Detya Putri Lestari / 008200900019

Fiona Melita F M / 008200900027

Gina Eka Jati / 008200900094
Marlon Novie Akay / 008200900047
Ruth Merlin / 008200900072

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HR AND THE INTERNATIONALIZATION OF BUSINESS

I. The Global Challenges

Most companies do business abroad needs to install all management system that will
be required to manage the overseas activities. The companies must question themselves,
“Should we staff the local offices abroad with natives?” “How should we appraise and pay
our local employees? How should we deal with the unions in our offices abroad?” and,
“How will cultural differences abroad impact the sorts of employee selection appraisal,
and compensation polices we use?” They need to answer all of those questions.
Different countries have different problems and polices regarding employment that
have to be highlighted by the company to choose the right plan for staffing. The
international human resource manager explained that the key of global pressure affecting
human resource management are deployment where the company can easily finding the
person with the right skills regardless of geographic location, knowledge and innovation
dissemination that can be spread through the organization regardless the origin and
identifying and developing talent on a global basis.

II. How Inter-country Differences Affect HRM

1. The cultural factor
Countries differ widely in their cultures. The culture create its citizen the basic of value
which adhere to and in the ways those value manifest themselves in nation’s art,
social programs, politics, and ways of doing things. In any cases cultural differences do
influence human resource policies and practices. Mexican workers expect the
managers to keep their distance rather than to be close and to be formal rather than
informal. In Germany, everyone is never allowed to arrive even a few minutes late and
should always address senior people formally with their title.
2. Economic system
Economic system affects the human resource management police, it means that
human resource police in each country will be different, depends on the economic
system used. Some countries are more wedded to the ideas of free enterprise than

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 other. For instance, France which has capitalist society imposed tight restrictions on
employers’ rights to discharge workers and limited the number of hours an employee
could legally work each week. Differences in labor costs are also substantial.
3. Legal and Industrial Relations Factors
The relationship among the worker, the union and the employer factors also vary from
country to country. The U.S practice of employment at will does not exist in Europe,
where firing or laying off workers is usually expensive. Codetermination is the rule in
Germany and several countries. It says that employees have legal rights to a voice in
setting company polices. Workers select their own representative to the supervisory
board of the employer and there is a vice president for labor at the top management
level.
4. HR Abroad: Europe, China
Companies doing business in Europe must adjust their human resource policies and
practices to European Union (EU) directives and laws. The interplay of directives and
country laws means that human resource practices must vary from country to country.
For example:
- Minimum EU Wages. Most EU countries have minimum wages system in place.
Some set national limits. Others allow employers and unions to work out their own
minimum wages.
- Working Hours. The EU sets the workweek at 48 hours, but most countries set it at
40 hours a week, and some, like France, implemented a 35 hours’ work-week.
- Employee representation. Europe has many levels of employee representation. In
France, for instance employers with 50 or more employers must consult with their
employees’ representatives on matters including working conditions, training and
profit-sharing plans and layoff.
- Termination of Employment. There are a wide range of required notice periods
when dismissing employees in Europe. They range from none in Spain to two
months in Italy.

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 In China, all firms must deal with national issues including relatively scarce
employment services and an increasingly active union movement. However, how they
deal with these issues depends to a large extent on the ownership of the firm. There
are wide variations in HR management practices among companies in China, and
between Chinese and Western firms.
- Recruiting. Because of governmental migration and other constraint, it is difficult
to recruit, hire, and retain good employees. In China, Employees are highly career
oriented, and gravitate toward employers that can provide the best career
advancement training and opportunities. The employer must verify that the
applicant is free to sign a new employment agreement.
- Selection. The dominant employee selection method involves analyzing the
applicant’s resume and then interviewing him.
- Appraising. The challenge comes from Chinese emphasis on harmony, face, and
non confrontation. The appraisal therefore needs to follow the formalities of
saving face and avoiding confrontational, tension-producing situation.
- Compensation. Although many managers endorse performance-based pay in China
many employers, to preserve group harmony, make incentive pay a small part of
the pay package. And, as in order parts of Asia, team incentives are advisable.
GLOBAL DIFFERENCES AND SIMILARITIES IN HUMAN RESOURCE PRACTICES

I. Personnel Selection Procedures

1. In United States, Australia, and Latin America, “personal interview”, “person’s ability
to perform technical requirements of the job”, and “proven work experiences in a
similar job” are the top of the criteria for selecting employees.
2. In People’s Republic of China, Indonesia, and Korea, “employee tests” were one of the
three top criteria for selecting employees.
3. In Japan and Taiwan, “the person ability to get along well with others already work
here” was one of the three personnel selection criteria.

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II. The Purpose of the Performance
There tends to be more variation in how different countries use performance appraisal.
1. Taiwan, United States, and Canada  “to determine pay”
2. United States, Australia, and Taiwan  “ to document the employees’ performances”
3. Japan and Mexico  “to recognize subordinate”

III. Training and Development Practices

When it comes to the purposes of training, there are usually more similarities than
differences across countries. Employers just about everywhere rank “to improve technical
abilities” as the main reason for providing employees with training.

HOW TO IMPLEMENT A GLOBAL HUMAN RESOURCES SYSTEM

I. Making the Global Human Resources System More Acceptable

There are three best practices for employees so that the global human resources
system will be acceptable to their local managers around the world, which are:
1. Remember that global systems are more acceptable in truly global organization.
The company, all managers, and all staffs should think of themselves as global both in
scope and perspective. Also all or most function and activities in the company operate
on a truly global basis. Truly global organizations require the managers to work global
teams and recruit and place the employees they hire globally.
2. Investigate pressures to differentiate and determine their legitimacy.
Human resource managers seeking to standardize selection, training, appraisal,
compensation, or other employee practices worldwide will meet resistance from local
manager who forbid them to do something because it is not culturally. After
investigating, be knowledgeable about local legal issue, and willing to differentiate if
necessary, and then test the new system (it can be mix between local culture and
global culture).
3. Try to work within the context of a strong corporate culture.

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 Strong corporate culture Company is easier to implement standardizes practices
worldwide. New recruits learn to value thoroughness, consistency, self-discipline, and
methodical approach from the managers. If all managers worldwide tend to share
these values, they are in a sense more similar to each other than there are
geographically differences. Having such global harmony makes it easier to develop and
implement standardizes human resource practices worldwide.

II. Developing a More Effective Global Human Resources System

Those best practices above are related in developing effective worldwide human
resources management system.
1. Form global human resources networks.
For example, form global teams to help develop the new human resources system.
The most critical factor in develop the new human resources system is “creating an
infrastructure of partners around the world for organization of local activities and to
help better understand their own system and own challenges.”
2. More important to standardize ends and competencies than specific methods.
It is better to standardize the recruitment and selection system worldwide rather than
details in who will be the interviewer or prescreen is by phone or in person, it is
depend by country.

III. Implementing the Global Human Resources System

After the employees do the best practices in developing effective global human
resources management, finally it can help ensure a more effective implementation of the
global human resources system.
1. Remember, “You can’t communicate enough.”
2. Dedicate adequate resources for the global human resources effort. For example, do
not expect the local HR office to suddenly start implementing new job analysis
procedures, except the head office provide adequate resources for it.

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STAFFING THE GLOBAL ORGANIZATION

I. International Staffing: Home or Local?

Locals are citizens of the countries where they are working and expatriates are
noncitizens of the countries where they are working.
1. Using Local
There are several reason employers rely more on local managers to fill their foreign
subsidiary’s management ranks, there are:
- Cost of using expatriates is usually far greater than the cost of using local workers.
- Local people may view the multinational as a better citizen if it uses local
management.
- Knowing the expats are posted to the foreign subsidiary for only a few years, may
overemphasize short-term result rather than more necessary long-term tasks.
2. Using Expatriates
There are also several reasons for using expats for staffing subsidiary, which are:
- The main reason is technical competence, because hard to find technical
qualification in the local candidates.
- Multinationals view a successful stint abroad as a required step in developing top
managers.
- Control is another important reason to use expatriates. Assume that home-country
managers are already steeped in the firm’s policies and culture, thus more likely to
apply headquarters’ ways of doing things.
3. Actually, the choice is not only between local and expats employees; there are other
solutions.
- Use internet based video technologies and group decision-making software to
enable global virtual teams to do business without either travel or relocation.
- Localization policy is a policy of transferring a home-country national employee to
a foreign subsidiary as a “permanent transferee”.

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II. Off-shoring
Off-shoring means having local employees abroad do jobs that the firm’s domestic
employees previously did in-house. Employers must offshore jobs to remain globally
competitive, and to save the money that should be used to do research and development,
and also create more domestic jobs for qualified workers.
Off-shoring is a matter that human resources managers will have to deal with.
Employers seeking to gain a cost advantage by off-shoring, for example, a call center, look
to human resource managers to help identify high-quality, low-cost talent abroad and to
provide the necessary information on things like foreign wage rates, working conditions,
and productivity. Human resources manager needs to:
- make sure that there is an effective supervisory and management structure in place to
manage these workers,
- make sure that all the employees receive the screening and training that they require,
- know about the navigation of local laws and for advice regarding cultural hiring
practices, and
- Ensure that the compensation policies and working conditions are satisfactory.

III. Management Values and International Staffing Policy

Expert often classify top executives’ values as ethnocentric, polycentric, or geocentric.
1. Ethnocentric is the notion that home-country attitudes, management style,
knowledge, evaluation criteria, and managers are superior to anything the host
country might have to offer.
2. Polycentric is the belief that only host-country managers can ever really understand
the culture and behavior of the host-country market; therefore, the foreign subsidiary
should be managed by local people.
3. Geocentric is the staffing policy that seeks the best people for key jobs throughout the
organization, regardless of nationality.

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IV. Why Expatriate Assignments Fail
Most employers are taking steps to reduce expats’ problems abroad. They are
selecting expats more carefully, helping spouses to get jobs abroad, and providing more
ongoing support to the expat and his or her family.
Some companies have formal “global buddy” programs. Here local managers assist
new expatriates with advice on things such as office politics, norms of behavior, and
where to receive emergency medical assistance.
1. Traits of Successful Expats
Personality, person’s intentions, and non-work factor like family pressure are the
important factors why expatriate usually assignments fail. Employers tend to select
expatriates based on technical competence rather than interpersonal skills or
domestic situation. Expatriate assignments rarely fail because the person cannot
accommodate to the technical demands of the job. The expatriate selections are made
by line managers based on technical competence. They fail because of family and
personal issues and lack of cultural skills that haven’t been part of the process.
2. Family Pressures
One study identified three things that helped make it easier for the spouse to adjust:
- Language fluency for the spouse
- Having preschool-age children
- Be a strong bond of closeness and mutual sharing between spouse and expat
partner.
3. What Employers Can Do
The other useful steps that employers can take are providing realistic previews of
what to expect, careful screening, improved orientation, improved benefits packages,
treats employees fairly with respect, providing an appeal processes, shorten the
length of the assignment, and person-job match is also important, insofar as
expatriates who are more satisfied with their jobs are more likely to adapt to the
foreign assignment.

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V. Selecting Expatriate Managers
The processes firms use to select managers for their domestic and foreign positions
obviously have many similarities. Testing, interviewing, and background checks are as
applicable for selecting expatriates as for domestic assignments. Selecting managers for
assignments abroad therefore means testing them for traits that predict success in
adapting to new environments. It’s not how different culturally the host country is from
the person’s home country, it’s the person’s ability to adapt that’s more important.
Adaptability Screening is a process that aims to assess the assignees (and spouses)
probable success in handling a foreign transfer and to alert them to issues (such as the
impact on children) the move may involve.

TRAINING AND MAINTAINING EXPATRIATE EMPLOYEES

I. Orienting and Training Employees on International Assignment

1. Required training
Level 1 . Training focuses on the impact of the cultural difference that related to business
outcome
Level 2. Trainig aims at getting participants to understand how attitudes are
formed and how they influence behavior (e.g. how unfavorable attitude
influences a new manager treats his new foreign subordinate
Level 3. Training provides factual knowledge about the target country
Level 4. Training provides skill building such as language, adjustment and adaptation skills
The employers also need traditional skill-oriented training and development to hone
the employee’s skill. Other type of human resource development are rotating
assignments, have management development center around the world, have classroom
programs (provide educational opportunities such as acquired MBAs), and periodic
seminar.
The purpose of rotating assignment are to help managers maintain relationship with
colleagues over the world and to make cross-border decisions, the purpose of periodic

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 seminar is to help improve control by building a unifying set of values, standards, and
corporate culture.
2. Trends in Expatriate Training
1. Providing continuing, in-country cross-cultural training during the early stages of an
overseas assignment
2. Employers are using returning managers as resources to cultivate the “global mind-
sets” of their home-office staff.

II. Compensating Expatriates

The company need to allocate different wage range according to cost-of-living
differences. Sometimes same wages paid to the employee to reduce the risk of perceived
inequities, actually that is not good because if the cost-of-living is not considered the
employee may not able to do high cost assignment. Other problem of paying wages to
employees is to ask the employee to move on somewhere abroad with the same position
but lower wages rate and one of the greatest difficulties in managing multinational
compensation is establishing consistent compensation measures between countries.
Some multinational companies conduct their own local annual compensation surveys
that covers all forms of compensation including cash and short- and long-term incentives.
This data can be used for things like annual salary increases and proposed changes in
benefit.
1. The balance sheet approach
It is the most common approach to formulating expatriate pay by equalizing
purchasing power across countries, a technique known as the balance sheet approach.
It focuses on four groups of expenses that are income taxes, housing, goods and
services, and discretionary expenses ( child support, car payment, and the like). The
employers estimate how much the expense that the expatriate may spend in the
home country and try to give the allowance needed to cover the same expenses in
the host country.

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 2. Incentive
While the situation is changing, employers still tend to use performance-based
incentives less abroad but it face several problem like public relation aspects to more
emphasizing performance-based payment though sometimes the local performance
only have a little or no impact on how the company as a whole performs.
- Foreign service premiums : financial payments over and above regular base pay. Range
from 10% to 30% of base pay and appear as weekly or monthly salary supplements.
- Hardship allowances : compensate expatriates for exceptionally hard living and working
conditions at certain foreign location, sometimes it paid incrementally ( with each
paycheck) and this is not a permanent raise.
- Mobility premiums : lump-sum payments to reward employees for moving from one
assignment to another.
This is an outline of how to set up a global pay system:
Phase I : Global philosophy framework.
The employer do :
a. defines its global reward philosophy of how can the reward help to achieve
strategic goal
b. review existing reward programs around the world
c. asseses the difference between the between the existing program and reward
philosophy
d. creates a compensation plan for each location
Phase II : Job structure framework. Systematize job description and performance
expectation
Phase III : Rewards framework.
To formulate specific pay policies that are globally consistent and locally
competitive
Phase IV : Talent management framework . concern about promotional opportunities and
career progress of the employee

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 Phase V : Ongoing program assesment. The employers reevaluate its global pay policies
periodically.

III. Appraising Expatriate Managers

There are some things that complicate the way to assess or appraise an expatriate’s
performance. One thing, the question is who will appraise the expatriate. However, the
cultural differences might distort the assessments. For instance, if the US expatriate
manager in India is culturally inappropriate in term of participation of decision making,
the host-country might evaluate somewhat negatively of his performance. On the other
hand, the home-office managers cannot provide valid appraisals, because they’re not fully
aware of the situation that faced by the expatriate. Similarly, the procedure of making
measurement to expatriate is by looking some criteria such as profit and market share.
There are some suggestions for improving the expatriate appraisal; The Employment Law
Feature presents related issues.
1. Stipulate the assignment’s difficulty level, and adapt the performance criteria to the
situation
2. Weigh the evaluation more toward the on-site manager’s appraisal than toward the
home-site manager’s.
3. If the home-office manager does the actual written appraisal, have him or her use a
former expatriate from the same overseas location for advice.

IV. International Labor Relations

The company who intentionally open subsidiaries abroad will find substantial
differences in labor relations practices among countries and regions. In general, the
characterizations of labor relations are centralization, employer organization, union
recognition and content and scope of bargaining. These kinds of characteristics are based
on the general European Labor relations.

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V. Terrorism, Safety and Global HR
The recent condition that can be seen is the increasing threat of terrorism which
affecting human resources activities both domestically and multi-domestic. Then, for
instance, the new federal antiterrorism laws and procedures are affecting the ability of
the employers to recruit import or export workers. However, the company might also face
more resistances from prospective expatriates, since they are more reluctant to accept
foreign postings and take their families abroad and those that do are demanding more
compensation. Then, the company have had to institute more comprehensive safety plans
including, for instance the evacuation plans to get employee safety. Therefore, there are
several steps to better protect the expat employees, for example, taking protective
measure, kidnapping and Ransom Insurance. Besides, there is one of the most
confounding and worrisome facts about sending employees abroad, which is 40% to 60%
of them will probably quit within the three years and of returning home. The formal
repatriation programs can be quite useful when the employer makes an investment in
training and sending the high-potential people abroad. However, the guiding principle for
the repatriation program is making sure that the expatriate and his or her family doesn’t
feel that the company has left them adrift.

VI. Improving Productivity through HRIS

At the time of company grows, relying on manual HR systems to manage activities like
worldwide safety, benefits administration, payroll and succession planning becomes
unwieldy. Therefore, more firms are integrating and automating their HR system into
Human Resources Information System (HRIS). Then, for global firms, it makes particular
sense to expand the firm’s human resource information system to include the firm’s
operation abroad. The database of the system in global firms includes the selecting
employees for assignments abroad and keeping track of each unit’s compensation plans,
benefit and personnel practices and policies.

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 KOPHI
(KOMUNITAS PEMUDA HIJAU INDONESIA)

Interviewee:

Saskia Raishaputri
The Human Resource Manager of Koalisi Pemuda Hijau

General Information:

Koalisi Pemuda Hijau (KOPHI) is a Non Governmental Organization that fights for climate
change in Indonesia. This organization is a national organization which will cover Indonesian youth from
Sabang to Merauke. It is based in London School Public Relation and has representatives in several
universities in some cities. To make them easier gather all Indonesian youth, KOPHI divided Indonesia
into some regional which will be announced in the Congress in October 2011. KOPHI also has created
four kinds of membership:

1. Head Quarter Committee: 2. Regional Committee

Requirement: Requirement:
 Indonesian;  Indonesian;
 Physically healthy;  Physically healthy;
 18 – 30 years old;  18 – 30 years old;
 Academician (when applied).  Academician.

3. Volunteer 4. Supporter
Requirement: Requirement:
 Indonesian;  Indonesian;
 Physically healthy;  Physically healthy.
 18 – 30 years old.

Even though KOPHI is an Indonesian Organization; some of the Board of KOPHI Advisors is
foreigners. The advisors including the foreigner advisors are actively participated in every big event that
KOPHI was held.

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Problem:

KOPHI created a mail list which is exclusive only for approval member. All the Head Quarter
Committee, regional committee and the advisors are automatically registered in the mail list. By this
mail list, they communicate, share information and report the daily progress of their job. Furthermore,
now, this mail list is flooded with the current updated information regarding the Pre-Congress I, Pre-
Congress II and Congress. It is the biggest event that KOPHI will hold this year. While all committee are
busy preparing these events, the foreign advisors criticized the committee. They thought that the
committee has not done anything for the earth since they officially launched this organization on last
October 30, 2010. They believe that the committee is just talking something that is not the priority at
this time in the mail list. They forced the committee to do something soon before they held the
congress. For instance, they ask the committee to educate the young people; held a school visit to train
them. However, these congresses are big events. The committee is willing to invite well known speakers;
invite representatives from each province in Indonesia; and held the congress in 3 different cities. It is
taking full attention from the committee so they cannot do what the board of advisors has suggested.
Moreover, since the committee still focuses on the congress, the foreign advisors are seemed attempt to
ignore any updated report from this project.

Solution

 From Human Resource Division

The HR manager suspects that language and the culture is the problem in their relationship. The
foreign advisors live more “greenly” than the members and so do their young generation in their
country. Because of that they think that educating the children is the priority. In contrast, HR
manager really knows that the unity of the youth in Indonesia is have to be strengthen first then
educating children by visiting school could be our first project that will be stated all at once in every
single province in Indonesia. Unfortunately, HR manager could not explain it clearly and this case
already arose. They started ignore our weekly report. Since all the members are Indonesian, they
always report and communicate in Indonesian, it probably makes the foreign advisors do not
interested in reading the postings in the mail list. They probably should use English in order to catch

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 their attention so they could give advice that could improve the performance, especially regarding
with the congress. But, HR manager realized that not all the member mastering English and it could
create new problem in the team. So, they agree that the postings are still written in Indonesian, but
every minutes of meeting always written in English.

Suggestion

In addition, KOPHI also have to consider about the suggestion that the foreign advisor have
mentions. Even though the KOPHI member are busy with the congress thing, they could build a
small team that can handle the “education for young generation” to school visits. By making their
suggestions (the foreign advisors’) come true; they can maintain the good relationship between
foreign advisors and the committee. Moreover, this activity has big mission to create a new “green”
generation and can be announced in the congress that KOPHI has been doing something
immediately after launch; it will give bonus point for KOPHI as a “green” organization.

Conclusion

In conclusion, difference cultural factor will give differences in values, attitudes, and
therefore behaviors and reactions of people from country to country. Like in KOPHI’s
problem, the expatriates have different idea regarding the organization’s agenda, in which
the expatriates believes that action is the priority of organization that they have to do,
whereas the Indonesian more prefer to gather the strong ideas first before action. In
addition, most of expats do not like to spend more time in meeting, but Indonesian is vice-
versa. Those differences create the relationship problem in KOPHI. In managing global
human resources there is also problem communication, especially in language. Sometimes
Indonesian is hard to express their idea clearly to expats, and also when expats explain
about their idea, hard for Indonesian to understand. Therefore in this case, HR manager of
KOPHI create policies that minutes of meeting should be written in English.

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