2. Global Human Resource Management
Chapter Eighteen
Global Human Resource Management

3. 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
Management training and development
Performance appraisal
Compensation policy

4. 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

5. International Human Resource Management
As shown in in this figure (which is based on Figure 13.1), people are the linchpin of a firm’s organization architecture. For a firm to outperform its rivals in the global marketplace, it must have the right people in the right postings. Those people must be trained appropriately so that they have the skill sets required to perform their jobs effectively, and so that they behave in a manner that is congruent with the desired culture of the firm. Their compensation packages must create incentives for them to take actions that are consistent with the strategy of the firm, and the performance appraisal system the firm uses must measure the behavior that the firm wants to encourage. As indicated in Figure 18.1, the human resource function, through its staffing, training, compensation, and performance appraisal activities, has a critical impact upon the people, culture, incentive, and control system elements of the firm’s organization architecture (performance appraisal systems are part of the control systems in an enterprise). Thus, human resource professionals have a critically important strategic role.
Figure 18.1, p. 620

6. Staffing Policy Staffing policy Types of 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

7. Ethnocentric Policy
Key management positions filled by parent-country nationals
Best suited to international businesses
Advantages:
Overcomes lack of qualified managers in host nation
Unified culture
Helps transfer core competencies
Disadvantages:
Produces resentment in host country
Can lead to cultural myopia

8. Polycentric Policy Host-country nationals manage subsidiaries
Parent company nationals hold key headquarter positions
Best suited to multi-domestic businesses
Advantages:
Alleviates cultural myopia
Inexpensive to implement
Helps transfer core competencies
Disadvantages:
Limits opportunity to gain experience of host country nationals outside their own country
Can create gap between home and host country operations

9. 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

10. Comparison of Staffing Approaches
Table 18.1, p. 623

11. 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

12. Reasons for Expatriate Failure
US multinationals
Inability of spouse to adjust
Manager’s inability to adjust
Other family problems
Manager’s personal or emotional immaturity
Inability to cope with larger overseas responsibilities
European multinationals
Japanese Firms
Inability to cope with larger overseas responsibilities
Difficulties with the new environment
Personal or emotional problems
Lack of technical competence
Inability of spouse to adjust

13. Expatriate Failure Rate
Table 18.2, p. 624

14. 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

15. Four Attributes that Predict Success
Self-Orientation
Possessing high self-esteem, self-confidence and mental well-being
Others-Orientation
Ability to develop relationships with host country nationals
Willingness to communicate

16. 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

17. Training and Management Development
Training: Obtaining skills for a particular foreign posting
Cultural training: Seeks to foster an appreciation of the host country’s culture
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

18. 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

19. 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

20. 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
percent

21. 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

22. Performance Appraisal
Problems:
Unintentional bias
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

23. 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

24. Compensation Two issues:
Pay executives in different countries according to the standards in each country or equalize pay on a global basis
Method of payment
Two issues are raised in every discussion of compensation practices in an international business. One is how compensation should be adjusted to reflect national differences in economic circumstances and compensation practices. The other issue is how expatriate managers should be paid. From a strategic perspective, the important point is that whatever compensation system is used, it should reward managers for taking actions that are consistent with the strategy of the enterprise.

25. Compensation in Various Countries
Table 18.3, p. 633

26. 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

27. Components of Expatriate Pay
Base Salary
Same range as a similar position in the home country
Foreign service premium
Extra pay for work outside country of origin
Allowances
Hardship, housing, cost-of-living, and education allowances
Taxation
Firm pays expatriate’s income tax in the host country
Benefits
Level of medical and pension benefits identical overseas

28. The Balance Sheet Approach
Figure 18.2 shows a typical balance sheet. Note that home-country outlays for the employee are designated as income taxes, housing expenses, expenditures for goods and services (food, clothing, entertainment, etc.), and reserves (savings, pension contributions, etc.). The balance sheet approach attempts to provide expatriates with the same standard of living in their host countries as they enjoy at home plus a financial inducement (i.e., premium, incentive) for accepting an overseas assignment
Figure 18.2, p. 634

29. International Labor Relations
Key Issue
Degree to which organized labor can limit the choices of an international business
Aims to foster harmony and minimize conflicts between firms and organized labor

30. 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

31. Strategy of Organized Labor
Attempts to establish international labor organizations
Lobby for national legislation to restrict multinationals
Attempts to achieve international regulations on multinationals through such organizations as the United Nations

32. 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