee are limited.
3. Franchising: In this mode, an independent firm called the franchisee uses the name of
another company called the franchisor for business operations for a certain fee. The franchisor
also grant the right to use his trademarks, operating process, product reputation and
marketing, HR and operational support to the franchisee. Franchising involves low risk, low
investment. Franchisor get to learn about the host country from the experience of the
franchisees. Franchisee gets the R&D and brand name with low cost and has no risk of product
failure. However, both the franchisor & franchisee are responsible for managing both product
Mergers & Acquisitions: To enter into an international business, a company may merge itself
with a foreign company. It is a quickest way to enter into international manufacturing and
marketing activities. Acquiring a foreign subsidiary is less risky than starting up from a grass
root level. The acquirer gets immediate ownership and control over the acquired firm’s asset.
Right selection of company is the most important decision here and requires expert advice.
Joint Venture: When two or more firms join hands for a particular venture, it is called a joint
venture. It is an easy way to enter into the international market since the firm can take
advantage of the experience and knowledge (about culture, market, business practices,
regulatory environment etc.) of the local partner. Both the firms share their resources and
skills, technology, expertise, marketing etc. however, venture may collapse as conflicts may
develop between or because of changes in the partner’s strength. Joint venture may slow down
decision-making due to the involvement of two or more decision-makers.
Wholly Owned Subsidiary: A company whose common stock is fully owned by parent
company is known as the Wholly Owned Subsidiary. It may arise through acquisition or by a
spin-off from the parent company. This approach is most risky one and can pay very good
Multiculturalism and HRM:
Managing diversities
Meaning and Definition:
Culture
 “Culture is what do and how we do. Culture is our routine of
sleeping, bathing, dressing, eating and getting to work. It is
our household chores and actions we perform on the job, the
way we buy goods and services. It is the way we greet friends
or address a stranger and even to a larger extent what we
consider right or wrong” (Lavaty & Kleiner 2001, p. 45).
 According to Hofstede, culture is “the collective
programming of the mind which distinguishes the members
of one group or category of people from another‟.
 According to Hofstede culture is a

three layered structure representing

less visible or implicit values and

assumptions as we move from outside

to inside. These layers include:

 Surface or explicit culture (the

outside layer),

 Hidden culture (the middle layer),

 Invisible or implicit culture

 Surface or explicit culture (the outside layer): it depicts the
aspects that are readily observable, such as clothing, food,
asthetics, norms, body language, mannerism, rituals, decorums
etc.
 Hidden culture (the middle layer): the second layer of the
model depicts the values, and philosophies and religion. It depicts
the views , beliefs, perceptions.
 Invisible or implicit culture: invisible culture is represented by
the core of the onion. The truth about the culture. This is the
most important aspect of culture which needs to be understood
by the HR manager as an understanding of this aspect helps
manger prepare employees for international assignments or
developing international compensation and motivation practices.
Theoretical contributions to
cultural diversity

1. 2. Cultural
Hofstede dimensions
Model by Hall
 1. Hofstede Model
 Geert Hofstede, a Dutch scholar and the best known researcher in this field has given 5D
Model to identify, classify and compare cultures. The various Cultural dimensions in
Hofstedes study are:
 POWER DISTANCE : power distance represents the inequality
among people. Lesser power distance means less inequality. As
power distance increases, there are greater status and authority
differences between superiors and subordinates. Power distance
in a nation affects the reactions to management authority. Power
distance affects Management’s attitude towards participative
management or autocratic approach.
 INDIVIDUALISM: the extent to which people in a country prefer
to act as individuals instead of members of groups. Asians tend to
be less individualistic and more group-oriented, whereas those in
the United States score the highest in individualism. In Cultures
with high individualistic tendencies promote individual
competition and with less individividualistic tendencies more
collective action.
 MASCULINITY/FEMININITY : The cultural dimension masculinity/femininity refers
to the degree to which “masculine” values such as assertiveness, performance
orientation, success, and competitiveness prevail over “feminine” values which are
quality of life, close personal relationships, and caring. This dimension might affect
the roles which are assigned to women employees in the various countries.
 UNCERTAINTY AVOIDANCE : The dimension of uncertainty avoidance refers to
the preference of people in a country for structured rather than unstructured
situations. A structured situation is one in which rules can be established and there
are clear guides on how people are expected to act. Those with uncertainty
avoidance behaviour get uncomfortable with the sudden changes but those with
flexible cultures take changes as challenges and face with it more zeal and spirit
and promote entrepreneurship.
 Long term orientation: Long term orientation deals with society’s search for
righteousness. In societies with long term orientation , people show an ability to
adapt traditions according to changed conditions, and determination in achieving
results as opposed to short-term values, where focus on the present and the past
which include respecting tradition and fulfilling social obligations.
 Cultural dimensions by Hall
 Edward Hall (1976), stressed the close relationship between culture and
communication. He defined cultures as a “system” to provide, send, store
information.
 Edward Hall developed a useful way to understand culture by identifying
their social framework as low or high context. Context can be best defined
as the array of stimuli surrounding a communication event including:
gestures; tone; physical distance between conversationists; time of day;
weather; situation; societal norms; geographic place of communication; and
other external factors.
 High context and low context cultures are differentiated by the emphasis
that is given to the context against the actual message itself.
 According to hall, in high context cultures, emphasis is placed on
the implicit messages rather than the explicit message. If there is
contradiction between the verbal and the non verbal aspect, non
verbal aspect is relied and acted upon where as in Low context
culture, much attention is paid to the actual message rather than
the stimuli surrounding the message. In case of contradiction
between the non verbal and verbal message, verbal messages are
relied upon. Information is explicitly known rather than implicit . In
low context cultures, a concrete meaning is expected, rather than
abstract meaning.
 All cultures either have a monochromatic or polychromatic sense of
time. Low-context cultures tend to be monochromatic. In
polychromatic cultures, many things go on at once. Polychromatic
cultures tend to be high-context.
 Advantages of cultural diversity
Variety of ideas : Since the workforce is from different cultural backgrounds they have
different perspectives of looking at the things and they can provide multiple ides about solving
a problem.
Development of new product: In case of new product development, the workforce with
different cultures can support the development of new product offering which can be useful for
a wide customer base.
Wide base of employees to choose upon the best talent. Staff retention will be better
since no employee will feel out of place. Employees will give their best and are more
knowledge of the customer base. Also employees with different cultures can provide better
understanding about the customers of different cultures and hence customer base can get
broadened.
Drawing from the full pool of talent, both domestic and international. A diverse
workforce means that employees are recruited from a wide pool of talent and enhancing the
prospects of recruiting the best employee for every available position in the organisation,
 Challenges of cultural diversity

Increased training costs: When the workforce differs in behavior, thinking and attitudes, they
need to be given training so that they can better understand each other. Problem arises not
with the verbal communication but the non verbal aspect of it. As different cultures have
different perspectives and norms, possibilities of misunderstanding increase which can be done
away with training only. Workforce can be made sensitive towards others cultures through
training only.
Increased incidents of conflict: Conflicts arise due to disagreement on a particular situation
which is quite obvious when people from diverse backgrounds having different perceptions
about different situations. Employees may have sensitivities towards their own culture and feel
others to be inferior to them. This may result in personality clashes and may result in
derogatory comments or gestures.
Low productivity: If diversity is not managed effectively, no system is developed to manage
the diversity, employees may feel dissatisfied which may affect their productivity and may also
lead to higher attrition rates.
Reverse discrimination: Reverse discrimination is a situation where the members of the
majority may feel that their interests are ignored and the minority are given preferential
treatment over them because of their minority status and not their ability or qualification.
Increase in costs: Members of diverse cultural backgrounds have different religious and
cultural expectations. The company needs to accommodate such differences , also their
different dietary needs and expectations which definitely leads to increase in cost of operation.
Overcoming the stereotypes and increasing fairness: Cultural stereotyping here means
when managers have the tendency to employ the people of their own culture rather than
having a fair selection on the basis of their appropriateness for the job. The minority
employees may feel neglected or ashamed of their culture and hence may not cooperate .
Stereotyping may spoil the entire company’s culture and affect its profitability adversely. So,
employees should be selected fairly on the basis of merit rather than on racial basis. The
screening tools must be culturally sensitive.
Blending cultural diversity with a dominant organizational culture: Make the culture of
the company so strong that the cultural differences among the work force get blended into the
organizational culture and all employees experience equality in the organization.
Organizational culture is a group of ruling ideas that include: ways of reasoning, ways of action,
common shared values, codes of conduct and ethical standards, which are formed and
developed over a long period . There should be commonly shared values in the organization
and all cultures should be led by one and only corporate culture at the sufficient level.
Dealing by a HR program or strategy: Significant responsibilities should be given to human
resource departments and modern management techniques should be utilized . In–service
training programs must be designed so that the employees can learn about the other people’s
culture. It will also help managers to understand how people from different cultures view work,
how or by what they are motivated, what their attitudes are, what they value, etc. Managers in
a culturally diverse workforce must use variable management techniques rather than a single
technique. It is very important for employees to be trained inter-culturally regarding business.
Adapting an employment relationship program: It has often been found that the
employees of the different cultures communicate less and hence they do not share their
experiences which always leads to some kind of invisible gap between them. Managers must
organize such programmes which can make them aware about different cultures, helps
develop positive attitudes towards different cultures, being flexible in communication, and
expressing personal concerns and confusions when facing cultural obstacles. The manager
must know the personalities and backgrounds of each employee individually . He must strive
to provide an aura of understanding to them. The minority employees must be appreciated and
must be made to know the importance they have for the organization . This will help obtain
their trust and loyalty and hence enhance their productivity.

Diversity management training program: To manage diverse workforce, training programs

should be designed to establish respect and developing a sensitivity for all of the differences
among employees and customers. Since multicultural workforce includes every job position
from the top management down to low–level employees, diversity management training
should be conducted for all levels of employees. By the training, employees will show more
respect to other people with different cultural backgrounds, and achieve more understanding
of others beliefs and their tradition It will also reduce the chances of costly failure because of
cultural difference problems. The training program emphasizes communication and
educational training, which has positive impact on both minority and non – minority
employees. For successful implementation of a training programme, involvement of upper
level management is must.
Policies and practices
in the multinational
enterprise
Promotions, Transfers,
Separations
Promotions
 Promotion means advancement in job. It is an upward movement of an employee from
current job to another which is higher in pay, responsibility, status and organisational
level. Just shifting of and employee to a different of having better working conditions
and locations does not refer to promotion. The new job will include higher pay and
responsibilities. Hence, there are three basic elements in promotion:
 a. Transfer of an employee to some higher job having more status, more benefits and
privileges.
 b. Reassignment of an employee to a position having increased responsibilities.
 c. Higher job grade.
 MNCs offer international promotions to their employees either on merit basis or
seniority basis or combination of two. Most of the MNCs appoint top level executives in
foreign subsidiaries from parent country nationals. Host country nationals are given
least chance to become executives as the practice adopted by Japanese MNCs. In
Japanese MNCs, foreign subsidiary managing directors are from parent country.
 Objectives of Promotions in MNCs
a. To take control within the hands of parent company, existing employees from parent country are
promoted to top level positions in foreign subsidiaries. Top level decisions are dominated by parent
country nationals.
b. To fully utilise the potential, skills and knowledge of the employees. Through promotions,
employees are given positions that will be of greater value to the company.
c. To develop competitive spirit amongst employees to acquire skills and knowledge required by
higher positions
d. To boost motivation amongst employees.
e. To develop internal source of employees ready to take jobs at higher levels in the organisation
f. to utilize the expertise of the existing employees for international locations
g. To build up morale, loyalty and a sense of belongingness amongst employees.
h. To reward committed, loyal and deserving employees
i. To conserve proved skill, training and ability
j. To reduce job rotation, absenteeism and turnover
k. To keep the deserving and dedicated manpower within the company.
l. To attract capable individuals
 Bases of Promotion

a. Seniority b. Merit based

based
a. Seniority based Promotion
 Seniority means length of recognised service in an organisation. In case of
seniority based promotions, the senior most person in the lower grade will
get promotion whenever there is an opening in the higher position.
 However, the same practice is not followed in its foreign subsidiary. Foreign
nationals are not promoted to top management positions. Only Japanese
parent country managers are promoted to top level management positions
in foreign subsidiary.
 The reason behind considering seniority as a basis of promotion is that there
is a positive correlation between length of service in the same job and the
amount of knowledge and skills acquired by the employee. There will be no
chance of biasness regarding promotion.
 advantages of having seniority as
a basis of promotion
a. It is relatively easy to measure the length of service and also to judge seniority.
b. It is widely accepted method of promotions accepted by trade unions also.
c. There are no chances of biasness or favouritism or discrimination.
d. Employees can predict their promotions. Hence, increases their morale and a sense of
satisfaction.
e. It reduces conflicts and grievances regarding promotions
f. It reduces the chances of labour turnover.
g. Company can fully utilise the skills, experience and knowledge of employees for higher positions
also.
h. MNCs promoting their senior employees to foreign subsidiaries can take charge and control of
subsidiary in its own hands.
i. PCN employees are well aware of policies, mission, vision and rules and regulations of the
company
limitations
a. MNCs offering promotions to parent country nationals and not offering to
local nationals of host country suffer from various human resources related
problems like labour turnover, trade union conflicts, lack of loyalty etc.
b. This method may discourage young and competent employees. they may
look for other companies.
c. It may not be necessary to have positive correlation between length of
service and learning power of employees. They may not have that much of
innovativeness or fresh ideas which are damn required for changing
situations.
d. Employees promoted without considering merit or their performance will
kill the zeal and interest for self development amongst them.
 b. Merit Based Promotions
 It refers to an employee’s skill, knowledge, ability, efficiency and aptitude as
measured from his/her educational, training and past employment record. Merit
based promotions means most able person in the lower grade, shall be promoted,
no matter how junior he/she may be in the company as well as regardless of their
socio economic background. American companies totally rely on merit for
promotions. In countries like Singapore, China, UK, Australia, Germany and
Thailand also, companies offer promotions based on merit.
 There are various ways to measure merit, which includes job performance, or
through written or oral examinations or personal interview or other records of
performance. Hence, MNCs following merit based promotions will either promote
their high performing employees from parent company to higher positions in
foreign subsidiaries or promote deserving local nationals from foreign subsidiary. It
will boost their morale and sense of belongingness to the company.
advantages of merit based system
of promotions
a. Company can utilise the skills of an employee in a better way at a
higher level.
b. Competent employees are motivated to excel and contribute to
organisational efficiency and effectiveness.
c. Employees are continuously encouraged to acquire new skills,
knowledge etc. for all round development.
d. Employees are promoted regardless of their socio-economic
background, including, country of origin, caste, creed etc. hence
improves motivation and loyalty and reduces chances of labour
turnover.
disadvantages of merit based
system of promotions
a. It is not easy to measure merit.
b. Techniques of measurement of merit are subjective.
c. Many employees and trade unions distrust the
management’s integrity in judging merit.
c. Seniority cum merit based
promotions
 To overcome the demerits of adopting solely either
seniority based or merit based promotions, many
companies adopt a mix of both. The most widely used
basis of promotion uses both measures of ability and
seniority.
 Transfers in MNCs
 Transfer means movement of an employee from one job to another without substantial
change in his duties, responsibilities, required skill, status and compensation.
 Job rotations and transfers of employees from one job, section, department, plant, branch
or subsidiary to another at the same or another place, where his/her salary, status and
responsibility are the same, help to develop different skills and experiences.
 However, constant job rotations or transfers can also result in low morale, disturbed career
development and family life.
 The process of international transfer of managers is also termed as expatriations. Though,
the term expatriate means any employee working outside his/her home country.
 Expatriates include parent country nationals (PCNs) and also third country nationals (TCNs)
working in foreign subsidiaries.
 An opposite term to expatriate is impatriate, where subsidiary employees are transferred to
head quarters.
 Research has found low presence of expatriate in Canadian and Western Europe.
Objectives for which companies adopt
international transfers:
a. To meet the subsidiary requirements: changes
at subsidiary level like technological changes,
changes in volume of production, quality of product,
production policy, product line, reallocation of or
reduction in workforce due to shortage or a surplus in
same sections etc. may demand the shift in job
assignments in order to place right man on the right
job. Companies go for transfers to stabilise
employment in the subsidiary. Companies will
transfer employees from parent country, or from
other subsidiaries within the region or anywhere in
the world working in company’s subsidiaries.
b. To meet employee’s requests: Sometimes, A well-known example of an employee
transfer is done at the request of the employee who was transferred from a parent
himself/herself. Employees may want to do their jobs company to a subsidiary is Sundar
at or near to their native place or country of origin,
Pichai, who moved from Google (the
due to challenges being faced in present situation. Or
they may need transfer to satisfy their desire to work parent company) to become the CEO of
under a different superior in a department/region/ or Google's subsidiary, YouTube, before
country. eventually returning to lead the entire
Google organization.
c. To ensure better utilisation of the employees: an employee may be
transferred because he/she is performing well and he/she may be suitable for
some other location, where his/her skills can be better utilised.
d. To make employees more versatile: international transfers make
employees more versatile. Employees can expand their capabilities. Employees
are prepared for more challenging assignments.
e. To adjust workforce: employees may be transferred from one subsidiary
where there is less work to another where there is more work. Hence, instead of
lay off or retrenchment they can be adjusted elsewhere.
f. To penalise the employees: some MNCs also resort to transfers as
disciplinary measures to shift employees to remote, far flung areas.
g. To fill vacant positions: international transfers are done to fill vacant
positions if there are lying in foreign subsidiaries, especially in developing
countries, where there is lack of availability of competent or qualified local
nationals. It may also hold true for developed countries, where there is necessary
to transfer specific knowledge and skills.
h. For management development: international transfers give international experience
to the managers which help in developing them for future important projects in
subsidiaries aboard or even within the parent company.
i. Organisational development: international transfers build a network between
expatriates and local managers and the company. Hence, it helps in smooth
communication network between parent company and subsidiary company.
j. To solve problems of subsidiaries: to realise and remove the problems of foreign
subsidiaries, transfers of expatriates are done. The parent country nationals come to know
about the problems of subsidiary and their root causes. Hence, parent country can take
strategic decisions to solve these problems.
k. To bridge cross-cultural diversity: international transfer results in socialisation of
PCNs with local managers and the local culture. Hence, strategies can be built as per local
conditions of the host country.
l. To ensure homogenous practices: international transfers are done to ensure
homogenous practices in foreign subsidiaries as conducted in parent company.
m. Transfer of technical knowhow and training: employees are transferred to transfer
their technical knowledge to the employees of foreign subsidiary. They also train the local
employees to accomplish the requirements of the company.
 Repatriation

Resignation

Dismissal or discharge
Separatio Death of employee
ns Suspension

Retrenchment

Lay Off
a. Repatriation
 Mostly expatriate employees fail in their first
foreign assignment may be at the initial stage
or at different later stages. The reasons behind
expatriate failure may be due to cultural shock
or nonadjustment with the host country’s
climate and other environmental conditions, or
due to nonadjustment with job demands, or
with behaviour of superior or colleague etc.
 Expatriates failed in their foreign assignments
are debriefed and repatriated to their previous
job in the home country.
 Sometimes, expatriates who are successful on
job and have adjusted to host country
environment, but due to non-adjustment of
family members with host country
environment or due to non-availability of
education facilities, medical or entertainment
facilities they have to return to home country.
 b. Resignation
 Employees in MNCs may resign to join
some other company for better
prospects. Or an employee can also
join due to some personal reasons like
female candidate marrying in some
other state or country, illness or bad
health of the candidate, or for any
other reason. In these cases,
resignation is voluntary.
 In compulsory resignation, an
employee is asked to put his/her
resignation to avoid termination of
services on the ground of gross
negligence of duty on his/her part or
some other serious charge against
him/her.
c. Dismissal or discharge
 In case an employee is alleged with
some serious charge like carelessness,
dishonesty, wilful violation of rules,
unauthorised absenteeism from duty
for a long time, inefficiency, violent and
aggressive acts, false statements of
qualifications or skills at the time of
employment etc. the company may
decide to dismiss or discharge him/her
from the services of the company.
 However, the company should resort to
this measure as a last resort and with
solid proofs. The employee should also
be given an opportunity to be heard.
d. Death of employee
 Some employees may die in service. When the cause
of death is due to occupational hazards, company also
give compensation as per the provisions of the rules
and regulations prevalent in the concerned country. As
compensation, company can also hire
spouse/child/dependent of the employee who dies in
service.
e. Suspension
 MNC may also suspend or prohibit
an employee from attending work
and perform normal duties as
assigned to him/her. This is done
as a serious punishment and is
generally awarded only after a
proper enquiry has been
conducted.
 During suspension, the employee
gets a subsistence allowance.
Once the charges against the
suspended employee are serious
and are proved, suspension may
also lead to termination.
 f. Retrenchment
 When company temporarily terminates the services of an employee due to some
business reasons like non-availability of raw materials, breakdown of machinery,
or any other reason which is beyond the control of the company it refers to
layoff.
 Employees are given compensation for the period for which they are laid off.
Employees can be recalled when the lay off period is over. Lay off is a very
expensive affair for the company, hence it should take every possible step to
avoid the causes of layoff. Rather company can resort to other cost cutting
measures like transfers or demotions etc.
 An MNC may have to face protests against the layoff or retrenchments in the
foreign country hence; it should take decision after considering all other options.