International Human Resources Management

Managing Human Resources
Belcourt * Bohlander * Snell
Copyright © 2008 by Nelson, a division of Thomson Canada Limited. All rights reserved.

5th Canadian edition
PowerPoint Presentation by Monica Belcourt, York University and Charlie Cook, The University of West Alabama

After studying this chapter, you should be able to: 1. Identify the types of organizational forms used for competing internationally. 2. Explain the economic, political-legal, and cultural factors in different countries that HR managers need to consider. 3. Explain how domestic and international HRM differ. 4. Discuss the staffing process for individuals working internationally. 5. Identify the unique training needs for international assignees and their employees.
Copyright © 2008 by Nelson, a division of Thomson Canada Ltd. 15±2


(cont d) After studying this chapter, you should be able to: 6. Identify the characteristics of a good international compensation plan. 7. Reconcile the difficulties of home- and host-country performance appraisals. 8. Explain how labour relations differ around the world.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.


Increasing Importance of Global Human Resource Understanding
International Mergers and Acquisitions

Foreign Human Resources

Importance of Global Human Resources Management

Global Competition

Market Access Opportunities
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a division of Thomson Canada Ltd. ‡ Transnational corporation  Firm that attempts to balance local responsiveness and global scale via a network of specialized operating units. Copyright © 2008 by Nelson.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. ‡ Global corporation  Firm that has integrated worldwide operations through a centralized home office. 15±5 .

15±6 . a division of Thomson Canada Ltd.1 Copyright © 2008 by Nelson.Types of Organizations Figure 15.

2003. Royal Dutch/Shell Group 9. BP 10.22 210.10 263.93 244.S. Copyright © 2008 by Nelson.36 158. 15±7 $286. Pfizer 5. July 14. Johnson & Johnson 8.99 244.97 Figure 15.´ Business Week. General Electric 2.89 232.86 161.Top International Companies MARKET VALUE (BILLIONS OF U. AIG Source: Chester Dawson. a division of Thomson Canada Ltd. DOLLARS) 1.24 150. Wal-Mart Stores 6. ExxonMobil 4. 34. Citigroup 7.48 153. Microsoft 3. ³The Global 1000.2 .

General Electric 10.S.21 179. Wal-Mart Stores 2. Royal Dutch/Shell 5. ³The Global 1000.23 131.80 Figure 15. DaimlerChrysler 8. a division of Thomson Canada Ltd.52 204. DOLLARS) 1. 34.70 126.Top International Companies (cont¶d) SALES (BILLIONS OF U.84 134.59 156. July 14. Allianz Source: Chester Dawson. 15±8 $244.43 178. Ford Motor 7. Toyota Motor 9. ExxonMobil 3.51 184. 2003.2 . BP 6. Copyright © 2008 by Nelson.72 162. General Motors 4.´ Business Week.

July 14.S.2 . 34.13 11. a division of Thomson Canada Ltd. General Electric 3.10 11.32 15.04 7.83 Figure 15. ³The Global 1000. Bank of America 7. Microsoft Source: Chester Dawson. 2003. Royal Dutch/Shell 6.90 7. Toyota Motor 10.42 9. Wal-Mart Stores 9. Altria Group 4.18 8.Top International Companies (cont¶d) PROFITS (BILLIONS OF U. ExxonMobil 5.25 9. Citigroup 2.01 9. Pfizer 8.´ Business Week. DOLLARS) 1. 15±9 $15. Copyright © 2008 by Nelson.

‡ They have a political impact that leads to cooperation among countries and to the breaking down of barriers of nationalism. ‡ They have direct investments in many countries.How International Companies Affect the World Economy ‡ Their production and distribution extend beyond national boundaries. affecting the balance of payments. 15±10 . Copyright © 2008 by Nelson. a division of Thomson Canada Ltd. making it easier to transfer technology.

and social structure of a host country influence how HR is conducted in that country.  Promotes job growth in trading nations. 15±11 . Copyright © 2008 by Nelson. ‡ Cultural environment  The communication patterns. education.How Does the Global Environment Influence Management? ‡ Unified Economies  Closely partnered nations such as the European Union (EU) have developed into strong competitors. a division of Thomson Canada Ltd. values and ideologies. religion.

The Nations of the European Union Copyright © 2008 by Nelson. a division of Thomson Canada Ltd. 15±12 .

15±13 . a division of Thomson Canada Ltd.3 Copyright © 2008 by Nelson.Cultural Environment of International Business Figure 15.

a division of Thomson Canada Ltd. 15±14 .Domestic versus International HRM ‡ Issues in international HRM in helping employees adapt to a new and different environment outside their own country:  Relocation  Orientation  Objective  Translation services Copyright © 2008 by Nelson.

‡ Third-country Nationals  Employees who are natives of a country other than the home country or the host country. ‡ Host-country Nationals  Employees who are natives of the host country. or Home-country Nationals  Employees from the home country who are on international assignment. 15±15 . a division of Thomson Canada Ltd.International Staffing ‡ Expatriates. Copyright © 2008 by Nelson.

Changes in International Staffing over Time Figure 15.4 Copyright © 2008 by Nelson. 15±16 . a division of Thomson Canada Ltd.

3. 15±17 . a division of Thomson Canada Ltd. 2. Most customers want to do business with companies they perceive to be local versus foreign.Hiring Host-Country Nationals ‡ Three main advantages: 1. Copyright © 2008 by Nelson. Since local governments usually want good jobs for their citizens. foreign employers may be required to hire locally. Hiring local citizens is generally less costly than relocating expatriates.

‡ Guest Workers  Foreign workers invited to perform needed labour. ‡ Transnational Teams  Teams composed of members of multiple nationalities working on projects that span multiple countries. Copyright © 2008 by Nelson. a division of Thomson Canada Ltd. ‡ Apprenticeships  Vocational training programs in skilled trades. 15±18 . or Visa  Government document granting a foreign individual the right to seek employment.Recruiting Internationally ‡ Work Permit.

a division of Thomson Canada Ltd. 15±19 .Selecting Global Managers ‡ Global manager  A manager equipped to run an international business ‡ Skills Categories Ability to seize strategic opportunities Ability to manage highly decentralized organizations Awareness of global issues Sensitivity to issues of diversity Competence in interpersonal relations Skill in building community Copyright © 2008 by Nelson.

2. Begin with self-selection. Assess augmented skills and attributes. 4. Copyright © 2008 by Nelson. 3.Selecting Global Managers 1. 15±20 . Create a candidate pool. Assess core skills. a division of Thomson Canada Ltd.

Highlights in HRM Skills of Expatriate Managers CORE SKILLS Experience Decision making Resourcefulness Adaptability Cultural sensitivity Team building Maturity AUGMENTED SKILLS Technical skills Negotiation skills Strategic thinking Delegation skills Change management Highlights 15. a division of Thomson Canada Ltd. 15±21 .4 Copyright © 2008 by Nelson.

15±22 . Copyright © 2008 by Nelson. ‡ Augmented Skills  Skills that are helpful in facilitating the efforts of expatriate managers.Measured Expatriate Characteristics ‡ Core Skills  Skills that are considered critical to an employee¶s success abroad. a division of Thomson Canada Ltd. ‡ Failure rate  Percentage of expatriates who do not perform satisfactorily.

Comparison of Advantages in Sources of Overseas Managers HOST-COUNTRY NATIONALS Less costly Preferred by host-country outlook governments Intimate knowledge of environment and culture Language facility HOME-COUNTRY NATIONALS (EXPATRIATES) Talent available within company Greater control Company experience Mobility Experience provided to corporate executives THIRD-COUNTRY NATIONALS Broad experience International Multilingualism Figure 15. a division of Thomson Canada Ltd.6 Copyright © 2008 by Nelson. 15±23 .

15±24 . a division of Thomson Canada Ltd.Expatriate Selection Criteria Figure 15.7 Copyright © 2008 by Nelson.

a division of Thomson Canada Ltd.Causes of Expatriate Assignment Failure ‡ Family adjustment ‡ Lifestyle issues ‡ Work adjustment ‡ Bad selection ‡ Poor performance ‡ Other opportunities arise ‡ Business reasons ‡ Repatriation issues Figure 15. 15±25 .8 Copyright © 2008 by Nelson.

15±26 . a division of Thomson Canada Ltd.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 Copyright © 2008 by Nelson.

Political structure and current players 9. a division of Thomson Canada Ltd. Current affairs. 15±27 . one should become acquainted with the following aspects of the host country: 1.Preparing for an International Assignment To prepare for an international assignment. Cultural values and priorities 5.9 Copyright © 2008 by Nelson. time zones. including relations between the host country and Canada 4. hours of business 10. Practical matters such as currency. Social and business etiquette 2. The language Figure 15. transportation. History and folklore 3. especially its major cities 6. Geography. Religion and the role of religion in daily life 8. Sources of pride and great achievements of the culture 7.

a division of Thomson Canada Ltd. ‡ Conversations with host country natives.Training Methods ‡ Reviewing available information about the host company: books. magazines. Copyright © 2008 by Nelson. video tapes. 15±28 . ‡ Temporary assignments to encourage shared learning. ‡ Sensitivity training to become familiar with the customs and overcome prejudices.

Sense of isolation. and C. Sanchez. Ambiguity owing to inability to decipher meaning of situations. Novice Transitional Mastery Repatriation Highlights 15.and post-arrival Arrival PRIMARY RESPONSE Cross-cultural unreadiness. P. Hurried time frame. Feelings of lack of fit and differential treatment. Ignorance of cultural training differences. 15±29 . no.5 Source: J. Stressor reevaluation. Bothered by living with a cultural paradox. Cultural blunders or inadequacy of coping responses. Rejection of host or parent culture. Cultural shock. Disappointment with unfulfilled expectations. Unrealistic evaluation of stressors to come.Highlights in HRM Stressors and Coping Responses in the Developmental Stages of Expatriate Executives STRESSOR Expatriate selection Assignment acceptance Pre. Cooper. Frustration with inability to perform boundary spanning role. ³Adapting to a Boundaryless World: A Developmental Expatriate Model. Copyright © 2008 by Nelson. 2 (May 2000): 96±106. a division of Thomson Canada Ltd.´ Academy of Management Executive 14. Loss of autonomy. Spector.

15±30 . Offer counseling to ease the transition. a division of Thomson Canada Ltd.    Throw a ³welcome home´ party.Returning from an Overseas Assignment ‡ Repatriation  The process of an employee transitioning home from an international assignment.  Copyright © 2008 by Nelson. Arrange conferences and presentations to make certain that knowledge and skills acquired away from home are identified and disseminated. Get feedback from the employee and the family about how well the organization handled the repatriation process.

a division of Thomson Canada Ltd.  Financial (money) incentives versus nonfinancial incentives (prestige. and influence)  Individual rewards versus collectivist concerns for internal equity and personal needs  General rule: match the rewards to the values of the local culture²create 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. 15±31 . independence. Copyright © 2008 by Nelson.Compensation ‡ Different countries have different norms for employee compensation.

long-term Competitiveness vs. organization vs. a division of Thomson Canada Ltd. government Equality vs. unemployment Protectionism vs. solidarity ECONOMIC CONDITIONS Size of economy Types of industries. open market SOCIAL CONSTRAINTS Income tax rates. work Short. 4 (July/August 1999): 25±34. no.Forces Driving Global Pay CULTURAL PREFERENCES Importance of status Role of individual vs. worker participation Skills.vs. 15±32 . relationships PERSONAL PREFERENCES Attitudes toward risk Quality of life vs.11 Source: Steven Gross and Per Wingerup. social costs Laws and regulations Collective bargaining. disparity Achievement vs. Copyright © 2008 by Nelson. natural resources Inflation. education of workforce Figure 15. ³Global Pay? Maybe Not Yet!´ Compensation and Benefits Review 31.

‡ Bonuses. profit-sharing. 15±33 .Compensation of Host-Country Employees ‡ Hourly wages vary dramatically from country to country. a division of Thomson Canada Ltd. benefits and paid leave may be more extensive and legally required. ‡ Pay periods are different. Copyright © 2008 by Nelson. ‡ High pay rates can upset local compensation practices. ‡ Seniority may be an important factor.

18 21. Copyright © 2008 by Nelson.Hourly Wages in Different Countries* COUNTRY Norway Germany (former West) Switzerland Belgium Sweden United States France Britain Japan Australia Canada Italy Spain Israel Korea Portugal Taiwan Brazil Mexico China Sri Lanka $/HOUR 31. November 2004.S.96 11.09 20. a division of Thomson Canada Ltd.12 Source: U.67 2. Figure 15.23 5.28 6. dollars for production workers in manufacturing.37 20.05 19.49 *Hourly compensation costs in U.73 25.25 27.S. Department of Labor.87 27.13 20.48 0.97 21.55 31.84 2. 15±34 .28 18. Bureau of Labor Statistics.73 10.63 0.35 14.

A. standard of living ‡ Provide for security in countries that are politically unstable or present personal dangers ‡ Include provisions for good healthcare ‡ Provide for the education of children Copyright © 2008 by Nelson. a division of Thomson Canada Ltd. friends. ‡ Consider foreign taxes the employee is likely to have to pay (in addition to domestic taxes) and help with tax forms and filing ‡ Allow for maintaining relationships with family. ‡ Facilitate reentry home ‡ Be in writing 15±35 . and business associates.Compensation of Expatriate Managers ‡ Provide an incentive to leave Canada ‡ Allow for maintaining a N.

Add incentive premiums 4. 15±36 . Calculate base pay 2. Figure cost-of-living allowance (COLA) 3. a division of Thomson Canada Ltd.Expatriate Compensation Systems ‡ Home-Based Pay  Pay based on an expatriate¶s home country¶s compensation practices ‡ Balance-Sheet Approach  A compensation system designed to match the purchasing power in a person¶s home country 1. Add assistance programs Copyright © 2008 by Nelson.

a division of Thomson Canada Ltd. 15±37 .Expatriate Compensation Systems (cont d) ‡ Host-Based Pay  Expatriate pay comparable to that earned by employees in a host country to which the expatriate is assigned ‡ Localization  Adapting pay and other compensation benefits to match that of a particular country ‡ Other Issues  Adequacy of medical care  Personal security  Education Copyright © 2008 by Nelson.

a division of Thomson Canada Ltd. 15±38 .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 Copyright © 2008 by Nelson.

´ HRMagazine 47. a division of Thomson Canada Ltd. ³Selection Savvy.Boosting ROI of Expatriates Major initiatives planned to improve assignment return on investment (ROI): Better candidate selection Career-planning skills Communicating objectives Assignment preparation Monitoring program Cross-cultural training Developing or expanding intranet Communication/recognition Web-based cultural training Mandating destination support Other Source: Andrea Poe. no. 4 (April 2002): 77±83. 15±39 32% 26 24 20 17 10 7 6 5 4 17 Business Case . Copyright © 2008 by Nelson.

Copyright © 2008 by Nelson. 15±40 . 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.International Organizations and Labour Relations ‡ International Differences in Unions  The level at which bargaining takes place (national. industry. a division of Thomson Canada Ltd.

or home-country nationals failure rate global corporation global manager guest workers ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ home-based pay host-based pay host country host-country nationals international corporation localization multinational corporation (MNC) repatriation third-country nationals transnational corporation transnational teams work permit. 15±41 . a division of Thomson Canada Ltd. or visa Copyright © 2008 by Nelson.Key Terms ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ augmented skills balance-sheet approach codetermination core skills cultural environment culture shock expatriates.

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