The Aspect of Strategic Human Resource Management in International Business

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As the world progressively becomes borderless, the factors of production capital, human resources, and technology will become increasingly mobile. The land as a production factor being the only constant and immovable. The challenge of human resource management would be then to provide critical people who will be International resources. 21st Century shall see an increased need for professionals who can be a part of this borderless business. Their adaptability to environmental facets; Political, Economic, Social, Technological, Environmental & Legal aspects of varying characteristics, will be the critical enabling success factors. International Human Resources need to cater to a complex environment unique to each country with many unforeseen contingencies due to the environmental interplay of facets. IHRM thus becomes a highly critical role. Their role determinant is to reduce the risk of foreign liabilities.

The critical attribute of International operations is high productivity and competitive advantage. Thus, the talent that caters to International business is transnational in skills and behaviors. It is a mandate that only the best can be Internationally mobile. They are the best on global leadership percentile scores of leadership competencies. A psychometric analysis of global leaders demonstrates that the competency scores show positive variance from the normed country-specific scores. Therefore, IHRM is all about managing the best talent, which reflects the company values and credo.

As International operations are demanding in nature need for Internationally mobile professionals exists owing to the following factors:

  1. Competency gaps need to be bridged in host countries or home country.
  2. Coaching up host country staff on the business attributes.
  3. Global integration needs of systems and processes.
  4. Cross-functional collaborative projects of Innovation and change.
  5. International talent pool development.
  6. Starting up operations.
  7. Turnaround of operations.
  8. The shift of business orbits.

The above factors bring out a singular thread of excellence in capabilities that the International talent brings on to the table. It also thus is a talent in high demand, and their retention and development is the key. We shall see trans-patriates tribe growing in count who will continuously move across continents with no career anchoring to a specific country. IHRM deals with the leadership aspect that demonstrates boundaryless Inclusion of global alliances and partnerships with global mindset as given competency.

IHRM needs to cater to the effective engagement of global talent for foreign assignments relative to nationalities of prospective deployable candidates qualifying as:

  1. Expatriate: An executive of foreign nationality being sent on an assignment.
  2. Home country national: A local professional who understands the domestic nuances.
  3. Parent country national: Transferred from the home country operations.
  4. Third country national: Deploying a professional from a country that is neither home nor host.
  5. Transpatriate: A professional who moves from country to country as an ongoing career prospect.
  6. Flexpatriate: Globe trotter on short term assignments and holds multiple visas.
  7. Reverse Expatriate: Professionals from emerging economies sent to developed economies for specific competencies to be returned to their home country.
  8. International Digital Nomads: A new breed of ubiquitous contracted Tech-Savvy highly specialized talent in specific domain skill-sets working on temporary assignments simultaneously with single or multiple companies.

The choice from the above options can be determined based on business objectives, costs, and leadership competencies. At times short assignments or frequent travel can justify cost decisions of engaging the international talent pool rather than a long-term stay option. It is also based on the type of culture an organization wishes to establish. The following framework becomes the basis of International talent deployment:

  1. Ethnocentric Culture: The idea is to propagate the home country’s culture. Thus, key management is always from the parent home country nationals. The executives must be educated on the host country dynamics and thus through preparedness is the key. The risk is that applying what works in the home country may create serious legal, regulatory, social, and branding issues. Usually, employee unrest is seen to be a significant risk.
  2. Polycentric Culture: A host country’s nationals manage the local affairs of the company; it seems to benefit the company. However, the brand may start getting perceived as a local brand and may lose its perception advantage of the home country’s competitiveness. However, it helps create a local affinity; while, global cooperation gaps are the standard issue.
  3. Regiocentric Culture: A regional mobility of talent taps into regional affinity and cultural similarities. However, even in regions, there are biases and can play up during operations creating conflicts. However, it does help create and manage regional headquarter strategies effectively.
  4. Geocentric Culture: This framework uses the most competent and best-suited professionals irrespective of nationalities. This is an ideal proposition for transnational companies; however, an expensive option to implement. It is worth investing in this framework if an organization wishes to position itself as a mega International brand across continents. Also, managing Diversity is a key challenge here.

IHRM, therefore, involves grooming of International Talent based on the latest trends. Analytics and assessments play an essential role. Psychometric tools, skill assessments, performance reviews help you evaluate your International talent, and coaches help most cater to their developmental needs. Preparing talent for International mobility ensures a reduction in the cost of foreignness. I have seen the following validated competencies global leaders display apart from superior functional skill-sets as the key:

  1. Global Mindset.
  2. Result Orientation.
  3. Emotional Intelligence.
  4. Social Intelligence.
  5. Authenticity.
  6. Cross Cultural Sensitivity.
  7. Adaptability.
  8. Design Thinking & Critical Thinking.
  9. International Business Acumen.
  10. Transformational Leadership Characteristics.
  11. Thought Leadership.
  12. Technology Savvy.

Thus, a pre-departure assessment is critical to determine the fit. This assessment has to be augmented with handholding with a host country coach for ease of adaptability and local acceptance. I have seen one critical risk, which is acceptance of the individual at the local level. Inclusive acceptance can only happen when local dynamics and host country dynamics are used with situational correctness. A Mentor who has worked in the host country and is from the home country provides a good back-up. A pool of Mentors to groom International talent is thus an important aspect. Pre-departure collaborative projects help local acceptance and even a grooming ground for developing new behaviors and overcoming stereotypes. It is also important to groom the family as that is the most vulnerable area for ex-pats. Any conflict at home is certainly expensive for the business.

Compensation and benefit of International talent must account for the following:

  • Tax differentials.
  • Local perquisites.
  • Hardship allowances.
  • Housing.
  • Cost of living.
  • Profit-sharing based on performance metrics.

The approaches to compensation are classified as under:

  1. Balance sheet approach: Allows maintenance of the same living standards as in the home country based on global parity.
  2. Head Quarter based approach: Salary set in comparison to a headquarter executive of similar experience, responsibility, and skill-sets.
  3. Host-based approach: Negotiated compensation based on host country policies.
  4. Global Market approach: Design Flexi-compensation, which considers foreign posting as a temporary phenomenon and is based on country-specific dynamics, individual talent attributes, and performance rating.

Thus, the disparity of compensation is given in MNE’s. International talent must be taken through awareness of the organization’s global mobility policy, and acceptance and agreement to it is the determinant of qualifying for global mobility programs.

Repatriation of talent comes with its issues of role fitment, compensation, re-adjustment to the environment. Special bonding to the members of the foreign team also play-up during operations decisions. A reverse culture shock can be experienced if the duration of stay in a foreign country is large enough, which induces cultural and behavioral modifications. Special initiatives of counseling are necessary.

As a Coach working with various MNE’s I can state with confidence that the world is going borderless, and talent is keen on International assignments. Cultural diffusion is happening because of information & communication technologies. With international trade and new geo-strategic blocs evolving, the need for International talent will grow. The role of IHRM will have to be objective based on people analytics. Managing Diversity and ensuring Inclusion will be the most critical key result areas on culture management. Talent assessment and development shall become more demanding over the years. As new trade blocs and emerging economies emerge, the demand for International talent will also rise. Thought leaders will have to be created who can make a difference to International Business. This breed of International Professionals will have to be identified, nurtured, and engaged effectively if organizations wish to succeed in the borderless world’s new world order.

Copyright 2020 Niket Karajagi International Business Blogs Series. 

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