International Human Resources Management Chapter 17 Why IHRM

International Human Resources Management Chapter 17

Why IHRM? �Should we staff the local offices abroad with local or Bangladeshi managers? �How should we appraise or pay local employees? �How should we identify and get right talent and skills? �How should we deal with the unions in our offices abroad?

Factors Affecting IHRM � Cultural Factors - Countries differ widely in their cultures � Hofstede's cultural dimensions theory is a framework for cross- cultural communication, developed by Geert Hofstede. This theory presents 6 dimensions: - Power distance index (PDI): The power distance index is defined as “the extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally. ” - Individualism vs. collectivism (IDV): This indicates the “degree to which people in a society are integrated into groups. ” Individualistic societies have loose ties and its counterpart, collectivism, describes a society in which tightly-integrated relationships tie extended families and others into in-group. - Uncertainty avoidance index (UAI): The uncertainty avoidance index is defined as “a society's tolerance for ambiguity, ” in which people embrace or avert an event of something unexpected, unknown, or away from the status quo.

Factors Affecting IHRM (Cont’d) - Masculinity vs. femininity (MAS): In this dimension, masculinity is defined as “a preference in society for achievement, heroism, assertiveness and material rewards for success. ” Its counterpart represents “a preference for cooperation, modesty, caring for the weak and quality of life. ” - Long-term orientation vs. short-term orientation (LTO): This dimension associates the connection of the past with the current and future actions/challenges. A lower degree of this index (short-term) indicates that traditions are honored and kept, while steadfastness is valued. Societies with a high degree in this index (long-term) views adaptation and circumstantial, pragmatic problem-solving as a necessity. - Indulgence vs. restraint (IND): This dimension is essentially a measure of happiness; whether or not simple joys are fulfilled. Indulgence is defined as “a society that allows relatively free gratification of basic and natural human desires related to enjoying life and having fun. ” Its counterpart is defined as “a society that controls gratification of needs and regulates it by means of strict social norms. ”

Hofstede Cultural Dimension on Bangladesh

Factors Affecting IHRM (Cont’d) � Economic System - Different economic systems also translate into differences in human resources management policies - Some countries in the Euro Zone tend to put more restrictions on the number of hours an employee can legally work (e. g. Portuguese workers average about 1980 hours of work annually, while German workers average 1, 648 hours - Differences in labor costs are also significant. Hourly compensation for production workers range from $2. 75 in Mexico to $6. 43 in Taiwan, $23. 82 in the U. S, , $27. 10 in the UK and $34. 21 in Germany

Factors Affecting IHRM (Cont’d) � Legal, Political and Labor Relations Factors - It is very important to understand the laws prior to entering the foreign market - Think for a moment about the impact of local laws on Walmart while operating in Germany - Firing people in the UK could be very expensive as compared to U. S. - Some courtiers (e. g. Germany) are concerned with codetermination which means that employees have the legal right to a voice in setting company policies

Staffing in Global Organization � Host Country Nationals (HCNs)- they are citizens of the countries in which they are working � Parent Country Nationals (PCNs)- they are the citizens of the country in which the multinational company has its headquarters � Third Country Nationals (TCNs)- They are the citizens of a country other than the parent or the host country (e. g. a Bangladeshi executive working in Cardiff branch of a U. S. multinational bank

Staffing in Global Organization (Cont. ) �The org. is headquartered in Bangladesh with a foreign office in U. K. �U. K. to U. K. = Host Country Nationals, Bangladesh to UK = Parent Country Nationals, Finland to U. K. = Third Country Nationals Finland Third Countr y U. K. Host Country Banglades h Parent/Ho me Country with the HQ

Staffing in Global Organization (Cont. ) Internationals staffing choices can be divided into two broad categories: �Locals- Citizens of the country in which they are working (e. g. Host Country Nationals) �Expatriates (expats)- Noncitizens of the countries in which they are working (e. g. Parent Country Nationals, Third Country Nationals)

Using Locals � Many people are reluctant to work in a foreign country � The cost of using expropriates is far greater than the cost of using local workers � Generally expatriates are at the foreign country for only a few years and may overemphasize short-term results

Using Expats � Employers can’t find local candidates with the required skills and knowledge � Control is another reason for using expatriates. Companies might lose the control if they rely on the locals

Management Values and International Staffing Policy � Ethnocentric Practices �The notion that home-country attitudes, management style, knowledge, evaluation criteria, and managers are superior to anything the host country has to offer. � Polycentric Practices �A conscious belief that only the host-country managers can ever really understand the culture and behavior of the hostcountry market. Therefore, the foreign subsidiary should be managed by local people � Geocentric Practices �The belief that the firm’s whole management staff must be hired on a global basis, on the assumption that the best manager of a specific position anywhere may be in any of the countries in which the firm operates. �Sony appointed as CEO someone from Wales who would run the firm’s U. S. operations

Relationship between management values and staffing choices �Ethnocentric Practices = ? �Polycentric Practices = ? �Geocentric Practices = ?

Relationship between management values and staffing choices �Ethnocentric Practices = Parent Country Nationals (PCNs) �Polycentric Practices = Locals/HCNs �Geocentric Practices = HCNs/PCNs/TCNs

Why Expatriate Assignments Fail �Personality �Personal intentions �Family pressures �Inability of the spouse to adjust �Inability to cope with larger overseas responsibility. �Lack of cultural skills

Helping Expatriate Assignment Succeed �Careful adaptability screening �Providing realistic previews of what to expect �Improved orientation �Cultural and language training �Improved benefits packages

Selecting Expatriate Managers �Adaptability screening �Assessing the expat’s (and spouse’s) probable success in handling the foreign transfer. �Overseas Assignment Inventory �A test that identifies the characteristics and attitudes international assignment candidates should have.

I. Job Knowledge and Motivation Managerial ability Organizational ability Imagination Creativity Administrative skills Alertness Responsibility Industriousness Initiative and energy High motivation Frankness Belief in mission and job Perseverance II. Relational Skills Respect Courtesy and fact Display of respect Kindness Empathy Non-judgmentalness Integrity Confidence III. Flexibility/Adaptability Resourcefulness Ability to deal with stress Flexibility Emotional stability Willingness to change Tolerance for ambiguity Adaptability Independence Dependability Political sensitivity Positive self-image IV. Extracultural Openness Variety of outside interests Interest in foreign cultures Openness Knowledge of local language[s] Outgoingness and extroversion Overseas experience V. Family Situation Adaptability of spouse and family Spouse’s positive opinion Willingness of spouse to live abroad Stable marriage Five Factors Important in International Assignee Success, and Their Components

Selecting Expatriate Managers �Realistic previews �The problems to expect in the new job as well as about the cultural benefits and unconventional behavior of the country.

Orienting and Training for International Assignment �Training is needed on: �The impact of cultural differences on business outcomes. �How attitudes (both negative and positive) are formed and how they influence behavior. �Factual knowledge about the target country. �Language and adjustment and adaptation skills.

Appraising Expatriate Managers �Challenges in appraising overseas managers �Determining who should appraise the manager �Deciding on which factors to base the appraisal �Improving the expatriate appraisal process �Weigh the evaluation more toward the on-site manager’s appraisal than toward the home-site manager’s �If the home-office manager does the actual written appraisal, use a former expatriate from the same overseas location for advice �Stipulate the assignment’s difficulty level, and adapt the performance criteria to the situation

Compensating Expatriates �The “Balance Sheet Approach” �Home-country groups of expenses—income taxes, housing, goods and services, and discretionary expenses—are the focus of attention. �The employer estimates what each of these four expenses is in the expatriate’s home country, and what each will be in the host country. �The employer then pays any differences such as additional income taxes or housing expenses.

The Balance Sheet Approach Items Bangladesh UK Alloowances Basic Salary £ 24, 000 £ 0. 00 1. Housing & Utilities £ 7000 £ 24, 000 £ 17000 2. Goods & Services £ 2000 £ 6000 £ 4000 3. Taxes £ 4000 £ 7000 £ 3000 4. Discretionary Income £ 4000 £ 6000 £ 2000 Expenses: Total £ 26000

The Balance Sheet Approach (Cont. ) (Assumes Base Salary of $80, 000)

Incentives �Hardship allowances �Payments to compensate expatriates for exceptionally hard living and working conditions at certain foreign locations. �Mobility premiums �Lump-sum payments to reward employees for moving from one assignment to another. �Foreign service premiums �Financial payments over and above regular base pay, and typically range between 10% and 30% of base pay.

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