chapter 19

International Business, 6th Edition

International Human Resource Management
and Labor Relations

Griffin & Pustay

19-1 Copyright 2010 Pearson Education, Inc. publishing as Prentice Hall
 Chapter Objectives

• Describe the nature of human resource

management in international business
• Detail how firms recruit and select
managers for international assignments
• Explain how international businesses
train and develop expatriate managers
• Describe labor relations in international
business

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 Chapter Objectives (continued)

• Discuss how international firms conduct

performance appraisals and determine
compensation for their expatriate
managers
• Analyze retention and turnover issues in
international business
• Explain basic human resource issues
involving nonmanagerial employees

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 Human Resource Management

Human Resource Management is

the set of activities directed at attracting,
developing, and maintaining the effective
workforce necessary to achieve a

firm’s objectives.

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 Figure 19.1 The International Human
Resource Management Process

HRM’s Strategic Content

Recruitment and Selection

Training and Development

Performance Appraisal

Compensation and Benefits

Labor Relations

Contribution to Organizational Effectiveness

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 International Staffing Needs

Managerial/Executive
Employees

Nonmanagerial
Employees

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 Scope of Internationalization

Export Department

International Division

Global Organization

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 Expertise Needs in Global Organizations

Product line

Functional skills

Individual country markets

Global strategy

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 Centralization versus
Decentralization of Control

• Centralized firms
– Favor home country managers
– Most common amongst international
division form
• Decentralized firms
– Favor host country managers
– Most common amongst
multidomestic firms
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 Staffing Philosophy

Parent
Country Nationals
(PCNs)

Host Country Third Country

Nationals Nationals
(HCNs) (TCNs)

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 Strategies for Staffing

• Ethnocentric staffing model

• Polycentric staffing model
• Geocentric staffing model

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 Figure 19.2 Necessary Skills and Abilities
for International Managers

Skills and Abilities Skills and Abilities

Necessary to Do Necessary to Work
the Job in a Foreign Location
•Technical •Adaptability
•Functional •Location-specific skills
•Managerial •Personal characteristics

Improved Chances of Succeeding in

an International Job Assignment

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 Recruitment of Managers

Experienced Younger
Managers Managers

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 Selecting expatriates is an important
element in international HRM.

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 Selection of Managers

Managerial competence

Appropriate training

Adaptability to new situations

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Table 19.1 Questions from AT&T’s Questionnaire
for Screening Overseas Transferees 1

• Would your spouse be interrupting a

career to accompany you on an
international assignment? If so, how do
you think this will affect your spouse and
your relationship with each other?
• Do you enjoy the challenge of making
your own way in new situations?
• Securing a job upon reentry will be
primarily your responsibility. How do you
feel about networking and being your
own advocate?
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 Table 19.1 Questions from AT&T’s Questionnaire
for Screening Overseas Transferees 2

• How important is it for you to spend

significant amounts of time with people of
your own ethnic, racial, religious, and
national background?
• As you look at your personal history, can
you isolate any episodes that indicate a
real interest in learning about other
peoples and cultures?

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Table 19.1 Questions from AT&T’s Questionnaire
for Screening Overseas Transferees 3

• How able are you in initiating new social

contacts?
• Can you imagine living without a
television?
• Has it been your habit to vacation in
foreign countries?
• Do you enjoy sampling foreign cuisine?
• What is your tolerance for waiting for
repairs?

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 Culture Shock

Culture shock is a psychological

phenomenon that may lead to feelings of
fear, helplessness, irritability, and
disorientation, which is commonly
experienced by new expatriates who may
experience a sense of loss regarding their
old cultural environment as well as
confusion, rejection, self-doubt, and
decreased self-esteem from working in a
new and unfamiliar cultural setting.
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 Figure 19.3 Phases in Acculturation

Honeymoon

Disillusionment

Adaptation

Biculturalism

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 Honeymoon Phase

• New culture seems exotic and

stimulating
• Excitement of working in new
environment makes employee
overestimate ease of adjusting
• Lasts for first few days or months

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 Disillusionment Phase

• Differences between new and old

environments are blown out of
proportion
• Challenges of everyday living
• Many stay stuck in this phase

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 Adaptation Phase

• Employee begins to understand

patterns of new culture
• Gains language competence
• Adjusts to everyday living

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 Biculturalism

• Anxiety has ended

• Employee gains confidence in ability
to function productively in new
culture
• Repatriation may be difficult

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 Overseas Success

• Likelihood of managers being

successful at overseas assignment
increases if the managers:
– Can freely choose whether to accept or reject the
assignment
– Have been given a realistic preview of the job and
assignment
– Have been given a realistic expectation of what
their repatriation assignment will be
– Have a mentor back home who will guard their
interests and provide support
– See a clear link between the expatriate assignment
and their long-term career path
19-25
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 Overseas Success

The U.S. military makes sure that its

members have “reminders” from home on
foreign deployments

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 Training and Development

• Assessing training needs

• Basic training methods
– Standardized
– Customized

• Developing younger managers

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 Figure 19.4 Barriers to Entering
Foreign Markets

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 Performance Appraisal

Performance Appraisal
is the process of assessing
how effectively people are performing their
jobs.

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 Functions of Performance Appraisals

To provide feedback to individuals

about how well they are doing

To provide a basis for rewarding top performers

To identify areas in which additional

training and development may be needed

To identify problem areas

that may call for a change in assignment
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 Compensation Packages

Cost-of-living allowance

Hardship premium

Tax equalization system

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 Figure 19.5 Global
Cost of Living Survey 2008

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 Components of Compensation Packages

Labor
Tax Codes Market Forces

Occupational
Government
Status
Regulations

Professional
Standards of Licensing
Living Requirements

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 Figure 19.6 An Expatriate Balance Sheet

Foreign and Foreign Service

Excess Foreign Costs Premium/ Hardship
Excess U.S. Taxes
Paid by Company Added by Company
Paid by Company

U.S. Domestic Base Salary

Taxes Consumption Savings

U.S. Spendable
U.S. Hypothetical Income
Tax and U.S. Hypothetical U.S. Levels
Social Security Housing and Utilities
U.S. Auto Purchase
19-34
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 Labor Relations

Comparative Labor Relations

Collective Bargaining

Union Influence and Codetermination

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photocopying, recording, or otherwise, without the prior
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Copyright © 2010 Pearson Education, Inc.

publishing as Prentice Hall