14  International Human Resource Management

14.1 What is IHRM?

International Human Resource Management (IHRM) is the set of activities, functions and processes that an organisation performs to attract, develop and maintain its workforce in a multinational context. Peter Dowling, the field’s leading textbook author, frames IHRM through three dimensions in his classic Morgan model: the type of HR activity, the type of country involved (parent, host, other), and the type of employee concerned (PCN, HCN, TCN) (dowling2017?).

A simple test of when HRM becomes IHRM: the moment an HR decision crosses a national border — a recruitment, a transfer, a payroll, a compliance check — IHRM applies.

TipThe Morgan / Dowling Model — Three Dimensions of IHRM
Dimension Categories
HR activity Procurement, allocation, utilisation (the standard HR functions)
Country Parent (home) country, host (subsidiary) country, other (third) countries
Employee Parent-Country National (PCN), Host-Country National (HCN), Third-Country National (TCN)

14.2 Three Categories of Employees

The single most-tested distinction in IHRM is the three-fold classification of employees in a multinational.

TipPCN, HCN, TCN
Category Definition Example
Parent-Country National (PCN) Employee from the firm’s home country, working abroad An Indian engineer of Tata Motors posted to its UK plant
Host-Country National (HCN) Employee from the country where the subsidiary operates A British plant manager of Tata Motors at the same UK plant
Third-Country National (TCN) Employee from a country other than the parent or the host A Singapore-citizen finance director hired by Tata Motors UK

A PCN posted abroad is also called an expatriate. The reverse — a foreign employee posted to the firm’s home country — is sometimes called an inpatriate.

14.3 IHRM vs Domestic HRM

IHRM differs from domestic HRM not only in degree but in kind. Dowling identifies six factors that systematically expand the IHRM brief.

TipSix Factors That Make IHRM More Complex
Factor What changes
More HR activities Taxation, relocation, immigration, host-government relations, language services
Broader perspective Decisions affect employees from several nationalities at once
More involvement in personal lives Housing, schooling for children, spouse employment, healthcare in unfamiliar systems
Changes in workforce mix Ratio of PCN / HCN / TCN evolves as the subsidiary matures
Risk exposure Expatriate failure, security, currency, political risk
External influences Local laws, unions, customs, religion, ethics, sanctions

14.4 Perlmutter’s EPRG Framework

Howard V. Perlmutter’s 1969 paper, “The Tortuous Evolution of the Multinational Corporation”, gave the field its most enduring typology of multinational orientation. Each orientation produces a distinct staffing pattern (perlmutter1969?).

TipPerlmutter’s Four Orientations (EPRG)
Orientation Mindset Staffing pattern Strength Limit
Ethnocentric “Home-country way is best” PCNs hold key positions abroad Tight control; transfer of parent culture High cost; demotivates HCNs; cultural blindness
Polycentric “Each country is different” HCNs run host operations; PCNs at HQ Local responsiveness; cost-efficient Subsidiaries become silos; little global integration
Regiocentric “Manage by region” Talent moves within a region Regional integration; broader career paths Each region a silo; barriers to global flow
Geocentric “Best person, anywhere” Nationality irrelevant; world-class talent placed by capability Global mindset; deep talent pool Hardest to implement; visa, tax, compensation complexity 

flowchart LR
  E[Ethnocentric<br/>Home-country first] --> P[Polycentric<br/>Local control]
  P --> R[Regiocentric<br/>Regional sharing]
  R --> G[Geocentric<br/>Truly global]
  style E fill:#FFEBEE,stroke:#C62828
  style P fill:#FFF8E1,stroke:#F9A825
  style R fill:#E8F5E9,stroke:#2E7D32
  style G fill:#E3F2FD,stroke:#1565C0

The arrow is not deterministic — many firms remain comfortably polycentric or regiocentric — but the geocentric orientation is the aspiration of most truly global firms.

14.5 Activities of IHRM

The classical HR functions of chapter 4 still apply, but each acquires international texture.

TipEight IHRM Activities and What is Different
Activity What is different in the international context
HR planning Forecast across markets, currencies and immigration regimes
Recruitment Multiple labour markets; navigating local skill scarcity and surplus
Selection Adding cross-cultural competence and language to selection criteria
Cross-cultural training Pre-departure, in-country, and re-entry training; spouse and family
Performance management Goals, ratings and feedback that work across cultures with different power-distance norms
Compensation Multiple currencies, cost-of-living, host taxes, hardship premiums
International labour relations Local unions, national IR systems, ILO standards
Repatriation Bringing the expatriate home; using the experience

14.6 Expatriate Management

14.6.1 Why Send Expatriates At All?

Edstrom and Galbraith identified three classical reasons firms send expatriates abroad.

TipThree Reasons for Expatriate Assignments (Edstrom & Galbraith)
Reason What the firm gets
Position-filling Fills a skill or knowledge gap that cannot be filled locally
Management development Develops the assignee’s global outlook and capabilities
Organisation development Transfers culture, processes and control across borders

14.6.2 The Expatriate Cycle

The expatriate’s experience is best understood as a four-stage cycle, with HR action required at each stage.

TipFour Stages of the Expatriate Cycle
Stage What HR does
Selection Match technical, cross-cultural, language and family-readiness criteria
Pre-departure preparation Cultural training, language, logistics, briefings; spouse and family
In-country assignment Mentoring, ongoing support, performance management, mid-term reviews
Repatriation Re-entry planning; using the assignment in the next role; addressing reverse culture-shock

14.6.3 Reasons for Expatriate Failure

Rosalie L. Tung’s 1981 study identified the most common reasons expatriate assignments fail (defined as early return, under-performance abroad, or resignation soon after) (tung1981?).

TipTung’s Reasons for Expatriate Failure
Reason What it covers
Inability of spouse / partner to adjust The single most-cited reason in study after study
Inability of the manager to adjust Cultural shock, isolation, language
Other family problems Children’s schooling, ageing parents at home
Personality / emotional immaturity Lack of cross-cultural sensitivity
Inability to cope with larger overseas responsibility The role itself is too big
Lack of motivation to work abroad Assigned, not chosen
Lack of technical competence Less common; a selection failure

The dominance of family reasons explains why mature firms now formally include the spouse and family in selection, training and support.

14.6.4 Cultural Shock and the U-Curve

Sverre Lysgaard’s U-curve hypothesis, refined by Oberg and others, models the expatriate’s adjustment in four stages: honeymoon (everything is exciting), crisis (cultural shock — frustration, anxiety, withdrawal), adjustment (gradual recovery), and mastery (functional ease). The reverse curve — re-entry shock — applies to repatriation.

14.7 International Compensation

Compensating an expatriate is harder than compensating a domestic employee. Two main approaches dominate practice.

TipTwo Approaches to International Compensation
Approach How it works Strength Limit
Going-rate (host-country) approach Pay the expatriate at the local market rate for the role in the host country Equity within the local team; simple Big swings when assignee moves between countries
Balance-sheet (home-based) approach Maintain the expatriate’s home-country standard of living, with allowances for housing, cost of living and hardship Predictable; protects the expatriate Costly; complex; can cause inequity vis-à-vis local peers

The classical balance-sheet build-up has four buckets: goods and services, housing, income taxes and reserves (savings, pension contributions). Allowances are added on top — hardship, mobility, cost-of-living adjustment, education allowance, home-leave.

14.8 Cross-Cultural Frameworks

Two frameworks dominate the IHRM literature on national culture.

14.8.1 Hofstede’s Cultural Dimensions

Geert Hofstede’s IBM-data study (1980; extended editions through 2010) identified six dimensions on which national cultures vary (hofstede2010?).

TipHofstede’s Six Cultural Dimensions
Dimension What it captures High end Low end
Power distance How accepted is unequal distribution of power Hierarchical (Malaysia, India) Egalitarian (Denmark, Sweden)
Individualism vs Collectivism Whose interests come first Individualistic (US, UK) Collectivist (China, India)
Masculinity vs Femininity Achievement and competition vs care and quality of life Masculine (Japan, Germany) Feminine (Sweden, Norway)
Uncertainty avoidance Tolerance for ambiguity High avoidance (Greece, Japan) Low avoidance (Singapore, Denmark)
Long-term vs Short-term orientation Persistence and tradition vs immediacy Long-term (China, South Korea) Short-term (Pakistan, Nigeria)
Indulgence vs Restraint Free gratification of desires vs strict social norms Indulgent (Mexico, Sweden) Restrained (Pakistan, Russia)

The implications for HR practice are direct — selection criteria, leadership style, performance feedback, reward systems and team design must all adapt to the local cultural profile.

14.8.2 Trompenaars and Hampden-Turner’s Seven Dimensions

Fons Trompenaars and Charles Hampden-Turner’s Riding the Waves of Culture (1997) offered a complementary seven-dimension framework based on dilemmas a manager faces across cultures (trompenaars1997?).

TipTrompenaars’s Seven Cultural Dimensions
Dimension Working tension
Universalism vs Particularism Rules vs relationships
Individualism vs Communitarianism Individual vs group
Specific vs Diffuse Compartmentalised vs holistic involvement
Neutral vs Affective Reserved vs emotional expression
Achievement vs Ascription Status by what you do vs who you are
Sequential vs Synchronic time One thing at a time vs many things at once
Internal vs External control Mastering nature vs harmonising with it

Hofstede’s and Trompenaars’s frameworks overlap on several dimensions and disagree on others; the practising IHRM manager uses both as diagnostic checklists, not as deterministic predictions.

14.9 Repatriation

Repatriation — bringing the expatriate home — is paradoxically the most mishandled stage of the cycle. The classic findings: about a quarter of repatriates leave the firm within a year of return; many feel that the foreign assignment was a career penalty rather than a benefit; and the firm rarely uses the global experience the assignee accumulated.

TipCommon Repatriation Issues
Issue What it looks like
Reverse culture shock Home no longer feels like home
Loss of status The autonomy and visibility of the foreign role disappear
Career anxiety Unclear next role; “out of sight, out of mind” effect
Financial adjustment Loss of expatriate allowances; lifestyle compression
Knowledge waste The firm does not tap into the assignee’s new global knowledge

Best-practice firms now treat repatriation as a planned HR process: post-arrival role identified before return, formal mentor reconnection, debrief sessions to capture knowledge, and explicit linkage of the assignment to the next career step.

14.11 Practice Questions

Eight questions to test the chapter. Each card hides the answer — click Show answer to reveal it.
Q1 A British citizen, employed by an
A British citizen, employed by an Indian multinational, posted from London to its Indonesian subsidiary, is best classified as a:
APCN
BHCN
CTCN
DInpatriate
Show answer
Correct answer
C. From the Indian parent's perspective, both London and Jakarta are non-parent countries, so the British employee is a Third-Country National (TCN) on this assignment.
Q2 Match Perlmutter's orientation with its staffing
Match Perlmutter's orientation with its staffing pattern:
Orientation Staffing pattern
(i) Ethnocentric (a) Best person from anywhere fills any role
(ii) Polycentric (b) PCNs in key positions abroad
(iii) Regiocentric (c) HCNs run host operations
(iv) Geocentric (d) Talent moves within a region
A(i)-(b), (ii)-(c), (iii)-(d), (iv)-(a)
B(i)-(a), (ii)-(b), (iii)-(c), (iv)-(d)
C(i)-(c), (ii)-(d), (iii)-(a), (iv)-(b)
D(i)-(d), (ii)-(a), (iii)-(b), (iv)-(c)
Show answer
Correct answer
A. (i)-(b), (ii)-(c), (iii)-(d), (iv)-(a)
Q3 According to Tung's classical study, the
According to Tung's classical study, the most cited reason for expatriate failure is:
ALack of technical competence
BInability of the spouse to adjust
CCurrency fluctuations
DTax disputes
Show answer
Correct answer
B. Family adjustment, especially of the spouse, dominates the reasons for early return.
Q4 The balance-sheet approach to international com...
The balance-sheet approach to international compensation aims primarily to:
APay the expatriate at the local market rate
BMaintain the expatriate's home-country standard of living
CTax the expatriate at the parent-country rate
DEliminate all allowances
Show answer
Correct answer
B. Balance-sheet (home-based) protects the home-country lifestyle.
Q5 Which of the following is not
Which of the following is not one of Hofstede's six cultural dimensions?
APower distance
BUncertainty avoidance
CIndividualism vs collectivism
DUniversalism vs particularism
Show answer
Correct answer
D. Universalism vs particularism is from Trompenaars and Hampden-Turner, not Hofstede.
Q6 Lysgaard's U-curve describes
Lysgaard's U-curve describes:
AThe shape of an expatriate compensation package
BThe four-stage adjustment of an expatriate from honeymoon through crisis to mastery
CThe cost-curve of multinational corporations
DThe repatriate productivity loss
Show answer
Correct answer
B. Honeymoon → crisis (culture shock) → adjustment → mastery.
Q7 Edstrom and Galbraith identified three reasons
Edstrom and Galbraith identified three reasons firms send expatriates. Which of the following is not one of them?
APosition-filling
BManagement development
COrganisation development
DCost reduction
Show answer
Correct answer
D. Cost reduction is rarely a reason for expatriate assignments — they are typically expensive.
Q8 Which of the following best describes
Which of the following best describes a self-initiated expatriate?
AA PCN sent on a formal long-term assignment by HQ
BAn individual who relocates abroad independently and joins a local employer
CA repatriate returning home
DAn inpatriate hired by HQ from a foreign subsidiary
Show answer
Correct answer
B. Self-initiated expatriates move abroad on their own initiative.
ImportantQuick recall
  • IHRM = HRM where decisions cross national borders. Dowling / Morgan three dimensions: HR activity × country × employee.
  • Three employee categories: PCN, HCN, TCN. Expatriate = PCN abroad; inpatriate = foreign employee at HQ.
  • Six factors that make IHRM more complex: more activities, broader perspective, personal-life involvement, workforce-mix changes, higher risk, external influences.
  • EPRG (Perlmutter): Ethnocentric → Polycentric → Regiocentric → Geocentric.
  • Edstrom & Galbraith’s three reasons to send expatriates: position-filling, management development, organisation development.
  • Expatriate cycle: selection → pre-departure prep → in-country → repatriation.
  • Tung’s failure reasons (in order of citation): spouse adjustment, manager adjustment, family problems, personality, role demand, motivation, technical competence.
  • U-curve: honeymoon → crisis → adjustment → mastery.
  • Two compensation approaches: going-rate (host-based) and balance-sheet (home-based).
  • Hofstede six dimensions: power distance, individualism / collectivism, masculinity / femininity, uncertainty avoidance, long-term / short-term, indulgence / restraint.
  • Trompenaars seven: universalism / particularism, individualism / communitarianism, specific / diffuse, neutral / affective, achievement / ascription, sequential / synchronic, internal / external.
  • Repatriation issues: reverse shock, loss of status, career anxiety, financial adjustment, knowledge waste.