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EXCEL BOOKS

Chapter

30
INTERNATIONAL HUMAN RESOURCE MANAGEMENT

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ANNOTATED OUTLINE
INTRODUCTION
In recent times, the trade barriers between nations have almost disappeared. Communication links have become faster and cheaper. There is convergence of consumer tastes also. The scarce resources of the nations have been moving around freely. In this scenario, companies have realised the importance of expanding their reach throughout the globe, integrating their production, finance, marketing and research activities in a careful way. In a way, this would mean sending and more and more employees overseas on temporary assignments. When sent abroad on such assignments, expatriates face unique problems

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The world is full of stateless corporations

Nestl (Switzerland): Nestl personifies the stateless corporation with 98 per cent of sales and 96 per cent of employees outside the home country. Nestls previous Global CEO was German born H. Maucher, and half of the company's general managers are non-Swiss. Maucher put strong emphasis on hiring local managers who are native to the region and know the local culture. The combination of strong brands and autonomous regional managers has made Nestl the largest branded food company in Mexico, Chile, Brazil, Thailand, Vietnam & China. The present CEO, Austrian Peter Brabeck - Letmathe, has held important positions all over the world and is leading a totally globalised review and revamp of Nestl's worldwide operations. Cola Cola: Is a multinational corporation that obtains over 80 per cent of its operating income from outside the United States. It operates in 185 markets, has more than 6,50,000 employees, and serves more than 5 billion customers. One of the company's core values is to 'think globally, but act locally.'

Other Companies: For example, Colgate-Palmolive Company sells Colgate toothpaste in more than 50 countries. McDonald's sells its burgers in 73 countries. Gilette, Johnson & Johnson earn well over 50 per cent of their profits overseas. Asea Brown Boveri (ABB) has operations throughout the world, having sought or taken minority positions in over 60 firms.
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Complexities in global operations

International operations have: More functions

More heterogeneous functions

More involvement in the employee's personal life Different approaches to management, since the population of expatriates and locals varies

More complex governments

external

influences,

such

as

from

societies

and

More cultural differences (with completely different languages, foods, values, beliefs and ways of doing things).

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International Human Resource Management

In the new millennium, of course, the traditionally conceived and practiced leadership skills do not seem to produce results. The leadership skills that are required for the newly emerging global economy seem to be somewhat different.

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Competencies needed by a transnational managers

Transnational Skills Global perspective Transnationally competent managers Understand worldwide business environment from a global perspective Learn about many cultures Transition and adaptation Cro ss -cultural interaction Collaboration Foreign experience Work with and learn from people from many cultures simultaneously Create a culturally synergistic organisational environment Traditional international managers Focus on a single foreign country and on managing relationships between headquarters and that country Become an expert in one culture Work with and coach people in each foreign culture separately or sequentially Integrate foreigners into headquarters national organisational culture

Local responsiveness Synergistic learning

Adapt to living in many foreign cultures Use cross -cultural interaction skills on a daily basis throughout ones career Interact with foreign colleagues as equals Transportation for career and organisation development

Adapt to living in a foreign culture Use cross cultural interaction skills primarily on foreign assignments Interact within clearly defined hierarchies of structural and cultural dominance Expatriation or impartation primarily to get the job done.

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International Human Resource Management

It is the process of procuring, allocating and effectively utilising human resources in a multinational corporation. Generally speaking, there are three sources of employees for an international assignment: parent country nationals, host country nationals and third country nationals. When compared to domestic HRM, the scope of IHRM is very wide as it has to take care of a number of constituencies

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Model of International HRM

HR ACTIVITIES

u ro c

re

te ca o All

e tilis U t

Host Country Nationals (CNs) Parent Country Nationals (PCNs) Third Country Nationals (TCNs)

e om H

he Ot

s Ho

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Cultural Differences And HRM

Expatriate managers, generally, face a kind of culture shock when they begin their operations in a different cultural setting. The list of barriers that confront them seem to be unending

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Puzzles confronting the expatriate manager

The following questions must be looked into carefully before sending managers on a foreign assignment: What is the host country's business culture like? What is the management style? Do I have the skills I will need to handle relationships with my employees? Will this assignment be good for my long-term career growth? Can I expect to be promoted when I return? How will I be treated if I do not succeed in my overseas job? What is the country like? What are the customs? Will I be able to adjust to the culture? Will my family be able to adjust to the new situation? Will my spouse be able to find suitable employment? Will my children be able to adjust to going to school in another country? How good is the educational system there? How will we learn enough of the new language to communicate effectively? Where will we live? How will the new housing arrangements compare to our current home? What will happen to our current home when we leave for the new assignment? What are the tax and other financial issues I will have to address as an expatriate? Who will advise me on these topics? Will the Company pay me in a way that protects my income from high foreign tax rates? How will our medical needs be taken care of?
L. Grant, "That overseas job could derail your career," Fortune, 14.4.97; S. Taylor R.N. Nappier, "Working in Japan", Sloan Management Review, Spring 1996)

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Cultural Differences And HRM

Sense of self and space Language Dress and appearance

Food, eating habits and perceptual problems

Time and time consciousness Relationships Values and norms

Beliefs and attitudes

Mental processes and learning Work habits and practices

Understanding the problems brought by the above complicating factors is very important for an expatriate manager, because a small mistake could lead to grave personal insult and jeopardise important business dealings. Fortunately cultural sensitivity can be learned through various techniques.
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Cross cultural training techniques for expatriate managers

(a) Documentary programmes: Trainees read about a foreign country's history, culture, institutions, geography, and economics. Videotaped presentations are often used.

(b)

Culture assimilation: Cultural familiarity is achieved through exposure to a series of simulated intercultural incidents, or typical problem situations. This technique has been used to quickly train those who are given short notice of a foreign assignment.
Language instruction: Conversational language skills are taught through a variety of methods. In most multinational companies, executives learn various languages in a routine way, so that they can be useful to the company in case of short-term foreign assignments. Sensitivity training: Experiential exercises teach awareness of the impact of one's actions on others. Field experience: Firsthand exposure to ethnic subcultures in ones own country or to foreign cultures heightens awareness. Business basics: This covers negotiating cross-culturally, working with various types of clients, making presentations etc.
(S. Oden Wald, "A Guide for Global Training", Training and Development, July 93.)

(c)

(d) (e) (f)

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Economic Factors And HR Practices

Differences in economic systems among countries also translate into inter country differences in HR practices. In free enterprise systems, companies focus on cost cutting, enhancing shareholder value, productivity etc. in socialist systems, the focus shifts to prevention of unemployment, even at the expense of efficiency. In labour surplus and capital hungry economies like India, upholding labour laws, respecting political ideologies, and offering jobs to economically poor and underprivileged sections may occupy the centre stage. These inter-country differences in cultures, economic systems, labour policies, thus, complicate the task of selecting, training and managing employees abroad.

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Economic Factors And HR Practices

International Recruitment While hiring executives, global companies are guided by three things; ethnocentrism, polycentrism and geocentrism a. b. Ethnocentrism: it is a cultural attitude marked by the tendency to regard one's own culture as superior to others Polycentrism: In the polycentric corporation there is a conscious belief that only host country managers can ever really understand the culture and behaviour of the host country market, therefore, the foreign subsidiary should be managed by local people. Geocentrism: it assumes that management candidates must be searched on a global basis, without favouring anyone.

c.

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Reasons for expatriate failures

Transfer anxieties: Foreign assignments might have been pushed ahead without adequate preparation and advance planning. The expat might, as result, find the task insurmountable, feel the pressure unbearable and return empty-handed.

Career problems: A foreign posting creates, for the expatriate a number of career problems (i) being 'out of sight, out of mind' and being bypassed for promotions (ii) the danger of coming home a stranger with few familiar faces to greet his/her arrival (iii) the likelihood of being tempted by the foreign life style and losing the desire to return.

Personal problems: As Negandhi reported, expatriates may encounter serious adjust problems such as: personal discomfort and uncomfortable living conditions, homesickness; education, medical, health problems of family members; social aloofness, cultural mismatch.
Other concerns: These include: (i) the foreign posting might be looked at as a short term obligation (ii) the expats performance might be evaluated against a short-term criteria, (iii) the expat may begin to feel the pinch due to lack of continuity in plans empowering him to conduct the show for a reasonable period (iv) business environment of the host country might be too restrictive, unfriendly and even unbearable.

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Economic Factors And HR Practices

International selection While selecting executives for international postings, the following things could be kept in mind i. ii. General and technical criteria Language skills

iii. Cross cultural suitability iv. Motivation for foreign assignment v. Family situation

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Expatriate managers : success and failure

The first key to finding a successful expatriate is a selection process that accurately determines who is culturally flexible and adaptable, has a supportive family situation, and is motivated to accept the overseas assignment. Characteristics of the expatriate manager Strong technical skills Good language skills Strong desire to work overseas Specific knowledge of overseas culture Well-adjusted family situation Complete support of spouse Behavioural flexibility Adaptability and open-mindedness Good relational ability Good stress management skills High probability for success Low probability for success Uncertain technical competency Weak language skills Unsure about going overseas Family problems Low spouse support Behavioural rigidity Unadaptability - closed to new ideas Poor relational ability Weak stress management skills

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Economic Factors And HR Practices

In selecting the individual who gets an overseas assignment, organisations must not only consider their ability to do the job but, in addition, must consider their ability to work in a new culture and emotionally handle the stress associated with a new set of cultural concerns International training and development Careful selection is only one side of the coin. To ensure success, expatriates require proper orientation, cross cultural training, career counselling etc. i. Orientation 1. cultural briefing 2. assignment briefing 3. shipping requirements ii. cross cultural training iii. career development and counselling
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Economic Factors And HR Practices

International compensation Compensation practices for international employees are much more complex than tose for domestic employees because many more factors must be considered i. ii. Income that the expatriate was getting at HRM Additional incentives to be paid on global assignment

iii. The income of local employees reporting to the expatriate

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Economic Factors And HR Practices

International labour relations

Labour management relations in international companies depend on the peculiar customs, traditions, laws and practices followed in respective countries. Global companies must pay adequate attention to the health, safety and security of their employees also. 1. The role of unions 2. Collective bargaining 3. Labour participation 4. Employee health 5. Employee safety

Repatriation 1. logistics 2. readjustment and integration into the community for the employee and his or her family
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