Global Human Resource Management

Human resource management (HRM)

Refers to the activities an organization carries out to use its human resources effectively Four major tasks of HRM
Staffing policy Management training and development Performance appraisal Compensation policy

International human resource management

Strategic role: HRM policies should be congruent with the firms strategy and its formal and informal structure and controls Task complicated by profound differences between countries in labor markets, culture, legal and economic systems

Staffing policy
Staffing policy
Selecting individuals with requisite skills to do a particular job Tool for developing and promoting corporate culture

Types of Staffing Policy

Ethnocentric Polycentric Geocentric

Ethnocentric policy
Key management positions filled by parent-country nationals Best suited to international businesses Advantages:
Overcomes lack of qualified managers in host nation Unified culture Helps transfer core competencies

Disadvantages:
Limit advancement opportunities for host country nationals Produces resentment in host country Can lead to cultural myopia

Polycentric policy
Host-country nationals manage subsidiaries Parent company nationals hold key headquarter positions Best suited to multi-domestic businesses Advantages:
Alleviates cultural myopia. Inexpensive to implement

Disadvantages:
Limits opportunity to gain experience of host-country nationals outside their own country. Can create gap between home-and host-country operations

Geocentric policy
Seek best people, regardless of nationality Best suited to Global and trans-national businesses Advantages:
Enables the firm to make best use of its human resources Equips executives to work in a number of cultures Helps build strong unifying culture and informal management network

Disadvantages:
National immigration policies may limit implementation Expensive to implement due to training and relocation Compensation structure can be a problem.

The expatriate problem

Expatriate: citizens of one country working in another Expatriate failure: premature return of the expatriate manager to his/her home country
Cost of failure is high

Inpatriates: expatriates who are citizens of a foreign country working in the home country of their multinational employer

Reasons for expatriate failure

Japanese Firms US multinationals Inability of spouse to adjust Inability to cope with larger overseas responsibilities Managers inability to Difficulties with the new adjust environment Other family problems Personal or emotional Managers personal or problems emotional immaturity of technical Inability to cope with larger Lack competence overseas responsibilities Inability of spouse to adjust. European multinationals Inability of spouse to adjust

Expatriate selection
Reduce expatriate failure rates by improving selection procedures An executives domestic performance does not (necessarily) equate his/her overseas performance potential Employees need to be selected not solely on technical expertise but also on cross-cultural fluency

Four attributes that predict success

Self-Orientation
Possessing high self-esteem, self-confidence and mental well-being

Others-Orientation
Ability to develop relationships with host-country nationals Willingness to communicate

Perceptual Ability
The ability to understand why people of other countries behave the way they do Being nonjudgmental and being flexible in management style

Cultural Toughness
Relationship between country of assignment and the expatriates adjustment to it

Training and management development

Training: Obtaining skills for a particular foreign posting
Cultural training : Seeks to foster an appreciation of the host-countrys culture, regular foreign postings Language training : Can improve expatriates effectiveness, aids in relating more easily to foreign culture and fosters a better firm image Practical training: Ease into day-to-day life of the host country

Training & management development continued

Development: Broader concept involving developing managers skills over his or her career with the firm
Several foreign postings over a number of years Attend management education programs at regular intervals

Management development & strategy

Development programs designed to increase the overall skill levels of managers through:
On going management education Rotation of managers through a number of jobs within the firm to give broad range of experiences

Used as a strategic tool to build a strong unifying culture and informal management network Above techniques support transnational and global strategies

Performance appraisal
Problems:
Unintentional bias Host-nation biased by cultural frame of reference Home-country biased by distance and lack of experience working abroad

Expatriate managers believe that headquarters unfairly evaluates and under appreciates them In a survey of personnel managers in U.S. multinationals, 56% stated foreign assignment either detrimental or immaterial to ones career.

Guidelines for performance appraisal

More weight should be given to onsite managers evaluation as they are able to recognize the soft variables Expatriate who worked in same location should assist home-office manager with evaluation If foreign on-site managers prepare an evaluation, home-office manager should be consulted before completion of formal the terminal evaluation

Compensation
Two issues:
Pay executives in different countries according to the standards in each country? or Equalize pay on a global basis?

Method of payment

Compensation issues
Type of Company Payment
How much home-country expatriates should be paid. Pay can and should be country-specific. May have to pay its international cadre of managers the same.

Ethnocentric

Polycentric

Geocentric/Transnational

Expatriate pay
Typically use balance sheet approach Equalizes purchasing power to maintain same standard of living across countries Provides financial incentives to offset qualitative differences between assignment locations.

Components of expatriate pay

Base Salary
Same range as a similar position in the home country

Foreign service premium

Extra pay for work outside country of origin

Allowances
Hardship, housing, cost-of-living and education allowances

Taxation
Firm pays expatriates income tax in the host country

Benefits
Level of medical and pension benefits identical overseas

International labor relations

Key Issue
Degree to which organized labor can limit the choices of an international business

Aims to foster harmony and minimize conflicts between firms and organized labor

Concerns of organized labor

Multinational can counter union bargaining power with threats to move production to another country Multinational will keep highly skilled tasks in its home country and farm out only low-skilled tasks to foreign plants
Easy to switch locations if economic conditions warrant Bargaining power of organized labor is reduced

Attempts to import employment practices and contractual agreements from multinationals home country

Strategy of organized labor

Attempts to establish international labor organizations Lobby for national legislation to restrict multinationals Attempts to achieve international regulations on multinationals through such organizations as the United Nations