Global Human Resource Management

2. Global Human Resource Management Chapter Eighteen

3. 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 Human Resource Management (HRM)

4. 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 International Human Resource Management

5. International Human Resource Management

6. 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 Staffing Policy

7. 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 Ethnocentric Policy

8. 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 Polycentric Policy

9. 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 Geocentric Policy

10. Comparison of Staffing Approaches

11. 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 = 3X 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 The Expatriate Problem

12. 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 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 Reasons for Expatriate Failure

13. Expatriate Failure Rate

14. 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 Expatriate Selection

15. 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 Four Attributes that Predict Success

16. 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 assignmentand the expatriate’s adjustment to it Four Attributes that Predict Success

17. 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 Training and Management Development

18. 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 Training and Management Development

19. 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 Repatriation of Expatriates

20. 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

21. 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 Management Development and Strategy

22. 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 Performance Appraisal

23. 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 Guidelines for Performance Appraisal

24. Two issues: Pay executives in different countries according to the standards in each country or equalize pay on a global basis Method of payment Compensation

25. Compensation in Various Countries

26. 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 Expatriate Pay

27. 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 Components of Expatriate Pay

28. The Balance Sheet Approach

29. 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 International Labor Relations

30. 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 Concerns of Organized Labor

31. 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 Strategy of Organized Labor

32. Accounting in the International Business Country Differences in Accounting Standards National and International Standards Multinational Consolidation and Currency Translation Accounting Aspects of Control Systems Looking Ahead to Chapter 19