international human resource management -...

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11

International Human Resource

Management


Human Resource Management (HRM)

• Human Resource Management (HRM): deals with the

overall relationship of the employee with the

organization

• Basic HRM functions: Recruitment, Selection, Training,

Performance Appraisal, Compensation, Labor

Relations


International Human Resource Management (IHRM)

• In the international arena, the basic HRM activities

take on an added complexity, for two reasons:

• Employees of MNCs include a mixture of workers of

different nationalities.

• HR Managers must decide the necessary extent of

adaptation to local business & national cultures.


Types of Employees in Multinational Organizations

• Expatriate: Employees who come from a country that is

different from the one in which they are working

• Home Country Nationals: Expatriate employees who

come from the parent firm’s home country

• Third Country Nationals: Expatriate workers who come

from neither the host nor the home country.

• Host Country Nationals: Local workers who come from

the host country where the MNC unit is located.


Types of Employees in Multinational Organizations

• Inpatriate: Employees from foreign countries who work

in the country where the parent company is located.

• Flexpatriates: Employees who are sent on frequent but

short-term international assignments.

• International Cadre (Globals): Managers who

specialize in international assignments.

• Commuter Assignments Employees: Employees who

live in one country, but spend part of the work week in

another country.


Multinational Managers:Expatriate or Host Country

• Deciding whether to use expatriate or local mangers

depends mostly on a firm’s multinational strategy.

• Transnational strategists see their managerial recruits

as employable anywhere in the world.

• Multidomestic strategists tend to favor local managers.

• For a particular position, the firm should ask:

• Given our strategy, what is our preference for this

position (host, home, or third country national)?


Multinational Managers:Expatriate or Host Country

• For expatriate managers (parent or third country):

• Is there an available pool of managers with appropriate skills for the position?

• Are they willing to take expatriate assignments?

• Do any laws affect the assignment of expatriate managers?

• For host country managers:

• Do they have the expertise for the position?

• Can we recruit them from outside our firm?


Is the Expatriate Worth It?

• IHRM decisions regarding use of expatriate managers

must take into account the costs of such assignments.

• The total compensation of expatriate managers is often

3-4 times higher than home-based salaries.

• In addition to high costs of relocating expatriates, more

multinationals are now concerned with expatriate

safety worldwide.


Potential Reasons for Expatriate Failure

• Individual: Personality of the manager; Lack of technical proficiency; No

motivation for international assignment

• Family: Spouse or family members fail to adapt to local culture; Spouse

or family members do not want to be there.

• Organizational:

• Excess of difficult responsibilities in the assignment

• Failure to provide cultural and other important pre-assignment training,

like language and culture

• Failure of company to pick the right person

• Failure to provide the level of technical support that domestic managers

are used to

• Failure to consider gender equity


Reasons for U.S. Expatriate Failure (2 of 3)

• Cultural:

• The Manager fails to adapt to local culture or

environment.

• The Manager fails to develop relationships with key

people in the new country because of the complexity

of cultivating networks with diverse people.


The Strategic Role of Expatriate Assignments

• Help managers acquire skills necessary to develop

successful strategies in a global context

• Help the company coordinate and control operations

that are dispersed geographically and culturally

• Provide important strategic information.

• Provide crucial information about local markets

• Provide opportunities for management development

• Provide important network knowledge


Selecting Expatriate Managers

• Selecting the wrong person for the job leads to failure.

• Selecting the wrong person can be a major expense,

costing more than $1 million per expatriate failure.

• Improperly selected employees who cannot perform

but who remain on assignment can be more damaging

to the firm than those who leave prematurely.

• Domestic performance does not predict expatriate

performance. Selection criteria may differ.


Key Success Factors for Expatriate Assignments

• Technical and managerial skills

• Personality traits (flexible, willing to learn)

• Relational abilities (ability to adapt to other cultures)

• Family situation (spouse & family willingness to go)

• Stress tolerance (ability to maintain composure)

• Language ability (speak, read & write the language)

• Emotional intelligence (empathize, relate to others)


Exhibit 11.5: Selecting Expatriates: Priorities for Success Factors by Assignment


Training and Development

• Predeparture cross-cultural training reduces expatriate failure rates and

increases job performance.

• The main objective of Cross-Cultural Training is to increase the relational

abilities of the future expatriate and the spouse and family.

• The training rigor depends on the assignment.

• Training Rigor: The extent of effort by both trainees and trainers to

prepare the expatriate for work abroad

• Low rigor training: Short time period; lectures and videos on local cultures; Briefings on company operations

• High rigor training: Lasts over a month; More experiential learning; Extensive language training; Includes interactions with host country nationals


Exhibit 11.7: Training Needs and Expatriate Assignment Characteristics


Performance Appraisal for the Expatriate

• Seldom can the firm use same performance criteria.

• Challenges:

• Fit of international operation in multinational strategy

• Unreliable data

• Complex and volatile environments

• Time differences and distance separation

• To overcome these difficulties:

• Fit the evaluation criteria to the strategy.

• Fine-tune the evaluation criteria.

• Use multiple sources of evaluation with varying periods of evaluation.


Expatriate Compensation

• Compensation packages must be attractive to skilled

managers, but also consider the increasing costs.

• Compensation packages have many common factors:

• Local market cost of living

• Housing

• Taxes

• Benefits


The Balance-Sheet Approach

• Provides a compensation package that attempts to balance purchasing

power in the host country with that in the home country: The expatriate

should not be in a better or worse position financially because of the

assignment.

• The firm provides allowances for adjustments for differences in taxes,

cost of living, housing, food, recreation, personal care, clothing,

education, home furnishing, transportation, and medical care.

• In addition to matching purchasing power, firms may provide additional

allowances: Foreign service premiums (often 10-20% of base pay);

Hardship allowance (extra money for difficult postings); Relocation

allowances (miscellaneous costs of move); Home-leave allowances

(transportation costs to return home once or twice per year)


The Repatriation Problem

• Repatriation Problem: the difficulties that mangers face

coming back to their home countries and reconnecting

with their old jobs.

• Three basic cultural problems “reverse culture shocks:”

• Adapting to new work environment and culture of

home office

• Relearning to communicate with others in home and

organizational cultures

• Adapting to their basic living environment


Strategies for Successful Repatriation

• These strategies may help firms to successfully

repatriate their managers:

• Provide a strategic purpose for the repatriation.

• Establish a team to aid the expatriate.

• Provide parent country information sources.

• Provide training and preparation for the return.


International Assignments for Women

• Estimates are that women represent only 12% of expatriate managers,

but 45% of management.

• Women face a glass ceiling at home, and an expatriate glass ceiling

worldwide, because of 2 myths:

• Myth 1: Women do not wish to take international assignments.

• Myth 2: Women will fail because of the foreign culture’s prejudices

against local women.

• Don’t assume that people from foreign cultures apply the same gender

role expectations to foreign workers that they do to local women.

• Successful women expatriates emphasize nationality, not gender.

• The issues that arise in cross-cultural interactions depend more on how

foreigners react to those of a different nationality.


What Can Companies Do to Ensure Female Expatriate Success?

• What firms can do to ensure the success of women:

• Provide mentors, networking with other women

• Identify and remove sources of barriers to

international assignment.


Multinational Strategy and IHRM

• Multinational companies have several options for developing the

appropriate IHRM policies for the implementation of their

multinational strategies.

• IHRM Orientation: A company’s basic tactics and philosophy for

coordinating IHRM activities for managerial and technical workers.

• Ethnocentric: All aspects of HRM tend to follow the parent

organization’s home country HRM practices.

• Regiocentric & Polycentric: HRM is more responsive to the host

country differences in HRM practices.

• Global: The firm assigns its best managers to international

assignments, recruiting worldwide.


Ethnocentric IHRM:Benefits and Costs

• Benefits:

• Little need to recruit qualified host country nationals for higher

management

• Greater control and loyalty of home country nationals

• Little need to train home country nationals

• Key decisions centralized

• Costs:

• May limit career development for host country nationals

• Host country nationals may never identify with the home company

• Expatriate managers are often poorly trained for international

assignments and make mistakes


Regiocentric & Polycentric IHRM: Benefits and Costs

• Benefits:

• Reduces training expenses

• Fewer language and adjustment issues

• Lessened hiring and relocation costs

• Costs:

• Coordination problems with headquarters based on cultural,

language, and loyalty differences

• Limited career-path opportunities for host country and regional

managers

• Limited international experiences for home country managers


Global IHRM Benefits & Costs

• Benefits

• Bigger talent pool

• High international expertise

• Development of transnational organizational cultures

• Costs

• Difficulty in importing managerial and technical employees

• Added expense

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