Lecture International business (11/e) - Chapter 20: Human resource management

The main goals of this chapter are to: Discuss the importance of creating a company “global mindset”; explain the relationship between competitive strategies (international, multidomestic, regional, and transnational) and international HR management approaches (ethnocentric, polycentric, regiocentric, and global); compare home country, host country, and third country nationals as IC executives;...

Human Resource Management

McGraw­Hill/Irwin

International Business, 11/e Copyright © 2008 The McGraw­Hill Companies, Inc. All rights reserved.

chapter twenty

Learning Objectives

 Discuss the importance of creating a company

“global mindset”

 Explain the relationship between competitive

strategies (international, multidomestic, regional, and transnational) and international HR

management approaches (ethnocentric,

polycentric, regiocentric, and global)

 Compare home country, host country, and third country nationals as IC executives

 Explain the difficulties of finding qualified

executives for international companies (ICs) and the importance of foreign language knowledge

Learning Objectives

 Explain what an expatriate is and the challenges of and opportunities of an expat position

 Discuss the increasing importance of

accommodating the trailing spouse of an

expatriate executive

 Identify some of the complications of

compensation packages for expatriate executives

– A mind-set that combines an openness to

and an awareness of diversity across

markets and cultures with a propensity and ability to synthesize across this diversity

International HRM Approaches

• Ethnocentric

parent company’s home country frame of reference

• Polycentric

specific local context of the subsidiary

International HRM Approaches

• Regiocentric

specific regional context of the subsidiary

• Geocentric

ability and experience without considering race or citizenship

Strategic Approach, Organizational Concerns, and the International Human Resource Management Approach to

Be Used

Recruitment, Selection and Training

• Parent Country National (PCNs) or Home

Country National

• Host Country National (HCN)

• Third Country National

Recruitment, Selection and Training

• Third Country National (TCN)

– May accept lower wages and benefits than will

employees from the home country

– May also come from a culture similar to that of

the host country

– May have worked for another unit of the IC and

be familiar with policies, procedures and people

– Common approach in developing countries

– May not be welcome by host country

– May come from an international agency

– Greater use as companies take geocentric view

Expatriates

• Family

– Nine of ten expatriate failures family-related

– Unhappy spouses major reason for early return

– Company losing a “million-dollar corporate-training

investment” in executive

Expatriate Services

• Health care programs to assist

companies and expatriates with

shopping, long-distance care for relatives, schools,

organizations, and cultural items

Total compensation Costs for Sending an Expatriate American Manager to Russia

– Based on differences in price of food, utilities,

transportation, entertainment, clothing, personal

services, and medical expenses as compared to home

• Allowances for Tax Differentials

– Ensures expatriates will not have less after-tax pay at

home

Allowances

• Education Allowances

• Moving and Orientation Allowances

Ranking of 50 Cities from Most to

Least Expensive, 2006

Bonuses

• Bonuses

– Expatriate employee compensation

payments in addition to base salary and allowances because of hardship,

inconvenience, or danger

– Bonuses include

• Overseas premiums

• Contract termination payments

• Home leave reimbursement

Compensation Packages

• For expatriate employees, packages

incorporate many types of payments or reimbursements and must take into

consideration exchange rates and

inflation

Hardship Differential Pay Premiums for Selected Cities and Countries, 2006

Compensation Packages

Can Be Complicated

• Allowances and percentage of base salary are

usually paid in host country currency

banked where employee directs

• What Exchange Rate?

nonconvertible currencies

Compensation of Third

Country Nationals

• Trend toward applying the same

compensation plan to third country

nationals as home country expatriates

• Problems can arise in

– The calculation of income tax differential

when American expatriate compared with expatriate from another country

– Home leave bonus

International Status

• Entitles expatriate employee to allowances

and bonuses applicable to the place of

residence and employment

• Perks