2008- SECTION C

DISCUSS THE INCREASING SCOPE OF IHRM. COMPARE DOMESTIC HRM

AND IHRM

WRITE A NOTE ON HRM AS PRACTISED IN JAPAN

WHAT IS EXPAT FAILURE? DISCUSS THE WAYS TO MINIMISE THE SAME.

ILLUSTRATE YOUR ANSWER

Expatriate failure not only means the premature return of an expatriate but also

the underachievement in that assignment. Eventually it represents the

organisational failure to manage human resources internationally.

There might be several reasons why many expatriates fail to deliver the objectives

assigned by the headquarters. Cultural adjustments, language differences, Foreign

Service hardship, length of assignment,

Below are the chief factors resulting in an unsuccessful expatriate

assignment.

1. Family Stress

Most expatriate managers are challenged and excited to be in their new

postings. They need to spend a lot of time at work since they are under pressure

to adapt to the new culture and their overall responsibilities are often larger than

they have experienced before.

As a result, the wives of expatriates spend a lot of time by themselves – and yes,

trailing spouses are still usually female – and are cut-off from their own family and

friends. At the same time, the wife is usually dealing with problems for which she

has no previous experience. She may catch a maid stealing or get stopped by a

policeman who wants a payoff for a non-existent offence. She may have been told

that internet connectivity is available but then finds it takes 6 months to install.

All through this, she will probably discover that suitable employment for herself is

next to impossible in an emerging country – seriously damaging her own long-

term career.

It is no surprise that it is generally the trailing spouse who suffers the greatest

culture shock in the new country. The result can be an unhappy spouse who does

her best to impair the performance of the expatriate manager.

Total marriage breakdown is not an uncommon result. Unofficial numbers from

the Asian Development Bank (a large development organization modeled after

the World Bank) are that upwards of 50% of their expatriate’s marriages fail due

to the stress of offshore postings.

The consequence is that many expatriate postings are either terminated early or

the performance of the expatriate managers are impaired.

2. Cultural Inflexibility

It is common for inexperienced expatriate managers to be taken completely by

surprise at the deep cultural differences in their posted country.

The expatriate finds that, after a seemingly open conversation about

improvements to be made, the local manager who reports to him doesn’t show

up for work for 2 days. In meetings, his local staff thinks it is acceptable to spend

hours talking on and on until every possible issue is agreed to by everyone. If the

expatriate manager is to be successful, he will need to learn how to adapt to

concepts such as “saving face” (the cause of the local manager not showing up for

work) and “building consensus” that are important in Asia.

He also needs to realize that transforming his new staff into Americans or

Japanese workers has been tried a million times and it doesn’t work. All

expatriates maneuver a narrow path between accepting local conventions on one

side and aspiring to international standards on the other.

Southeast Asia has a rich variety of cultures. The differences in religion are one

example. Thailand is graciously Buddhist, Indonesia is gently (but intensely)

Islamic and Philippines is completely Catholic. As for Singaporeans, some say their

only religion is work. Managing such varied peoples obviously requires very

different tactics.

3. Emotional Immaturity

In their home countries, most expatriates are middle-managers with relatively

ordinary lives. Once relocated to Asia, they are suddenly thrust into the national

spotlight as the Country Manager of a high profile multinational organization.

They have more people reporting to them than ever and often have more control

over them.

On the personal front, expatriates may have household servants for the first

time, are called upon to meet senior government officials and are generally made

to feel important. Further, some expatriates may be attracting enthusiastic

attention of certain local females seeking their own type of fame and fortune by

landing a high-status foreign boyfriend or husband.

The combination of greatly expanded responsibility and social status can be

difficult to handle for people lacking the emotional maturity to keep themselves

grounded. It is not uncommon for expatriates to either destroy their career

opportunities and/or marriages by ignoring responsibilities and succumbing to

self-destructive temptations.

4. Responsibility Overload

In almost all cases, the responsibilities of expatriates in emerging countries will

be larger than they are used to overseeing. Given the nature of emerging

countries in Southeast Asia, expatriates may supervise 5 to 10 times more people

than ever before.

In other words, a German IT Manager who managed 15 people in his home

country could have 100 in Malaysia. An American call center manager with 100

people in the US can find himself soon overseeing 800 in Philippines.

Such large increases in responsibility are difficult for anyone to handle. Added to

that, are the new challenges of managing expectations of head office managers

and clients in other countries and who may not understand the cultural

differences that are impacting results.

5. Physical Breakdown

Expatriates are generally motivated to succeed and excited about gaining

international experience. As a result, they often work long hours in the early part

of their postings to do “whatever it takes” to be successful. They are also adapting

to seemingly overwhelming cultural differences with local staff and greatly

expanded responsibilities.

On the home front, the families of expatriates are almost certainly going through

their own severe cultural adjustments and may be clamouring for the managers’

time and attention to help them through it.

The combination of emotional despondency and physical exhaustion from

elevated stress levels and overwork is a common problem for new expatriates --

otherwise known as burn-out. Unless alleviated, the result can be dramatically

reduced effectiveness or work-interrupting illness for the manager.

FOUR APPROACH TO MULTINATIONAL STAFFING DECISIONS

Corporate culture and management philosophy, to a great extent decide the

formulation and implementation of corporate and operational strategies and

their evolution into various stages of internationalization. Companies involved in

world trade and investment can be divided into four types based on their

management approach and corporate philosophy:

Ethnocentric

Polycentric

Regiocentric

Geocentric

Ethnocentric Organisation:

There motto is ‘this work in my country therefore, it must work in other

countries also'. These are home country oriented organization. Example, when a

Japanese corporation invests in Mexico, Japan is the home country and Mexico is

the host country. If the Japanese Corporation is ethnocentric, it will expect

Mexicans to accept the inherent superiority of Japan. Investments will be made

on the Japanese methods of conducting business.

In this approach, all key management positions are held by parent country

nationals, e.g., Toyota, Matsushita, Samsung etc. this strategy may be appropriate

during the early phases of international business, because firms at that stage are

concerned with transplanting a part well in their home country. Ethnocentric

corporations believe that home country nationals are more intelligent, reliable

and trust worthy than foreign nationals. Firms such as Procter and Gamble,

Philips, and Matsushita originally followed the ethnocentric approach.

In this approach, all important positions in MNCs are filled up by PCNs in

the early stages of internalization. Apart from this, for certain business-related

reasons which are as follows:

1. A perception that qualified HCNs may not be available for the units;

2. To ensure that coordination and communication are maintained adequately

in headquarters.

But, these are several problems in adopting the approach. Some of them have

been pointed below:

1. An ethnocentric staffing policy limits the promotion opportunities of HCNs,

which may lead to reduced productivity and increased turnover among that

group.

2. The adaptation of expatriate managers to host countries often takes a long

time during which PCNs make mistakes and make poor decisions.

3. When PCN and HCN compensation packages are compared, the often

considerable income gap in favor of PCNs is viewed by HCN, as unjustified.

4. For many expatriates, a key international position means new status,

authority and an increase in standard of living. These changes may affect

expatriates sensitivity to the needs and expectations of their host country

subordinates.

Apart from, this the cost of maintenance of expatriates is quite high. This

approach is not only reflected in the staffing policy but in all other areas such as

performance appraisal where evaluation format is designed and administered by

parent nationals and new product development is done in the home country.

Many international companies exhibit this ethnocentric philosophy. They have

difficulty in communicating in different languages and accepting cultural

differences. But ethnocentrism limits strategic alternatives to entry modes, such

as exporting, licensing and then key operations.

Polycentric Organisations:

These motto is ‘when in Rome do as the Romans do'. When you are

elsewhere lives as they live elsewhere. The polycentric staffing requires host

country nationals to be hired to manage subsidiaries, while parent-country

nationals occupy key positions at corporate headquarters. Although top

management positions are filled by home-country personnel, this is not always

the case. They see profit potential in a foreign country but find the foreign market

difficult to understand.

The polycentric message is: ‘Local people know what is best for them. Let's

give them some money and leave them alone as long as they make us a profit.'

Governmental pressure and foreign laws often necessitate polycentric approach.

The local government may be a major customer and insist on local ways to be

adopted. Many multinationals adopt this approach because they face the

heterogeneous environments in which product preferences may be the deciding

factors and strategies are to be developed on a market by market basis. There are

several advantages with this approach are outlined below:

1. Employing HCNs eliminate language problems for the expatriates and their

family members, reduces cost on costly awareness training programs, and

takes care of the adjustment problems to a large extent.

2. In politically sensitive situations, it helps the MNCs to maintain a low

profile.

3. Even though high salaries may have to be given to attract HCN applicants, it

still works out cheaper for the company in the long run as compared to

employing PCNs.

4. The crucial problem of turnover experienced when employing PCNs can be

avoided effectively by employing HCNs, since they are more stable and can

help in maintaining the continuity in managing subsidiaries more efficiently.

Some are they problems are as follows:

1. Bridging the gap between HCN subsidiary. Managers and the PCN managers

at headquarters is a major problem, especially with regard to language

barriers, conflicting national loyalties and differences emanating from

personal values, attitudes to business and so on. This may result in a MNC

becoming a ‘federation' of independent national units with weak linkages

to the corporate head quarters.

2. Lack of exposure to international assignments among PCN managers at

headquarters and lack of career mobility among HCN managers due to their

stagnation in subsidiaries will ultimately affect the strategic decision-

making capabilities, reducing their market share and customer base and

their position in the foreign country vis-à-vis their competitors.

Regiocentric Organization:

These are regionally oriented organizations. A Corporation implements a

regional strategy when synergistic benefits can be obtained by sharing functions

across regions. The international staff is transferred with in the same region they

work, example, for a global firm having a number Asia-Pacific, European and US, a

manager working in Asia-Pacific region will be moving within the same region

only, if the company adopts regiocentric approach. Regional headquarter

organizes collaborative efforts among local subsidiaries, it is responsible for the

regional plan, local research and development, local executive selection and

training, product innovation, cash management, brand policy, capital expenditure

and public relations.

The headquarter managers world strategy, country analysis basic research

and development, foreign exchange, transfer pricing, inter company loans, long-

term financing, selection of top management, technology transfer and

establishing corporate culture. The advantages of using a regiocentric approach

are:

1. It allows interaction between executives transferred to regional

headquarters from subsidiaries in the region and PCNs, posted to the

regional headquarters.

2. It reflects some sensitivity to local conditions, since local subsidiaries are

staffed almost totally by HCNs.

3. It can be a way for a multinational to more gradually from a purely

ethnocentric or polycentric approach to a geocentric approach.

Disadvantages of regiocentric policy.

1. It can produce federalism at a regional rather than a country basis and

constrain the organization from taking a global stance.

2. While this approach does improve career prospects at the national level it

only moves the barrier to regional level staff may advance to regional

headquarters but seldom to positions at the parent headquarters.

Geocentric Organisation:

This staffing philosophy seeks the best people for key jobs throughout the

organization, regardless of nationality, selecting the best person for the job,

irrespective of nationality is most consistent with the underlying philosophy of a

global corporation. The MNC is taking a global approach to its operation,

recognizing that each part (subsidiaries and headquarters) makes a unique

contribution with its unique competence. It is accompanied by a worldwide

integrated business and nationality is ignored in favour of ability. There are three

main advantages to its approach:

1. It enables a multinational firm to develop an international executive team

which assists in developing a global perspective and an internal pool of

labour for deployment throughout the global organization.

2. It overcomes the federation drawback of the polycentric approach.

3. It supports cooperation and resource sharing across units.

There are disadvantages associated with a geocentric policy.

1. Bridging the gap between HCN subsidiary managers and the PCN managers

at headquarters is a major problem, especially with regard to language

barriers, conflicting national loyalties and differences emanating from

personal values attitudes to business and so on.

2. Host government want a high number of their citizens employed and may

utilise immigration controls in order to force HCN employment if enough

people and adequate skills are unavailable.

3. Many western countries need extensive documentation if they wishes to

hire a foreign national instead of a local national, which is time consuming,

expensive and at times, futile.

4. A geocentric policy can be expensive to implement because of increased

training and relocation costs. A related factors is the need to have a

compensation structure with may be higher than national levels in many

countries.

5. Lack of exposure to international assignments among PCN managers at

headquarters and lack of career mobility among HCN managers due to their

stagnation in subsidiaries will ultimately affect the strategic decision-

making capabilities of both the groups of managers, thereby affecting the

firms, and the quality of their business decisions and their resource

allocation capabilities, reducing their market share and customer base and

their position in the foreign country, vis-à-vis their competitors.

6. Large numbers of PCNs, TCNs and HCNs need to be sent abroad in order to

build and maintain the international team required to support a geocentric

staffing policy. To implement a geocentric staffing policy successfully,

therefore, requires a longer lead time and more centralized control of the

staffing process. This necessarily reduces the independence of subsidiary

management in these issues, and this loss of customarily may be resisted

by the subsidiary.