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Staffing in IHRM

Strategic Role of HR

4 Basic Tasks
Staffing policy
Management training & development
Performance appraisal
Compensation policy

Labor Relations & Strategy



Human Resources
Activities a firm carries out to use human resource effectively
strategy, staffing, performance evaluation, management
development, compensation & labor relations

Through influence on character development, quality &
productivity a firms HR can help achieve the primary strategic
goal of reducing the cost of value creation & adding value by
better serving customer needs.

International HR complicated by profound differences in labor
markets, culture, legal systems & economic systems
How to staff key management posts
How to develop managers to have cultural literacy
How to compensate people in different nations
How to deal with issues of expatriate managers
Opening Case - Molex
70 year old Chicago manufacturer of electronic components

1967 International Division to coordinate exporting 1970 Japanese plant 1971
Irish plant

2003 61% of business from international sales of $1.84 b 50 plants in 21
countries 16,000 people worldwide (1/3 in US)

Strategy =
Low cost & excellent customer service
Plants are located where conditions are favorable & major customers are
close
Truly global company - at home wherever in world they operate that
proactively shares valuable knowledge across operations in different
countries
Committed to globally minded managers, multilingual competency & creation
of common company culture

HR most localized of functions
Regular expatriates 3 to 5 years in another country (50)
Inpats come to US to work at HQ
3
rd
country nationals who move from one Molex entity to another (Singapore
to Taiwan)
Short term project transfers 6 to 9 months
Medium term project transfers 12 to 24 months


Strategic Role of
International HR
Strong fit between HR practices & strategy is required for high
profitability

Sustained source of high productivity & competitive advantage in the
global economy

HR policies need to be congruent with strategy - 4 Strategies pursued
by international business
Multi-domestic = create value by emphasizing local responsiveness
International = transferring core competencies overseas
Global = realizing experience curve & location economies
Transnational = doing all these thing simultaneously

Molex transnational strategy building a strong corporate culture &
informal management network for transmitting information within the
organization.

Staffing Policy

Selection of employees for particular jobs

Tool for developing and promoting corporate culture (norms &
value system) to attain higher performance

Types
Ethnocentric
Polycentric
Geocentric
Types of Staffing Policy
Ethnocentric
Ethnocentric - all key management positions are filled by parent
company nationals
May believe the host country lacks qualified individuals
May see this as the best way to maintain a unified corporate
culture
May believe it is the best way to transfer core competencies
to a foreign operation
Disadvantages
Limits advancement opportunities for host-country nationals
-> resentment, lower productivity & increased turnover
Can lead to cultural myopia failure to understand host
country cultural differences that require different approaches
to management & marketing

Compatible with an international strategy
Types of Staffing Policy
Polycentric
Polycentric Requires host country nationals to be recruited to manage
subsidiaries, while parent country nationals occupy key positions at
corporate HQ
Firm less likely to suffer from cultural myopia
Less expensive to implement -> reducing the cost of value creation
(expats are $$$)

Disadvantages
Host country nationals have limited opportunities to gain experience
outside their own country & cant progress to senior positions ->
resentment
Gap can form between host country managers & parent country
isolating HQ staff from various foreign subsidiaries (Unilevers little
kingdoms & transnational)
Lack of management transfers can lead to lack of integration -> a
federation of largely independent national units with only nominal
links to H
Difficult to transfer core competencies or realize experience curve &
location economies
Compatible with a multi-domestic strategy
Types of Staffing Policy
Geocentric
Geocentric seeks the best people for the job throughout the company,
regardless of nationality
Enables firm to make the best use of its human resources
Enables the firm to build a cadre of international executives who are at
home working in a number of cultures
Build a strong unifying corporate culture & informal management
network required for global & transnational strategies
Better able to create value from the pursuit of experience curve &
location economies and from the multidirectional transfer of core
competencies
Reduce cultural myopia & enhance local responsiveness

Disadvantages
Immigration laws can require the employment of host-country nationals
Expensive to implement training & relocation costs
Need a compensation structure with a standardized international base
pay level higher than national levels in most countries

Compatible with both global & transnational strategies

Expatriate Managers
Ethnocentric & geocentric staffing policies rely on extensive use
of expatriate managers

Prominent feature is expatriate failure pre-mature return of
an expatriate manager to his or her home country
Failure of firms selection policies to identify individuals who will not
thrive abroad (^ 40% return early from developed & ^ 70% return
early from developing)
Cost of failure can be 3X the expats annual domestic salary + cost
of relocation = $250,000 - $1M
Reasons (US) inability of spouse to adjust; managers inability to
adjust; other family problems; managers personal or emotional
maturity; inability to cope with larger overseas responsibilities

Selecting Expatriate Managers
90% of time employees are selected on the basis of their technical
expertise, not their cross cultural fluency.

Only 10% of 50 Fortune 500 firms tested for important traits such as
cultural sensitivity, interpersonal skills, adaptability & flexibility

4 dimensions predict success in a foreign posting (Mendenhall &
Oddou)
Self-orientation self-esteem, self-confidence, & mental well being
Others-orientation ability to interact effectively with host country
nationals (relationship development & willingness to communicate)
Perceptual ability ability to understand why people in other countries
behave the way they do
Cultural toughness relationship between country of assignment & how
well an expatriate adjusts to a particular posting


Training & Development
Training the manager to do the specific job & management development which
can happen over the course of a career

Job transfers are opportunities for broad international experience that will
enhance the management & leadership skills of executives

Training expatriate manager & spouse cultural, language & practical training
to reduce failure

Repatriation of Expats prepare them for reentry into the home country (15%
of returning expats leave w/i 1 year, 40% w/i 3 years)

Management development as a strategic tool especially transnational
Strong unifying corporate culture & information management network to assist in
coordination & control
Need to be able to detect pressures for local responsiveness & that requires cultural
understanding
Performance Appraisal
Two groups usually evaluate the performance
of expats host nation & home office
managers. Both are subject to bias
More weight should be given to on-site manager
appraisal than off-site (soft variables)
Former expat who served in country could be
involved in the appraisal
When on-site prepares, off-site should be
consulted before it is complete to balance
Compensation
How should compensation be adjusted to reflect national
differences according to prevailing country standards or
equalize pay on a global basis

How should expatriate managers be paid
Ethnocentric how much home country expats should be paid
Polycentric lack of managers mobility among national operations
-> pay can be kept country specific
Geocentric pay the international executives the same basic salary
regardless of country of origin or assignment

Balance sheet approach to expat pay = equalizes purchasing
power across countries (figure 16.1 page 549)
International Labor Relations
Concern of domestic unions about MNEs
company can counter its bargaining power with the power to move the plant to
another country
International business will keep highly skilled tasks in the home country & farm out
low-skilled tasks to the foreign plants
International business will attempt to import employment practices & contractual
agreements from its home country

Organized labor has responded by
Trying to establish international labor organizations
Lobbying for national legislation to restrict MNEs
Achieve international regulations on MNEs through UN

Not very successful because
Unions want to cooperate but compete with each other for jobs
Wide variation in union structure
Divergent ideologies about role of union in society & class conflict