Chapter 12 Human Resource Management

1. Chapter 12 Human Resource Management

2. CHAPTER 12HUMAN RESOURCE MANAGEMENT

3. Learning Objectives • After studying this chapter, you should be able to explain: • The role of human resources management in international business • The major functions of human resources • Problems and solutions in international postings—the expatriate dilemma

4. The Importance of International HRM • A firm must have effective human resources management to ensure that the right people with the right skills are available and turnover is minimized. • This is especially true for an expatriate, who is an individual sent to a foreign location from the firm’s home market.

5. The Importance of International HRM • Maintaining an expatriate employee in a foreign location is expensive, the costs involve relocation costs, training costs, educational costs, and ensuring that compensation is tax neutral. • Tax neutral ensures that an expatriate does not pay more tax by being posted abroad. • Failure in assignments also involve additional costs, such as lost productivity at foreign location, new recruiting, training, traveling costs, and other expenses associated with employee turnover.

6. Human Resources Management Functions • HRM functions include selection, training and development, appraisal and compensation, and socialization • Selection • The three common methods are interviews, observation, and written tests. • Single individual interviews are a common selection method; however, multiple individual interviews are an effective method of selection. • Multiple interviews are commonly used for higher-level and professional jobs including expatriate positions.

7. Human Resources Management Functions • Selection (cont.): • Group interview is a selection tool in which there are multiple candidates and multiple interviewers present at the same time. • It emphasizes on how the candidate responds to real situations and how they cooperate with others. • Group interviews are often employed for filling midlevel and lower-level positions.

8. Human Resources Management Functions • Selection (cont.): • Observation method involves monitoring the prospective employee interacting with colleagues, giving a presentation, or actually performing a job. • This method is more common in research, engineering, professional organizations, governments, and universities, and is particularly helpful in selecting individuals for overseas assignments.

9. Human Resources Management Functions • Selection (cont.): • The different written test methods include Structured Questionnaire method, intelligence (IQ) tests, integrity tests, cultural toughness, and cultural intelligence test (CQ). • Cultural-toughness assesses whether a candidate appears competent to work in a specific country. • Cultural intelligence test (CQ) evaluates a person’s ability in a cross-cultural setting.

10. Human Resources Management Functions • Overview of selection methods • The use and acceptance of selection methods/devices vary around the world • Determining adaptability: • Work experiences with cultures other than one’s own, previous overseas travel, a knowledge of foreign languages, and recent immigration background or heritage. • The ability to integrate with different people, cultures, and types of business organizations. • The ability to sense developments in the host country, and the ability to solve problems within different frameworks and from different perspectives.

11. Human Resources Management Functions • Overview of selection methods • Determining adaptability (cont.): • Sensitivity to differences and nuances in culture, politics, religion, and ethics. • Flexibility in managing operations on a continuous basis despite a lack of assistance and gaps in information.

12. Human Resources Management Functions • Overview of selection methods (cont.): • The education, age, and experience are important aspects in identifying individuals who would be best suited for an international assignment. • Other aspects include reporting relationships, specific responsibilities, authority, necessary connections, and professional judgment.

13. Human Resources Management Functions • Overview of selection methods (cont.): • Language training is very important, and is an effective method of learning about a country and its customs. • While evaluating candidates for overseas assignments, a firm should consider employee’s reasons for wanting to work abroad.

14. Human Resources Management Functions • Advantages of utilizing expatriates for foreign assignments: • Familiarity with the company’s resources, processes, and values. • Knowledge of the firm’s management processes and culture • Detailed knowledge of company policies, procedures, and corporate culture • Maintain a ‘‘foreign image’’ in the host country and enhance its legitimacy. • May improve marketing and open doors for firm. • Having extra expertise, different background and experience than locals • Loyalty to the firm. • Expat is often highly loyal and has many connections within it. • Provide credibilty at HQ when expat conveys information from foreign market

15. Human Resources Management Functions • Disadvantages of utilizing expatriates for foreign assignments: • Expatriates are expensive, as it involves costs such as compensation package, training cost, and replacement costs. • Lack of motivation to learn the new culture and adapt to it. • Miscommunication is common.

16. Human Resources Management Functions • Advantages of utilizing host-country employees for foreign assignments: • Familiarity with the local language, culture, and customs, thus saving on training in language proficiency or acculturation. • Extensive tacit knowledge about how things are done in that country and region. • Local employee’s tacit understanding of the business situation. • Enhancement of company’s reputation in the host country.

17. Human Resources Management Functions • Disadvantages of utilizing host-country employees for foreign assignments: • Difficulty finding qualified people. • Loyalty may interfere with company policies. • Lack of understanding of the international company’s culture and processes.

18. Human Resources Management Functions • Training • A corporation-run training program is important in preparing expatriate executives for a specific region. • Teaching about the region’s language, recent history, culture, and technical shortcomings in the region are essential.

19. Human Resources Management Functions • Appraisal and compensation • Performance appraisal is a systematic and periodic review of employee performance. • The basic purpose of employee evaluation is to build better-performing organizations and to aid in the professional development of employees. • There are several types of performance appraisal.

20. Human Resources Management Functions • Appraisal and compensation (cont.): • The written essay method of employee evaluation requires the manager to provide a subjective assessment of the employee’s performance. • This method does not provide reliable feedback on performance.

21. Human Resources Management Functions • Appraisal and compensation (cont.): • The trait rating appraisal method requires the manager to assign numerical or descriptive rating on a list of personality traits and job attitude. • This approach is too open for favoritism. • 360 degree evaluations involve appraisals by the supervisor, coworkers, subordinates, and even customers to increase the reliability on evaluations.

22. Human Resources Management Functions • Appraisal and compensation (cont.): • The critical incident approach focuses on those tasks and behaviors that are key in making the difference between executing a job effectively and ineffectively. • The method works well with jobs that are otherwise difficult to quantify.

23. Human Resources Management Functions • Appraisal and compensation (cont.): • The behaviorally anchored rating scales (BARS) use the constituents of critical incidents along with graphic rating scales. • It uses careful job analysis to determine the behaviors required for a particular job. • This method works well when a job’s tasks are well understood and performance can be measured in quantitative terms.

24. Human Resources Management Functions • Appraisal and compensation (cont.): • The managing by objective (MBO) approach involves management and employees agreeing to key goals and ways in which they can be reached. • This approach leads to unethical behavior to meet goals, overly narrow bottom-line mindsets, and prevents innovation and long term thinking.

25. Human Resources Management Functions • Additional organizational applications • The system of employee differentiation, popularized by Jack Welch, “force ranks” employees into three categories based on vitality curve. • This method forces managers to write a frank appraisal that help employees who are not performing well.

26. Human Resources Management Functions • Additional organizational applications (cont.): • For the system to be effective, the objective needs to be specified by the organization and communicated to employees. • Critics state that this system disrupts team work and innovation, and is not suited for egalitarian or collective societies.

27. Human Resources Management Functions • Additional organizational applications (cont.): • According to W. Edwards Deming, performance reviews should be held regularly, and feedback should be provided either in verbal or written form.

28. Human Resources Management Functions • Compensation • The compensation decision involves establishing an overall policy for all employees or distinguishing among home-country nationals, host-country locals, and third-country nationals. • The selected compensation approach should not demoralize the foreign subsidiary’s staff. • The nature of job is important in formulating the compensation system.

29. Human Resources Management Functions • Compensation (cont.) • The objectives of compensation policies include: • The compensation policy should be consistent and fair in its treatment of all categories of expatriate employees. • The policy must work to attract and retain expatriates in the areas where the corporation has the greatest need.

30. Human Resources Management Functions • Compensation (cont.): • Base salary is the amount of money that an expatriate normally receives in the home country. • Base pay also serves as the benchmark for calculating bonuses and benefits. • A firm’s compensation package must consider how specific compensation practices can be adjusted in each country to provide the most tax-effective, appropriate rewards for expatriate, host-country, and third-country managers.

31. Socialization • The socialization function has two parts - socialization of local hires into the company culture and acculturation of the expatriate to the local environment. • Socialization of local hires into the company culture occurs with careful selection and training.

32. Additional Challenges Facing Expatriates in International Postings • Physical environment – Includes aspects such as geographical distance, food, and weather. • Social environment – Includes aspect such as language, which might hamper an expatriates effectiveness.

33. Additional Challenges Facing Expatriates in International Postings • Lack of adequate training for foreign assignments – Adoption of rigorous training programs can significantly improve expatriate performance in an overseas environment.

34. Additional Challenges Facing Expatriates in International Postings • Communication challenges – Firms must coach expatriates on communication and speaking style to make their communication appropriate and easily understandable. • Technical sophistication - Differences in technical sophistication may make implementation of a new technology or technique more difficult.

35. Additional Challenges Facing Expatriates in International Postings • Parent objectives and policies • Family • Other socio-cultural issues • Repatriation