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Chapter 10
International Human Resource Management
Copyright 2004 Thomson Learning All rights reserved
Learning Objectives
Know the basic functions of human resource management Define international human resource management Understand the difference between international and domestic human resource management Know the types of workers used by multinationals
Copyright 2005 South-Western/Thomson Learning All rights reserved
Learning Objectives
Know how and when to use expatriate managers Know the skills necessary for a successful expatriate assignment Understand how expatriate managers are compensated and evaluated Appreciate the issues regarding expatriate assignments of women managers
Learning Objectives
Know what to do to make the expatriate assignment easier for their female expatriates Understand e.HR systems and how they can be useful in IHRM Understand the relationship between choice of a multinational strategy and international human resource management
Human Resource Management and Functions

HRM: deals with the entire relationship of the employee with the organization Recruitment: process of identifying and attracting qualified people to apply for vacant positions Selection: process of filling vacant positions in the organization
Basic HRM Functions

Training and development: giving employees the knowledge, skills, and abilities to perform successfully Performance appraisal: system to measure and assess employees work performance
Basic HRM Functions

Compensation: organizations entire reward package, including financial rewards, benefits, and job security Labor relations: ongoing relationship between an employer and those employees represented by labor organizations
International Human Resource Management

All HRM functions, adapted to the international setting Two added complexities compared to domestic HRM Must choose a mixture of international employees Must decide the extent of adaptation to local conditions
Types of Employees in Multinational Organizations

Expatriate: employee from a different country Home country nationals: expatriate employees from the parent firms home country Third country nationals: expatriate workers who come from neither the host nor home country
Types of Employees in Multinational Organizations

Host country nationals: local workers who come from the host country where the unit is located Inpatriate: employees from foreign countries who work in the country where the parent company is located
Key Questions Regarding Local Employees

How can we identify talented local employees? How can we attract these employees to apply for jobs? Can we use our home countrys training methods with local employees? What types of appraisal methods are customary?
Key Questions Regarding Local Employees (cont.)

What types of rewards do local people value? How can we retain and develop employees with a high potential as future managers? Do any local laws affect staffing, compensation, and training decisions?
The Expatriate or the Host Country Manager

Multinationals must decide whether to use expatriates or home country nationals Need to look at some questions Given the firms strategy, what is the preference for the position?
The Expatriate or the Host Country Manager

Using expatriate managers Do parent country managers have the appropriate skills? Are they willing to take expatriate assignments? Do any laws affect the assignment of expatriate managers? Using host country managers Do they have the expertise for the position? Can we recruit them from outside the company?
Is the Expatriate Worth It?

Decisions must take into account costs of such assignments High cost High failure rate
Exhibit 10.1: Paying for the Expatriate Manager: Indices of Cost of Living Abroad
Reasons for U.S. Expatriate Failure

Individual Personality of the manager Lack of technical proficiency No motivation for assignment Family Spouse or family members fail to adapt Family members or spouse do not want to be there
Reasons for U.S. Expatriate Failure (cont.)

Cultural Manager fails to adapt Manager fails to develop relationship with key people Organizational Excessively difficult responsibilities Company fails to pick the right person Company fails to provide the technical support
Strategic Role of Expatriate Assignments

Helps managers acquire international skills Helps coordinate and control operations dispersed activities Communication of local needs/strategic information to headquarters In-depth knowledge of local markets
International Cadre: Another Choice

Separate group of expatriate managers who specialize in a career of international assignments Have permanent international assignments Move from international assignments to international assignments Recruited from any country Sent to worldwide locations to develop cross-cultural skills
Key Success Factors for Expatriate Assignments

Technical and managerial skills Personality traits Relational abilities Family situation International motivation Language ability
Exhibit 10.2: Expatriate Success Factors and Selection Methods
Priority of Success Factors

Assignment length Technical and professionals skills are key for short assignments Cultural similarity Required interaction with local people Job complexity and responsibility
Exhibit 10.3: Selecting Expatriates: Priorities for Success Factors by Assignment Characteristics
Training and Development

Cross-cultural training: increases the relational abilities of future expatriates and their spouses and families Training rigor: extent of effort by both trainees and trainers required to prepare the trainees for expatriate positions
Training and Development (cont.)

Low rigor training Short time period Lectures and videos on local cultures Briefings on company operations High rigor training Last over a month Experiential learning Extensive language training Includes interactions with host country nationals
Exhibit 10.4: Training Rigor: Techniques and Objectives
Expatriate Performance Appraisal: Challenges

Fit of international operation in multinational strategy Unreliable date Complex and volatile environments Time difference and distance separation Local cultural situation
Steps to Improve the Expatriate Performance Appraisal

1. Fit the evaluation criteria to strategy 2. Fine-tune the evaluation criteria 3. Use multiple sources of evaluation with varying periods of evaluation
Exhibit 10.6: Evaluation Sources, Criteria, and Time Periods for Expatriate Performance Appraisals
The Expatriate Manager: Compensation

The balance-sheet approach Provides a compensation package that equates purchasing power Allowances for cost of living, housing, food, recreation, personal care, clothing, education, home furnishing, transportation, and medical care
Exhibit 10.7: Balance Sheet Approach To Expatriate Compensation
Additional Allowances and Perquisites

Foreign service premiums Hardship allowance Relocation allowances Home-leave allowances
Expatriate Manager Compensation: Other Approaches

Headquarters-based compensation: paying home country wages regardless of location Host-based compensation system: adjusting wages to local lifestyles and costs of living Global pay systems: worldwide job evaluations, performance appraisal methods, and salary scales are used
Repatriation Problem
Difficulties faced coming back home Three basic cultural problemsreverse culture shocks Adapt to new work environment and culture of home Expatriates must relearn own national and organization culture Need to adapt to basic living environment
Strategies for Successful Repatriation

Provide a strategic purpose for the repatriation Establish a team to aid the expatriate Provide parent country information sources Provide training and preparation for the return Provide a home-leave policy to encourage expatriates to make regular visits to the home office Provide support for the expatriate and family on return
International Assignments for Women: Two Myths

Myth 1: Women do not wish to take international assignments. Myth 2: Women will fail in international assignments because of the foreign cultures prejudices against local women. Successful women expatriates Foreign not femaleemphasize nationality not gender
International Assignments for Women: Advantages

More visible Strong in relational skills Wider range of interaction options
International Assignments for Women: Disadvantages

Face the glass ceiling Isolation and loneliness Constant proving of themselves, working harder than male Need to balance work and family responsibilities Need to worry about accompanying spouse
More Women in the Future?

Women expatriate managers are expected to grow Acute shortage of high-quality managers Increasing number of women provide role models
What Can Companies Do To Ensure Female Expatriate Success?

Provide mentors Provide opportunities for interpersonal networks as a form of organizational support Remove sources of barriers Provide support to cope with dual-career issues
Multinationals and Electronic Human Resource Management

Electronic human resources (e.HR): automation of various aspects of the human resources system of a company
Strategic Benefits of e.HR Systems

Reduce HR and administrative system cost Boosts productivity Improve HR services to employees Employees take control of their own data Repository of the wealth of knowledge and skills of expatriates Employee tracking for career management and other HR purposes Repository of information for outside stakeholders
Proper Steps to e.HR Implementation

Develop business case to justify using e.HR or upgrade to e.HR Make the system customer-focused Be proactive Organize collected data in ways that is useful to the organization
Multinational Strategy and IHRM

IHRM orientation: companys basic tactics and philosophy for coordinating IHRM activities for managerial and technical workers
Exhibit 10.8: IHRM Orientation and IHRM Practices for Managers and Technical Workers
Multinational Strategy and IHRM

Ethnocentric IHRM: all aspects of HRM for managers and technical workers tend to follow the parent organizations home-country HRM practices
Benefits of Ethnocentric IHRM

Little need to recruit qualified host country nationals for higher management Greater control and loyalty of home country nationals Key decisions centralized
Costs of Ethnocentric IHRM

May limit career development for host country nationals Host country nationals may never identify with the home company Expatriate managers are often poorly trained for international assignments and make mistakes Expatriates may have limited career development
Regiocentric and Polycentric IHRM

Regiocentric IHRM: region-wide HRM policies are adopted Polycentric IHRM: firm treats each country-level organization separately for HRM purposes Greater responsiveness to host country differences
Benefits of Polycentric and Regiocentric HRM Policies

Reduces costs for training of expatriate managers from headquarters No investment in language training Fewer problems with adjustments to local cultures Less expensive
Costs of Polycentric and Regiocentric IHRM Policies

Coordination problems with headquarters based on cultural, language, and loyalty differences Limited career-path opportunities for host country and regional managers Limited international experience for home country managers
Global IHRM Orientations

Recruiting and selecting worldwide Assigning the best managers to international assignments regardless of nationality
Global IHRM Orientations

Benefits Bigger talent pool Develops international expertise Helps build transnational organizational cultures Costs Importing managerial and technical employees not always possible Added expense
IHRM Orientation and Multinational Strategy

Early stages of internationalizationethnocentric IHRM Multilocal strategiesethnocentric or regiocentric Regional strategyregiocentric, polycentric or global
Exhibit 10.9: IHRM Orientations and Multinational Strategies

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Chapter 10

International Human Resource Management

Copyright 2004 Thomson Learning All rights reserved

Copyright 2005 South-Western/Thomson Learning All rights reserved

Copyright 2005 South-Western/Thomson Learning All rights reserved

Copyright 2005 South-Western/Thomson Learning All rights reserved

Human Resource Management and Functions

Copyright 2005 South-Western/Thomson Learning All rights reserved

Basic HRM Functions

Copyright 2005 South-Western/Thomson Learning All rights reserved

Basic HRM Functions

Copyright 2005 South-Western/Thomson Learning All rights reserved

International Human Resource Management

Copyright 2005 South-Western/Thomson Learning All rights reserved

Types of Employees in Multinational Organizations

Copyright 2005 South-Western/Thomson Learning All rights reserved

Types of Employees in Multinational Organizations

Copyright 2005 South-Western/Thomson Learning All rights reserved

Key Questions Regarding Local Employees

Copyright 2005 South-Western/Thomson Learning All rights reserved

Key Questions Regarding Local Employees (cont.)

Copyright 2005 South-Western/Thomson Learning All rights reserved

The Expatriate or the Host Country Manager

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The Expatriate or the Host Country Manager

Is the Expatriate Worth It?

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Copyright 2005 South-Western/Thomson Learning All rights reserved

Reasons for U.S. Expatriate Failure

Reasons for U.S. Expatriate Failure (cont.)

Strategic Role of Expatriate Assignments

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International Cadre: Another Choice

Key Success Factors for Expatriate Assignments

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Exhibit 10.2: Expatriate Success Factors and Selection Methods

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Priority of Success Factors

Copyright 2005 South-Western/Thomson Learning All rights reserved

Copyright 2005 South-Western/Thomson Learning All rights reserved

Training and Development

Copyright 2005 South-Western/Thomson Learning All rights reserved

Training and Development (cont.)

Exhibit 10.4: Training Rigor: Techniques and Objectives

Copyright 2005 South-Western/Thomson Learning All rights reserved

Expatriate Performance Appraisal: Challenges

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Steps to Improve the Expatriate Performance Appraisal

Copyright 2005 South-Western/Thomson Learning All rights reserved

Copyright 2005 South-Western/Thomson Learning All rights reserved

The Expatriate Manager: Compensation

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Exhibit 10.7: Balance Sheet Approach To Expatriate Compensation

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Additional Allowances and Perquisites

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Expatriate Manager Compensation: Other Approaches

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Strategies for Successful Repatriation

International Assignments for Women: Two Myths

International Assignments for Women: Advantages

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International Assignments for Women: Disadvantages