Chapter Eighteen Global Human Resource Management 18 3
Chapter Eighteen • Global Human Resource Management
18 - 3 Human Resource Management (HRM) • Refers to the activities an organization carries out to use its human resources effectively • Four major tasks of HRM - Staffing policy Management training and development Performance appraisal Compensation policy Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 4 International Human Resource Management • Strategic role: HRM policies should be congruent with the firm’s strategy and its formal and informal structure and controls • Task complicated by profound differences between countries in labor markets, culture, legal, and economic systems Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 5 International Human Resource Management Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 6 Staffing Policy • Staffing policy - Selecting individuals with requisite skills to do a particular job - Tool for developing and promoting corporate culture • Types of Staffing Policy - Ethnocentric - Polycentric - Geocentric Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 7 Ethnocentric Policy • Key management positions filled by parent-country nationals • Best suited to international businesses • Advantages: - Overcomes lack of qualified managers in host nation - Unified culture - Helps transfer core competencies • Disadvantages: - Produces resentment in host country - Can lead to cultural myopia Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 8 Polycentric Policy • • Host-country nationals manage subsidiaries Parent company nationals hold key headquarter positions Best suited to multi-domestic businesses Advantages: - Alleviates cultural myopia - Inexpensive to implement - Helps transfer core competencies • Disadvantages: - Limits opportunity to gain experience of host country nationals outside their own country - Can create gap between home and host country operations Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 9 Geocentric Policy • Seek best people, regardless of nationality • Best suited to global and trans-national businesses • Advantages: - Enables the firm to make best use of its human resources - Equips executives to work in a number of cultures - Helps build strong unifying culture and informal management network • Disadvantages: - National immigration policies may limit implementation - Expensive to implement due to training and relocation - Compensation structure can be a problem Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 10 Comparison of Staffing Approaches Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 11 The Expatriate Problem • Expatriate: citizens of one country working in another - Expatriate failure: premature return of the expatriate manager to his/her home country • Cost of failure is high: estimate = 3 X the expatriate’s annual salary plus the cost of relocation (impacted by currency exchange rates and assignment location) • Inpatriates: expatriates who are citizens of a foreign country working in the home country of their multinational employer Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 12 Reasons for Expatriate Failure • US multinationals - Inability of spouse to adjust Manager’s inability to adjust Other family problems Manager’s personal or emotional immaturity - Inability to cope with larger overseas responsibilities • European multinationals • Inability of spouse to adjust Mc. Graw-Hill/Irwin International Business, 6/e • Japanese Firms - Inability to cope with larger overseas responsibilities - Difficulties with the new environment - Personal or emotional problems - Lack of technical competence - Inability of spouse to adjust © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 13 Expatriate Failure Rate Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 14 Expatriate Selection • Reduce expatriate failure rates by improving selection procedures • An executive’s domestic performance does not (necessarily) equate to his/her overseas performance potential • Employees need to be selected not solely on technical expertise, but also on cross-cultural fluency Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 15 Four Attributes that Predict Success • Self-Orientation - Possessing high self-esteem, self-confidence and mental well-being • Others-Orientation - Ability to develop relationships with host country nationals - Willingness to communicate Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 16 Four Attributes that Predict Success • Perceptual Ability - The ability to understand why people of other countries behave the way they do - Being nonjudgmental and flexible in management style • Cultural Toughness - Relationship between country of assignment and the expatriate’s adjustment to it Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 17 Training and Management Development • Training: Obtaining skills for a particular foreign posting - Cultural training: Seeks to foster an appreciation of the host country’s culture - Language training: Can improve expatriate’s effectiveness, aids in relating more easily to foreign culture, and fosters a better firm image - Practical training: Ease into day-to-day life of the host country Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 18 Training and Management Development • Development: Broader concept involving developing manager’s skills over his or her career with the firm - Several foreign postings over a number of years - Attend management education programs at regular intervals Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 19 Repatriation of Expatriates • A critical issue in the training and development of expatriate managers is preparing them for reentry into their home country • Repatriation should be seen as the final link in an integrated, circular process that selects, trains, sends, and brings home expatriate managers • Research shows that there is a problem with the repatriation process Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 20 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 Mc. Graw-Hill/Irwin International Business, 6/e 20 30 40 percent 50 60 70 © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 21 Management Development and Strategy • Development programs designed to increase the overall skill levels of managers through: - Ongoing management education - Rotation of managers through a number of jobs within the firm to give broad range of experiences • Used as a strategic tool to build a strong unifying culture and informal management network • Above techniques support transnational and global strategies Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 22 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 evaluate and under-appreciate them • In a survey of personnel managers in U. S. multinationals, 56% stated foreign assignment either detrimental or immaterial to one’s career Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 23 Guidelines for Performance Appraisal • More weight should be given to on-site manager’s evaluation as they are able to recognize the soft variables • Expatriate who worked in same location should assist home-office manager with evaluation • If foreign on-site managers prepare an evaluation, home-office manager should be consulted before completion of formal evaluation Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 24 Compensation • Two issues: - Pay executives in different countries according to the standards in each country or equalize pay on a global basis - Method of payment Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 25 Compensation in Various Countries Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 26 Expatriate Pay • Typically use balance sheet approach - Equalizes purchasing power to maintain same standard of living across countries - Provides financial incentives to offset qualitative differences between assignment locations Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 27 Components of Expatriate Pay • Base Salary - Same range as a similar position in the home country • Foreign service premium - Extra pay for work outside country of origin • Allowances - Hardship, housing, cost-of-living, and education allowances • Taxation - Firm pays expatriate’s income tax in the host country • Benefits - Level of medical and pension benefits identical overseas Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 28 The Balance Sheet Approach Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 29 International Labor Relations • Key Issue - Degree to which organized labor can limit the choices of an international business • Aims to foster harmony and minimize conflicts between firms and organized labor Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 30 Concerns of Organized Labor • Multinational can counter union bargaining power with threats to move production to another country • Multinational will keep highly skilled tasks in its home country and farm out only low-skilled tasks to foreign plants - Easy to switch locations if economic conditions warrant - Bargaining power of organized labor is reduced • Attempts to import employment practices and contractual agreements from multinational’s home country Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 31 Strategy of Organized Labor • Attempts to establish international labor organizations • Lobby for national legislation to restrict multinationals • Attempts to achieve international regulations on multinationals through such organizations as the United Nations Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
18 - 32 Looking Ahead to Chapter 19 • Accounting in the International Business - Country Differences in Accounting Standards National and International Standards Multinational Consolidation and Currency Translation Accounting Aspects of Control Systems Mc. Graw-Hill/Irwin International Business, 6/e © 2007 The Mc. Graw-Hill Companies, Inc. , All Rights Reserved.
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