Global Human Resource Management Chapter 18 © McGraw Hill Companies, Inc., 2000

The Strategic Role of International HRM Staffing policy: Selecting individuals with requisite skills to do a particular job. Tool for developing and promoting corporate culture. © McGraw Hill Companies, Inc., 2000 18-1

Strategy, Structure and Control Systems International Strategy Structure Multidomestic International Global Transnational and Controls Centralization of operating decision Decentralized Core competency Some centralized Mixed centralized centralized and decentralized Rest decentralized Informal matrix Horizontal differentiation Worldwide area Worldwide Worldwide Informal matrix structure product division product division Need for coordination Low Moderate High Very high Integrating mechanisms None Few Many Very many Performance Ambiguity Low Moderate High Very high Need for cultural controls Low Moderate High Very high Table 18.1 © McGraw Hill Companies, Inc., 2000 18-2

Types of Staffing Policy Ethnocentric: All key management positions are filled by parent-company nationals. Polycentric: Host-country nationals manage subsidiaries, parent-company nationals have key positions at headquarters. Geocentric: Seek best people for key jobs, regardless of nationality. © McGraw Hill Companies, Inc., 2000 18-3

Comparison of Staffing Approaches Staffing Strategic Approach Appropriateness Advantages Disadvantages Overcomes lack of Produces resentment Ethnocentric International qualified managers in host country host nation Unified culture Can lead to cultural myopia Helps transfer core competencies Polycentric Multidomestic Alleviates cultural Limits career mobility myopia Isolates headquarters Inexpensive to from foreign implement subsidiaries Geocentric Global and Uses human resources National immigration Transnational efficiently policies may limit implementation Helps build strong culture and informal management network Expensive Table 18.2 18-4 © McGraw Hill Companies, Inc., 2000

The Expatriate Problem 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). © McGraw Hill Companies, Inc., 2000 18-5

Expatriate Failure Rates Recall Rate Percent Percent of Companies US Multinationals 20 - 40% 7% 10 - 20% 69 < 10 24 European Multinationals 11 - 15% 3% 6 - 10 38 <5 59 Japanese Multinationals 11 - 19% 14% 6 - 10 10 <5 76 Table 18.3 © McGraw Hill Companies, Inc., 2000 18-6

Reason 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. 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. European Multinationals: Inability of spouse to adjust. © McGraw Hill Companies, Inc., 2000 18-7

Expatriate Selection Self-orientation: Others-orientation: Strengthen self-esteem, self-confidence and mental well-being. Others-orientation: Enhance ability to interact with host-country nationals. Perceptual ability: The ability to empathize - understand why people in host-country behave the way they do. Cultural toughness: How well an expatriate adjusts to a particular posting tends to be related to the country of assignment. © McGraw Hill Companies, Inc., 2000 18-8

Training for Expatriate Managers Cultural: Seeks to foster an appreciation of the host-country’s culture. Language: Can improve expatriate’s effectiveness, relate more easily to culture and fostered a better firm image. Practical: Ease into day-to-day life of the host country. 1. Culture 2. Language 3. Practical © McGraw Hill Companies, Inc., 2000 18-9

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 © McGraw Hill Companies, Inc., 2000 18-10

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 evaluates and appreciates them. Many believe a foreign posting does not benefit their career. © McGraw Hill Companies, Inc., 2000 18-11

Guidelines for Performance Appraisal More weight given to on-site manager’s evaluation. Former expatriate who served in the same location should assist home-office manager with the evaluation. If foreign on-sight manager preparing evaluation, home-office manager consulted before evaluation is finalized. © McGraw Hill Companies, Inc., 2000 18-12

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 © McGraw Hill Companies, Inc., 2000 18-13

International Labor Relations Key issue: degree to which organized labor can limit the choices of an international business. Labor concerns: Counter bargaining power with threat to move jobs off-shore. Keep high-skill work at home and ship low-skill work to foreign plants. Importing employment practices and contractual agreements from the home-country. © McGraw Hill Companies, Inc., 2000 18-14

Strategy of International Labor Try to establish international labor organizations. Lobby legislatures to restrict multinationals. Use United Nations to regulate multinationals. Efforts have not been successful. © McGraw Hill Companies, Inc., 2000 18-15

Multinationals’ Approach to Labor Relations Decentralize: labor laws, union power and nature of collective bargaining varies from country to country. Centralize: Want to rationalize global operations. Need to control labor costs and maximize threat of move to lower cost country. Before move, get new union approval for work practices. © McGraw Hill Companies, Inc., 2000 18-16