2. 19 Human Resource Management International Business by Ball, McCulloch, Frantz, Geringer, and Minor McGraw-Hill/Irwin Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved. This chapter covers: Differences in labor conditions The growing role of women The “Global Mindset” The relationship between strategy and HR approaches IC executives The difficulties of finding qualified IC executives Expatriates and the trailing spouse

3. Chapter Objectives  Remember cultural differences in labor conditions  Realize the growing role of women in international business  Recognize the importance of creating a company “Global Mindset”  Understand the relationship between competitive strategies and HR management approaches  Compare home country, host country, and third country nationals as IC executives  Understand the difficulties of finding qualified executives for international companies (IC)  Understand what an expatriate is and the challenges of and opportunities of an expat position  Realize the increasing importance of accommodating the trailing spouse of an expatriate executive  Remember some of the complications of compensation packages for expatriate executives 19-2

4. Human Resource Management Human Resource Management includes Estimation of work force needs Recruitment and selection Training and development Motivation Compensation Discipline Employment termination 19-3

5. Worldwide Labor Conditions In 2004 47% of the world’s six billion people under the age of 24 6.2% of the total population unemployed and looking for work 11% decline in manufacturing jobs worldwide Global industrial output up 30% Worldwide increased participation of women in the work force Largest pool of skilled workers in the U.S. Still only represent 11.2% of corporate officers in the U.S. 59% of business worldwide include women in senior management More women starting their own business Attitudes toward women vary tremendously worldwide 19-4

6. Worldwide Labor Conditions Immigrant Labor Large movement of unskilled labor between nations Significant illegal immigrant populations In U.S. number of immigrant workers increasing EU has huge influx from Eastern Europe 19-5 Child Labor One out of six children worldwide work Often dangerous or filthy conditions and little or no compensation Majority in Asia and Africa Have no other option in poor countries ILO and UNICEF campaign against

7. Worldwide Labor Conditions  Forced Labor  Most common in Asia, Africa and Latin America  Generally women, children, and low-income men  Rural to Urban Shift  Difficult to teach workers from farms and villages how to adjust to factory life  Regional or Cultural Differences in Labor Conditions  Too many to discuss all  Japan versus China example 19-6

8. Staffing: The Good News and the Difficulties  The successful manager of a foreign affiliate must be able to  Understand the home country and the host country  Speak the language  Such managers exist, and may be found in  The home country  The host country  A third country 19-7

9. The Global Mindset Combines an openness to and awareness of diversity across cultures and markets with a propensity and ability to synthesize across this diversity Open minds Respect other cultures Push the limits of the culture Find opportunities to innovate 19-8

10. The International HRM Approach Ethnocentric Staffing International strategic orientation Most decisions made at headquarters Utilize citizens of their own country in key foreign positions May encounter difficulties overcoming cultural biases Broadens their experience 19-9 Polycentric Staffing Multidomestic orientation Use HCNs for subsidiaries and and PCNs for HQ HCNs familiar with local customs, culture and language Generally lower cost Some countries require hiring of local nationals

11. The International HRM Approach Regiocentric Staffing Regional strategic approach Regional employees selected for key positions Can use Third Country Nationals (TCNs) Salaries may actually be higher Similarity in language does not mean similarity of culture 19-10 Geocentric Staffing Transnational strategic orientation Select the best person for each job without regard for national origin Capitalizes on each staffing policy HRM strategy consistent across all subsidies

12. Training Home or PCN Encouraged to study the language and culture of the country to which they are going Sent on short trips for exposure Can send to business school Families of executives transferred overseas a major problem 19-11

13. Training Host Country National (HCN) Hired in the home country Students graduating from home country business schools First sent to IC headquarters Hired in the host country May set up in-house training programs in the host country May use business courses in the host country’s universities May send to home country school or training 19-12

14. Training Third Country National (TCN) Third country nationals may accept lower wages and benefits than will employees from the home country They 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 Will see greater use of TCNs as companies take the geocentric view 19-13

15. Expatriates A person living outside of his or her country of citizenship Arrange mentor Cleary define expectations Learn the new market Learn the language Network Excellent training opportunity 19-14

16. Expatriates Family Nine out of ten expatriate’s failures are family-related Unhappy spouses are the biggest reason for employees asking to go home early The company will be losing a “million-dollar corporate-training investment” in the executive 19-15 Children Can wreak havoc with children’s lives Personal computers and email help Trailing Spouses Two-career families complicate matters More companies trying to help spouses with job search Spouse may not be allowed to work

17. Language Training  The English speakers are stuck in a language trap  The English language has become the lingua franca of the world  English is everybody’s second language  Always better to speak language of potential customer  Customers can hide behind language during negotiations 19-16

18. Repatriation When expatriate returns home Reverse culture shock Can also prove traumatic for the family Company should provide counseling and assistance before family heads home 19-17

19. Expatriate Services Health care programs Claims administration Language translations Currency conversions Service standardization Banking services Online, 24-hour assistance Training Culture and language 19-18 House hunting Grocery and hardware shopping Utilities hook up Maid service Schools Organizations Cultural items

20. Best Practices Provide cross-cultural and language training Provide benefits package suitable to assigned region Provide cross-cultural assistance for family members Provide regular communication regarding health and safety issues Provide assistance in balancing personal and professional needs 19-19

21. Compensation  Salaries  Paying home country nationals the same salaries as their domestic counterparts permits worldwide consistency  Because of increasing use of third country nationals, those personnel are generally treated in the same way  Some pay same base pay to HCNs 19-20

22. Allowances Housing Allowance Permits executive to live at same standard as at home Cost-of-Living Allowance Based on differences in price of food, utilities, transportation, entertainment, clothing, personal services, and medical expenses as compared to home 19-21 Allowances for Tax Differentials Ensures expatriates will not have less after-tax pay than they would at home Education Allowances Insures children receive education equal to that at home Moving and Orientation Allowances Household effects and language instruction

23. Compensation Bonuses Expatriate employee compensation payments in addition to base salaries and allowances because of hardship, inconvenience, or danger Bonuses include Overseas premiums Contract termination payments Home leave reimbursement 19-22

24. Compensation Packages Can Be Complicated What Percentage? All allowances and a percentage of the base salary are usually paid in the host country currency In practice, the percentage varies from 65 to 75 percent, and the remainder being banked where the employee wishes What Exchange Rate? An exchange rate must be chosen Harder in countries with exchange controls and nonconvertible currencies Stock Plan Problems 19-23

25. 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 bonuses 19-24

26. Perks  Perks are symbols of rank in the corporate hierarchy and are used to compensate executives while minimizing taxes  Common perks include  Private pension plan  Retirement payment  Life insurance  Health insurance  Company house or apartment 19-25

27. 10 Leading Occupations of Employed Women Full-time Wage and Salary Workers 2003 Secretaries and administrative assistants Elementary and middle school teachers Registered nurses Nursing, psychiatric, and home health aides Cashiers Customer service representatives First-line supervisors/managers of office and administrative support First-line supervisors/managers of retail sales workers Bookkeeping, accounting, and auditing clerks Receptionists and information clerks

28. Child Labor

29. Child Labor by Region