INTERNATIONAL BUSINESS MANAGEMENT
LESSON 24
HUMAN RESOURCE IN INTERNATIONAL
BUSINESS-MANAGEMENT QUALIFICATION
Objectives:
• To illustrate the importance of human resources in
international business.
• To explain the unique qualification of international
managers.
• To evaluate issues that arises when companies transfer
managers abroad.
• To examine companies alternatives for recruitment, selection,
compensation, development, and retention of international
managers.
• To discuss how national labour markets can affect companies
optimum methods of production.
• To describe country differences in labor policies and practices.
• To highlight international pressures on MNE’s relations
with labor worldwide.
• To examine the effect of international operations on
collective bargaining.
Case Study
Dow’s International Management Development
Dow Chemical, founded in 1897 in Midlands, Michigan, is a
global science and technology based company that develops and
manufactures chemical, plastic, and agricultural products and
services for customers in 170 countries. More than half of its
nearly $28 billion in annual sales come from foreign markets.
Dow’s operations include eight global businesses that rely on
208 manufacturing sites located in 38 countries. Dow’s
workforce of nearly 50,000 employees is spread across 168
countries. Map shows the regional distribution of Dow’s
workforce.
The need to run these far-flung operations has led Dow to
develop a decidedly international management group. Specifi-
cally, nearly three-quarters of Dow’s top management
committee are managers who either were non-U.S. born or have
had considerable foreign experience. Its CEO, for example, was
born in Liverpool, England, and had held previous positions
with Dow U.K, Dow Europe, Dow Hong Kong, Dow Asia,
and Dow North America.
This placement of foreign-born and/or internationally
experienced persons in Dow’s leadership is suggestive of
general processes of internationalization. Specifically, Peter
Drucker, a leading management scholar, reasoned that a truly
multinational company “demands of its management
© Copy Right: Rai University
11.154
MAP 2.1 The worldwide Distribution of Dow’s workforce
Source: www.dow.com (9september 24,2004).
People that they think and act as international businessmen
[and businesswomen] in a world in which national passions are
as strong as ever.” A company whose top management includes
people from various countries with varied country experiences
presumably is less likely to place the interests of one country
above those of others and arguably will have a worldwide
outlook. While some may debate the strength of this rela-
tionship, few question that the experience of working abroad
under different environmental and company conditions helps
managers grasp some of the challenges that are not as prevalent
in a purely domestic context.
Although a global outlook pervades Dow today, it neither
naturally nor quickly emerged-that is, making international
operations an integral part of the company’s commitment
required Dow seek a commitment to international business
from a broad spectrum of managers. The company estimates
that it took about 20 years to bring about this change in
outlook. Until 1954, just over 6 percent of Dow’s business too.,
place outside of the United States. Moreover, over 80 percent of
that amount was generated by its foreign subsidiary in Canada.
A company historian recounted this attitude in the late 1950s,
observing:
As for the overseas operations, a majority of the veterans
regarded them as a sideline. The foreign market was all right as a
place for getting rid of surplus products, but the only truly
promising market was in the United States. They questioned
the idea of the company becoming too deeply involved in
countries whose politics, language, culture, monetary controls,
and ways of doing business were strange to them.
While some of Dow’s younger managers did not share this
ethnocentric attitude, Dow still needed to take dramatic steps to
convert the majority of its managers to an international
outlook. One method the company’s president employed in
1958 was to give international responsibilities to people who
were widely perceived to be destined for top-level positions in
the company. For example, the company appointed C. B.
203
 Branch, manager of Dow’s fastest-growing department, to be For many years, Dow had difficulty convincing people to accept
INTERNATIONAL BUSINESS MANAGEMENT

head of foreign operations. It assigned Herbert “Ted” Dow foreign assignments because of the difficult experiences
Doan, a 31-year-old member of the board of directors, to visit associated with repatriating them to acceptable positions. Dow
Europe on a fact-finding mission. (Ted Doan’s father and has tried to correct this problem by
grandfather both had been Dow presidents.) Both Branch and • Sending some of its best people abroad so that “everybody
Doan quickly went on to become presidents of Dow. Thus, will want them when they come back.”
direct exposure helped the company’s managers readily grasp the
• Assigning higher-level supervisors to serve as “godfathers”
importance of international operations.
who look after the transferred employees’ home-career
Dow has continued this sort of program. In the mid-1990s, interests and keep them up-to-date on organizational
Dow dismantled its geographic and functional units and activities.
replaced them with a global business model. This model had a
• Providing each transferee with a written guarantee of a job at
fundamental requirementnamely getting people to “think
the same or higher level upon returning from the foreign
globally.” To make this happen, senior executives increasingly
assignment.
encouraged managers from the start of their careers to pursue
opportunities to learn from top-caliber people and from best
practices around the world in order to gain a truly international
perspective on business success.
In addition to providing international exposure to headquar-
ters’ top-level managers, companies need to attract and retain
high-quality personnel (largely local residents) within each
country where they operate. To do so, Dow gives its executives
throughout its worldwide operations the opportunity to reach
top management levels. In addition, in Dow’s expanding
international operations, a key priority is the development of
local people to run the company’s local businesses and opera-
tions. To this end, Dow has increased its investment in
executive education for future local business leaders. In
addition, because the company aims to employ local residents
wherever possible, it has worked hard to develop programs that
promote a culture of lifetime learning for local workers. Finally,
a company’s local human resources must change as corporate Finally, one may question whether these outlooks and pro-
strategies evolve. Thus, because of its growing commitment to grams directly affect those U.S. workers who JO not plan to go
expand its business in the Asia Pacific, Dow has created many abroad. Certainly, the global nature of its business leads Dow
career opportunities throughout this region. to encourage employees to consider traveling or living and
working internationally. Those who do not plan to do so still
When qualified local managers are not readily available in foreign must think globally-that is, even in the event that certain
locations, companies must transfer people to those operations. domestic positions may not require international travel or
At some point, this question arises: When Dow sends manag- relocation, those home-country managers often work as part of
ers to foreign operations, what qualifications should they have? global teams on projects with a global scope. The company has
Robert Lundeen, a former Dow chairperson who had served 12 supported this collaboration with communications technology
years as president of the Pacific division and 3 years as president that networks every desktop. Senior executives believe this
of the Latin American division, gave some indication of his capability lets people seamlessly support one another around
philosophy. After endorsing the crucial need for technical the globe as they work on team projects. Indeed, as Dow
expertise, he said, “When I worked in Asia, I observed that formally declared, geography does not limit any employee’s
many Americans seemed to delight in their insularity, and that career. No matter where a manager happens to call home, he or
attitude hurts the ability . . . [to] do business in foreign she is a part of a global team who has opportunities to work
countries.” on projects and take on responsibilities with a scope that
This drawback, along with the difficulty that some managers transcends national borders.
have in adjusting to foreign locations, led Dow to brief all
Introduction
prospective transferees on company transfer policies. In
Our opening case highlights one company’s efforts to deal with
addition, they are given information about the country where
international human resources, efforts which are more compre-
they will be assigned, as compiled by personnel in the host
hensive than those of most MNE’s. In addition, Dow
country. Dow follows is this procedure with a meeting between
Chemical invests in developing its global intellectual assets,
transferees and their spouses and recently repatriated employees
which include human capital (the knowledge that each indi-
and their spouses to explain the emotional issues involved in
vidual has and generates) and organizational capital (the
the move’s early stages. Couples are also given the option of
knowledge that has been institutionalized within the structure,
attending a two-week language and orientation program.
processes, and culture of the organization).

© Copy Right: Rai University

204 11.154
Most international companies agree on the importance of
qualified personnel in the effort to achieve foreign growth and
operational objectives. For instance, at a roundtable discussion
of chief executives on how the world is changing and what
management can do to respond, the chairman of Unilever said,
“The single most important issue for us has been, and will
continue to be, organization and people.” Figure 9.1 shows the
importance of international human resources in international
business.
The need for highly qualified people is crucial. Any company
must determine its human& resource needs, hire people to
meet those needs, motivate them to perform well, upgrade
their skills so that they can move onto more challenging tasks,
and ultimately retain them. Several factors make international
human resource management different from domestic manage-
ment.
Figure 9.1 Human Resource in International Business
Human resource management is one of the necessary factions
for implementing companies’ international strategies.
• Different labor markets. Each country has a different mix of
available workers and a different mix of labor costs. MNEs
can gain advantages by accessing these various human
resource capabilities. For example, GM’s Mexican upholstery
operation employs low-cost production workers, and IBM’s
Swiss R&D facility hires skilled physicists. Whether
companies seek resources or markets abroad, they may make
the same product differently in different countries-for
example, by substituting hand labor for machines because a;
diverse labor markets.
Human resource management is one of the necessary
functions for implementing companies’ international
strategies.
• International worker mobility problems. There are legal,
economic, physical, and cultural barriers to overcome when
transferring workers to a foreign -country. Yet MNEs benefit
from moving people, especially when there are shortages of
people with needed skills in a particular country. In such
situations, companies often must develop special
recruitment, training, compensation, transfer, and retention
practices.
• National management styles and practices. Employees’
attitudes toward different management styles vary from
country to country, and so do prevailing leadership practices
and labor-management relations. These differences may
strain relations between headquarters and subsidiary
© Copy Right: Rai University
11.154
personnel or make a manager less effective when working
INTERNATIONAL BUSINESS MANAGEMENT
abroad than when working at home. At the same time, the
experience of working with different national practices gives
companies opportunities to transfer successful practices from
one country to another.
• National orientations. Although a company’s goals may
include attaining global efficiencies and competitiveness, its
personnel (both labor and management) may emphasize
national rather than global interests. Certain human resource
practices can alleviate extreme national partiality.
• Strategy and control. Companies find that some country
operations are more important to global success than others.
Further, country operations differ in cross-national
integration, dependence on headquarters for resources, and
need for national responsiveness. These differences may
change over time. Management qualifications and styles need
to parallel the needs of these different national operations in
order to achieve the company’s worldwide strategy.
Management Qualifications and Characteristics
We begin our discussion of international human resource
management by examining the relationships between headquar-
ters and subsidiaries, national variations in managerial styles,
and management qualifications and characteristics for headquar-
ters and subsidiaries.
Headquarters-Subsidiary Relationship
International staffing is two tiered. First, subsidiaries need
people who can manage well locally. Second, headquarters needs
people who can coordinate and control worldwide and regional
operations. These two staffing needs are Closely related because
headquarters managers typically select and evaluate subsidiary
managers. Both sides must be sufficiently aware of and willing
to trade-off the competing requirements of global integration
and national responsiveness.
These trade-offs are complex and depend on the company’s
philosophy (for example, ethnocentric, polycentric, or geocen-
tric) and on the countries operational benefits from
independence versus interdependence. There is much less need
to impose standard human resource practices-such as hiring
qualifications and training programs-or a corporate culture
abroad when a company has a multidomestic strategy than
when it has a global or transnational strategy. Regardless of
where the company lies between these extremes, it may face
dilemmas because the technology, policy, and managerial style it
has developed in one locale may be only somewhat suitable
elsewhere. International managers, at headquarters and in
subsidiaries, must recognize when to introduce and when not
to introduce practices to a country.
Headquarters and subsidiary managers must communicate well
to ensure that they understand each other. Because geographic
distance constrains travel for face-to-face meetings and different
time zones complicate voice-to-voice exchange, much of the
communication between headquarters and subsidiaries is
written and sent bye-mail, faxes, and letters. However, these
written contacts are imperfect substitutes for face-to-face and
voice-to-voice communications, which allow immediate
questions and clarifications when managers are unsure they
205
 understand exactly what others mean. Nevertheless, companies
INTERNATIONAL BUSINESS MANAGEMENT
have been able to reduce the number of international trips by
bringing groups together electronically. Indeed, the challenges
of international travel, made worse by the events and outcomes
of September 11, 2001, have spurred international managers to
devise ways to manage the relationship between headquarters
and subsidiaries. For example, more managers utilize online
collaboration technologies, such as web, video, and voice
conferencing. While these technologies do not substitute for in-
person interaction, they help create an organizational setting that
is as close as possible to being there and enable people to work
and communicate effectively over distances. In addition, some
companies report that virtual mettings, besides reducing travel
costs and risks, boost productivity by building better relation-
ships with more frequent contact, more responsive customer
service, and faster decision-making cycles. For example, Bristol-
Myers Squibb uses video communications systems to help its
scientists collaborate globally so they can identify and make
available pharmaceutical therapies more quickly.
Communication difficulties, no matter through what sort of
medium, arise when managers’ native languages differ. Corpo-
rate communications, directives, and manuals may require
translation, which takes time and money. If they are not, the
content may be understood perfectly abroad, but the compre-
hension time may be longer because people read more slowly in
a second language. Likewise, in order to do the same quality
work as home-country counterparts, communication problems
may force a manager working abroad to spend more time on a
project. Although headquarters managers often overlook or
downplay these inherent inefficiencies, they still hold subsidiary
management responsible for meeting the company’s objectives.
Cultural differences color the intents and perceptions of what is
communicated. Managers mistakenly may assume that foreign-
ers will react the same way as their colleagues to decision-making
and leadership styles-a particular problem with team projects
that include various nationalities. The problem is amplified in
cooperative arrangements when business activities include not
just different nationalities but also different companies.
Communication between headquarters and subsidiary manage-
ment is eased somewhat because English has become the
international language of business. Managers cannot learn all
the languages in every country in which their companies operate.
So business between, say, Italy and Saudi Arabia, may be
conducted in English. Even some MNEs from non-English-
speaking countries, such as ABB of Switzerland, have adopted
English as their official office language. A working knowledge
of the subsidiary country’s language can, nevertheless, help
headquarters managers gain acceptance by subsidiary personnel
as well as better understand local events.
The aftermath of the terrorist attacks of September 11, 2001
have constrained the mobility of international businesspersons-
both at headquarters and subsidiaries-to manage their
relationship. Most notably, foreign travel has seen increased
difficulty and danger. In recourse, managers and companies
have adopted various precautions. Some avoid flying U.S. flag
carriers overseas, opting for lower-profile airlines. Others have
© Copy Right: Rai University
206
applied stringent safeguards. Black & Decker, for example, asked
employees to reconsider plans for overseas trips. Novartis went
a step farther, placing restrictions on its 9,000 North American
employees who travel for the company to about ten countries.
While it declined to identify these ten nations, Novartis banned
travel to some of them, limited travel to essential purposes
only for others, and, for the remainder, required the employee
notify the company’s corporate security department before
departure. Operationally, many companies now routinely
purchase trip cancellation insurance. In addition, more compa-
nies instruct employees to order tickets only through the
company’s official travel agency in order to avoid the confusion
that followed 9/11; in the resulting turmoil, many companies
had trouble-finding employees who had bought tickets from
other sources. Procedurally, companies now advise workers to
put together a communication system with friends, family, and
business associates so that somebody is familiar with their
plans. Similarly, companies advise personnel to register with
American embassies overseas upon arrival and, in some
situations, supplement a cell phone with a short-wave radio.
Matching Style of Operations
Where there is a need for cross-border integration, whether
between headquarters and subsidiaries or among subsidiaries,
humanist, feeling-type managers (those concerned with how
their decisions will affect others, particularly others’ feelings) are
apt to be more effective than scientific, thinking-type managers
(those concerned with processing information analytically and
objectively). The reason this is so is that the collaborative nature
of cross-border integration requires a high level of cross-
personal cooperation. Cooperation is enhanced when managers
take into account the outlooks of people who can expedite or
impede integration.
Similarly, the MNEs that follow a multidomestic strategy do
not need to transfer human resource competencies from one
unit to another; in fact, this is not generally possible. The
operation in Singapore might work independently to develop
human resource practices that deal effectively with labor
shortages and high worker mobility in its market without
transferring information on such practices to units of the
company in other countries. The MNEs that follow a global
strategy would attempt to transfer their home-country policies
and practices to their foreign units because they feel that such
policies are valid outside the parent country. The MNEs that
follow a transnational strategy would attempt to transfer their
best practices to all operations in all countries, regardless of
where they happened to originate.
There is also a need to manage in a style that motivates and
engages subordinates. Such as between authoritarian and
participatory styles of leadership and individualism versus
collectivism in the workplace. Although any country has
successful managers whose styles vary, there is substantial
anecdotal evidence of greater success when managerial actions
are congruent with subordinates’ preferences and expectations.
Thus, managers may improve their performance by adjusting to
the preferred management styles of the people with whom they
are working.
11.154
Qualifications Specific to Headquarters and individual also needs an exceptional family to accept the

INTERNATIONAL BUSINESS MANAGEMENT

Subsidiaries frequent absences and recovery periods from travel fatigue.
Thus far, we have emphasized managerial qualifications that
Subsidiary Management
apply to the relationship between headquarters and subsidiaries.
In addition, headquarters managers who are responsible for
international operations have duties that differ from those of
their domestic counterparts. Similarly, foreign subsidiary
managers have responsibilities that generally differ from those
of home-country managers at similar organizational levels. We
now discuss these topics.
Headquarters Management
Headquarters managers who are responsible for international
business must interact frequently with high-level authorities in
foreign countries to negotiate investments, sell technology,
evaluate new market opportunities, assess monetary conditions,
and so on. Their tasks are even more difficult than those faced
by subsidiary managers because they must be away from home
for extended and indefinite periods. Their international trips are
stressful before, during, and afterwards. Before, they must make
arrangements while trying to complete pending work and to Although foreign subsidiaries usually are much smaller than the
spend time with their families. During their trip, they eat, sleep, parent, their senior managers often must perform top-level
and move in unfamiliar places while seeking the confidence of management duties. This may mean taking responsibility for a
and rapport with people in many different foreign countries. variety of business functions and spending time on external
Upon their return, they face the work that has piled up in their relations with the community, government, and public.
absence, the preparation of expense reports, and the guilt from Managers with comparable profit or cost responsibility in the
being away from family. Further, they may suffer jet lag, a home country may perform middle-management tasks; as such,
condition in which one’s biological clock tells the body the they may lack the breadth of experience necessary for a top
wrong time to sleep, eat, and feel alert or drowsy; under the best management position in a foreign subsidiary. A subsidiary
circumstances, this clock can adjust by only one or two hours a manager also must work independently because most subsid-
day.1s However, frequent moves between time zones may also iary operations lack many staff functions, such as market
have long-term adverse physical and mental effects, such as research. At headquarters, a manager can get advice from
slower reactions and poorer performance. Figure 9.2 satirizes the specialists by walking to the next office or floor or by making a
problem of jet lag. Even if headquarters personnel can reduce few telephone calls. The subsidiary manager, however, often
the rigors of foreign travel, they may be ill at ease with the- must rely on his or her own personal judgment.
foreign aspects of their responsibilities if their rise to the It’s hard to imagine that the housing development in this
corporate level has been entirely through their performance in photo is outside Beijing, China. A South Africa resident walks
domestic divisions. within the western style development built to house business
Headquarters staff traveling abroad can also face problems of expatriates working in the area.
loneliness, particularly in their personal lives. Such staff people The travel required to oversee international operations is
are apt to miss family events and the celebrations that take place stressful.
during their home country’s holidays. International trips tend Source: From Punch magazine. Reprinted by permission.
to be longer and farther away than domestic ones, making it
difficult to return home on weekends. As one international
executive commented,
Often you won’t be able to plan in advance when you are
leaving on business or when you will return. Being present at
birthdays, school plays, anniversaries, family reunions and other
events may become the exception instead of the rule. While
you’re away, mortgage payments will probably be due, the
MasterCard bill will arrive, the furnace will fail, your child will get
chicken pox, the IRS will schedule a full audit, the family car will
be totaled, and your spouse will sue for divorce.
In summary, it takes a distinctive type of individual to adjust to
extensive travel to man; different environments. Moreover, this

© Copy Right: Rai University

11.154 207