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2010 South-Western, a part of Cengage Learning

All rights reserved.

PowerPoint Presentation by Charlie Cook

The University of West Alabama

Chapter Objectives
After studying this chapter, you should be able to
Identify the types of organizational forms used for
competing internationally.
Explain the economic, political-legal, and cultural
factors in different countries that HR managers
need to consider.
Explain how domestic and international HRM
differ.
Discuss the staffing process for individuals
working internationally.
Identify the unique training needs for international
assignees and their employees
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Chapter Objectives (contd)

After studying this chapter, you should be able to
Identify the characteristics of a good international
compensation plan.
Reconcile the difficulties of home- and hostcountry performance appraisals.
Explain how labor relations differ around the
world.

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Managing Across Borders

International corporation
Domestic firm that uses its

existing capabilities to
move into overseas
markets.

Multinational corporation
(MNC)
Firm with independent

business units operating in

multiple countries.

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Global corporation
Firm that has integrated

worldwide operations
through a centralized
home office.

Transnational corporation
Firm that attempts to

balance local responsiveness

and global scale via a
network of specialized
operating units.

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FIGURE

15.1

Types of Organizations

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Increasing Importance of Understanding

Global Human Resources Management
International
International
Mergers
Mergersand
and
Acquisitions
Acquisitions

Foreign
ForeignHuman
Human
Resources
Resources

Global
GlobalHuman
Human
Resources
Resources
Management
Management

Global
Global
Competition
Competition

Market
MarketAccess
Access
Opportunities
Opportunities

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How International Companies Affect

the World Economy
Their production and distribution extend
beyond national boundaries, making it easier to
transfer technology.
They have direct investments in many
countries, affecting the balance of payments.
They have a political impact that leads to
cooperation among countries and to the
breaking down of barriers of nationalism.

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How Does the Global Environment Influence

Management?
Unified Economies
Closely partnered nations such as the European

Union (EU) have developed into strong competitors.

Promotes job growth in trading nations.

Cultural Environment
The communication patterns, religion, values and

ideologies, education, and social structure of a host

country influence how HR is conducted in that
country.

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FIGURE

15.3

Cultural Environment of International Business

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Domestic versus International HRM

Issues in international HRM in helping
employees adapt to a new and different
environment outside their own country:
Relocation
Orientation
Translation services

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International Staffing
Expatriates, or Home-country Nationals
Employees from the home country who are on

international assignment.

Host-country Nationals
Employees who are natives of the host country.

Third-country Nationals
Employees who are natives of a country other than

the home country or the host country.

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FIGURE

15.4

Changes in International Staffing over Time

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Hiring Host-Country Nationals

Advantages:
1. Hiring local citizens is generally less costly than

relocating expatriates.
2. Since local governments usually want good jobs
for their citizens, foreign employers may be
required to hire locally.
3. Most customers want to do business with
companies they perceive to be local versus
foreign.

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Recruiting Internationally
Work Permit, or Visa
Government document granting a foreign individual

the right to seek employment.

Guest Workers
Foreign workers invited to perform needed labor.

Apprenticeships
Vocational training programs in skilled trades.

Transnational Teams
Teams composed of members of multiple

nationalities working on projects that span multiple

countries.
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1
Global Laws and Pacts Prohibiting Discrimination
U.S. laws affecting firms conducting business outside the United States:
Title VII of the Civil Rights Act of 1964
Age Discrimination in Employment Act (ADEA)
Americans with Disabilities Act (ADA)
International laws that require nondiscrimination in employment:
European Union (EU)Equal Pay Directive
International Labour Organization (ILO)Equal Remuneration
Convention No. 100
Organization for Economic Cooperation and Development Enterprises
(OECD)Guidelines for Multinational Enterprises
United NationsGlobal Compact

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Selecting Global Managers

Global Manager
A manager equipped to run an international business

Skills Categories for Global Managers

Ability to seize strategic opportunities
Ability to manage highly decentralized organizations
Awareness of global issues
Sensitivity to issues of diversity
Competence in interpersonal relations
Community-building skills

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FIGURE

15.5

Comparison of Advantages in Sources of Overseas Managers

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Selecting Global Managers

1.
2.
3.

Begin with self-selection.

Create a candidate pool.
Assess core skills.
Skills considered critical

to an employees success
abroad.

4. Assess augmented skills and

attributes.
Skills helpful in facilitating

the efforts of expatriate

managers
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2
Skills of Expatriate Managers
CORE SKILLS

AUGMENTED SKILLS

Experience

Technical skills

Decision-making

Negotiation skills

Resourcefulness

Strategic thinking

Strategic thinking

Delegation skills

Adaptability

Change management

Cultural sensitivity
Change management
Team building
Maturity

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FIGURE

15.6

Expatriate Selection Criteria

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FIGURE

15.7

Causes of Expatriate Assignment Failure

Family adjustment
Lifestyle issues
Work adjustment
Bad selection
Poor performance
Other opportunities arise
Business reasons
Repatriation issues

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Training and Development

Essential training program content to prepare
employees for working internationally:
Language training
Cultural training
Assessing and tracking career development
Managing personal and family life
Repatriation

Culture shock
Perpetual stress experienced by people who settle

overseas.

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FIGURE

15.8

Preparing for an International Assignment

To prepare for an international assignment, one should become acquainted

with the following aspects of the host country:
1. Social and business etiquette
2. History and folklore
3. Current affairs, including relations between the host country and the United States
4. Cultural values and priorities
5. Geography, especially its major cities
6. Sources of pride and great achievements of the culture
7. Religion and the role of religion in daily life
8. Political structure and current players
9. Practical matters such as currency, transportation, time zones, and hours of
business
10. The language

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3
Nonverbal Communications in Different Cultures

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Training Methods
Reviewing available information about the host
company: books, magazines, video tapes.
Conversations with host country natives.
Sensitivity training to become familiar with the
customs and overcome prejudices.
Temporary assignments to encourage shared
learning.

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FIGURE

15.9

A Synthesis of Country Clusters

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FIGURE

15.10

Selected Foreign-Born Executives

COMPANY, NAME, AND COUNTRY OF ORIGIN

Chevron, David O'Reilly (Ireland)

Citigroup, Vikram Pandit (India)
Dow Chemical, Andrew Liveris (Australia)
PepsiCo, Indra Nooyi (India)
Coca-Cola, Muhtar Kent (Turkey)
Alcoa, Alain J. P. Belda (Morocco)
Eli Lily, Sydney Taurel (Morocco)
3M, George W. Buckley (Great Britain)
Eastman Kodak, Antonio Perez (Spain)

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Assessing and Tracking Career Development

Developmental and Career Advantages of an
International Assignment:
Increases the expatriates responsibilities and

influence within the corporation

Provides a set of unique experiences beneficial to

both the individual and the firm

Enhances understanding of the global marketplace

Offers the opportunity to work on a project

important to the organization

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4
Repatriation Checklist
Before they go:
Make sure there is a clear need for the international assignment.
Dont send someone abroad unnecessarily. Develop a clear set
of objectives and expectations and time frames in which they
should be met.
Make sure that your selection procedures are valid. Select the
employee and also look at and involve the employees family.
Provide (or fund) language and cultural training for the employee
and the employees family.
Offer counseling and career assistance for the spouse.
Establish career planning systems that reward international
assignments and lead to promotion and knowledge sharing.

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4
Repatriation Checklist (contd)
While they are away:
Jointly establish a developmental plan that focuses on the goal
to be achieved.
Tie performance objectives to the achievement of the goal.
Identify mentors who can be a liaison and support person from
home.
Keep communications open so that the expatriate is aware of job
openings and opportunities.
Arrange for frequent visits back home (for the employee and the
family). Make certain they do not lose touch with friends and
relatives.

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4
Repatriation Checklist (contd)
When they come back home:
Throw a welcome home party and arrange for a meeting with
other former expatriates.
Offer counseling to ease the transition.
Arrange conferences and presentations to make certain that
knowledge and skills acquired away from home are identified and
disseminated.
Set up an expatriate database to help other employees who go
abroad later.
Get feedback from the employee and the family about how well the
organization handled the repatriation process..

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Global Compensation Challenges

Different countries have different norms for
employee compensation:
Financial (money) incentives versus nonfinancial

incentives (prestige, independence, and influence)

Individual rewards versus collectivist concerns for

internal equity and personal needs

General rule:

Match the rewards to the values of the local culturecreate

a pay plan that supports the overall strategic intent of the
organization but provides enough flexibility to customize
particular policies and programs to meet the needs of
employees in specific locations.

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FIGURE

15.11

Hourly Wages in Different Countries*

COUNTRY
Norway
Denmark
Germany
Netherlands
Belgium
Sweden
Switzerland
Austria
Finland
Luxembourg
United Kingdom
Australia
Ireland
Canada
Italy
France
United States

$/HOUR
41.05
35.45
34.21
32.34
31.85
31.80
30.67
30.46
29.90
27.74
27.10
26.14
25.96
25.74
25.07
24.90
23.82

COUNTRY
Japan
Spain
Greece
Korea, Republic of
New Zealand
Israel
Singapore
Portugal
Czech Republic
Taiwan
Hungary
Hong Kong SAR (1)
Poland
Brazil
Mexico
Philippines
Sri Lanka

$/HOUR
20.20
18.83
16.10
14.72
14.47
12.98
8.55
7.65
6.77
6.43
6.29
5.78
4.99
4.91
2.75
1.07
0.54

*Hourly compensation costs in U.S. dollars for production workers in manufacturing.

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Compensation of Host-Country Employees

Hourly wages can vary dramatically from
country to country.
Pay periods are different.
Seniority may be an important factor.
High pay rates can upset local compensation
practices.
Bonuses, profit-sharing, benefits and paid leave
may be more extensive and legally required.

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Compensation of Host-Country Managers

Global Compensation System
A centralized pay system whereby

host-country employees are

offered a full range of training
programs, benefits, and pay
comparable with a firms
domestic employees but adjusted
for local differences

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Compensation of Expatriate Managers

An effective international compensation program must:
Provide an incentive to leave the United States
2. Allow for maintaining an American standard of living
1.

Provide for security in countries that are politically unstable or

present personal dangers
4. Include provisions for good health care
3.

8.

Reimburse the foreign taxes the employee is likely to have to pay

(in addition to having to pay domestic taxes) and help him or her
with tax forms and filing
Provide for the education of the employees children abroad, if
necessary
Allow for maintaining relationships with family, friends, and
business associates via trips home and other communication
technologies
Facilitate the expatriates reentry home

9.

Be in writing

5.

6.
7.

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Expatriate Compensation Systems

Home-Based Pay
Pay based on an expatriates home countrys

compensation practices

Balance-Sheet Approach
A compensation system designed to match the

purchasing power in a persons home country

1. Calculate base pay
2. Figure cost-of-living allowance (COLA)
3. Add incentive premiums
4. Add assistance programs

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Expatriate Compensation Systems (contd)

Split Pay
A system whereby expatriates are given a portion of

their pay in the local currency to cover their day-today expenses and a portion of their pay in their
home currency to safeguard their earnings from
changes in inflation or foreign exchange rates

Host-Based Pay
Expatriate pay is comparable to that earned by

employees in a host country to which the expatriate

is assigned.

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Expatriate Compensation Systems (contd)

Localization
Adapting pay and other compensation benefits to

match that of a particular country

Reduces resentment among local staff members if
they are earning significantly less.

Other Issues
Adequacy of medical care
Personal security
Compensation policies of competitors

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Performance Appraisal
of International Managers
Who Should Appraise Performance?
Home-country evaluations
Host-country evaluations

Adjusting Performance Criteria

Augmenting job duties
Individual learning
Organizational learning

Providing Feedback
Debriefing interview

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The Labor Environment Worldwide

International Differences in Unions:
The level at which bargaining takes place (national,

industry, or workplace)
The degree of centralization of union-management
relations
The scope of bargaining (parties and issues)
The degree to which government intervenes
The degree of unionization and union strength
The political affiliations of unions

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augmented skills

host-based pay

balance sheet approach

host country

codetermination

host-country nationals

core skills

international corporation

cultural environment

localization

culture shock

multinational corporation (MNC)

expatriates, or home-country nationals

repatriation

failure rate

split pay

global compensation system

third-country nationals

global corporation

transnational corporation

global manager

transnational teams

guest workers

work permit, or visa

home-based pay

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