ULUSLARARASI İŞLETME

There are also several objectives of international compensation policies of MNEs, which are stated below (Briscoe, Schuler, and Tarique, 2012): Attraction and retention of the bestqualified talent to staff the MNE in all of its locations; attraction and retention of employees who are qualified for international assignments; facilitation of transfers between the various employment locations within the MNE; establishment and maintenance of a consistent and reasonable relationship between the compensation of employees at home and abroad; maintenance of compensation that is reasonable concerning the practices of competitors yet minimizing costs to the extent possible.

According to Dunlop (1958: 16), a national industrial relations system consists of four basic components, which are actors or parties (employees, employers, government), rules (both substantive and procedural resulting from mutual cooperation and oppositions between actors), an ideology (which binds separate actors one another) and the environmental context .

It is not easy to manage human resources because employees come into companies with different educational backgrounds, occupations, motivation, gender identities, ages, and other various demographic and occupational features. On top of these, as firms go global, finding, managing, and retaining human resources become especially challenging because all of those activities become more complicated within the actual reality of different national cultures and ways of doing business in those cultures. Therefore, we need to define and understand international human resources management if we are to understand the business done on an international level.

International human resources management (IHRM) refers to the planning, recruiting and selecting, training and developing, evaluating, and retaining employees for the international operations of international companies. In this chapter, international companies will be referred to as multinational enterprises. A multinational enterprise (MNE), also called a multinational corporation (MNC), is “a company that produces goods or delivers services in more than one country.” A multinational enterprise has its management headquarters in one (or rarely more than one) country, namely the home country (parent country), while also operating in other countries, namely the host countries (Eurostat, 2019). International human resources managers, usually located at corporate or regional headquarters at the home country, support subsidiary (host country) managers by providing IHRM guidelines and by finding, training, and evaluating employees for international operations.

As also understood from the information given, the answer is E. All of the statements above related to international human resources management are correct.

Awareness of cultural differences is essential for international human resources managers.

IHRM is usually more complicated than domestic human resources management. In order to understand the complexity of IHRM, we need to understand its three dimensions. The dimensions of IHRM are activity dimension, regional dimension, and employee-group dimension. IHRM consists of different activities (i.e., recruitment and selection, training and development, performance appraisal and compensation, labor relations, leadership) which form the first dimension. The second dimension is related to the regional aspect which includes whether HRM is carried out in the homecountry, host-country, or other countries; and the third dimension is concerned with different employee groups, i.e., whether they are homecountry nationals, host-country nationals, or from other countries (third-country nationals) (Morgan, 1986; Morschett, Schramm-Klein, and Zentes, 2015).

As also understood from the information given, the answer is E. All of the statements related to international human resources management in the options are correct.

Awareness of cultural differences is essential for international human resources managers.

IHRM is usually more complicated than domestic human resources management. In order to understand the complexity of IHRM, we need to understand its three dimensions. The dimensions of IHRM are activity dimension, regional dimension, and employee-group dimension. IHRM consists of different activities (i.e., recruitment and selection, training and development, performance appraisal and compensation, labor relations, leadership) which form the first dimension. The second dimension is related to the regional aspect which includes whether HRM is carried out in the homecountry, host-country, or other countries; and the third dimension is concerned with different employee groups, i.e., whether they are homecountry nationals, host-country nationals, or from other countries (third-country nationals) (Morgan, 1986; Morschett, Schramm-Klein, and Zentes, 2015).

As also understood from the information given, the answer is E. All of them are related to  activity dimension of international human resources management.

Based on these dimensions, Dowling, Festing, and Engle (2013) discussed six factors that drive the complexity of IHRM; these factors are as follows:

As alos understood from the information given, the answer is E. All of the are the factors that drive the complexity of international human resources management.

In managing human resources at an international level, the first decision will be about where the employees for various positions should come from. Employees can come from three sources: (1) a parent (home) country, (2) a host country, and (3) a third country. A parent country is a country in which the company’s corporate headquarters is located. For example, Turkey is the parent country of TAV Construction. A host country is a country in which the parent country organization seeks to – or has already located – a facility. A third country is a country other than the host country or the parent country; and the company in question may or may not have a facility there (Noe, Hollenbeck, Gerhart and Wright, 2019: 658).

As also understood from the information given, the answer is E. All of the statements in the options related to staffing at international level are correct.

In managing human resources at an international level, the first decision will be about where the employees for various positions should come from. Employees can come from three sources: (1) a parent (home) country, (2) a host country, and (3) a third country. A parent country is a country in which the company’s corporate headquarters is located. For example, Turkey is the parent country of TAV Construction. A host country is a country in which the parent country organization seeks to – or has already located – a facility. A third country is a country other than the host country or the parent country; and the company in question may or may not have a facility there (Noe, Hollenbeck, Gerhart and Wright, 2019: 658).

Then, based on the above classification, employees are categorized as: (a) parent-country (home-country) nationals, (b) host-country nationals, and (c) third-country nationals. Parent-country nationals (PCNs) are employees who were born and live in the parent (home) country. Host-country nationals (HCNs) are those employees who were born and raised in the host country. Third-country nationals (TCNs) are employees who were born in a country other than the parent and host countries but work in the host country. For instance, a Turkish employee working for a French MNE in Germany can be considered a TCN.

As also understood from the information given, the answer is E. All of the statements above related to staffing at international level are correct.

In filling the positions at MNEs, each category of employees has its advantages and disadvantages. The preference of one category over the others is determined by the approach to human resources management in the MNE. Following the footsteps of Chakravarthy and Perlmutter (1985), four global strategies of MNEs are described next, together with the approaches they bring to staffing. These include ethnocentric, polycentric, geocentric, and regiocentric approaches. (Daniels, Radebaugh and Sullivan, 2015; Deresky, 2017; Geringer, McNett, Minor and Ball, 2016; Hill, 2013; Patel and Budhwar, 2017; Peng, 2011; Wild and Wild, 2016).

The Ethnocentric Approach: An MNE is said to be following an ethnocentric approach when strategic decisions are made at the headquarters; and critical positions in both the domestic and foreign operations of an MNE are filled by personnel from the parent country (PCNs) with no or minimal autonomy delegated to the foreign subsidiaries. (Patel and Budhwar, 2017: 120).

The Polycentric Approach:  When an MNE treats each subsidiary as a distinct national entity, it is said to be adopting a polycentric approach. Acknowledging that the business environment and business practices in another country are different from those at the home country, the host country operation will be allowed more decision-making autonomy and will be staffed primarily by HCNs. This approach overcomes some of the shortcomings of the ethnocentric approach. Some MNEs use this approach in East Asia, Australia, and other markets that are deemed too expensive to staff with expatriates (Luthans and Doh, 2018).

The Geocentric Approach:  While the polycentric attitude strives for optimal local solutions, this might be sub-optimal for the whole organization. MNEs which think more globally in terms of their operations, recognizing that each part (subsidiaries and headquarters) makes a unique contribution with its unique competence are said to pursue a geocentric approach to staffing (Patel and Budhwar, 2017: 121). Here, all the subsidiary managers are regarded as equal to those at the headquarters. IBM is an excellent example of an MNE attempting to use such an approach (Luthans and Doh, 2018).

The Regiocentric Approach: The regiocentric approach is a mix between the polycentric and the geocentric approaches. With the assumption that adaptation within regions is more comfortable than between regions (Morschett, Schramm-Klein, and Zentes, 2015: 512), the MNE divides its operations into geographic regions and moves staff within particular regions, e.g., Europe, America, Asia, rather than between regions. For example, countries from the Middle East are staffed with managers from the Middle East but not necessarily from the same country. Here, reliance on the regional group cooperation of the local managers takes precedence, and the regions operate relatively independently from one another. It will not be easy for the regional managers to be promoted to headquarters positions, but they can enjoy a certain degree of regional autonomy in decision making (Luthans and Doh, 2018; Patel and Budhwar, 2017).

As also understood from the information given, the answer is E. All of them are the global strategies and the approaches of multinational enterprises (MNEs) they bring to staffing.

Despite its advantages, ethnocentric staffing has its negative aspects too. Firstly, relocating managers from the home country is usually expensive. The bonuses that managers often demand and/or receive for relocating, plus relocation expenses for entire families, can increase the cost of a manager several times over. These high compensation packages can also lead to resentment among the HCNs with whom they are working. Secondly, being away from friends and relatives can be a severe source of stress for the PCNs. Thirdly, the more the host country’s culture is different from the home country’s culture, the more it puts pressure on the PCN. On the way to adapting to a new culture, poor decisions can be made because of not understanding the local customers and the needs of lower-level employees who are typically HCNs. Lastly, host governments can be discontent about this practice if they expect the MNE to employ locals in positions at any level. This disappointment may lead those governments to impose specific immigration laws and workplace regulations to force the MNE to hire locals.

As also understood from the information given, the answer is E. All of them are the negative aspects of ethnocentric staffing.

Companies whose activities are highly international need employees with language fluency and in-depth experience in other countries. Meanwhile, small companies or those new to international business can begin with some basic cultural training. As a company increases its international involvement and cross-cultural contact, employees’ cultural knowledge must keep pace. Companies use many methods to prepare their employees for an international assignment. International assignment preparation methods are as follows:

These methods tend to reflect an employee’s level of international involvement. The goal is to create informed, openminded, flexible managers with a level of cultural training appropriate to the duties required of them.

As also understood from the information given, the answer is E. All of them are the methods used by the companies to prepare their employees for an international assignment.

Due to the effect of international performance management on organizational performance, it is evident that an effective and systematic performance appraisal is required for expatriates and foreign managers besides local employees. For that, MNEs pay attention to the purposes of performance management and typically to purposes of performance appraisal. According to Briscoe et al. (2012: 345), two broad purposes of performance appraisal consist of evaluation goals and development goals:

Evaluation Goals

Development Goals

As also understood from the information given, the answer is E. All of them are evaluation goals which is one of purposes of performance appraisal.

Fenwick (2004: 311) classified the internal and external factors that influence the international compensation policy of MNEs:

MNC internal environment

MNC external environment

As also understood from the information given, the answer is E. All of them in the options are external environment variables that influence international compensation policy of MNEs.

According to the author, the identified internal and external environments of MNEs would largely determine their adopted staffing orientations (either, ethnocentric, geocentric or polycentric); and the nature of the international compensation will vary in accordance with MNEs staffing orientations.

Industrial relations cover all aspects of employment relationships with particular attention to labor and management relations (Katz, 1988). Industrial relations is a broad concept encompassing many relations regarding the workplace. Kaufman (2008) classifies industrial relations under two distinct paradigms; the Original Paradigm and the Modern Paradigm. The Original Paradigm focuses on employment relations, and the Modern Paradigm focuses on unions and labor management relations. According to Dunlop (1958: 16), a national industrial relations system consists of four basic components (Figure 5.6), which are actors or parties (employees, employers, government), rules (both substantive and procedural resulting from mutual cooperation and oppositions between actors), an ideology (which binds separate actors one another), and the environmental context (as cited by Rahim, 2011: 66).

As also understood from the information given, the answer is E. All of the statements related to international industrial relations in the options are correct.

IHRM is usually more complicated than  domestic human resources management. In order to understand the complexity of IHRM, we need to understand its three dimensions. The dimensions of IHRM are activity dimension, regional dimension, and employee-group dimension. IHRM consists of different activities (i.e., recruitment and selection, training and development, performance appraisal and compensation, labor relations, leadership) which form the first dimension. The second dimension is related to the regional aspect which includes whether HRM is carried out in the home country, host-country, or other countries; and the third dimension is concerned with different employee groups, i.e., whether they are homecountry nationals, host-country nationals, or from other countries (third-country nationals) (Morgan, 1986;Morschett, Schramm-Klein, and Zentes, 2015)

External influences of the government and national culture:  Employees must be hired, evaluated, and compensated in ways consistent with the country and regional customs and regulations. Laws govern work hours, the firm’s ability to dismiss or lay off employees, and severance compensation. These regional customs and regulations are frequent challenges in large MNEs. 

The mix of foreigners versus locals: Foreign subsidiaries are frequently staffed from the home country, the host country, and/or
third countries. The mix of staff depends on several factors, including the international experience of the firm, the cost of living in a foreign location, and the availability of qualified local staff. As a result, the mix of foreigners and locals complicate IHRM.

The need for an international compensation policy: Proper
compensation packages become an issue, especially when there are higher costs of living in the host countries. Compensation packages may need to include allowances for housing, education, and other facilities
that are not readily available in the host country. Establishing a fair and comparable compensation scale, regardless of nationality, is a frequent challenge in large MNEs.

The need for defining the positioning of the product: Defining the positioning of the product is not within the scope of IHRM function. It is an issue within the scope of the marketing function.

An MNE is said to be following an ethnocentric approach when strategic decisions are made at the headquarters; and critical positions in both
the domestic and foreign operations of an MNE are filled by personnel from the parent country (PCNs) with no or minimal autonomy delegated
to the foreign subsidiaries. (Patel and Budhwar, 2017: 120).

Aiming for an optimal allocation and synergy effects, the geocentric approach emphasizes interdependencies and strives for a collaborative
approach between the headquarters and subsidiaries as well as among subsidiaries. With a geocentric staffing policy, the HRM strategy tends
to be consistent across all subsidiaries, utilizing the best people for all the critical jobs throughout the organization, whatever their nationality is or whatever the geographical location of the post to be filled is. In other words, the local operation may choose PCNs, HCNs, or TCNs depending on the operation’s specific needs according to geocentric approach.

Many international employees experience what is called the reverse culture shock upon returning home. One reason for this to happen is that the  expatriate and his/her family assume that things have stayed the same at home, while in fact, friends may have changed, moved; or new managers may have been hired along with new employees. Thus, a training and development called repatriation is undertaken to  help expatriate managers make the transition back to their home country.

Two broad purposes of international performance appraisal consist of evaluation goals and development goals: Diagnosing individual and organizational problems is a development goal. On the other hand, evaluation goals include providing feedback to employees, so they will know where they stand; identifying high-potential employees; helping management in making discharge and retention decisions; and providing a means of warning employees about unsatisfactory
performance.