Global Human Resource Management

Chapter 18

© McGraw Hill Companies, Inc., 2000

The Strategic Role of International
HRM
Staffing policy:
Selecting individuals with requisite
skills to do a particular job.
Tool for developing and
promoting corporate culture.

© McGraw Hill Companies, Inc., 2000

18-1
 Strategy, Structure and Control Systems
International Strategy
Structure Multidomestic International Global Transnational
and Controls
Centralization Decentralized Core competency Some centralized Mixed centralized
of operating centralized and decentralized
Rest decentralized Informal matrix
decision
Horizontal Worldwide area Worldwide Worldwide Informal matrix
differentiation structure product division product division
Need for
coordination Low Moderate High Very high
Integrating None Few Many Very many
mechanisms
Performance Low Moderate High Very high
Ambiguity
Need for Low Moderate High Very high
cultural controls
© McGraw Hill Companies, Inc., 2000 Table 18.1
18-2
 Types of Staffing Policy
Ethnocentric:
All key management positions are filled by
parent-company nationals.
Polycentric:
Host-country nationals manage subsidiaries, parent-
company nationals have key positions at
headquarters.
Geocentric:
Seek best people for key jobs, regardless of
nationality.
© McGraw Hill Companies, Inc., 2000
18-3
 Comparison of Staffing Approaches
Staffing Strategic
Approach Appropriateness Advantages Disadvantages

Ethnocentric International Overcomes lack of Produces resentment

qualified managers in host country
host nation
Unified culture Can lead to cultural
Helps transfer core myopia
competencies
Polycentric Multidomestic Alleviates cultural Limits career mobility
myopia Isolates headquarters
Inexpensive to from foreign
implement subsidiaries
Geocentric Global and
Uses human resources National immigration
Transnational efficiently policies may limit
Helps build strong implementation
culture and informal Expensive
management network Table 18.2
© McGraw Hill Companies, Inc., 2000 18-4
 The Expatriate Problem
Expatriate failure:
Premature return of the expatriate manager to
his/her home country.
Cost of failure is high:
Estimate - 3X the expatriate’s annual salary
plus the cost of relocation (impacted by
currency exchange rates and assignment
location).

© McGraw Hill Companies, Inc., 2000

18-5
 Expatriate Failure Rates
Recall Rate Percent Percent of Companies
US Multinationals
20 - 40% 7%
10 - 20% 69
< 10 24
European Multinationals
11 - 15% 3%
6 - 10 38
<5 59
Japanese Multinationals
11 - 19% 14%
6 - 10 10
<5 76

Table 18.3

© McGraw Hill Companies, Inc., 2000

18-6
 Reason for Expatriate Failure
US Multinationals Japanese Firms
 Inability of spouse to  Inability to cope with
adjust. larger overseas
 Manager’s inability to responsibilities.
adjust.  Difficulties with the new
 Other family problems. environment.
 Manager’s personal or  Personal or emotional
emotional immaturity. problems.
 Inability to cope with  Lack of technical
larger overseas competence.
responsibilities.  Inability of spouse to
adjust.
European Multinationals: Inability of spouse to adjust.
© McGraw Hill Companies, Inc., 2000
18-7
 Expatriate Selection
Self-orientation:
Strengthen self-esteem, self-confidence and mental
well-being.
Others-orientation:
Enhance ability to interact with host-country nationals.
Perceptual ability:
The ability to empathize - understand why people in
host-country behave the way they do.
Cultural toughness:
How well an expatriate adjusts to a particular posting
tends to be related to the country of assignment.
© McGraw Hill Companies, Inc., 2000
18-8
 Training for Expatriate Managers
Cultural:
Seeks to foster an appreciation of the host-
country’s culture.
Language:
Can improve expatriate’s effectiveness,
relate more easily to culture 1. Culture
and fostered a better firm image. 2. Language
Practical:
3. Practical

Ease into day-to-day life of the

host country.
© McGraw Hill Companies, Inc., 2000
18-9
 Repatriation of Expatriates
Didn’t know what position
they hold upon return.
Firm vague about return,
role and career progression.
Took lower level
job.
Leave firm within
one year.
Leave firm within
three years

10 20 30 40 50 60 70

© McGraw Hill Companies, Inc., 2000

18-10
 Performance Appraisal
Problems:
Unintentional bias.
• Host-nation biased by cultural frame of reference.
• Home-country biased by distance and lack of
experience working abroad.
Expatriate managers believe that headquarters
unfairly evaluates and appreciates them.
• Many believe a foreign posting does not benefit
their career.

© McGraw Hill Companies, Inc., 2000

18-11
 Guidelines for Performance
Appraisal
More weight given to on-site manager’s
evaluation.
Former expatriate who served in the same
location should assist home-office manager
with the evaluation.
If foreign on-sight manager preparing
evaluation, home-office manager consulted
before evaluation is finalized.
© McGraw Hill Companies, Inc., 2000
18-12
 A Typical Balance Sheet
Additional
Home and Costs Paid by
Host- Company
Figure 18.1 Country
Income Income
Premiums
Taxes Taxes and
Incentives
Income Housing Income
Taxes Housing Taxes
Housing Goods and Housing
Services
Goods and Goods and Goods and
Services Services Services
Reserve Reserve Reserve Reserve
Home- Host- Host-Country Home- Country
Country Country Costs Paid by Equivalent
Salary Costs Company and Purchasing
from Salary
Power
© McGraw Hill Companies, Inc., 2000
18-13
 International Labor Relations
Key issue: degree to which organized labor can
limit the choices of an international business.
Labor concerns:
Counter bargaining power with threat to move
jobs off-shore.
Keep high-skill work at home and ship low-
skill work to foreign plants.
Importing employment practices and
contractual agreements from the home-country.

© McGraw Hill Companies, Inc., 2000

18-14
 Strategy of International Labor
Try to establish international labor
organizations.
Lobby legislatures to restrict multinationals.
Use United Nations to regulate
multinationals.

Efforts have not

been successful.
© McGraw Hill Companies, Inc., 2000
18-15
 Multinationals’ Approach to
Labor Relations
Decentralize: labor laws, union power and
nature of collective bargaining varies from
country to country.
Centralize:
Want to rationalize global operations.
Need to control labor costs and maximize threat
of move to lower cost country.
Before move, get new union approval for work
practices.
© McGraw Hill Companies, Inc., 2000
18-16