International human resource management lesson 03

3 INTERNATIONAL HR PLANNING CONTENTS 3.0 Aims and Objectives 3.1 Introduction 3.2 Objectives of Human Resource Planning 3.3 Recruitment and Selection 3.3.1 Human Resource Forecasting 3.3

UNIT II

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INTERNATIONAL HR PLANNING

CONTENTS

3.0 Aims and Objectives

3.1 Introduction

3.2 Objectives of Human Resource Planning

3.3 Recruitment and Selection

3.3.1 Human Resource Forecasting

3.3.2 Determining Net HR Requirements

3.3.3 Recruitment

3.3.4 Realistic Job Previews

3.3.5 Selection

3.4 International Labour Market — Sources

3.4.1 Parent Country Nationals (PCNs)

3.4.2 Host Country Nationals (HCNs)

3.4.3 Third Country Nationals (TCNs)

3.5 Staffing Policies

3.5.1 Ethnocentric Approach

3.5.2 Polycentric Approach

3.5.3 Geocentric Approach

3.5.4 Regiocentric Approach

3.6 Recruitment and Selection in IHRM

3.6.1 Types of International Employees and their Required Competencies 3.6.2 International Migration and the Impact on Recruitment

3.6.3 International Talent Management

3.6.4 Local Selection and Assessment Issues

3.6.5 Selection Criteria

3.6.6 Development of an Effective Workforce

3.7 Let us Sum up

3.8 Lesson End Activity

3.9 Keywords

3.10 Questions for Discussion

3.11 Suggested Readings

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3.0 AIMS AND OBJECTIVES

After studying this lesson, you will be able to:

 Know what is international HR Planning

 Describe recruitment and selection criteria for international organisation

 Explain staffing policies and appraises in global context

3.1 INTRODUCTION

Human Resource Management is crucial to organisational competitiveness and productivity due to the growing diversity of the world’s workforce and its increasing importance The need to manage this diversity better has become a major challenge to the international manager The emergence of women as a major source of human resources for the corporates is part of that diversity If an international organisation is to survive in today’s competitive environment, it must successfully manage the increasing complexities of its human resources Human resource management is also growing in importance as multinational corporations continue to relocate their operations to those geographical areas where they can get the most for their human resource currency

If large corporations intend to retain their domestic operations and still be competitive with respect to cost and quality, they will have to improve their human resource management Employees must be viewed as valuable assets—resources that are vital to the successful performance of the organisation Talented people must be attracted to join the organisation, developed to perform at high levels, and encouraged to remain with the organisation with loyalty and commitment to the organisation and its objectives

In the Human Resource Cycle (Gupta, 2006) ‘selection process’ is the main variable influencing directly the ‘performance’ as also the ‘employee development process’ The four generic processes: selection, performance appraisal, rewards management and human resource development reflect sequential managerial tasks Performance, in other words, is a function of all the human resource components: selecting people who are able to best perform the job defined by the structure; motivating employees by rewarding them judiciously, training and developing people for future performance and appraising employees in order to justify the rewards The strategy and structure also impact performance through the manner in which the jobs are designed, how the organisation is structured and how well services and products are planned to meet environmental threats and opportunities

These basic resource processes can be done at three levels: strategic level which deals with policy formulation and goal setting; managerial level which is concerned with the availability and allocation of resource to carry out the strategy plan; and at the operational level to carry out day-to-day activities

When staffing overseas positions, the Multinational Corporation (MNC) has three major

options: (1) an ethnocentric staffing approach, employing host country nationals; (2) a

polycentric staffing approach, employing home country nationals; and (3) a geocentric

staffing approach, employing third country nationals Host country nationals comprise the local workforce that can be hired by the international firm Home country nationals

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are those from the corporation’s home country Third country nationals are citizens

from nations other than the host country nationals in developed countries Overall, most

MNCs tend to use more host country nationals in developed countries On the other

hand, U.S-based MNCs tend to employ more host country nationals in managerial positions

because: (1) they are more familiar with the local culture; (2) they know the local

language(s); (3) they cost less than home country nationals; and (4) employing locals is

simply good public relations (Tung 1982) Many Western MNCs have found that the key

to success on foreign soil is to employ local workers Analog Devices, Inc has achieved

global success in a highly technical industry by hiring local managers, training them

extensively, and then empowering them to hire and manage more local talent Similarly,

global sales have soared at Bausch & Lomb by developing local managerial resources

and turning them loose to develop their own geographical areas (Gilbert, 1988)

The human resource selection process varies widely from one country to another However,

it can be said that Asian corporations are known for their extensive testing and screening

techniques Asians, overall, are very test-oriented and are comfortable with the testing

process Europeans do not test as much as Asians but considerably more than Americans

Testing in the U.S has been discouraged because of its negative impact on equal

employment and affirmative action efforts Testing and other rigorous staffing practices

are used even less in Canada, where equal employment and human rights legislation is

more restrictive than in the U.S

In nations where there are more college graduates than good job openings, students

must be aggressive if they are to land the better employment opportunities However,

just the opposite is true in Japan, where job openings are far more numerous than the

number of qualified college graduates As a result, students are put under a great deal of

pressure to accept job offers far in advance of graduation Firms have become so

aggressive in their attempts to push students into early offer acceptance that the Ministry

of Education issued guidelines to control the favor of potential employers Students that

feel employers are twisting their arms unfairly have a hot line they can all to report

guideline violators Intermediaries, such as college professors, play a critical role in (a)

helping employers identify potentially top candidates and (b) in encouraging students to

accept certain offers Similarly, having taken a critical seminar from a certain professor

is often given greater weight by employers than overall grades By contrast, the staffing

process in Mexico is initiated by employers on a needs-base only, because there is always

an overabundance of job candidates Help-wanted advertising in the newspapers is

inefficient, because newspapers are so expensive that most potential workers can’t

afford them As a result, job opening are communicated largely by word of mouth or by

going out into the community and asking people to apply (Cherrington, 1991)

Attracting an Effective Workforce

Attracting an effective workforce is a complex task of identifying human resource needs

and the actions that must be taken over time to satisfy these needs As shown in Figure 3.1,

the task of attracting an effective workforce consists of human resource planning, job

analysis, forecasting human resource requirements, forecasting human resource demand,

forecasting internal supply, identifying the net human resource requirements, and filling

those through recruitment, selection, training and development, transfer, and job rotation

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Source: Manab Thakur et al., International Management (2002), p 246

Figure 3.1: Human Resource Planning

3.2 OBJECTIVES OF HUMAN RESOURCE PLANNING

The major underlying objective of human resource planning is to lay the foundation from which the organisation will always have the right people in the right places to do the work required by the organisation Human resource planning is part of the overall strategic planning of the employing organisation and includes such factors as: (1) environmental scanning; (2) business and economic forecasting; (3) developing and maintaining a competitive advantage in the marketplace; (4) determining long-range technical needs

Job analysis: is the systemic study of job requirements and those factors that influence

the performance of those job requirements Typically, a job analysis is the first step in the

Human Resource Planning

Environmental Scanning Business and Economic Forecasting Competitive Advantage Policies, Plans, Procedures Technical Needs

Net Human Resource Requirements

Job Descriptions Quantity Location Timing Criticality

Forecasting Human Resource Demands

Job Descriptions Quantity Location Timing

Forecasting Internal Supply

Skills Available Promotability Trainability Key Personnel

Forecasting Human Resource Requirements

Job Analysis

Transfer and Job Rotation

Training and Development Recruitment

Selection

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staffing process and is designed to identify who is to do what, where, when, and how

McCormick (1976) suggests that job analysis usually concentrates on:

1 Work Activities—to identify precisely what tasks are to be accomplished.

2 Performance Standards—to identify the expected output in terms of both quantity

and quality

3 Work Technologies—to identify appropriate machine, tools, and other job

technologies

4 Job-Related Tangible and Intangibles—to identify the knowledge to be applied,

materials to be processed, products to be made, or performances to be performed

in the course of the work

5 Job Context—to identify work conditions, social conditions, compensation, and

work schedule

6 Personal Requirements—to identify required skills, experience, education, training,

and other attributes required for the job

The above information may be obtained by observing incumbents on the job, by interviewing

incumbents and/or their superiors, or through the administration of questionnaires The

information collected through the job analysis is used, in turn, to create a written job

description and a written job specification The job description usually is a listing of the

job duties, the working conditions, and the tools, materials, and equipment used to perform

the job Probably the most important portion of the job description is the listing of the

minimum qualifications needed to fill the job This section is sometimes called the job

specification, which is a list of the qualifications that the potential applicant must have.

3.3 RECRUITMENT AND SELECTION

3.3.1 Human Resource Forecasting

Human resource forecasting is the process by which an organisation estimates its future

human resource needs The process of human resource forecasting is a two-stage

operation First, it is necessary to forecast future human resource needs in terms of job

description, quantity, location needed, and timing Second, it is necessary to make a

forecast of the internal supply of human resources by surveying existing employees to

identify available skills, knowledge, aptitudes, promotability, trainability, and the identity

of key personnel Human Resource Forecasting may also be categorised as short-term

forecasting According to Daft (1991), short-term forecasting is usually accomplished in

five steps:

 The demand for the organisation’s product or service is estimated in the light potential

changes in the environment

 The overall sales forecast is then estimated

 A staffing budget for each department is estimated

 Overall staffing requirements are estimated

 Consideration is then given to forecasted labour market conditions and internal

factors (such as retirements) that might impact the human resource situation

Long-term human resource forecasting follows much the same process but is much

more complex and deals with greater uncertainty with respect to both those external and

internal factors that might impact the labour scenario One of the most important steps in

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conducting the human resource forecast is the analysis of the abilities, education, experience, aptitude, and performance of existing employees This special task requires

a human resource skills inventory of the major strengths and weaknesses of existing employees Such inventories are often computerised into an employee information

system A good human resource inventory helps management plan development, training,

and promotion activities for their subordinates It can also be a valuable part of an

organisation’s formal succession planning by which plans are established for the orderly

replacement of personnel over time Perhaps its most critical application is to the process whereby an organisation plans for the replacement of its key management personnel The human resource inventory can provide the information necessary to develop a

management replacement chart.

3.3.2 Determining Net HR Requirements

Once an organisation has estimated its future demand and supply of human resource, the next step in the staffing process is to match the two forecast to identify areas of future overstaffing and areas of future manpower shortages If there is a predicted problem with overstaffing, the problem may be resolved by utilising attrition (not replacing people who leave), offering early retirements, transferring people to understaffed areas, and terminating people If there is a predicted shortfall of employees for the future, the problem may be resolved by discouraging retirements, hiring new people, transferring people from overstaffed areas, and installing labour-saving equipment and processes

3.3.3 Recruitment

Recruitment may be defined as that process by which an organisation attracts people to

apply for their job openings The goal is to recruit a pool of qualified candidates from which the desired people may be selected In order to be certain the recruitment process follows prescribed guidelines; organisations may establish recruitment; policies Recruitment can be categorised into two types: (1) external recruitment; and (2) internal recruitment Pierce and Dunham (1990) contend that external recruitment is conducted

in four steps:

1 Planning: Human resource managers must first determine those jobs they wish to

fill, how many candidates they can reach and how many of them would accept the job offer

2 Strategy Development: Next, a strategy is developed that specifies where to look

for candidates, as well as how and when to look

3 Searching: Based on the plan and the strategy, candidates are contacted and

given job information and applications are collected From this pool of candidates, the required new people are hired

4 Programme Evaluation: The recruitment programme must be continuously

monitored, evaluated, and changed as required

Typically, sources for external recruitment include direct applications received (walk-ins and applications by mail), public employment agencies, private employment agencies, executive search firms, schools and colleges, professional associations, all branches of the military, unions, the handicapped, summer interns, and former employees Internal recruitment consists of promotion from within, job posting, and contacts and referrals by current employees Another especially good source of recruitment candidates is through the collection of temporary, part-time, and contract workers that has become known as the “temps” (Cherrington, 1991)

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3.3.4 Realistic Job Previews

One technique of the recruitment process is known as the Realistic Job Preview (RJP),

by which every candidate is given all the pertinent and realistic information about both

the job and organisation Both the positive and negative sides of the job and the firm are

included In this manner, a candidate can make a more-informed choice and select jobs

for which he or she is better suited In the long run, the RJP helps to improve overall job

satisfaction and performance It also avoids situations where dissatisfaction and poor

performance results from a person finding that the job and its environment were not as

advertised

3.3.5 Selection

Selection may be defined as the process by which the organisation choose from among

the applicants, those people who are perceived the best meet the job requirements For

each candidate, the organisation evaluates candidate skills, education, experience, and

so on to find the people who best ‘fit’ the particular job specification In other words,

ideal selection identifies the best fit between the person and the job Box 3.1 describes

the Japanese selection process used by Mitsubishi at its U.S plant

Box 3.1: Employee Selection at Mitsubishi For the U.S based Mitsubishi-Chrysler joint venture auto plant, employees are selected

the Japanese way The selection process lasts three days On the first day, applicants are

required to perform tasks that mimic factory jobs Work-related tests are followed by a

series of written, medical, and drug tests and a final screening by plant supervisors The

selection process tests individuals for high level of skills, dedication to their work, an

aptitude for learning new work methods, teamwork is expected Those who are selected

must go through a rigorous training programme, where they learn technical skills,

interpersonal skills, creativity facilitation, and idea-generation They are taught efficiency

in the form of the Japanese philosophy of ‘kaizen’, or continual improvement This basic

training is followed by several weeks of on-the-job training Later, promotion decisions are

based, in part, on how well candidates do in management development seminars and

in-basket exercises In any respect, human resource management is a priority task in Japanese

firms

Mitsubishi’s relations with its U.S employees seem to be faring well, as the firm reports

that over 50% of its U.S sales are vehicles that were manufactured in the U.S (Business

Week, 1988)

There are seven basic factors in the selection process: (1) application forms;

(2) interviewing; (3) assessment centres; (4) employment testing; (5) reference checks;

(6) physical examinations; and (7) selection validation

Application Forms: Application forms are used by the organisation to obtain useful

information about the candidates Most application blanks provide information with respect

to the candidate’s education, experience, work history, and various background

demographics In some countries, there are equal employment laws that protect minorities

from unfair discrimination In such countries, employers should take care not to use the

application blank to collect information that is irrelevant to job success or information

that might prove to be detrimental to the minority candidate Employers must be aware

of false statements that are apt to be found on application blanks

This is in contrast to the approach of Shell, which is to provide a wider geographical

exposure for managers as they progress up the career ladder

Different competences are valued and different approaches to developing management

competences are applied in different organizations, depending to a large extent on their

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view of international management and how this fits in with their overall international strategy and positioning

Check Your Progress 1

1 Mention the steps involved in external recruitment

2 Mention the basic factors (steps) in the selection process

3.4 INTERNATIONAL LABOUR MARKET — SOURCES

There are three basic sources the MNCs can tap for overseas positions: (1) home or parent country nationals (PCNs); (2) host country nationals (HCNs); and (3) third country nationals (TCNs)

3.4.1 Parent Country Nationals (PCNs)

PCNs are managers who are citizens of the country where the MNC is headquartered

In fact, sometimes the term ‘headquarter’s nationals’ is also used These managers are commonly called expatriates or, simply, exports, which refers to those who live and work away from their parent country There are a variety of reasons for using PCNs The most common reason was to start up operations MNCs prefer to have their own people launch a new venture The second most common reason, was that the parent country people had the necessary managerial and technical expertise (Tung, 1982)

3.4.2 Host Country Nationals (HCNs)

HCNs are local managers who are hired by the MNC There are many reasons for hiring them at the lower or middle-level ranks Many countries require the MNC to hire local talent as part of opening their markets to MNCs For example, in Brazil, two-thirds

of employees in any foreign subsidiary have to be Brazilian nationals In India too, before approving joint venture agreements, the government restricts the number of expatriates

to be employed, primarily to limit the foreign exchange outflow and to prepare Indian nationals to undertake the responsibility at a future time

PCNs fill usually top positions, but this is not always the case For example, companies following the multi-domestic philosophy or polycentric approach would select most positions, including top ones, from the host country, but usually after starting the operations For example, Hindustan Lever Ltd, a subsidiary of the Unilever group in India is currently headed by an Indian

Tung (1981) identified four reasons for use of host country managers:

1 These individuals are familiar with the culture;

2 They know the language;

3 They are less expensive and know the way things are done, the rules of local market and how to get things done or who can influence; and

4 Hiring them is good public relations

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3.4.3 Third Country Nationals (TCNs)

TCNs are managers who are citizens of countries other than the one in which the MNC is

headquartered or the one in which it is assigned to work by the MNC Tung (1991) found

that the two most important reasons that American MNCs use third country nationals are:

1 These people have the necessary expertise,

2 They were judged to be the best ones for the job

Japanese companies usually do not hire TCNs, while Phatak (1995) found that US

companies usually prefer TCNs from Europe TCNs are found typically in large MNCs

in advanced stages of growth A number of advantages are cited for using them One is

that their salary package is usually less than that of a PCN The knowledge of local

language, like English was the reason for choosing British managers by US companies in

former British colonies like India, Jamaica, West Indies and Kenya

Today, a new breed of multi-lingual, multi-experienced ‘global-managers’ has emerged

These new managers are part of a growing group of international executives who can

manage across borders and do not fit the traditional third country mould With a unified

Europe, and North America and Asia becoming business hubs, such global managers are

in great demand

3.5 STAFFING POLICIES

The four approaches to multinational staffing decisions—ethnocentric, polycentric,

geocentric, and regiocentric—tend to reflect the managerial philosophy towards

international operations held by top management at headquarters

3.5.1 Ethnocentric Approach

An ethnocentric approach to staffing results in all key positions in a multinational being

filled by Parent-Country Nationals (PCNs) While this approach may be common for

firms at the early stages of internationalization, there are often sound business reasons

for pursuing an ethnocentric staffing policy

 A perceived lack of qualified Host-Country Nationals (HCNs), and

 The need to maintain good communication, coordination, and control links with

corporate headquarters

For instance, when a multinational acquires a firm in another country, it may wish to

initially replace local managers with PCNs to ensure that the new subsidiary complies

with overall corporate objectives and policies, or because the local staff may not have

the required level of competence

An ethnocentric policy, however, has a number of disadvantages Zeira (1976) has

identified several major problems:

 An ethnocentric staffing policy limits the promotion opportunities of HCNs, which

may lead to reduced productivity and increased turnover among that group

 The adaptation of expatriate managers to host countries often takes a long time

during which PCNs often make mistakes and make poor decisions

 When PCN and HCN compensation packages are compared, the often-considerable

income gap in favour of PCNs is viewed by HCNs as unjustified

 For many expatriates a key international position means new status, authority, and

an increase in standard of living These changes may affect expatriates’ sensitivity

to the needs and expectations of their host-country subordinates