Chapter 18: Global Human Resource Management Learning objectives: 1. Understand the strategic role of HRM 2. Focus on four key areas: (1) staffing, (2) training and development; (3) compen-sation, and (4) labor relations 3. Draw managerial implications Chapter 18 © Mike W. Peng (The Ohio State University)

© Mike W. Peng (The Ohio State University) Outline 1. The strategic role of HRM 2. Staffing 3. Training and development 4. Compensation 5. Labor relations 6. Managerial implications Chapter 18 © Mike W. Peng (The Ohio State University)

1. The strategic role of HRM (A) HRM: Activities an organization carries out to utilize its human resources effectively (B) It is people who formulate and implement strategies! Chapter 18 © Mike W. Peng (The Ohio State University)

© Mike W. Peng (The Ohio State University) 2. Staffing (I) (A) Three international staffing approaches: Ethnocentric: Focus on home country norms Good for an international strategy Polycentric: Emphasize host country norms Good for a multidomestic strategy Geocentric: Flexibility is the key Good for global and transnational strategies Chapter 18 © Mike W. Peng (The Ohio State University)

Types of staffing policy Ethnocentric Key management positions filled by parent-country nationals Polycentric Host-country nationals manage subsidiaries, parent company nationals hold key Headquarter positions Geocentric Seek best people, regardless of nationality Chapter 18 © Mike W. Peng (The Ohio State University)

© Mike W. Peng (The Ohio State University) 2. Staffing (II) (B) Expatriates A manager working in a different country High expatriate costs: $300,000 annually High expatriate failure rates: More than 10% U.S. European Japanese expat failure 76% 41% 24% No. 1 problem for U.S. and European expats: Inability of spouse to adjust No. 1 problem for Japanese expats: Inability to cope with the larger responsibility Chapter 18 © Mike W. Peng (The Ohio State University)

© Mike W. Peng (The Ohio State University) 2. Staffing (III) (C) Expatriate selection Self-orientation: Self-confidence Others-orientation: Open mindedness Perceptual ability: Cross-cultural sensitivity Cultural toughness: Ability to adjust to distant cultures In other words, don’t select expats just based on technical skills and domestic track record! Chapter 18 © Mike W. Peng (The Ohio State University)

3. Training and development (I) (A) Expats training Only 30% expats receive training Always a good idea to involve family Types of training Cultural training: Deeper understanding Foreign language training: Basics will be helpful Practical training: The nuts and bolts for survival Timing and intensity Chapter 18 © Mike W. Peng (The Ohio State University)

Training and development (II) Training: obtaining skills for a particular (foreign) posting. Development: develops manager’s skills over his/her career in the Firm. Chapter 18 © Mike W. Peng (The Ohio State University)

3. Training and development (III) Language and cultural training Practical training 1. Culture 2. Language 3. Practical Time Departure/entry Chapter 18 © Mike W. Peng (The Ohio State University)

3. Training and development (IV) (B) Repatriation training Typically ignored Dreadful results for many companies (see next slide) Chapter 18 © Mike W. Peng (The Ohio State University)

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 10 20 30 40 50 60 70% Chapter 18 © Mike W. Peng (The Ohio State University) 18-10

© Mike W. Peng (The Ohio State University) 4. Compensation (I) (A) National differences in compensation Pay managers in different countries according to local norms, or on a global basis? Ethnocentric firms: Pay expats according to their home country standards Polycentric firms: Pay local rates Geocentric firms: Equalization seems to be the only way out in the long run; but it can be very costly Chapter 18 © Mike W. Peng (The Ohio State University)

National differences in compensation Table 18.4 CEO HR Director Accountant Mfg. Employee Argentina $860,704 $326,874 $63,948 $17, 884 Canada 742,228 188,070 44,866 36,289 Germany 421,622 189,785 61,375 36,934 Taiwan 179,486 102,491 30,652 11,924 UK 719,665 268,302 107,839 28,874 US 1,403,899 306,181 66,377 44,680 Chapter 18 © Mike W. Peng (The Ohio State University)

© Mike W. Peng (The Ohio State University) 17-12 Figure 17.3 Cost of living New York = 100 New York = 100, June 1997 Source: The Economist, June 28, 1997, p. 108. Chapter 18 © Mike W. Peng (The Ohio State University)

© Mike W. Peng (The Ohio State University) 4. Compensation (II) (B) Expatriate pay: Very expensive! Base salary: Similar to similar positions domestically Foreign service premium: 10-30% base salary, as an inducement Allowances Hardship Cost of living Housing Education Taxation and benefits Chapter 18 © Mike W. Peng (The Ohio State University)

A typical balance sheet Additional Costs Paid by Company Home and Host-Country Income Taxes Figure 18.1 Income Taxes Premiums and Incentives Income Taxes Housing Income Taxes Housing Goods and Services Housing Housing Goods and Services Goods and Services Goods and Services Reserve Reserve Reserve Reserve Home-Country Salary Host-Country Costs Host-Country Costs Paid by Company and from Salary Home- Country Equivalent Purchasing Power Chapter 18 © Mike W. Peng (The Ohio State University) 18-13

5. International labor relations (A) Domestic unions: Resent job losses (B) Foreign unions: Resent exploitation by foreign bosses and companies (C) Global strategies of organized labor: Trying to establish international labor organiztions Lobbying governments to restrict MNEs Lobbying UN to regulate MNEs None has been very successful (e.g., Seattle protest in December 1999) Chapter 18 © Mike W. Peng (The Ohio State University)

6. Managerial implications (A) Pay attention to cultural differences and their impact on HRM (B) Focus on key problem areas: Selection, training, and repatriation of expats; Development of local managers; and Compensation (C) Be open-minded enough to accommodate changes Chapter 18 © Mike W. Peng (The Ohio State University)