Firms progress through five stages as they internationalize their operations: (1) domestic operations, (2) export operations, (3) subsidiaries or joint ventures, (4) multinational operations, and (5) transnational operations. The higher the stage, the more HR practices need to be adapted to diverse cultural, economic, political, and legal environments.

In managing its overseas subsidiaries, a firm can choose an ethnocentric, polycentric, or geocentric approach. Firms tend to rely on expatriates more when sufficient local talent is unavailable, the firm is trying to create a corporatewide global vision, international and domestic units are highly interdependent, the political situation is unstable, and there are significant cultural differences between the host country and the home country.

An important part of international HRM is managing expatriate employees, both during their international assignments and when they return home. International assignments fail because of career blockage, culture shock, lack of predeparture cross-cultural training, an overemphasis on technical qualifications, the use of such assignments to get rid of troublesome employees, and family problems. Upon returning, expatriates may meet with a lack of respect for their acquired skills, a loss of status, poorly planned jobs, and reverse culture shock.

In selecting people for international assignments, employers should emphasize cultural sensitivity, establish a selection board of expatriates, require previous international experience when possible, explore the possibility of hiring the foreign-born who can later serve as “expatriates,” and screen candidates’ spouses and families. Cross-cultural training programs of various lengths and levels of rigor can be implemented to prepare employees for their assignments. In terms of career development for expatriates, companies should position international assignments as a step toward advancement within the firm and provide support for expatriates. To avoid problems in the compensation area, companies should provide expatriates with enough disposable income and incentive bonuses and avoid having expatriates fill the same or lower-ranking jobs that locals hold in the international operation.

Managers should not simply transfer abroad HRM practices based on the home country’s social and cultural standards. Rather, they should mold these practices to the cultural environments in which the international facilities are located. In general, the more an HRM practice contradicts prevailing societal norms, the more likely it will fail.

Many firms have the potential to export profitably. A company is more likely to fare better in its export attempts when it clearly reinforces international activities by (1) explicitly considering international experience in hiring decisions, (2) providing developmental activities to equip employees with international skills, (3) creating career ladders for internationally experienced employees, and (4) designing a reward structure that motivates employees to begin export activities.