flowchart LR
E[Ethnocentric<br/>Home knows best<br/>PCN]
P[Polycentric<br/>Host knows best<br/>HCN]
R[Regiocentric<br/>Region as unit<br/>Mixed]
G[Geocentric<br/>Best person<br/>any nationality]
E --> P --> R --> G
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15 International Human Resource Management: Concepts, Approaches (EPRG), Expatriate Management, Cross-Border Compensation, Repatriation and the Morgan-Schuler Models
15.1 When HR Crosses Borders
International Human Resource Management (IHRM) covers the HR functions of organisations that operate across countries. The added complexity comes from three layers — more HR activities (international taxation, relocation, host-government relations), more types of employees (parent-country, host-country, third-country nationals), and more environmental factors (culture, legal regime, labour markets, political systems). The classical frameworks — Perlmutter’s EPRG, Morgan’s three-dimensional model, Schuler’s integrative framework — organise these added layers.
15.2 1 · IHRM vs Domestic HRM
TipIHRM vs Domestic HRM
| Dimension | Domestic HRM | IHRM |
|---|---|---|
| Number of HR activities | Standard set | Standard + relocation, expatriate tax, host-country liaison |
| Types of employees | Local | PCN, HCN, TCN |
| Cultural perspective | Single national culture | Multiple national cultures |
| Legal exposure | One jurisdiction | Many jurisdictions |
| External factors | Domestic labour market | Global currency, politics, security |
| Risk to the employee | Lower | Personal and family risks of relocation |
| HR involvement in life of employee | Workplace | Workplace + housing + schooling + family |
15.2.1 Three Employee Categories
TipPCN, HCN, TCN
| Category | Definition | Example (US firm in India) |
|---|---|---|
| PCN — Parent-Country National | Citizen of the country where headquarters is | An American posted to the Indian subsidiary |
| HCN — Host-Country National | Citizen of the country where the subsidiary operates | An Indian working in the Indian subsidiary |
| TCN — Third-Country National | Citizen of a country other than HQ or host | A British national working in the Indian subsidiary of the US firm |
15.3 2 · Perlmutter’s EPRG Framework
Howard Perlmutter (1969) described four mindsets toward staffing overseas operations. The acronym EPRG is among the most-tested concepts in IHRM.
TipPerlmutter’s EPRG Mindsets
| Mindset | Staffing logic | Key positions held by |
|---|---|---|
| E — Ethnocentric | “Home country knows best” | PCNs in all key positions overseas |
| P — Polycentric | “Each host country knows its own market best” | HCNs in subsidiaries; PCNs at HQ |
| R — Regiocentric | Region (e.g., EU, ASEAN) is the unit | Managers move within a region |
| G — Geocentric | “Best person for the job, regardless of nationality” | Truly global cadre — PCN/HCN/TCN as best fit |
15.3.1 Advantages and Limitations
TipEPRG — Advantages and Limitations
| Mindset | Advantage | Limitation |
|---|---|---|
| Ethnocentric | Control, consistency, knowledge transfer from HQ | Cost, expatriate failure, local resentment |
| Polycentric | Cultural fit, lower cost, host-government goodwill | Weak HQ-subsidiary integration; few global managers |
| Regiocentric | Regional consistency, broader manager pool | Slow path to truly global |
| Geocentric | Talent optimisation, global capability | Costly, complex tax and immigration, time to build |
NotePYQ trap — EPRG order
The progression E → P → R → G runs from least to most internationalised orientation. Geocentric is the “best person regardless of nationality” mindset.
15.4 3 · Morgan’s Model of IHRM (1986)
P. V. Morgan (1986) defined IHRM as the interplay of three dimensions:
TipMorgan’s Three Dimensions
| Dimension | Content |
|---|---|
| HR activities | Procurement, allocation, utilisation |
| National / country categories | Parent country (HQ), host country (operations), other countries (sources of finance, labour) |
| Employee categories | PCN, HCN, TCN |
These three dimensions interact — for example, procurement of a PCN for a host-country subsidiary from a third-country source of labour.
15.5 4 · Schuler-Dowling-De Cieri Integrative Framework (1993)
Randall Schuler, Peter Dowling and Helen De Cieri (1993) extended Morgan into a strategic integrative framework. It identifies:
TipSchuler-Dowling-De Cieri Components
| Block | Content |
|---|---|
| Exogenous factors | Industry characteristics, country/regional environment |
| Endogenous factors | Structure of international operations, strategy, headquarters orientation, experience |
| SHRM issues | Inter-unit linkages (control, coordination) and internal operations (HR practices) |
| SHRM functions | Planning, staffing, T&D, performance management, compensation |
| SHRM policies and practices | Specific operational choices |
| MNE concerns and goals | Competitiveness, efficiency, local responsiveness, flexibility, transfer of learning |
15.6 5 · Expatriate Management
15.6.1 The Expatriate Cycle
flowchart LR
S[Selection] --> P[Pre-departure<br/>training]
P --> A[Assignment<br/>support]
A --> R[Repatriation]
R -. lessons .-> S
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15.6.2 Selection of Expatriates
Selection focuses on five attributes:
- Technical competence for the role.
- Cross-cultural adaptability — flexibility, openness.
- Family situation — spouse and children’s adjustment.
- Language skills.
- Motivation — desire for the assignment.
15.6.3 Pre-Departure Training
TipMendenhall-Oddou Cross-Cultural Training Types
| Training type | Content |
|---|---|
| Information giving / fact-oriented | Country profile, customs, taxation |
| Affective / attitude-oriented | Role plays, critical-incident learning, case studies |
| Immersion / experiential | Language training, field experience, simulations |
15.6.4 Causes of Expatriate Failure
Failure = early return or inability to perform on assignment.
TipTop Causes of Expatriate Failure
| # | Cause |
|---|---|
| 1 | Spouse / family inability to adjust |
| 2 | Manager’s own inability to adjust |
| 3 | Other family-related problems |
| 4 | Manager’s personality and emotional maturity |
| 5 | Inability to cope with the size of foreign responsibility |
| 6 | Technical incompetence |
| 7 | Lack of motivation for the assignment |
NotePYQ anchor — Spouse adjustment is the #1 cause
The single most-cited cause of expatriate failure in research (Tung 1987; Black & Mendenhall) is the inability of the spouse / family to adjust to the host country. NTA stems exploit this counter-intuitive fact.
15.6.5 Cultural-Adjustment U-Curve and W-Curve
Oberg (1960) described cross-cultural adjustment as a U-curve:
TipU-Curve of Cultural Adjustment (Oberg)
| Stage | Description |
|---|---|
| 1. Honeymoon | Excitement, novelty |
| 2. Culture shock | Frustration, disorientation |
| 3. Adjustment | Slow recovery, coping mechanisms |
| 4. Mastery | Effective functioning in the new culture |
Adding the repatriation curve (re-entry honeymoon → reverse culture shock → re-adjustment → mastery) gives the W-curve model.
15.7 6 · International Compensation
15.7.1 Two Approaches
TipTwo Approaches to Expat Compensation
| Approach | Logic | Where used |
|---|---|---|
| Going-rate (host-country) | Pay according to local market rate | Subsidiary-centric; long-term assignments |
| Balance-sheet (home-based) | Maintain expat’s home-country purchasing power, plus differentials | Most common for medium-term assignments |
15.7.2 Balance-Sheet Components
TipBalance-Sheet Components
| Component | What it does |
|---|---|
| Base salary | Same as home country |
| Cost-of-living allowance (COLA) | Adjusts for host-country price level |
| Hardship / location allowance | Compensates for difficult posts |
| Foreign-service premium | Inducement to accept |
| Housing and education allowances | Helps with major host-country expenses |
| Tax equalisation / protection | Ensures expat is no worse off due to host-country tax |
| Medical, insurance, relocation, home leave | Standard support |
15.8 7 · Repatriation
15.8.1 Why Repatriation Matters
A successful overseas assignment can be undone by mishandled re-entry. Common problems:
- Reverse culture shock.
- Loss of autonomy gained overseas.
- “Out of sight, out of mind” — no suitable role at HQ.
- Career stagnation.
- Spouse and children’s re-adjustment.
15.8.2 Effective Repatriation Practice
- Repatriation agreement signed before departure.
- Sponsor / mentor at HQ during the assignment.
- Communication with HQ during posting.
- Identifiable role to return to.
- Recognition for international experience.
- Cross-cultural debriefing — capture lessons.
15.9 8 · Adler’s IHRM Approaches
Nancy Adler distinguishes four organisational responses to internationalisation:
TipAdler’s Four IHRM Approaches
| Approach | Logic |
|---|---|
| Parochial | Ignore cultural differences |
| Ethnocentric | Minimise impact by imposing home culture |
| Polycentric | Manage cultural differences by adapting to each |
| Synergistic | Leverage cultural differences as a source of innovation |
15.10 Practice Questions
Q 01
EPRG
Easy
In Perlmutter's EPRG framework, the "best person for the job, regardless of nationality" view is:
View solution
Correct Option: D
Geocentric — global cadre.
Q 02
PCN
Easy
An American posted by a US firm to its Indian subsidiary is best classified as a:
View solution
Correct Option: B
Citizen of HQ country = PCN.
Q 03
Expat failure
Medium
Empirical research identifies the leading cause of expatriate failure as:
View solution
Correct Option: C
Spouse/family adjustment is the most-cited cause (Tung, Black & Mendenhall).
Q 04
Morgan model
Hard
Morgan's (1986) model of IHRM identifies how many interacting dimensions?
View solution
Correct Option: B
HR activities × national categories × employee categories.
Q 05
U-curve
Medium
The U-curve of cross-cultural adjustment is attributed to:
View solution
Correct Option: B
Oberg, 1960 — honeymoon, culture shock, adjustment, mastery.
Q 06
Balance sheet
Medium
The balance-sheet approach to expatriate compensation aims to:
View solution
Correct Option: B
Maintain home-country purchasing power + COLA + hardship + premium + tax equalisation.
Q 07
Perlmutter
Hard
The EPRG framework was proposed by:
View solution
Correct Option: A
Perlmutter, 1969 — added "R" (regiocentric) in 1979 with Heenan.
Q 08
Repatriation
Medium
"Reverse culture shock" refers to:
View solution
Correct Option: B
Re-entry shock at repatriation.
Q 09
Polycentric
Medium
A multinational that fills subsidiary key positions almost entirely with HCNs and lets each subsidiary operate locally follows a:
View solution
Correct Option: B
Polycentric — host knows best.
Q 10
Match
Hard
Match the contribution with the author:
| (i) | EPRG framework | (a) | P.V. Morgan |
| (ii) | Three-dimensional IHRM model | (b) | Perlmutter |
| (iii) | Integrative SHRM framework | (c) | Oberg |
| (iv) | U-curve of cultural adjustment | (d) | Schuler-Dowling-De Cieri |
View solution
Correct Option: A
Perlmutter-EPRG; Morgan-three-D; Schuler-Dowling-De Cieri-integrative; Oberg-U-curve.
Q 11
TCN
Hard
A British national working for a Japanese MNC in its Brazilian subsidiary is a:
View solution
Correct Option: C
Neither HQ (Japan) nor host (Brazil) country = TCN.
Q 12
Pre-departure training
Medium
Among the three Mendenhall-Oddou pre-departure training types, language training and field experience belong to:
View solution
Correct Option: C
Immersion = experiential, hands-on.
Q 13
Adler approach
Hard
In Adler's classification, leveraging cultural differences as a source of innovation is the:
View solution
Correct Option: D
Synergistic — leverages difference.
Q 14
Tax equalisation
Medium
Tax equalisation in expatriate compensation aims to:
View solution
Correct Option: B
Tax equalisation makes the expat tax-neutral vs home.
Q 15
Going rate
Medium
The going-rate (host-country) compensation approach is most suitable for:
View solution
Correct Option: B
Going rate ties pay to local market — fits long-term, subsidiary-centric assignments.
Q 16
W-curve
Hard
The W-curve extends Oberg's U-curve by adding:
View solution
Correct Option: B
W = U abroad + U on return.
Q 17
IHRM complexity
Easy
Which is not typically cited as a reason IHRM is more complex than domestic HRM?
View solution
Correct Option: D
External environment is *more* complex, not simpler.
Q 18
Regiocentric
Medium
A European MNC that rotates managers freely within Europe but rarely outside it is best described as:
View solution
Correct Option: C
Region as the unit of staffing = regiocentric.
Q 19
Schuler
Hard
In Schuler-Dowling-De Cieri's framework, "competitiveness, efficiency, local responsiveness and flexibility" are described as:
View solution
Correct Option: C
MNE strategic concerns and goals.
Q 20
Foreign service premium
Medium
A "foreign-service premium" is intended to:
View solution
Correct Option: B
Premium as inducement to accept the posting.
15.11 Quick Recall
ImportantQuick recall
- IHRM = domestic HRM + relocation + tax + host-government + multi-culture + multi-jurisdiction.
- Three employee categories: PCN (HQ country), HCN (host country), TCN (third country).
- Perlmutter EPRG: Ethnocentric (home knows best), Polycentric (host knows best), Regiocentric (region), Geocentric (best person, any nationality).
- Morgan (1986) — three dimensions of IHRM: HR activities × country categories × employee categories.
- Schuler-Dowling-De Cieri (1993) — integrative framework with exogenous + endogenous factors, SHRM issues, functions, policies, MNE goals.
- Adler — four approaches: parochial, ethnocentric, polycentric, synergistic (leverage difference).
- Expatriate failure — leading cause is spouse / family adjustment. Other: own adjustment, family, personality, scale, technical, motivation.
- Mendenhall-Oddou training types: information-giving, affective, immersion.
- Oberg U-curve: honeymoon → culture shock → adjustment → mastery. W-curve adds repatriation re-adjustment.
- International compensation — two approaches: going-rate (host market) and balance-sheet (home + COLA + premium + tax equalisation).
- Repatriation challenges: reverse culture shock, loss of autonomy, “out of sight, out of mind”, career stagnation.