Introduction

The following report consists of comprehensive analysis and evaluation of crucial issues in HR from an international perspective. There will be investigated issues regarding international selection procedures, compensation and difficulties of employee’s repatriation from international assignments. For each issue will be provided a set of recommendations in order to mitigate a possible risk as well as increase financial efficiency of such HR practices.

Repatriation. Reverse cultural shock

The major purpose of expatriation is a transferring knowledge, skills and technologies to overseas company’s subsidiaries as fast as it possible. It is noteworthy, that concept of expatriation becoming more and more important due to rapidly increased globalization and a role of Multinational Enterprises (MNE) (Osman-Gani and Hyder 2008, 456).

The framework of implementing international assignment is determined as an initial process (expatriation) and culmination (repatriation) (Osman-Gani and Hyder 2008, 456). Repatriates have a significant strategic value for the company, since they have a comprehensive understanding of both headquarters’ and branch’ operations (Taeb 2004, 195). Additionally, Taeb (2004, 195) stated, that repatriates able to transfer acquired technology and information from host to home country, which extend an efficiency of support activities on the value chain analysis.

By deploying a role of knowledge transfer, Burmeister at.al (2015, 736) have found a direct relationship between the expansion of organisational knowledge and return on investment from repatriates’ assignment.  However, after completing an international assignment, expatriates may face some difficulties with adopting to the changed environment of their home country. These changes, regarding to the community, such as friends, relatives or colleges as well as organisational practices and policies of the workplace (Taeb 2004, 195) may negatively affect the process of knowledge transfer from repatriates to knowledge recipients (Burmeister et.al 2015, 751).

Hyder and Lovblad (2007, 264) emphasised, that the repatriation process in some cases is even more difficult for an employee, than initial relocation to the host country.  Moreover, Nery-Kjerfve and McLean (2012, 616), Hyder and Lovblad (2007, 265) in their studies revealed a common issue in the repatriation process, called “cultural shock” or “reverse cultural shock”.

Hurn (1999, 225) recognised reasons for the phenomenon of “reverse cultural shock” and determined them in the gap between expectations of returnees of retrieval into familiar community, friendship, business contacts and reality, where the environment is unfamiliar.  In most cases symptoms embodied in such behaviour patterns as Alienation (home country is not as pleasant as it was remembered) and Reversion (major personal changes happened due to cultural shock) (Hurn 1999, 225).

Aforementioned “Reverse cultural shock” embracing disappointments and depressions impose costs to the company, lead to high turnover rates among repatriates (Osman-Gani and Hyder 2008, 457), which have negative consequences for financial performance of the company as well as strategically (Taeb 2004, 195).

Recommendation

In order to diminish possible financial losses from higher turnover rate, increase a strategical effectiveness of knowledge transfer and generally alleviate the issues of repatriates, organisations should  consider this process as a major international HR problem and raise this issue at the top management level (Hurn 1999, 228).

First, there should be deployed a transparent and holistic support for repatriates by implementing a special policy to determine the responsibilities of key HR personnel and line managers in both home and host countries (Howe-Walsh and Torka 2017, 72). IT technologies together with social media will be supportive tools for information transfer and eliminate complaints about late returning alert, problems with finding schools, houses and taxes during returning home (Howe-Walsh and Torka 2017, 69, 72)

Secondly, an attention should be focused on repatriates’ families. Roles of children and partners must be included in international career policies and recognised as a key stakeholder with a significant impact on the outcome of international assignment (Howe-Walsh and Torka 2017, 72).

Thirdly, repatriates should be considered as a part of HR workforce planning, they must have a clear understanding of their future job opportunities within the organisation (Howe-Walsh and Torka 2017, 72).

Selection of International Management.

Employee selection is an instrument of HR practices which referred to employer procedures to make an employment decision, based on information collected about applicants. The main aim for which selection serves is identify the most qualified (suitable) individual for the job (Berry 2003, 2).

Recent researches have revealed, that global organisations pursue so-called “globally harmonized recruiting system” (Deters 2017, 50), the aim of which is a balanced combination between the reflection of HR standard practices on the company’s vision, values, strategy and local HR development, culture, education system. Deters (2017,51) indicated that selection procedures vary in different countries, and HR strategies created in the Western world will not be applicable for other countries.

In the context of this report selecting issues will be considered from the perspective of selection of international management as well as expatriates, since selection system in both cases will be analogical (Harris and Brewster 1999, 489).

Kang and Shen (2016, 28) determined that one of the most significant challenge for modern MNC’s is embodied in selecting the right candidates to the right position, which in turn gives to the company a sustainable competitive advantage. Hurn (2014, 373) classified recruitment strategy into four approaches: Ethnocentric (key positions are filled by parent company employees), Polycentric (for managing subsidiaries are hired Host country personnel), Geocentric (appoint the most suitable personnel, suitable personnel regardless of nationality) and Regiocentric (employees selected regarding the geographical region).

It should be noted, that Harvey et al. (1999, 168), pointed issues regarding appointing host country personnel to subsidiary’s key positions (Polycentric approach). This approach led to a loss of control over the subsidiary, dependency on host country managers, erasure of identification with organisational values and overall complication of HR tasks.

Moreover, Harvey et al. (1999, 168) identified a set of competencies, which global managers must possess, such as cultural sensitivity, understanding the company’s values and strategies, ability to manage heterogeneous teams. Additionally, Harris and Brewster (1999, 491) determined top five significant competencies specifically related to the international manager’s job:  international negotiation, strategy, marketing, global awareness and cultural sensitivity.

Further research on the practical side of selection process revealed some neglect regarding the interviewing of potential candidates and cultural awareness tests (Harris and Brewster 1999, 492). Thus, it could be seen that in most cases, selection procedures tend to focus more on technical qualification, rather than personality, psychology and cultural awareness. Moreover, selection interviews with candidates are usually a negotiation about terms and conditions rather than determining the most suitable candidate (Harris and Brewster 1999, 492). It was also revealed a disregard for the importance of interviewing families, which entails negative impact for success of international work.

The role of candidates’ selection for international appointments is difficult to overestimate, since the mistake and selecting a wrong person can negatively affect a company’s reputation (Hurn 2014, 374).

Recommendation

One of the suitable tools to decrease threats to the company from the wrong selected candidate for international assignment or managerial job in MNC’s subsidiary is using an external recruitment agency, or internal assessment centers. The effectiveness of this tool has been proven by such large companies as HSBC, Shell and BP, in an assessment centers of which have been developed a special tests to identify the right candidate (Emerald 2007, 35). For proper selection, the applicant is placed under pressure and perform individual or group exercises, that help to figure out a clear understanding of skills and capabilities (Hurn 2014, 374).

Identification of right candidates could take a place during interviewing fresh graduates on the basis of  a questionnaire with covers the following issues: whether or not the person is ready to spend an entire life outside home country, change a lifestyle, adopt a nomadic life style, relationship with eldering relatives, lack of permanent friends. Overall, interviewees should be aware about all advantages and disadvantages of international work, and develop the rational attitude towards the work from their graduation (Hurn 2014, 375)

Complexity of compensation

The main purpose of compensation is to attract, motivate and retain employees by providing them tangible rewards (Phillips and Fox 2003, 465), which will be subjected to analysis to identify issues related to international perspective.

One of the pitfalls facing by global organisations, refer to adaptation of global or regional policies to local requirements (Wilson and Williams 2007, 12). Thus, companies struggle with finding a rational balance in compensation policy in order to secure employees with competitive salaries in response to both global and local needs. Under these circumstances, some global organisations such as EY (EY 2014, 12) and Cadbury Schweppes (Wilson and Williams 2007, 13) have realized that a standardised approach in compensation mechanism is threatened by technical issues, refer to estimating total costs globally as well as a different tax compliance system.

The determining factor for success for global companies is aspiration to retain the most qualified expatriates, since they are most valuable for an organisation which pursue an international expansion of operation (Sims and Schraeder 2005, 99). The work’s specific of expatriates dictates a different approach of compensation, where situational factors shift from a “fair” system of flexible adjusting remuneration on an international basis (Sims and Schraeder 2005, 99). Sims and Schraeder (2005, 101-103) determined these situational factors, that need to take into consideration while adjusting compensation policy as following: host country standard of living, health care, housing and foreign taxes.

Phillip and Fox (2003, 467) in turn, pointed a strategy, where starting point is the “basic” salary in the home country, then compare it with host country salary and choose the one which is highest. Additionally, to aforementioned factors, there also considered an adjustment regarding to compensational of inconvenience or dangerous assignment (Phillip and Fox 2003, 467).

Historically, expatriates were considered as  tools for maintaining strong relationships with headquarters, or introduce new products and develop an organisation on the start-up level. However, today the philosophy has been changed to the consideration them as a peer or subordinates of host-country employees (Phillip and Fox 2003, 470). This aspect revealed another issue of compensation mechanism, particularly discrimination against host country employees, where expatriate’s salary is higher than equally talented local employees.

All of these aspects embodied in so-called “complexity of expatriate compensation” (Suutari and Tornikoski 2001, 392). Given intricacy and high cost of expatriates will find their solutions in the next section.

Recommendation

One of the possible solutions, aimed to reduce the amount of compensations, spent on the expatriates is implication of so-called “permanent transfer” (McNulty 2014, 508). This cost-effective mechanism embodied in the idea of employee’s relocation from home to host country without further return. As a result, this measure will lead to reduce not only extensive costs, but also risks of discriminatory precedents in the workplace due to unequal compensating principles. This particular tactic has been already employed by companies such as KPMG, Brookfield and ORC Worldwide (McNulty 2014, 508).

Another way to overcome the complexity related to adjusting expatriates’ compensation is to transform it to the global compensation mechanism (McNulty 2014, 511). Utilising this perspective, companies will shift their focus from so-called “expatriate status” to the international nature of the job. Due to a change in ideology in relation to the concept of expatriation, it is also possible to restore the balance of the distribution of funds spent on expatriate compensation and ordinary employees.

Conclusion

Coming full circle, then, it was determined 3 thorny issues regarding to International HRM practices. The first issue embodied in the problem of repatriation adjustment to changed home country environment. A study of this issue led to the finding of a relationship between the company’s financial performance and knowledge transfer, which could take a place only with successful adaptation and overcoming so-called “cultural shock”. For maximising chances for success, it is supposed to employ some recommendations, namely transparent support, focusing on repatriates’ families and integrating in the part of HR Planning. Secondly, there have been identified problems in the selection mechanism of expatriates, that relies on two areas for consideration: geographical and skills. Using external recruiting agency, developing special skills by providing trainings and selecting the right candidates on the graduation stage considered as a recommendation for this particular issue. Finally, several recommendations have been given in order to deal with complexity of compensation scheme as well as to decrease a high cost of expatriates’ assignment. Employing a tactic “permanent transfer’ together with switching in ideological focus of expatriation allows to reduce costs, to balance in the allocation of tangible resources and eliminate risk of discrimination on the workplace.

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