International and Comparative Human Resource Management

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This assignment includes all learning journals which I kept during the semester. It was compulsory for us to keep learning journals in IHRM unit. Learning journal is a continuous document that a learner writes in order to record the progress and reflections on learning and experiences we gather in our learning process (Dennis, 2007).

Learning journals can benefit learners in many ways. According to (Smith, 2006) learning journals help learners to remember their daily learning and experiences, keeping journals can stimulate our brains to think critically, and stimulate our thoughts and would allow us to think in a different way and most importantly journals would allow us to keep records of our thoughts for later considerations or reflections.

The purposes of these journals were to assist me, to document my development and progress in the unit, process my learning and insights by focussing on particular point of interest, use a process to improve self awareness, and gather information and learning that I can critically reflect on.

In order to achieve those purposes I elaborated on key points which were discussed during the lecture, questions and issues that came to my mind in the journal entries and completed weekly after each session. Further I referred the recommended text book and other relevant sources including some websites in order to increase the credibility of journal articles and to gather more knowledge on IHRM. Finally, I have arranged journal articles in the same order as they are presented in the unit outline in order to make it easier to be assessed.

Journal 1 (11/03/2010) - Introduction to IHRM

The class was started by the lecturer Mr. Chandana Kumara by briefly explaining the course structure of IHRM unit. He explained the roles of student and lecturer clearly and more importantly we were informed about assessments of this unit and gave many important advices on how to attain a good grade.

Next he moved directly to the today's lecture. The answer to the question, "why organisations go international" was explained by bringing up the factors that have created a global marketplace. Today's market has become a one market place where all the companies are competing in global level due to reasons like increase in travel between countries, development in technologies especially telecommunication and internet, migration of people, convergence of global lifestyles, and economies of scale that organisations can experience by operating in international level. Therefore in order to grow and sustain in modern business world where competition is intense, organisations are compelled to put a step forward and operate in global market place. Actually this explanation was very interesting as I have encountered this globalisation concept in many units in this degree course.

Then he explained us key terms of IHRM which are necessary to be familiar with before going into the depth of the unit. There are three types of employees in IHRM context. PCNs - parent country nationals (employees who are coming from the country where the head office is situated), HCNs - host country nationals (employees who are from the country where subsidiary is located) and TCNs - third country nationals (employees who are coming from another country).

Next we learned a new word called expatriate when he started to explain the differences between HRM and IHRM. "An expatriate is an employee who is working and temporarily residing in a foreign country" (Dowling & Welch, 2008). This is an obvious difference between HRM and IHRM where in IHRM employees are moved across countries. Other differences between IHRM and HRM that we discussed include that IHRM has more HR activities than domestic HRM, a broader perspective is needed, it is more involved in employees' personal lives, and the risk exposure.

Actually there are more activities involved in IHRM than HRM. For an example before an expatriate send to an international assignment they should be trained in terms of language and culture. Further HR department have to resolve expatriate's family issues also. Broader perspective means HR departments not only have to manage employees from their own country, now they have to look after and manage TCNs and HCNs as well. That is in IHRM they have to deal with different people from different cultures. Actually it is a more challenging task. Actually IHRM is more involved in personal lives of employees. Since employees are moving into a different country which may be completely different from their own culture, employees would have to face various issues including resettlement in that country, children's education, etc. Therefore HR departments of MNEs need to look after their employees including their personal issues.

At the end of the session the lecturer told us to research on emi-etic distinction as a home work. Actually emi-etic is two perspectives that can be employed to study cultural systems of societies. Emic knowledge that is culture specific aspects is essential for an intuitive and empathic understanding of a culture. Whereas Etic knowledge that is a culture's common aspects is essential for cross cultural comparisons. From this knowledge it is easier to understand why firms in different countries become more alike (Etic/convergence approach) and why some individuals in these firms are maintaining cultural specificity (Emic/divergence approach)

I think today we learned many important areas that will be essential to understand future sessions of IHRM. Actually I personally liked the way that the lecturer conducted the today's lesson. He asked many questions to think in deep and broader way. I think it will be very useful to this subject since IHRM is a broader subject than HRM and now I am more interested to pursue upcoming lessons of IHRM.

Journal 2 (18/03/2010) - Cultural Differences

Learning about culture is quite interesting because of its practical implication for everyday life. With the globalisation, development in technologies, and increase in trade between countries today's market has become a global market place. Therefore it is obvious that we will have to work or deal with different people from different countries. To deal with different people understanding their culture is very important.

Culture is defined by Ed Schein as "a set of basic assumptions, shared solutions to universal problems of external adaptation and internal integration, which have evolved over time and are handed down from generation to generation". (Dubrin, Dalglish, & Miller, 2006) Basically it is the way of life of a group of people. (Francesco & Gold, 2005)

In today's lesson we learned different cultural frameworks that can be used to identify differences among cultures. Those frameworks have been developed by researchers in order to classify the cultures of the world. (Francesco & Gold, 2005) Among them Hofstede's dimensions of cultural values were more familiar to me because I have learned them in a previous subject of this degree course. This framework focuses mainly on work related values. Therefore this would be more important for us as business students. Dimensions include Individualism vs. Collectivism, Power Distance, Uncertainty Avoidance and Masculinity vs. Femininity. For an example power distance is the extent to which less powerful members of organisations accept the unequal distribution of power. In companies where large power distance cultures are existing differences among different ranks are accepted. On the other hand in masculine society more male or tough values like assertiveness are dominant (Francesco & Gold, 2005).

Kluckhihn and Stradfbeck's framework describes the values orientation of a culture using 6 dimensions. Those include Relation to Nature, Time Orientation, Basic Human Nature, Activity orientation, etc. According to the framework those value orientations represent how societies cope with issues that people living in those societies face. For an example Mastery cultures like US always try to change the nature as they want using the technology available to them where as Eskimos live with the nature as it is (Francesco & Gold, 2005).

Other frameworks which we discussed includes Tropenaars's cultural framework, Hall's High and Low Context Framework, Cultural Metaphors, etc. All these frameworks assist us to identify and differentiate different cultures.

What I found interesting in this session was the discussion about whether culture can be changed or not. Our lecturer said that culture cannot be changed and he argued that culture only evolves. Therefore I decided to research more on that topic. Further I'm interested in finding more information on differences among cultures and how we can deal with those cultures.

With the learning from this session I have started to appreciate differences among people from different cultures and I will be more sensitive and tolerant to those differences in my future encounters with people from different cultures.

The knowledge that I have gathered today about cultural differences will help me to succeed in my future career as a manager because today's world is becoming more interdependent and connected. Further cultural knowledge is becoming more important for IHRM as it is about managing people internationally or conducting HR activities with people from different cultures.

Journal 3 (25/03/2010 & 01/04/2010) - The Organisational Context; HRM in the Host Country Context

Part 1 - The Organisational Context (25/03/2010)

Before starting the lecture it was difficult for me to understand the importance and connectivity of this chapter (Organisational Context) with IHRM. But as we discussed the content in depth during the lecture, gradually I started to appreciate the connectivity between IHRM activities and organisational context.

The lecture was started explaining how and why organisations or MNEs change their structures as they face various challenges when they grow and expand into international arena. We discussed many management demands, strains and many other factors that influence organisations to change their structure.

For an example growth will result in organisation spreading in more geographic locations. Also it may affect the flow and volume of information and geographic dispersion results in more encounters with different cultures and languages. All these factors may require organisation to implement new control mechanisms and improved coordination among its units (Dowling & Welch, 2008). In order to meet those new requirements organisations would change their structures.

Next we discussed two major issues that MNEs have to face when devising a new structure. They were whether to centralize or to decentralize and the type and form of control exerted over subsidiary by the parent. For an example if there are delays in decision making due to reasons like hierarchies that are existing in an organisation or geographical distance that subsidiary is situated with the head office, the organisation would have to consider delegating some powers to the subsidiary unit. Therefore in order to face those challenges organisations may choose a structure from a simple exporting unit or international division to more advance and complex matrix structure or to a networked organisation structure.

The matrix structure was harder for me to understand because of the complexity in the structure itself. Therefore I decided to research more on that structure and organisations that are based on that structure. Also in the lecture we learned that matrix structure is more difficult to manage due to reasons like dual reporting which may lead to issues like confusion and more over this structure need to overcome barriers like culture, language and distance in order to be effectively implemented.

Next we moved on to a discussion which is more relevant to the subject. That is how these structural responses of organisations affect its HR activities. According to (Dowling & Welch, 2008) centralized organisations have large, well resourced HR departments and they engage in wide range of functions. For an example in centralized organisation staffing activity is under the control of head office. In contrast in decentralized organisations HR responsibilities of head office is limited only to a few activities. Therefore according to my understanding I believe that HR manager have more responsibility in devising a suitable structure for an organisation by looking at the external environment and internal requirements.

The most important thing that I learned in this lecture was the saying "Think globally and act locally". With the learning from this session I realized that there is a deep meaning in this saying. That is although companies go international in order to sustain and grow with the intense global competition. They have to serve and operate in local markets by meeting local requirements and most importantly they need to respect local cultures.

Part 2 - HRM in the Host Country Context (01/04/2010)

With the name of this module itself it was easier for me to understand this session is about HRM practices in the host country. Actually I was correct this module is all about how to deal with HR issues of local staff and various implications for HR managers in dealing with those issues.

Today's lecture was started with introducing what is localisation and standardisation of HRM practices. Standardisation is where organisations practice same basic policies of HR across the whole organisation. Localisation is where preparing of HR practices in order to make them more suitable or applicable to local environment. Organisations may choose either localisation or standardisation due to various reasons. Next we discussed those influences.

There are many factors that need to be analysed to decide whether organisation should standardise or localize their HRM practices. It is possible to divide them into two categories, external and internal. External factors would be cultural, economic and institutional factors. Degree of integration, strategy of the organisation, degree of integration with the host country and organisational culture would be external factors.

For an example standardisation of work practices would be suitable for a local subsidiary if local staffs are naturally inclined towards corporate norms, if expatriates are able to socialize local staff with corporate culture and if standardised work practices of head office are appropriate to the local environment. Western uniforms may not be applicable in Arab cultures. Therefore organisations have to localize those aspects. Further if an organisation perceives a particular subsidiary may more important for them they would practice standardisation in order to show their corporate characteristics to external parties.

I personally believe that the most important aspect to be analysed before deciding on whether to standardise or localize would be the culture of the host country because culture has the biggest impact on work practices of people. Also we learned during the lecture the linkage between culture and the behaviour of people. For an example in countries where uncertainty avoidance is high employees tend to prefer more fixed salary rather than payment based on performance. Therefore the HR implication is if the standardised practices do not suitable for local environment, organisations should localize them in order to make them more appeal to the local staff.

Also we discussed the importance of mode of operation in the host country in determining the standardisation of work practices. The lecturer explained that franchised operation in host country may influence more local operations whereas wholly owned subsidiary may influence toward standardisation.

Actually at the end of this module I realized that it is not about selecting a one best method that is either standardisation or localisation. It is about balancing or choosing the best mix of practices which is suitable for each unique situation because each method has its own advantages and disadvantages. For an example, localisation may fulfil legal requirements of that county and motivate local employees since they are able to work in their own ways. On the other hand standardisation may serve as a control mechanism and also it may allow organisation to enjoy scale advantages in HR function.

Journal 4 (08/04/2010) - Sustaining International Business Operations

This journal article is based on my readings of the relevant chapter in the text book and other external sources such as web articles, because today was a holiday as a result of the general election.

This chapter manly focuses on how organisations manage people in order to sustain in international business operations. And covers areas like issues related to various approaches of staffing, reasons for using international assignments, various types of international assignments and role of expatriates and non expatriates.

According to the text there are four staffing approaches; ethnocentric, polycentric, geocentric and regiocentric (Dowling & Welch, 2008). In ethnocentric approach subsidiaries are managed by PCNs. The main advantage of this approach is organisation can assure that the subsidiaries will comply with the objectives and policies of the parent company. And further they will be able to maintain good communications and coordination with their subsidiaries. But there are many disadvantages like limiting the promotional opportunities for HCNs and the time and toughness for PCNs to adapt to that foreign culture.

In polycentric approach usually subsidiaries would be managed by HCNs. HCNs will rarely be promoted to the head office and PCNs will usually not employed in subsidiaries. Therefore using this approach some disadvantage of ethnocentric approach like language barriers and time that is spent in adjusting to the culture can be eliminated. But this approach is also not without its own drawbacks like, potential of conflicting national loyalties and possibility of lack of coordination between subsidiary and the head office.

Under geocentric approach any nationality can be found in key positions of subsidiaries and head office. Therefore in this method TCNs, HCNs, or PCNs can hold any position in the organisation. But on the other hand, in regiocentric method mangers are appointed on the regional basis. Usually employees in subsidiaries can be transferred within the region.

The key area of this topic as I believe is impossibility to pre determines a best staffing approach since each staffing method has its own advantages and disadvantages. Therefore HR manager should plan a unique staffing policy by analysing the situation.

Other important areas of the chapter included reasons for using international assignments and various types of those assignments. Text has identified many reasons that organisations transfer employees across borders including position filling, management development, and organisation development. Depending on those reasons and the nature of the task that expatriates are going to perform organisational assignments has divided into three broader categories naming short term, extended and long term. Among those categories it is possible to find non standard assignments like virtual assignments, contractual assignments and commuter assignment. (Dowling & Welch, 2008)

Roles of expatriates and non expatriates were another interesting area of this chapter. As I saw the name non expatriate I thought it is another name for HCNs or TCNs but as I read on the content I realized that non expatriates are people who travel internationally but they are not called expatriates as they do not relocate in that country (Dowling & Welch, 2008). Among those roles being agents for socializing, boundary spanners and language nodes are important roles that are expected from both expatriates and none expatriates.

Since this chapter is more about staffing international assignments I feel that the learning that I have gathered through this chapter would help me to understand the next session which is staffing better. And moreover this learning would help me in my future career as I learned many techniques that are used by MNEs when they face various challenges like cultural differences, etc. in international markets.

Journal 5 (22/04/2010) - Staffing (Recruitment & Selection for International Assignments)

With the start of the today's lesson I felt that we have entered into a core area of this subject. With the learning from previous subjects of the degree program I knew that staffing or recruitment and selection is an important step in a HR plan.

According to (Solomon, 1994) researchers have found that around 25% of overseas assignments fail due to failures in recruitment processes. First of all the HR manager should be aware that when dealing with international assignments the issues that expatriate employee faced are completely different from the issues that an employee in home country faces.

Since there are high costs associated with expatriate failure, it is crucial for organisations to select right person accurately. As lecturer explained in the class there are huge direct as well as indirect costs are associated with expatriate failure. I believe that organisations should be more aware of the indirect costs like damaging the relationship with foreign stake holders and negative effects on local staff than direct costs like relocation expenses since indirect costs can damage the organisation in the long run than direct costs which can be monetarily evaluated.

Then we discussed the reasons for expatriate failure. Expatriate failure was defined in the slides as "premature return of an expatriate". But the lecturer more elaborated on this and explained that this definition should be understood carefully. He explained that premature return can occur due to various reasons which are far away from the responsibility of the expatriate like failure of the assignment itself, assigning him to a better job, etc. not only due to the failure of the expatriate.

Then we moved on to discuss the factors that moderate expatriate performances. Among them we discussed more on factors like inability to adjust to the foreign culture, length of assignment and psychological contract. In there the lecturer nicely explained the phases of cultural adjustment using the graph provided in the slides.

(Dowling & Welch, 2008)

If you make mistakes in others' cultures as soon as you went there they will tolerate them (Phase 1). But with the time passing you should learn how to behave in that culture. If you still making mistakes then they will not tolerate. Therefore you will be exposed to experience the culture shock (Phase 2). If you learn and adapt (Phase 3) to that culture you will succeed but if you fail to do so you will have to leave that culture.

Another important discussion of today's lecture was selection criteria. Among those criteria technical ability, cross-cultural suitability, family requirements, company requirements and language can be considered as important. Naturally technical or person's ability to perform the task is a must. Cross-cultural suitability, its importance and how to adjust to another culture is mentioned earlier. And further we discussed more on family requirements during the lecture. Most critical issues would be how to look after expatriate's children's education, etc. if the employee is more committed to the family, the issues would become more critical. Another issue which is related to family is challenges faced by dual career families that are where husband and wife both are doing jobs.

Therefore in my view it can be said that HR managers have many challenges to face when staffing international assignments. And also it is very important to give expatriate time and facilities to adapt to the new environment before expecting to perform at their best as soon as they start to work in international assignments.

Journal 6 (29/04/2010) - Training and Development

After selecting the right person to perform in an international assignment next step would be on how to prepare that person for that purpose. Then the training and development comes to the context. In this lecture we elaborated on the importance of expatriate training and we discussed many techniques and areas to be looked after when designing an effective training program since the various challenges that have to be faced by the international assignees which they would not encounter in home country.

Lecture was started by asking us the difference between the training and development. Prior to the lecture I was in a position where I believed that training and development are the same where employees are just trained to meet their objectives. But the lecturer explained nicely the difference between those two words and the importance of each. According to (Stone, 2008) training emphasises immediate improvements in the attitudes, knowledge, and skills that are needed to perform the current job where as development is the growth of an employee in terms of ability and understanding. And more importantly development prepares an employee for future responsibilities.

The next we discussed in the class was the effectiveness of pre-departure training programs and its components. Actually what I learned was it is not easy to measure the effectiveness of a pre-departure program. Reasons would be mainly due to the diversity among cultures and as a result what might work in a culture may not work in another.

But with the differences and challenges like cultural differences, language differences, etc. that expatriates would have to face in an international assignment, training them before leaving the home country or in other words pre-departure training program is very important. As we discussed in the lecture most important components of an effective pre-departure training program includes cultural awareness program, language training, preliminary visits, practical assistance and training for the training role, etc.

As many expatriates fail due to the incapability of adjusting to the host country's culture cross cultural training becomes vital. When going to a different culture expatriates should respecting that culture. They should know business and social customs of that country in order to become successful. There is a nice proverb that perfectly suitable to the context that is, "Be a Roman when in Rome"

Language skill is another important area to be trained. It is very important to learn host country language especially in countries like Arab countries where English language is not much in the usage. Otherwise it would become major problem since communication is an important aspect in business. On the other hand preliminary visits may also be an important part of the training program. Actually I believe that the personal experience that an expatriate receive through such a visit cannot be compared with a class room training session.

More interesting part that I learned in this lecture was training expatriates for the training role. Actually once expatriates land on the host country they may have to train HCNs. For an example expatriate would have to train HCNs with parent country specific procedures. Therefore training expatriates on how to train HCNs with cultural sensitive manner becomes important.

Also I leaned today that by developing international expertise organisations can have advantages in many ways. One thing would be management development and other is organisational development. Management development helps organisations to utilize pools of experienced international assignees in their future international assignments and organisational development assist organisations to base their future growth plans by utilizing accumulated knowledge, skills and abilities through international experiences of their employees.

Journal 7 (13/05/2010) - Performance Management

What is performance management? What is performance appraisal? Is there a difference between those two terms or are they same? These were the questions that came across with the start of the today's lesson. Lecturer clearly defined those two terms and explained what each term mean and the importance of those to organisations especially for MNEs.

Performance management is "a process that enables the multinationals to evaluate and continuously improve individual, subsidiary unit and corporate performance, against clearly defined pre-set goals and targets" (Dowling & Welch, 2008). It is obvious that in order to manage performance, performance should be evaluated first. We learned during his explanation that performance appraisal is a technique which is used by organisations to evaluate performances.

Then we moved on to discuss more on performance appraisals in MNEs. Actually prior to this session I believed that performance evaluation is only conducted in individual level. But today I learned that it is conducted at various levels especially in MNEs. Lecturer explained that performance evaluations should be conducted at many levels including subsidiary performances and individual performances.

There are many factors to consider when evaluating performances of subsidiaries. We discussed lot on these factors and some of important factors to be considered were whole vs. part, non comparable data, and volatility of global environment. Actually it is very important to consider whole organisation or MNE rather than short term profitability of a subsidiary. Other thing is due to various reasons like country specific problems that some subsidiaries are facing in particular markets their performances may get affected. For an example if exchange rates or taxation rates change suddenly those data might become non comparable with other subsidiaries. Also volatilities in global environment like terrorism and oil prices changes may affect particularly for few subsidiaries.

Other important area of our discussion was performance appraisal of individuals. Today I realized that performance evaluation of HCNs, TCNs or PCNs is not an easy task since the complexities like cultural differences, language differences that are inherent with international assignments. Therefore HR managers are faced with many challenges such as selecting the correct method to evaluate performances, and selecting the best evaluators who are suitable with particular cultures. For an example, in high power distance countries like Arab countries they may not like peer evaluation method that is because in those cultures subordinates may not like to evaluate their manager's or superior's performances. Therefore different methods will have to be used in different countries.

Further we discussed the importance of evaluation criteria and feedback also. In order to evaluate performances accurately an appraisal system should consist of all performance criteria namely, hard goals, soft goals and contextual goals. That is because each criterion has its own limitations in assessing performances. For an example, hard goals are goals that can be easily measured and quantifiable goals. On the other hand soft goals are based on relationships or personal traits. Therefore in order a performance appraisal system to become comprehensive it should contain all the criteria.

As we discussed in the lecture, feedback is a crucial element of an effective performance evaluation system. Timely feedbacks are must for employees in order to check whether they are achieving their goals. If employees have achieved their goals they will be rewarded to motivate them and if they have not met those, support and advices will be provided on how to meet those goals. It is obvious that support and advices are more important for expatriates since they need not only to perform their technical tasks but also they have to face cultural challenges in international environment.

Journal 8 (20/05/2010) - Re-entry and Careers

This session was started by the lecturer asking students to think about possible issues that an expatriate might come across when they come back to the parent country or in the repatriation. Actually students suggested many good examples and the lecturer elaborated on them in order to make them clearer to the entire class. The main issues that were discussed in the class are as follows.

They may have to face re-entry shock that is for an example the whole organisation may have changed including the organisational culture and systems after he leaving the country. Also he will have to face many internal mental dilemmas as his subordinates might have got promoted than his level after he left the country. And most importantly he will have to change his lifestyle that he used to live in that country if his salary or compensation has been reduced after the repatriation.

Actually this re-entry process has added many important activities for IHRM. HR department have to monitor expatriates' careers, they have to keep accounts and monitor how many expatriates have gone for foreign assignments and when they would return to their parent country. Further HR department need to manage expatriates' careers and personal issues after they repatriate.

Next we discussed the repatriation process in details. The repatriation process includes four stages, preparation, physical relocation, transition and adjustment (Dowling & Welch, 2008). In the preparation phase expatriate and his family should be prepared to move back to the home country. The lecturer explained that the reparation phase should be started at least six months prior to the repatriation. That is because expatriate might have many things to be prepared before leaving the country. For an example he might need time to dispose his assets which he used in that country and he will have to arrange his children's education, etc. In the next two phases expatriate will have to detach from his affairs in the foreign country and move back to the home country. If required he will be temporarily accommodated until he settle down again in the home country. In the final phase the repatriate would need to readjust to the home country context by coping with changes.

Next we discussed issues that a repatriate would have to face that we had not discussed in the beginning of the session. Job related issues may include devaluation of international experience. For an example if an employee of USA come to Sri Lanka for an assignment for about 5 years. His experience may not be valued by the USA parent company as they have superior technologies, etc than in Sri Lanka. Further Re-entry position can become an issue, and he might not receive recognition as in the past and his status may have loosed. Therefore he will have to be patient as a new comer to the organisation until he get used to it. Other main issues we discussed included social issues like effects on partner's career, re-establishment of social networks, etc.

At the end of the session we discussed multinational responses towards repatriation issues. Actually handling repatriate issues is critical for MNEs. If an employee decides to leave the company after repatriation it would become a huge cost for the organisation. Organisations have invested a lot in terms of training, etc and the exposure and the experience that an employee has gathered through the international assignment is very important for organisation in order to get a return on that investment.

Actually before starting this session I never thought coming back to the home country (repatriation) after a foreign assignment would be an issue. But after the session I started to appreciate the importance of managing re entry issues from employee's perspective as well as MNE's perspective.

Journal 9 (20/05/2010) - Compensation

Today's second session was started by introducing the things that need to be considered when compensating expatriates. It is important to have the knowledge about the foreign country before designing a compensation package. Taxation of that country, employment laws including statutory requirements, currency rates and fluctuations, inflation rate, and country's general salary level, etc. would have to be considered.

Actually compensation in IHRM has added more activities than in domestic HRM. It is more complex because MNEs need to address issues of different categories of employees including PCNs, HCNs and TCNs. When compensating employees in MNEs they would have to deal with multiple currencies, multiple tax systems and statutory requirements. Also understanding about business customs and cultures of those countries may be required because in some cultures like US employees would be motivated for compensation package whereas in some cultures like Japan job security would be a priority.

It is very important to construct an appropriate compensation system to address the needs of employees working in other countries while maintaining HR policies of the organisation intact. An unnecessary large compensation package would be a cost to the organisation. Also according to (Dowling & Welch, 2008) compensation is a key element that influences performances of expatriates.

An international compensation program includes many components, base salary (the basic component of the compensation and serves as a benchmark for other components like bonuses and allowances), hardship premiums (compensation for life adjustments and influence expatriate to accept the foreign assignment), allowances (cost of living allowances, home leave allowances, education allowances, housing allowances, etc are provided to cover extra costs that an expatriate would have to bear as a result of the foreign assignment), benefits (includes medical coverage, pension plans, etc. this has added many complexities for IHRM as they have to consider many factors since those benefits are subjected to different demands from country to country) (Dowling & Welch, 2008).

There are two approaches to international compensation. The going approach and the balance sheet approach (Dowling & Welch, 2008). The going rate approach is based on the host country market rates and the balance sheet approach tries to maintain parent country standards.

In the base pay structure expatriates might be compensated by additional payments if they move from high pay country (e.g. US) to a low pay country (e.g. Sri Lanka) since the base pay approach compensate employees according to the host country standards. There are many advantages of this approach like equality with local nationals, simplicity and equality among different nationalities. But also there are many disadvantages like this method can result in variation in the compensation between assignments for the same employee and differences in compensation for expatriates of the same organisation in different countries.

The most common method used by MNEs is the balance sheet approach. Incentives and benefits will be added to make the compensation more attractive. There are many advantages of this approach like equity in assignments between expatriates of the same country and most importantly this method will suitable where expatriates move from high pay country to a low pay country since they are able to receive the same amount of pay under this method that they received in the home country plus various incentives.

I learned today that compensation is more complex task in international HRM than in domestic HRM since various issues and facts that HR departments have to consider. From the expatriates' perspective it would be necessary to compensate them enough to motivate them and retain with the organisation because foreign assignments are challenging and they will have to incur various costs as a result of foreign assignments.

Journal 10 - Business Etiquette & Social Customs

I had to prepare this journal before participating for the relevant lecture since next class is the final class of the semester and this assignment need to be handover on that day. Therefore this journal would be based on my readings of relevant handout and other external sources like web articles.

Business etiquettes are the forms or manners which are accepted and required by the business people when engaged in business activities (Basics of Business Etiquette, 2009). It involves almost every activities including saying the right things, dressing the right way and doing the right things (Duddukuri, 2010).

Other important area of this module is social customs. Customs are socially accepted ways of behaving in a given situation (Beamer & Varner, 2001).

The handout (Beamer & Varner, 2001) discusses many accepted manners and behaviours that are essential to understand before engaged in international businesses. They include etiquettes in making introductions, exchanging business cards, recognizing positions and status, dining practices and gift giving.

There are differences between cultures when introducing people. For an example in US people are often addressed in their first name where as in Asian countries like Sri Lanka people are introduced by the surname often with titles like Mr or Mrs. Usually introduction is accompanied by handshake (Westerners), or bow (Japanese) depending on the culture.

When comes to business card exchange different cultures deal with it differently. For an example, Japanese and South Koreans accept business cards with both hands in order to show respect to the other party. And in US they will just glance on it and put away. But if someone does that in Japan, Japanese might feel that they were offended or neglected. Also in some societies social status is associated with education but in contrast in India people are divided into certain classes with their birth by the cast.

Tipping and gift giving is also an important business etiquette to be aware of because some countries gift giving may consider as bribing and is barred by the law. Japanese may consider not giving tips will result in losing faces.

Important social customs that would be important to be aware of might include male and female relationships, humour, superstitions, taboos and dress codes. There are big differences between countries when come to male female relationships. In Arabs females would not be usually engaged in businesses whereas in Mexico male managers may kiss their female secretaries every morning.

What is accepted in one culture may be considered as a taboo in other cultures. For an example in Arab asking about the health of a man's wife may be considered as taboo and Russians don't wear coats in indoor and may consider as taboo. But in contrast in Europe Jackets may be worn even if it's cold.

The important lesson that I learned by studying this module is that if a manager or an expatriate doesn't know how to behave in business dealings or in some social dealings as accepted by the society in that particular culture he might be unsuccessful in dealings with those people. Therefore having the knowledge about business etiquettes and social customs which are accepted in that particular society that an expatriate move into is very important.

Therefore I think that MNEs should not forget to include business etiquettes and social customs of the host country into the pre departure training program of expatriates.


At the end of the semester I realized how broader the IHRM than HRM which I have learned in this degree course. I started to understand and appreciate the complexity and added activities for HR department of MNEs when managing human resources including PCNs, HCNs and TCNs who come from different cultures and work together in different countries.

Actually keeping learning journals was a new concept for me. As this is the first experience of my entire life keeping a learning journal, actually this assignment helped me to understand the importance of keeping learning journals as a student and helped me to learn how to keep a learning journal.

Therefore at the end I believe that this assignment helped me to successfully reflect on IHRM unit and further these journal articles will also help me to study for the final exam to achieve a good grade. Finally, the knowledge I have gathered in IHRM would help me to succeed in my future career.