chapter 18 global human resource management. learning objectives discuss the strategic role of hrm...

Chapter 18

Global Human Resource

Management

Learning Objectives

Discuss the strategic role of HRMExamine HRM major functions

Staffing policyTraining and developmentPerformance appraisalCompensation policyLabor relations

Identify issues and problems in staffing and managing expatriates

IBUS 330 Dr. Nini Yang

The Strategic Role of International Human Resource Management

To insure that HRM policies are congruent with and in support of the firm’s strategy, structure and controls.


Strategy, Structure and Control Systems

Worldwide area Worldwide Worldwide Informal structure product division product division matrix

centralized centralized and decentralized

International Strategy

Structure Multi-domestic International Global Transnational & ControlsCentralization of operating decision

Decentralized Core competency Some Mixed centralized

Horizontal differentiation

Rest decentralized Informal matrix

Need for coordination Low Moderate High Very high

Integrating mechanisms None Few Many Very

manyPerformance Ambiguity Low Moderate High Very

highNeed for cultural controls Low Moderate High Very

high


Table 18.1

Staffing Policy

Staffing policy:Selecting individuals with requisite skills to do a particular job.Also as tools for developing and promoting corporate culture.

Types of staffing policy:Ethnocentric.Polycentric.Geocentric.


Types of Staffing Policy

Ethnocentric

Key management positions filled by

parent-country nationals

Polycentric

Host-country nationals manage

subsidiaries, parent company

nationals hold key Headquarter

positions

Geocentric

Seek best people, regardless

of nationality


Comparison of Staffing Approaches Staffing Strategic

qualified managers in host country

Alleviates cultural Limits career mobilityInexpensive to from foreign

Transnational

Uses human resources National immigration

Table 18.2

myopia

Approach Appropriateness Advantages Disadvantages

Ethnocentric International

Polycentric Multi-domestic

Geocentric Global and

Overcomes lack of Produces resentment

in host nation Unified culture Can lead to cultural

Helps transfer core competencies

myopia Isolates headquarters implement subsidiaries

efficiently policies may limitimplementationHelps build strong

culture and informal management network

Expensive

Higher cost


The Expatriate Problem

Citizens of the firm’s home country working in another countryExpatriate failure:

Premature return of the expatriate manager to his/her home country

Cost of failure is high:Estimate at three times of an expatriate’s annual salary plus the cost of relocation (impacted by currency exchange rates and assignment location)$250,000-1million


Expatriate Failure Rates

Recall Rate Percent Percent of CompaniesUS

Multinationals20 - 40% 7%10 - 20% 69

< 10 24European Multinationals11 - 15% 3%

6 - 10 38<5 59

Japanese Multinationals

11 - 19% 14%6 - 10 10

<5 76 Table 18.3


Reason for Expatriate Failure

U.S. MultinationalsInability of spouse to adjustManager’s inability to adjustOther family problemsManager’s personal or emotional immaturityInability to cope with larger overseas responsibilities

Japanese FirmsInability to cope with larger overseas responsibilitiesDifficulties with the new environmentPersonal or emotional problemsLack of technical competenceInability of spouse to adjust

European Multinationals: Inability of spouse to adjust.


Expatriate Selection

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

An executive’s domestic performance does not necessarily equate to his/her overseas performance.

Mendenhall &

Oddou’s Predictors of success


Training and Management Development

Training: Obtain skills for

a particular (foreign) posting.

Development: Develop

manager’s skills over his/her career

in the Firm.


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 life of the

host country.

1. Culture

2. Language

3. Practical


Repatriation of Expatriates

percent

Didn’t know what position they hold upon return.Firm vague about return, role and career progression.

Leave firm within three years

10 20 30 40 50 60 70

Took lower level job.

Leave firm within one year.


Management and Development Strategy

Programs designed to increase overall skill through a mix of education and assignment rotations

Provides varied experienceAttempt to improve firm’s management productivity and qualityParticularly true for transnational strategy

Unifying corporate culture and management networks

Socialize norms and value systemsFoster esprit de corpsBuild informal networksStrengthen identification with company


Performance AppraisalProblems:

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.


Guidelines for Performance Appraisal

More weight given to onsitemanager’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.


Compensation

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


National Differences in Compensation

Country CEO HR Director

Accountant

Mfg. Employee

Japan $545,233 $235,536 $59, 107 $51, 994

Canada 742,228 188, 070 44,866 36,289

Germany 421,622 189,785 61,375 36,934

Taiwan 179,486 102,491 30,652 11,924

United Kingdom

719,665 268,302 107,839 28,874

United States

1,403,899 306,181 66,377 44,680

Table 18.4


Compensation Issues

EthnocentricHow much home-country expatriates should be paid

PolycentricPay can and should be country-specific

Geocentric/Transnational

May have to pay its international cadre of managers the same


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.


A Typical Balance Sheet

Reserve Reserve Reserve Reserve

Goods and Services

Goods and

ServicesGoods and Services

Goods and Services

Housing

HousingHousing

Housing

Income Taxes

Income Taxes

Income Taxes

Home and Host-

Country Income Taxes Premiums

and Incentives

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


Figure 18.1

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.


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.


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.


Multinationals’ Approach to Labor Relations

Decentralize: labor laws, union power and nature of collective bargaining vary from country to countryNow a trend toward centralization:

Want to rationalize global operationsNeed to control labor costs and maximize threat of move to lower cost countryCompetitive 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


Implication for Effective IHRHuman Resource Management practices vary across borders.Both home-country and host-country economic, social, cultural, political, and legal factors influence and constrain HR functions.Corporate strategies guide and determine how HR works in an organization.Global experience and good knowledge of IHR can enhance one’s career as a successful manager whether one works at the home-country headquarters or overseas.


chapter 18 global human resource management. learning objectives discuss the strategic role of hrm...

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