Slide international business 6e by CHarless hill 07IBChapter 18

International Human Resource Management • Strategic role: HRM policies should be congruent with the firm’s strategy and its formal and informal structure and controls • Task complicate

Chapter Eighteen

Global Human Resource

Management

Human Resource Management

(HRM)

• Refers to the activities an organization carries out

to use its human resources effectively

• Four major tasks of HRM

- Staffing policy

- Performance appraisal

- Compensation policy

International Human Resource

Management

• 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

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

- Produces resentment in host country

- Can lead to cultural myopia

Polycentric Policy

• Host-country nationals manage subsidiaries

• Parent company nationals hold key headquarter positions

• Best suited to multi-domestic businesses

- Limits opportunity to gain experience of host country nationals

outside their own country

- Can create gap between home and host country operations

Geocentric Policy

• 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

Comparison of Staffing

Approaches

The Expatriate Problem

• 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

Reasons for Expatriate

Failure

• US multinationals

- Inability of spouse to adjust

- Manager’s inability to adjust

- Other family problems

Expatriate Failure Rate

Expatriate Selection

• 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

Four Attributes that

Four Attributes that

Predict Success

• 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 assignment and the

expatriate’s adjustment to it

Training and Management

- 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

• 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

Repatriation of Expatriates

• 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

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

Management Development and

Strategy

• 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

Performance Appraisal

• Problems:

• 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

Guidelines for Performance

Appraisal

• 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

• 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 in Various

Countries

Expatriate Pay

• 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

Components of Expatriate Pay

• Base Salary

• Foreign service premium

The Balance Sheet Approach

• Aims to foster harmony and minimize conflicts

between firms and organized labor

Concerns of Organized

Labor

• 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

• Attempts to achieve international regulations on

multinationals through such organizations as the

United Nations

Looking Ahead to Chapter 19

• Accounting in the International Business

- Country Differences in Accounting Standards

- National and International Standards

- Multinational Consolidation and Currency Translation

- Accounting Aspects of Control Systems