Chapter 9 Staffing Training and Compensation for Global

Chapter Learning Goals 1. Understand the strategic importance to the firm of the IHRM function and its various responsibilities. 2. Learn about the major staffing options for global operations and the factors involved in those choices. 3. To appreciate the challenges involved in staffing operations in emerging market countries 9 -2 Copyright © 2014 Pearson Education, Inc.

Chapter Learning Goals 4. Emphasize the need for managing the performance of expatriates through careful selection, training, and compensation. 5. Discuss the role of host country managers and the need for their training and appropriate compensation package. 6. Distinguish among various IHRM practices around the world. 9 -3 Copyright © 2014 Pearson Education, Inc.

Opening Profile: Staffing Company Operations in Emerging Markets BRIC Countries 9 -4 Copyright © 2014 Pearson Education, Inc. Many are simply not at the skill level required by foreign companie s BRIC Need for up to 75000 business leaders, but 3000– 5000 may be available BRIC Have outpaced the supply of mid and upper -level managem ent

Chapter Learning Goals Understand the strategic importance to the firm of the IHRM function

Opening Profile: BRIC—The Shortage of Mid/Upper-Level Managers 9 -6 Copyright © 2014 Pearson Education, Inc. Severe deficit at all levels of managem ent China Deficit starting at the middle level. Also, dealing with the “brain drain” India Deficit at all managem ent levels Russia Brazil Deficit at upperlevel managem ent

Opening Profile: What Attracts the Potential Recruits in Emerging Markets? • A global “name brand” known for its Bran excellence d Purpos e 9 -7 • A company that is breaking into new markets, with new models and strategy Opportunit y • A company that provides a fast-track training and career path Culture • An organizational culture of openness and transparency Copyright © 2014 Pearson Education, Inc.

Major Challenges in IHRM 1. 2. 3. 4. 5. 9 -8 Enhancing global business strategy Aligning HR issues with business strategy Designing and leading change Building global corporate cultures Staffing organizations with global leaders Copyright © 2014 Pearson Education, Inc.

IHRM Functions Recruitment and selection Management of expatriates Training and development Compensation and performance

Chapter Learning Goals Learn about the major staffing options for global operations and the

Staffing for Global Operations Ethnocentric Approach Used at internationalization stage of strategic expansion, with centralized structure Parent-country nationals (PCNs) 9 -11 Copyright © 2014 Pearson Education, Inc. Polycentric Approach Often used with multinational strategy Host-country nationals (HCNs)

Staffing for Global Operations Global Staffing Approach Third country nationals (TCNs) Transpatriates Inpatriates: managers with global experience who are transferred to the organization’s headquarters country 9 -12 Copyright © 2014 Pearson Education, Inc. Regiocentric Approach Can produce a mix of PCNs, HCNs, and TCNs

Strategic Mode, Organizational Variables, and Staffing Orientation Aspect of enterprise Ethnocentric Strategic orientation International Multidomestic Regional Transnational Perpetuation Expatriates used for key positions Locals used for key positions locally Regional people used regionally Best people used anywhere Home standards applied Determined locally Determined regionally Globally integrated Wide variation Based on contribution to regional objectives Based on contribution to local and worldwide objectives Evaluation and control Rewards 9 -10 High at home; low in subsidiaries Copyright © 2014 Pearson Education, Inc. Polycentric Regiocentric Global

Chapter Learning Goals To appreciate the challenges involved in staffing operations in emerging market

MNC Staffing Most MNCs start from their own pool of managers polycentric or regiocentric policy: Increasing pressure from local governments to hire locals The greater cost of expatriate staffing Improvement in managerial and technical competence “all things being equal, a local national who speaks the language, understands the culture and the political system, and is often a member of the local elite should be more effective than an expatriate alien” 9 -15 Copyright © 2014 Pearson Education, Inc.

Global Mind-set Attributes for Successful Expatriates Intellectual capital Psychological capital Social capital 9 -16

Chapter Learning Goals Emphasize the need for managing the performance of expatriates through careful

Managing Expatriates: Selection Job factor s Motivationa l state Success categories Langua ge skills

Managing Expatriates: Selection High toleranc e for stress Less on domestic experience, gender, int’l

Expatriates Performance Management Selection based on headquarters criteria Inadequate preparation, training, orientation Alienation or poor support from headquarters Inability to adapt to the local culture 9 -20 Copyright © 2014 Pearson Education, Inc.

Expatriates Performance Management Problems with spouse and children Insufficient compensation and financial support Poor programs for career support and repatriation 9 -21 Copyright © 2014 Pearson Education, Inc.

Expatriate Training and Development • Eating duck tongue and pigeon Chin head a Braz • Home phones don’t work il • Pervasive poverty India Indones ia • Rent paid 2– 3 years in advance Japa • Doctors reveal little to patients n 9 -22 Copyright © 2014 Pearson Education, Inc.

Expatriate Training and Development Japanese Expatriate Planning 9 -23 Copyright © 2014 Pearson Education, Inc. • Selection based on long-term knowledge of executives and their families • Use of longer assignments (e. g. , 5 years) • Extensive headquarters support

IHRM Process to Maximize Effectiveness of Expatriate Assignments Evaluate potential problems. Select expatriates. Develop contracts. Repatriate after successful assignment. Evaluate effectiveness and problems. Assess development and support needs. Integrate value-added to firm. Debrief expatriate and family. To improve IHRM process 9 -24 Copyright © 2014 Pearson Education, Inc.

Cross-Cultural Training 9 -25 Culture Shock • A state of disorientation and anxiety about not knowing how to behave in an unfamiliar culture • The goal of training is to ease the adjustment to the new environment Subcultu re Shock • When a manager is transferred to another part of the country, where there are cultural differences • The “shock” comes from feeling like an “immigrant” in one’s own country Copyright © 2014 Pearson Education, Inc.

Culture Shock 1. Honeymoon 2. Irritation and hostility 3. Gradual adjustment 4. Biculturalism 9

Training Techniques Area studies Culture assimilators Language training Sensitivity training Field experiences Host-family surrogate

Corporate Programs to Develop Global Managers ABB rotates 500 managers to different countries every 2– 3 years. Pepsi brings foreign managers to the United States for one-year assignments. British Telecom uses informal mentoring between expatriates and potential assignees. 9 -28 Copyright © 2014 Pearson Education, Inc.

Integrating Training with Global Orientation Export Stage Training need: low to moderate Content: interpersonal skills, culture, customer values, business behavior HCNs: train to understand parent-country products and policies 9 -29 Copyright © 2014 Pearson Education, Inc. Multidomestic Stage Training need: moderate to high Content: interpersonal skills, culture, technology transfer, business practices and laws HCNs: familiarize with production and service procedures

Integrating Training with Global Orientation Multinational Stage Training need: high moderate to high Content: interpersonal skills, two-way technology transfer, corporate value transfer, strategy, stress management, culture, business practices HCNs: training in technical areas, products and services, corporate culture 9 -30 Copyright © 2014 Pearson Education, Inc. Global Stage Training need: high Content: global corporate operations, corporate culture transfer, customers, global competitors, strategy HCNs: training in proficiency in production and efficiency systems, corporate culture, business systems, global conduct policies

Factors that Influence the Integration of Expatriates with Local Staff Facilitates Integration 9 -31 Hinders Integration Forming close working Not using team concept relationships Learning local language Transferring technical/business knowledge Cultural adaptability Respect Not learning local Copyright © 2014 Pearson Education, Inc. language HQ mentality Spouse/family adjustment problems Being autocratic Limited time in assignment

Chapter Learning Goals Discuss the role of host country managers and the need for

Compensating Expatriates Du. Pont’s Global Transfer Center of Expertise creates perceptions of equity and goodwill. Companies are looking for ways to cut the costs of expatriate assignments. The need to reconcile parent- and host-country practices adds complexity. 9 -33 Copyright © 2014 Pearson Education, Inc. The balance sheet approach Tax equalization Components of the compensation package: salary, taxes, allowance, benefits

Components of the Compensation Package 9 -34 Salary Taxes Allowances Benefits • Local salary buying power vs. home salary • Equalize any differential effects of taxes • Relocation expenses, housing, trips home… • Health insurance, stock options Copyright © 2014 Pearson Education, Inc.

Exhibit 9 -10 9 -35 Copyright © 2014 Pearson Education, Inc.

Chapter Learning Goals Distinguish among various IHRM practices around the world. 9 -36 Copyright

Training HCNs Facilitates indigenization Links successful corporate culture and local culture Facilitates e-business adoption

Management Focus: Success! Starbucks’ Java Style in Beijing Challenges: recruiting, motivating, and retaining Beijing managers Chinese recruits want training and advancement opportunities more than money. 9 -38 Copyright © 2014 Pearson Education, Inc.

Management Focus: Success! Starbucks’ Java Style in Beijing Recruits are trained in management and in Starbucks’ culture Three months in Seattle Make coffees in a real store Training, and resulting trust and participation, also serve as motivators 9 -39 Copyright © 2014 Pearson Education, Inc.

Compensating HCNs Eastern Europeans require more cash than Americans. Compensation in Japan is becoming more Westernized. In Latin America an employees pay and title are associated with type of car. 9 -40 Copyright © 2014 Pearson Education, Inc.

Comparative Management in Focus: Compensation 9 -41 “Best Practices” Regional Clusters Country Specific Incentives not too large, pay based on individual performance, reduce seniority pay Asian and Latin countries use more seniority pay, group/team pay, and pay for future goals United States uses less incentives than expected, China and Taiwan use more Copyright © 2014 Pearson Education, Inc.

Comparative Management in Focus: Selection “Best Practices” Regional Clusters Anglo cluster focuses on technical skill, “Getting along with others” and work “Fit with experience; corporate Korea, Japan, values” and Taiwan deemphasize work experience 9 -42 Copyright © 2014 Pearson Education, Inc. Country Specific Japan looks at a person’s potential; Korea relies on employment tests; Taiwan relies on interviews

Conclusion Global HR management = vital component of global strategy Strategies = ethnocentric, polycentric, regiocentric, and global Many causes of ex-pat failure: inadequate preparation, inability to adapt, lack of HQ support for repatriation, etc. Cultural training, language instruction, familiarity with everyday matters training is needed Compensation must be carefully designed 9 -43 Copyright © 2014 Pearson Education, Inc.

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