Global Human Resource Management:

What Is Human Resource Management?

 Human resource management (HRM) - the activities an organization carries out to utilize its
human resources effectively

 more complex in an international business

 These activities include determining human resource strategy, staffing, performance

evaluation, management development, compensation, labor relations

 expatriate managers

 Firms need to ensure there is a fit between their human resources practices and strategy

International HRM Differences:

 Greater Number of Services

 Special Services to Unique Group

 Compensation Complexity

 Foreign Exchange Rate Attention

 Language and Cultural Differences

What Is The Strategic Role Of HRM In International Firms?

The Role of Human Resources in Shaping Organizational Architecture

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Summarize the strategic role of human resource management in the international business.

The strategic approach to HRM—strategic human resources management (SHRM) —means going
beyond administrative tasks such as payroll processing. Instead, as shown in the opening case on
Enterprise, managers need to think more broadly and deeply about how employees will contribute
to the company's success.

Increasing Importance of Global Human Resources Understanding:

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Composition of the Cultural Environment of International Business:

Key Issues in Global HRM

1. Worldwide Human Resources Planning

 Recruiting and Selection

 Expatriate orientation and training

 Repatriation

 Performance appraisal

2. Compensation

 Dealing with inflation and unexpected changes in exchange rates

 Providing sufficient pay to keep individuals

 Should company pay hardship allowance?

 Dissatisfaction with cost of living allowances

3. Housing (Complex problems at home and overseas)

4. Benefits Planning

 Developing equity among employees

 Several plans necessary for different categories of personnel

5. Taxation (Proliferation of new laws)

6. Communication of HR Policies and Programs Worldwide

 Treat communication as a continuous process

 Face-to-Face contact frequently

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  Make policy manuals brief and simple

 Be sensitive to needs of receiver

 Send regular written explanations of policy changes

 Periodic rotation of overseas HR managers desirable

 Security

Managing in a Foreign Environment:

 Attitudes Vary

 Motivational Tools are Distinctly Different

Managerial Values

 Role of Competition

 Role of Blame

 Role of Shame

 Role of Participation: Japan (hi)

 Role of Autocratic: Europe (hi) and South America (hi)

Sources of Managerial Talent

 Home Country Nationals (Expatriates)

 Host Country Nationals (Natives)

 Third Country Nationals (Non-Home/Host)

Advantages of Different Sources for Overseas Managers

Host Country Home Country Third Country

• Less cost • Talent available • Broad experience

within company
• Preference of host • International
country • Greater control outlook
government
• Company • Multi-lingualism
• Knowledge of experience
environment
• Mobility
• Language facility
• Experience provided
to corporate
executives

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6 Major Reasons for American Expatriate Failures in Foreign Environment

 Inability of the manager’s spouse to adjust to a different cultural environment.

 The manager’s inability to adapt to a different physical or cultural environment. Other

family-related problems.

 The manager’s personality or emotional immaturity.

 The manager’s inability to cope with the responsibilities posed by the overseas work.

 The manager’s lack of technical competence.

 The manager’s lack of motivation to work overseas.

What Is A Staffing Policy?

 Staffing policy - the selection of employees who have the skills required to perform a
particular job

 Four main approaches to staffing policy

1. The ethnocentric approach - subsidiaries managed by Parent-country nationals

(PCNs). Fill key management positions with parent-country nationals.
2. The polycentric approach - subsidiaries managed by Home-country nationals (HCNs).
Recruit host country nationals to manage subsidiaries in their own country, and
parent country nationals for positions at headquarters
3. The geocentric approach - subsidiaries managed by most suitable individual
(PCN/HCN/TCN). Seeks the best people, regardless of nationality for key jobs
4. Regiocentric – subsidiaries managed by staff who move within their region.
According to Pigors (1973: 690) there are three different sources of employees with whom an
international company can be staffed. First, the company can send employees from its home
country, which are referred to as expatriates, expats or home country nationals. Second, it can
recruit host country nationals (natives of the host country), and third, it can hire third country
nationals who are natives of a country other than the home country or the host country.
LO2: Identify the pros and cons of different approaches to staffing policy in the international business.

Which Staffing Policy Is Best?

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Selection Methods

 Interviews (executives and psychologists)

 Assessment Centers (exercises)

 Tests (language and special tests)

 Role of Family

Flowchart of the Selection-Decision Process

Preparing for an International Assignment

Study the following subjects:

 Social and business etiquette.
 History and folklore.
 Current affairs, including relations between the country and the United States.
 The culture’s values and priorities.
 Geography, especially the cities.
 Sources of pride: artists, musicians, novelists, sports, great achievements of the culture,
including things to see and do.
 Religion and the role of religion in daily life.
 Political structure and current players.
 Practical matters such as currency, transportation, time zones, hours of business.
 The language.

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Cultural Shock

 "A Disorientation that Causes Perpetual Stress"

 Disorienting Incidents

 Impossible Communication

 Telephone Difficulties

 Family Frustrations

Special Considerations

 Career Development Risks

 Reentry Problems

 Managing Family Life

 Terrorism

Recruitment

 Government Regulations

 Work Permits Universally Required

 Recruitment of Locals Varies

 Guest Workers

 Role of Church, Family, Politics

Selection

 Merit Versus Best Family

 Family Ties

 Social Standing

 Origin

 Industrialized versus Less Developed

Training Issues

 Local Resources

 Less Technical Capabilities

 Apprenticeship Strengths in Europe

 Management Development (US Leader)

 Language (English Need)

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Compensation

 Host Country Employees

 Production Standard or Time or Combination

 Benefits (often higher than U.S.)

 Profit Sharing (may be Required)

 Managers

 Narrowing of Salary Gap with USA

Expatriate Compensation

 Base Pay

 Differentials

 Incentives

 Company Assistance

 Cost: 3-4 times USA Rate

Compensation of Expatriate Managers

To be effective, a compensation program must:

1. Provide an incentive to leave the united states.

2. Maintain an American standard of living.

3. Facilitate reentry into the united states.

4. Provide for the education of children.

5. Maintain relationships with family, friends, and business associates.

Compensation Elements of an Expatriate

 Programs used by most U.S. Based MNCs have four elements:

 Base pay – equal to pay of domestic counterparts in comparably evaluated jobs.

 Differentials – to offset the higher costs of overseas goods, services, and housing.

 Incentives – to compensate the person for separation from family, friends, and domestic
support systems.

 Company assistance programs – to cover added costs such as moving and storage costs,
automobile, and education expenses.

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The Price of an Expatriate

Note: Additional costs often incurred aren’t listed above, including language and cross-cultural
training for employee and family, and costs of selling home and cars in the U.S. before moving.

*Figures take into account payments by employee to company based on hypothetical U.S. income
tax and housing costs.

*It is not unusual to triple costs compared to USA earnings.

An employer’s typical first-year expenses of sending a U.S. executive abroad.

What Is Expatriate Failure?

 The main reasons for U.S. expatriate failure are

 the inability of an expatriate's spouse to adapt

 the manager’s inability to adjust

 other family-related reasons

 the manager’s personal or emotional maturity

 the manager’s inability to cope with larger overseas responsibilities

 The reason for European expatriate failure is

 the inability of the manager’s spouse to adjust

How Can Firms Reduce Expatriate Failure?

 Firms can reduce expatriate failure through improved selection procedures

 Four dimensions that predict expatriate success are

1. Self-orientation - the expatriate's self-esteem, self-confidence, and mental well-being

2. Others-orientation - the ability to interact effectively with host-country nationals

3. Perceptual ability - the ability to understand why people of other countries behave the way
they do

4. Cultural toughness – the ability to adjust to the posting

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Why Is A Global Mindset Important?

 A global mindset may be the fundamental attribute of a global manager

 cognitive complexity

 cosmopolitan outlook

 A global mindset is often acquired early in life from

 a family that is bicultural

 living in foreign countries

 learning foreign languages as a regular part of family life

What Is Training And Management Development?

 After selecting a manager for a position, training and development programs should be
implemented

 Training focuses upon preparing the manager for a specific job

 Cultural training

 Language training

 Practical training

 Management development is concerned with developing the skills of the manager over time

 historically, most firms focus more on training than on management development

What Happens When Expatriates Return Home?

 Training and development should include preparing and developing expatriate managers for
reentry into their home country organization

 need good programs for

 re-integrating expatriates back into work life within their home country
organization

 utilizing the knowledge they acquired while abroad

How Should Expatriates Be Evaluated?

 Evaluating expatriates can be especially complex

 typically, both host nation managers and home office managers evaluate the
performance of expatriate managers

 But, both types of managers are subject to unintentional bias

 home country managers tend to rely on hard data when evaluating expatriates

 host country managers can be biased towards their own frame of reference

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What Are The Key Issues In Compensating Expatriates?

 Two key issues on compensation

1. How to adjust compensation to reflect differences in economic circumstances and

compensation practices

 there are substantial differences in executive compensation across countries

2. How to pay expatriate managers

 most firms use the balance sheet approach

What Are The Key Issues In Compensating Expatriates?

 A compensation package has five components

1. Base salary - normally in the same range as the base salary for a similar position in the home
country

2. Foreign service premium - extra pay the expatriate receives for working outside his country
of origin

3. Various allowances - hardship, housing, cost-of-living, education

4. Tax differentials - may have to pay income tax to both the home country and the host-
country governments no reciprocal tax treaty exists

5. Benefits – many firms provide the same level of medical and pension benefits abroad that
employees receive at home

Why Are International Labor Relations Important?

 Organized labor is concerned that

1. Multinationals can counter union bargaining power by threatening to move

production to another country

2. Multinationals will farm out only low-skilled jobs to foreign plants making it easier to
switch production locations

3. Multinationals will import employment practices and contractual agreements from

their home countries and reduce the influence of unions

Why Are International Labor Relations Important?

 Organized labor has responded to the increased bargaining power of multinational

corporations by

1. Trying to set-up their own international organizations

2. Lobbying for national legislation to restrict multinationals

3. Trying to achieve regulation of multinationals through international organizations

such as the United Nations

 Many firms are centralizing labor relations to enhance the bargaining power of the
multinational vis-à-vis organized labor

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