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Items Description of Module Subject Name Human Resource Management Paper Name Managing Culture and Diversity

Module Title Organization Culture & Human Resource Management Practices Module Id Module No. 11

Pre- Requisites Basic understanding of Human Resources Management and Organisational Culture

Objectives To develop conceptual understanding Human Resources Management and Organisational Culture

Keywords Human Resources Management , Organisational Culture, Globalisation, International Human Resources Management



1. Module 11: Organizational Culture and Human Resources Management Practices 2. Learning Outcomes

3. Introduction

4. Expatriation and repatriation 5. Global Staffing Approach 6. Compensation

7. Cultural shock 8. Training 9. Virtual Teams 10. Summary

1. Module 11 : Organization Culture & Human Resource Management Practices 2. Learning Outcomes:

By the end of this module, students will be able to

 understand the concept and relevance of International Human Resources Management and Cultural Training

 get familiar with Training compensation, dealing with culture shock

3. Introduction- Organization Culture & HRM Practices:

Human Resources Management has a tough task of retaining people. With MNCs going glocal i.e., either shifting the place of manufacture to the place where the cost of manufacturing is low-cost, cost of maintaining staff, looking out for R & D, it is about curbing cost while retaining talent or deploying the best talent locally o internationally. An Organisation is a society which has a mission, and each society has its own mainstay traditions and customs , moral fibre and identity. Such qualities are so basic that they are likely to be dominant than the business development, strategic - marketing or financial, team conduct and business domination (Schneider, 2000). Culture defines appropriate behaviour, motivates individuals and asserts solutions where there is ambiguity. It manages a company performance - internal relations and values. Organisational culture controls the success of mergers, acquisitions and diversifications , new expertise, convention and infrastructure and socialisation (Deal and Kennedy, 1982; Peters and Waterman, 1982; Graves, 1986; Thompson, 1993; Mullins, 2005).

Morgan has presented IHRM on 3 dimensions. The broad human resource activities of procurement, allocation and utilisation (these 3 broad activities can easily be expanded into six HR major activities). The national or country categories involved in IHRM activities:

 the host country where a subsidiary may be located

 the home country where the firm is headquartered and

 'Other' countries that may be the source of labour, finance and other inputs.


Figure 1: Dimension model of IHRM

(Source: ad opting from P.V.Morgan, IHRM : Fact or Fiction. Personnel Administrator, Vol 31, 9 , 1986, pp 44)

4. Expatriation and Repatriation

The three national or country categories involved in IHRM activities are:

 Host-country nationals (HCNs)

 Parent -country nationals (PCNs) and

 Third-country nationals (TCNs)


The staff are transferred from local borders to diverse positions in the global organisations’ overseas businesses – They have are called expatriates. In short, expatriate is a person working and for the short term living in overseas.

Inpatriate: the relocation of employees into the head quarters operations, HCNs ( home country nationals) become inpatriates when they relocated back as expatriates.

Repatriation: The process of re-integration of expatriated into the headquarter organisation and career ladder as well as into social environment

MNCs problems:

– Less appreciation – Loss of social life

– inappropriate career transfer

Human Resource Activities

Procure Allocation Utilize




Host-Country Nationals (HCNs)

Parent-Country Nationals (PCNs) Third-Country Nationals (TCNs)

Type of Employees



– hurdles in career – ability to influence – hostility from co-workers

– technological change and process change Personal problems:

– group adjustment – importance and position – monetary inconvenience

5. Global Staffing Approach:

An approach in which the staff is recruited from within or outside the company, regardless the nationality. The person should be culturally viable and must easily adapt to the cultures.

Knowledge of the local language of the foreign land is an added advantage.

6. Compensation:

Global managers deal with two areas of focus. They must manage intricate and unstable details while simultaneously emerging successfully by developing reward policies and reimbursement packages.

For global organisations to productively administer compensation and reimbursement , it must be well aware of the taxation laws, customs, background and employment styles of the country, knowledge with legal tender fluctuations and the effect of price rises on payment, an understanding of why and when exceptional grant must be supplied and which grants are necessary in what countries – all within the framework of changing political, economic and social conditions and due to this reason many MNCs tie up with consulting firm.

Expatriate compensation is seen more as a component of a more balanced system of world pay.

Expatriate compensation must draw and maintain staff in the areas where the MNC has the maximum requirement and prospects. The compensation must be reasonable and identify with aspects likes incentives for overseas facility, tax equalisations and payment for realistic expenditure.

The compensation should help the movement of global employees in a cost efficient manner for the organisation. It must give due thought to justice and simplicity of direction .The purpose of expatriate reimbursement is that the employee will anticipate in the proposal of monetary security such as payback, social security and livelihood costs overseas. The employee will expect a overseas project to offer prospects for financial progression .

To make sure that the expatiates are not at a disadvantage with their foreign posting, the balance sheet approach is used to level the standard of living between the host country and home country.

Global organisations take up the supplementary costs that the expat would incur for taxes, housing, and goods and services. The tax gap is intricate and costly for the country and multinationals apply a procedure of tax equalisation: the company reimburse any taxes due that the expatriate is given for the project; the expatriate gets to pay what she / he would pay at home. The time and means of disbursement of funds, decide what the overseas levies were incurred. The global worker expects concerns such as housing, education of children and amusement activities dealt with in the course of action.

Compensating Host-Country Nationals

The purpose of compensation is to attract, safegaurd and encourage employees. Global organisations should compensate well for the skilled manpower to retain them (McNally, 1992). Cultures vary along with country HR policies . As organisations are growing like never before, it is the HR which is


feeling the challenges as it has to learn the different political systems, regulation and traditions of the new countries. They create both problems and opportunities. Opportunities - driving force for the global organisations to increase their intercontinental production (Robbins, 1997).

International reimbursement includes take-home pay and remuneration, inducement such as monetary benefits and old age retirement assistance.

Global managers deal with two areas of focus. They must handle intricate and confused local information while at the same time maintaining a combined but premeditated reimbursement policies, practice and principles.

For international organisations to handle payment and remuneration necessitates the facts and figures of service and monies levied by the law, traditions, surroundings and employments details of those countries , awareness of the legal tender fluctuations and the effect of price rises on payment - a thorough knowledge of the allowances to be distributed – the entire framework of changing political, trade and industry and societal surroundings. This stage is when the global organisations need to take the assistance of a consultant.

Expatriate compensation is seen more as a component of a more balanced system of world pay which should be reliable by and large on the approach , the organization and the trade and commerce of the global organisation.

A good compensation package should help to retain international in a cost effective manner for the firm. The policy must give due consideration to fair play and the simplicity of management .The purpose of global reimbursement is that the employee expects monetary security in terms of payback, social security and less expenditure in global location.

The employee will expect issues such as housing education of children and recreation to be addressed in the policy.

Compensating Expatriates

Remuneration – People expect to earn more than in the home country due to fluctuations of the currency in the market

Taxes – people donot like to be taxed heavily and expect the taxes do not take away the savings . allowance – Employees working abroad expect aid – financial or otherwise in the form of education of kids, relocation allowance, to and fro charges to go home and back and many other others

Benefits – Health insurance; stock options Host-Country Nationals

Reimbursement should be consistent with the situations, local market , pay scales of the local personnel, benefits, cost of living ,etc.


Figure 2: Global Compensation Packages

Global organisations cannot pay equal amount to their employees for a foreign assignment. It differs from country to country and the base pay, though may remain same, the additional benefits like education, fees, to and fro charges of going home , cost of living etc is taken into consideration.

The cost of labour (both direct and indirect compensation) in globe across is one of the reasons why there is business expansion. Good packages can lure the best talent to come forward for foreign posting. When reimbursement packages are compared with packages of the locals it casts a doubt of suspicion that they being treated unfairly (Gomez-Mejia, 1998).

MNCs balance business objectives with the compensation programs such as base salary, taxes, allowances, cost-of-living allowances (COLAs), housing and reimbursable expenses (Solomon, 1995) 7. Cultural Shock

Cultural shock refers to the unpleasant experience that can be had when coming into contact with other cultures. It is a state of disorientation and anxiety about not knowing how to behave in an unfamiliar culture. The new environment requires many adjustments in a short period, challenging the people to such an extent that their experiences that cause psychological disorientation . This causes the employees to leave early , or they will be compensated more for the job to retain the person.

The cause a cultural shock is practised is because people are not able to speak in strange location and have to learn methods to tide of their difficulties.

Culture shock progresses through four stages, as described by Oberg:

1. Honeymoon, when positive attitudes and expectations, excitement and a tourist feeling prevails

2. Irritation and hostility, the crisis stage when cultural differences result in problems at work, at home and in daily living – many expatriates and family members feel homesick and disoriented.

3. Gradual adjustment, a period of recovery in which the 'patient ' gradually is able to understand and predict patterns of behaviour, use the language and the family starts to accept their new life.

4. Biculturalism, the stage in which and his family members grow to accept and appreciate local people and practices and are able to function effectively in two cultures.

According to Marx, international managers experience cultural shock psychologically at three levels.

She uses what she calls the ' culture shock triangle' to describe these levels.


Figure 3 : The culture shock Pyramid

Emotions From euphoria to depression to contentment


From stereotyping to culturally effective thinking

Social skills and identity

From national to transnational social skills and to an international identity

(Source: Marx, 1999:12).

Marx insists on the statement that the culture shock phase is a part and parcel of the adaptation / adjustment phase and as such, should have no pessimistic connection. This is a stage experienced by all employees who feel lost at some point of time, during their stay at a foreign posting.

Sub- culture shock

Though less extreme to the cultural shock, this occurs when a manager is transferred to another part of the country where there are cultural differences – essentially from what he/she perceives to be a majority culture to a minority culture. This shock is like a feeling like an immigrant in one's own country and being unprepared for such differences.

To know how culture change can improve an employee’s performance, he should be aware of what constitutes a culture. All this launches the foundation for initiating a new framework for the new culture. Along with that change, a technique for analysis for initiating cultural change - the change of the culture of an organization, there is little hope of continuing improvement in organizational performance. The main reason for the breakdown of the organisational effectiveness is that the implements and modus operandi may be the same as the organization remains the same. When the basic values, orientations and definitions and goals are constant, so is the organisation. change in organisations can take place only when the mutual trust is not broken down and when the employees fails to change pessimism , disappointment, failure of the mechanism and decline in self-esteem among organization members. As Cameron and his colleagues found in their research, the organisation change strategy is gamble which can be paid off, unless tried!

8. Training


• are trainers through transfer of knowledge

• ensure that systems and processes are adopted

• gain management capabilities


Figure 4: Training for international teams

Expatriates require pre-departure training to deal with

• cultural adjustment

• foreign language Support includes:

• preliminary visits

• relocation assistance

• training for trainers

Intercultural Training

The objective of inter-cultural training is to help people cope with unexpected events in a new culture.

It is the most common form of pre-departure training. Cultural awareness programmes include that the expatriates learn and adapt to and not feel isolated from the host country by appropriate behaviours and coping patterns and also understanding the host-country’s value and belief system . The pre-departure programme should be designed in such a way that the expatriate is aware of the cultural awareness, language skills and also the appropriate behaviours and coping patterns. One of the main reasons for expatriate failure is the inability of spouses to adjust in (Tung, 1982 cited by Hill, 2005)

Figure 5: Cross-cultural training


In addition to providing training it is a part of the commitment of the organisation to provide training to the spouse of the expatriate. Studies have shown that the success or failure of the stay of the expatriates in foreign lands is directly related to how well the spouse adjusts with the place of stay. And this depends on the organisation , on well it can train the spouse – culturally wise and language wise.

Family adjustment support and relocation services can include:

• housing issues

• household goods movement

• destination services

• settling in assistance

• yearly home visits

• eldercare assistance

• visas and work permits

• relocation allowance

• compensation and benefits

• education assistance for families

• health and medical insurance and


• spousal employment and career assistance

• hardship allowances

• automobile allowances

• factual knowledge about the other country and travelling abroad

• adjustment and adaptation to the foreign country host countries value and belief systems

• taxation policy Figure 6: Virtual teams

9. Virtual Teams

Employees in various locations around the world who coordinate their work and decisions through teleconferencing, email, and a so on. Virtual teams helps the organisation in cost effectiveness. The barriers to distance and culture , is covered by the working of virtual teams .


The success or failure of the expatriate depends on both the organisation and the individual as both have a bearing on the career prospects in the organisation. The success of expats is due to the family support. (Adler 2001; Dowling et al.1999), when issues like the spouses career are involved (Punnett et al. 1992; Harvey and Buckley 1998). International HR has ensured that an expatriate is given his full due when the promotions are taking place in the organisation. Today the expatriate is no longer felt like an outsider, as he also is task force to reckon with.

10. Summary:

Retaining international workforce is important for the organisation as the cost involved in staffing, compensation, training and development is very high. Repatriates must know their position in the corporate ladder after a foreign posting . Cultural shock may have a toll on the employees and a cultural training is a must for all organisations which require to send its personnel abroad. Cultural Training and foreign compensation is an important aspect of Human Resources. Cultural training is required for the whole family, at times, as the stress of the spouse in foreign country can cause stress to the employee too!

Compensation of the international staff should taken into consideration the education of the kids of expatriate, the taxes levied by that country and compensate the loss for the job of the spouse. When an expatriate leaves the organisation in the middle of the job, his loss is not mendable, he makes a dent in the job which is tough for the organisation to rectify. Hence training, compensation are two important factors responsible for the stay. Being lonesome is worrisome, hence IHRM takes into consideration the concept of family. Families are the gate away to home sickness.




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