chapter twenty Human Resource Management Mc GrawHillIrwin International

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chapter twenty Human Resource Management Mc. Graw-Hill/Irwin International Business, 11/e Copyright © 2008 The

chapter twenty Human Resource Management Mc. Graw-Hill/Irwin International Business, 11/e Copyright © 2008 The Mc. Graw-Hill Companies, Inc. All rights reserved.

Learning Objectives § Discuss the importance of creating a company “global mindset” § Explain

Learning Objectives § Discuss the importance of creating a company “global mindset” § Explain the relationship between competitive strategies (international, multidomestic, regional, and transnational) and international HR management approaches (ethnocentric, polycentric, regiocentric, and global) § Compare home country, host country, and third country nationals as IC executives § Explain the difficulties of finding qualified executives for international companies (ICs) and the importance of foreign language knowledge 3

Learning Objectives § Explain what an expatriate is and the challenges of and opportunities

Learning Objectives § Explain what an expatriate is and the challenges of and opportunities of an expat position § Discuss the increasing importance of accommodating the trailing spouse of an expatriate executive § Identify some of the complications of compensation packages for expatriate executives 4

The Global Mindset • Expatriate – A person living outside citizenship country • Global

The Global Mindset • Expatriate – A person living outside citizenship country • Global Mind-set – A mind-set that combines an openness to and an awareness of diversity across markets and cultures with a propensity and ability to synthesize across this diversity 5

International HRM Approaches • Ethnocentric – Hiring and promoting employees on the basis of

International HRM Approaches • Ethnocentric – Hiring and promoting employees on the basis of parent company’s home country frame of reference • Polycentric – Hiring and promoting employees on the basis of specific local context of the subsidiary 6

International HRM Approaches • Regiocentric – Hiring and promoting employees on the basis of

International HRM Approaches • Regiocentric – Hiring and promoting employees on the basis of the specific regional context of the subsidiary • Geocentric – Hiring and promoting employees on the basis of ability and experience without considering race or citizenship 7

Strategic Approach, Organizational Concerns, and the International Human Resource Management Approach to Be Used

Strategic Approach, Organizational Concerns, and the International Human Resource Management Approach to Be Used 8

Recruitment, Selection and Training • Parent Country National (PCNs) or Home Country National -

Recruitment, Selection and Training • Parent Country National (PCNs) or Home Country National - Study of language and culture • Host Country National (HCN) – Hired in the host country • Third Country National 9

Recruitment, Selection and Training • Third Country National (TCN) – May accept lower wages

Recruitment, Selection and Training • Third Country National (TCN) – May accept lower wages and benefits than will employees from the home country – May also come from a culture similar to that of the host country – May have worked for another unit of the IC and be familiar with policies, procedures and people – Common approach in developing countries – May not be welcome by host country – May come from an international agency – Greater use as companies take geocentric view 10

Expatriates • Family – Nine of ten expatriate failures family-related – Unhappy spouses major

Expatriates • Family – Nine of ten expatriate failures family-related – Unhappy spouses major reason for early return – Company losing a “million-dollar corporate-training investment” in executive 11

Language Training • Language Trap – International business person speaks only home language –

Language Training • Language Trap – International business person speaks only home language – English language has become lingua franca – Chinese new “hot” language to know 12

Expatriate Services • Health care programs to assist companies and expatriates with – Claims

Expatriate Services • Health care programs to assist companies and expatriates with – Claims administration – Language – Translations – Currency conversions – Service standardization – www. Expat. Expert. com – www. branchor. com 13

Expatriate Services • Banking services – Online, 24 -hour assistance • Training – Culture

Expatriate Services • Banking services – Online, 24 -hour assistance • Training – Culture and language • House hunting, utilities hook up, grocery and hardware shopping, long-distance care for relatives, schools, organizations, and cultural items 14

Compensation §Salaries § Paying home country nationals the same salaries as their domestic counterparts

Compensation §Salaries § Paying home country nationals the same salaries as their domestic counterparts §permits worldwide consistency §bonuses § Increasing use of third country nationalsoften treated like PCNs § Trend to pay HCNs same base 15

Total compensation Costs for Sending an Expatriate American Manager to Russia 16

Total compensation Costs for Sending an Expatriate American Manager to Russia 16

Allowances • Housing Allowance – Permits executive to live at same standard as at

Allowances • Housing Allowance – Permits executive to live at same standard as at home • Cost-of-Living Allowance – Based on differences in price of food, utilities, transportation, entertainment, clothing, personal services, and medical expenses as compared to home • Allowances for Tax Differentials – Ensures expatriates will not have less after-tax pay at home 17

Allowances • Education Allowances – Insures children receive education equal to that at home

Allowances • Education Allowances – Insures children receive education equal to that at home • Moving and Orientation Allowances – Household effects and language instruction 18

Ranking of 50 Cities from Most to Least Expensive, 2006 19

Ranking of 50 Cities from Most to Least Expensive, 2006 19

Bonuses • Bonuses – Expatriate employee compensation payments in addition to base salary and

Bonuses • Bonuses – Expatriate employee compensation payments in addition to base salary and allowances because of hardship, inconvenience, or danger – Bonuses include • Overseas premiums • Contract termination payments • Home leave reimbursement 20

Compensation Packages • For expatriate employees, packages incorporate many types of payments or reimbursements

Compensation Packages • For expatriate employees, packages incorporate many types of payments or reimbursements and must take into consideration exchange rates and inflation 21

Hardship Differential Pay Premiums for Selected Cities and Countries, 2006 22

Hardship Differential Pay Premiums for Selected Cities and Countries, 2006 22

Compensation Packages Can Be Complicated • Allowances and percentage of base salary are usually

Compensation Packages Can Be Complicated • Allowances and percentage of base salary are usually paid in host country currency – Percentage usually 65 to 75 percent, with remainder banked where employee directs • What Exchange Rate? – Must be chosen – More difficult in countries with exchange controls and nonconvertible currencies 23

Compensation of Third Country Nationals • Trend toward applying the same compensation plan to

Compensation of Third Country Nationals • Trend toward applying the same compensation plan to third country nationals as home country expatriates • Problems can arise in – The calculation of income tax differential when American expatriate compared with expatriate from another country – Home leave bonus 24

International Status • Entitles expatriate employee to allowances and bonuses applicable to the place

International Status • Entitles expatriate employee to allowances and bonuses applicable to the place of residence and employment • Perks – Compensate executives while minimizing taxes • Private pension plan • Retirement payment • Life Insurance • Hidden slush funds (can be illegal) • Club membership • Company house • Foreign affiliate directorship 25