Fourth Edition

1. International Business Fourth Edition

2. CHAPTER 18 Global Human Resource Management

3. Chapter Focus • Look briefly at the strategic role of HRM. • Examine HRM’s four major tasks: • Staffing policy. • Management training and development. • Performance appraisal. • Compensation policy. • Tasks are complicated by: • Varying compensation policies among countries. • Labor laws may prohibit unions in one country and mandate them in another. • Equal employment legislation may be pursued in one country and not in another.

4. The Strategic Role of International HRM • Insure that HRM policies are congruent with the firm’s strategy, structure and controls.

5. International Strategy Structure Multidomestic International Global Transnational and Controls Centralization of operating decision Decentralized Core competency Some centralized Mixed centralized centralized and decentralized Rest decentralized Informal matrix Horizontal differentiation Worldwide area Worldwide Worldwide Informal matrix structure product division product division Need for coordination Low Moderate High Very high Integrating mechanisms None Few Many Very many Performance Ambiguity Low Moderate High Very high Need for cultural controls Low Moderate High Very high Strategy, Structure and Control Systems Table 18.1

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.

7. Polycentric Geocentric Ethnocentric Host-country nationals manage subsidiaries, parent company nationals hold key Headquarter positions Seek best people, regardless of nationality Key management positions filled by parent-country nationals Types of Staffing Policy

8. Approach Appropriateness Advantages Disadvantages Overcomes lack of Produces resentment Ethnocentric International host nation Unified culture Can lead to cultural myopia Helps transfer core competencies Polycentric Multidomestic myopiaIsolates headquarters implement subsidiaries Geocentric Global and efficiently policies may limit implementation Helps build strong culture and informal management network Expensive Comparison of Staffing Approaches Staffing Strategic qualified managers in host country Alleviates cultural Limits career mobility Inexpensive to from foreign Uses human resources National immigration Transnational Table 18.2

9. The Expatriate Problem • Citizens of one country working in another. • Inpatriates: expatriates who are citizens of a foreign country working working in the home country of their multinational employer. • Expatriate failure: • Premature return of the expatriate manager to his/her home country. • Cost of failure is high: • Estimate = 3X the expatriate’s annual salary plus the cost of relocation (impacted by currency exchange rates and assignment location).

10. Recall Rate Percent Percent of Companies US Multinationals 20 - 40% 7% 10 - 20% 69 < 10 24 European Multinationals 11 - 15% 3% 6 - 10 38 <5 59 Japanese Multinationals 11 - 19% 14% 6 - 10 10 <5 76 Expatriate Failure Rates Table 18.3

11. 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. 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. Reason for Expatriate Failure European Multinationals: Inability of spouse to adjust.

12. Expatriate Selection An executive’s domestic performance does not (necessarily) equate to his/her overseas performance. Mendenhall & Oddou Predictors of success: • Self-orientation: • Strengthen self-esteem, self-confidence and mental well-being. • Others-orientation: • Enhance ability to interact with host-country nationals. • Perceptual ability: • The ability to empathize - understand why people in host-country behave the way they do. • Cultural toughness: • How well an expatriate adjusts to a particular posting tends to be related to the country of assignment.

13. Training and Management Development Training: obtaining skills for a particular (foreign) posting. Development: develops manager’s skills over his/her career in the Firm.

14. 1. Culture 2. Language 3. Practical Training for Expatriate Managers • Cultural: • Seeks to foster an appreciation of the host-country’s culture. • Language: • Can improve expatriate’s effectiveness, relate more easily to culture and fostered a better firm image. • Practical: • Ease into day-to-day lifeof the host country. 18-9

15. 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 20 30 40 50 60 70 percent Repatriation of Expatriates

16. Management and Development Strategy • Programs designed to increase overall skill through mix of education and assignment rotations. • Provides varied experience. • Attempt to improve firm’s management productivity and quality. • Particularly true for transnational strategy. • Unifying corporate culture and management networks. • Socialize norms and value systems. • Foster esprit de corps. • Build informal networks • Strengthen identification with company.

17. 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 evaluates and appreciates them. • Many believe a foreign posting does not benefit their career.

18. More weight given to onsite manager’s evaluation. Expat who worked in same location should assist home-office manager with evaluation. If foreign on-site manager preparing evaluation, home-office manager should be consulted before finalization. Guidelines for Performance Appraisal

19. Compensation • Two issues: • How to adjust compensation to reflect national differences in economic circumstances and compensation practices. • How expatriate managers should be paid.

20. National Differences in Compensation

21. Compensation Issues

22. Expatriate Pay • Typically use balance sheet approach. • Equalizes purchasing power across countries. • Provides financial incentives to offset qualitative differences between assignment locations. • Components of a typical expatriate compensation package include: • Base salary. • Foreign service premium. • Various allowances. • Tax differentials. • Benefits.

23. Home and Host-Country Income Taxes Income Taxes Premiums and Incentives Housing Income Taxes Income Taxes Housing Goods and Services Housing Housing Goods and Services Goods and Services Goods and Services Reserve Reserve Reserve Reserve Home-Country Salary Host-Country Costs Host-Country Costs Paid by Company and from Salary Home- Country Equivalent Purchasing Power Additional Costs Paid by Company A Typical Balance Sheet Figure 18.1

24. International Labor Relations • Foster harmony and minimize conflict between the firm and organized labor. • Key issue: degree to which organized labor can limit the choices of an international business.

25. Concerns of Organized Labor • Firms can counter bargaining power by threatening to move production to another country. • International business will keep highly skilled tasks in home country and farm out only low-skilled tasks to foreign plants. • Importing employment practices and contractual agreements from home country that may diminish union’s influence and power.

26. Strategy of International Labor • Try to establish international labor organizations. • Lobby legislatures to restrict multinationals. • Use United Nations to regulate multinationals. Efforts have not been successful.

27. Multinationals’ Approach to Labor Relations • Decentralize: labor laws, union power and nature of collective bargaining varies from country to country. • Now a trend toward Centralize: • Want to rationalize global operations. • Need to control labor costs and maximize threat of move to lower cost country. • Competitive advantage can come from the way work is organized in a plant. Bargaining with local unions is, therefore, a priority. • Before move, get new union approval for work practices.