Cross cultural management 5e by cullen CH11

Learning Objectives• Know the basic functions of human resource management • Define international human resource management • Understand the difference between international and domestic

Learning Objectives

• Know the basic functions of human resource

management

• Define international human resource management

• Understand the difference between international and

domestic human resource management

• Know the types of workers used by multinationals

• Know the basic functions of human resource

management

• Define international human resource management

• Understand the difference between international and

domestic human resource management

• Know the types of workers used by multinationals

Learning Objectives

• Know how and when to use expatriate managers

• Know the skills necessary for a successful expatriate

assignment

• Understand how expatriate managers are

compensated and evaluated

• Appreciate the issues regarding expatriate

assignments of women managers

• Know how and when to use expatriate managers

• Know the skills necessary for a successful expatriate

assignment

• Understand how expatriate managers are

compensated and evaluated

• Appreciate the issues regarding expatriate

assignments of women managers

Learning Objectives

• Know what companies can do to make the expatriate assignment easier for their female expatriates

• Understand the relationship between choice of a

multinational strategy and international human

resource management

• Know what companies can do to make the expatriate

assignment easier for their female expatriates

• Understand the relationship between choice of a

multinational strategy and international human

resource management

Human Resource Management and Functions

• Human resource management (HRM): deals with the overall relationship of the employee with the

organization

• Recruitment: process of identifying and attracting

qualified people to apply for vacant positions

• Selection: process of filling vacant positions in the

organization

• Human resource management (HRM): deals with the

overall relationship of the employee with the

organization

• Recruitment: process of identifying and attracting

qualified people to apply for vacant positions

• Selection: process of filling vacant positions in the

organization

Basic HRM Functions

• Training and development: giving employees the

knowledge, skills, and abilities to perform successfully

• Performance appraisal: system to measure and assess employees’ work performance

• Compensation: organization’s entire reward package,

including financial rewards, benefits, and job security

• Labor relations: ongoing relationship between an

employer and those employees represented by labor

organizations

• Training and development: giving employees the

knowledge, skills, and abilities to perform successfully

• Performance appraisal: system to measure and assess employees’ work performance

• Compensation: organization’s entire reward package,

including financial rewards, benefits, and job security

• Labor relations: ongoing relationship between an

employer and those employees represented by labor

organizations

International Human Resource Management (IHRM)

• All HRM functions, adapted to the international setting

• Two added complexities compared to domestic HRM

- Must choose a mixture of international employees

- Must decide the extent of adaptation to local

conditions

• All HRM functions, adapted to the international setting

• Two added complexities compared to domestic HRM

- Must choose a mixture of international employees

- Must decide the extent of adaptation to local

conditions

Types of Employees in Multinational Organizations

• Expatriate: employee who comes from a different

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 home country

• Expatriate: employee who comes from a different

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 home country

Types of Employees in Multinational Organizations

• Host country nationals: local workers who come from the host country where the unit is located

• 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: managers who specialize in

international assignments Also called “globals”

• Host country nationals: local workers who come from

the host country where the unit is located

• 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: managers who specialize in

international assignments Also called “globals”

The Expatriate or the Host Country Manager

• Multinationals must decide whether to use expatriates

or host country nationals

• Need to consider some questions

- Given the firm’s strategy, what is the preference

(host, home, or third country national) for the

position?

• Multinationals must decide whether to use expatriates

or host country nationals

• Need to consider some questions

- Given the firm’s strategy, what is the preference

(host, home, or third country national) for the

position?

The Expatriate or the Host Country Manager

• 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?

• 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 Cost of living abroad is often considered

- High cost due to unusual compensation packages

- High failure rate

• IHRM decisions regarding use of expatriate managers must take into account the costs of such assignments Cost of living abroad is often considered

- High cost due to unusual compensation packages

- High failure rate

Exhibit 11.1: Paying for the

Expatriate Manager: Indices of

Cost of Living Abroad

Reasons for U.S Expatriate Failure

• Individual

- Personality of the manager

- Lack of technical proficiency

- No motivation for assignment

• Family

- Spouse or family members fail to adapt

- Family members or spouse do not want to be there

• Individual

- Personality of the manager

- Lack of technical proficiency

- No motivation for assignment

• Family

- Spouse or family members fail to adapt

- Family members or spouse do not want to be there

Reasons for U.S Expatriate Failure (cont.)

• Cultural

- Manager fails to adapt

- Manager fails to develop relationship with key people

• Cultural

- Manager fails to adapt

- Manager fails to develop relationship with key people

Reasons for U.S Expatriates Failure (cont.)

• Organizational

- Excess of difficult responsibilities

- Failure to provide cultural and other important

pre-assignment training

- Company fails to pick the right person

- Company fails to provide the technical support that domestic managers are used to

- Failure of company to consider gender equity

• Organizational

- Excess of difficult responsibilities

- Failure to provide cultural and other important

pre-assignment training

- Company fails to pick the right person

- Company fails to provide the technical support that domestic managers are used to

- Failure of company to consider gender equity

Strategic Role of Expatriate Assignments

• Helps managers acquire skills to develop successful

strategies in a global context

• Helps company coordinate and control operations that are dispersed culturally and geographically

• Global assignments provide important strategic

information

• Provides critical, detailed information about local

markets

• Provide important network knowledge

• Helps managers acquire skills to develop successful

strategies in a global context

• Helps company coordinate and control operations that

are dispersed culturally and geographically

• Global assignments provide important strategic

• Selection of expatriate managers

• Selecting wrong person leads to failure

• Costs the company

• Estimated to cost more that $1 million per

expatriate failure

• Domestic performance does not predict expatriate

performance Selection criteria may differ

• Selection of expatriate managers

• Selecting wrong person leads to failure

• Costs the company

• Estimated to cost more that $1 million per

expatriate failure

• Domestic performance does not predict expatriate

performance Selection criteria may differ

Key Success Factors for Expatriate Assignments

• Technical and managerial skills

Exhibit 11.2: Expatriate

Success Factors and

Selection Methods

Priority of Success Factors

• Assignment length

- Short assignments focus on technical and

professionals skills

• Cultural similarity

• Required interaction and communication with locals

• Job complexity and responsibility

• Assignment length

- Short assignments focus on technical and

professionals skills

• Cultural similarity

• Required interaction and communication with locals

• Job complexity and responsibility

Exhibit 11.3: Selecting Expatriates:

Priorities for Success Factors by

Assignment Characteristics

Training and Development

• Cross-cultural training: increases the relational abilities

of future expatriates and their spouses and families

• Training rigor: extent of effort by both trainees and

trainers required to prepare the expatriate

• Cross-cultural training: increases the relational abilities

of future expatriates and their spouses and families

• Training rigor: extent of effort by both trainees and

trainers required to prepare the expatriate

Training and Development (cont.)

• Low rigor training

- Short time period

- Lectures and videos on local cultures

- Briefings on company operations

• High rigor training

- Last over a month

- Experiential learning

- Extensive language training

- Includes interactions with host country nationals

• Low rigor training

- Short time period

- Lectures and videos on local cultures

- Briefings on company operations

• High rigor training

- Last over a month

- Experiential learning

- Extensive language training

- Includes interactions with host country nationals

Exhibit 11.4: Training Rigor:

Techniques and Objectives

Exhibit 11.5: How the Rigor of Training

Relates to the Expatriate Assignment

Expatriate Performance Appraisal

• Conducting reliable performance appraisal for the

expatriate is very challenging

• Challenges

• Fit of international operation in multinational strategy

• Unreliable data

• Complex and volatile environments

• Time difference and distance separation

• Conducting reliable performance appraisal for the

expatriate is very challenging

• Challenges

• Fit of international operation in multinational strategy

• Unreliable data

• Complex and volatile environments

• Time difference and distance separation

Steps to Improve the Expatriate Performance Appraisal

1 Fit the evaluation criteria to strategy

2 Fine-tune the evaluation criteria

3 Use multiple sources of evaluation with varying periods

of evaluation

1 Fit the evaluation criteria to strategy

2 Fine-tune the evaluation criteria

3 Use multiple sources of evaluation with varying periods

of evaluation

Exhibit 11.6: Evaluation Sources,

Criteria, and Time Periods for

Expatriate Performance Appraisals

Expatriate Compensation

• Compensation packages present challenges Has to

be attractive to skilled managers, but also consider the issue of costs

Tend to include many common factors:

- Local market cost of living

- Housing

- Taxes

- Benefits

• Compensation packages present challenges Has to

be attractive to skilled managers, but also consider the issue of costs

Tend to include many common factors:

- Local market cost of living

- Housing

- Taxes

- Benefits

The Balance-Sheet Approach

• Provides a compensation package that equates

purchasing power (host country with home country)

• Aim is that expatriate should not be better or worse

position financially as a result of the assignment

• Allowances for adjustments for differences in taxes,

cost of living, housing, food, recreation, personal care, clothing, education, home furnishing, transportation,

and medical care

• Provides a compensation package that equates

purchasing power (host country with home country)

• Aim is that expatriate should not be better or worse

position financially as a result of the assignment

• Allowances for adjustments for differences in taxes,

cost of living, housing, food, recreation, personal care, clothing, education, home furnishing, transportation,

and medical care

Exhibit 11.7: Balance Sheet

Approach To Expatriate

Compensation

Additional Allowances and Perquisites

In addition to equating purchasing power, additional

allowances often provided

• Foreign service premiums

• Hardship allowance

• Relocation allowances

• Home-leave allowances

In addition to equating purchasing power, additional

allowances often provided

• Foreign service premiums

• Hardship allowance

• Relocation allowances

• Home-leave allowances

Other Approaches to Expatriate Compensation

• Headquarters-based compensation: paying home

country wages regardless of location

• Host-based compensation system: adjusting wages to local lifestyles and costs of living

• Global pay systems: worldwide job evaluations,

performance appraisal methods, and salary scales are used

• Headquarters-based compensation: paying home

country wages regardless of location

• Host-based compensation system: adjusting wages to local lifestyles and costs of living

• Global pay systems: worldwide job evaluations,

performance appraisal methods, and salary scales are used

Repatriation Problem

• Difficulties that managers face coming back to their

home country and reconnecting to home organization

• Three basic cultural problems -“reverse culture shocks”

- Adapt to new work environment and culture of home office

- Relearn to communicate with others in home and

organizational cultures

- Need to adapt to basic living environment

• Difficulties that managers face coming back to their

home country and reconnecting to home organization

• Three basic cultural problems -“reverse culture shocks”

- Adapt to new work environment and culture of home office

- Relearn to communicate with others in home and

organizational cultures

- Need to adapt to basic living environment