International Human Resources Management Chapter 10, Part 1

Chapter Outline International human resources management (IHRM) Human resources management (HRM) Adapting HRM practices to global business Types of employees in global organizations Home-country nationals Host-country nationals Third-country nationals Inpatriates Legal documents: passports and visas

Chapter Outline (2) Expatriate vs. home country managers Criteria for making this decision Is the expatriate worth it? Financial costs of expatriates Risk of expatriate failure Benefits of having managers with international experience International cadre: another choice

Chapter Outline (3) Choosing the right expatriate for the job Key success factors Matching the candidate and the job

Human Resources Management (HRM) and HRM Functions HRM: deals with the entire relationship of the employee with the organization Recruitment: process of identifying and attracting qualified people to apply for vacant positions Selection: process of filling vacant positions in the organization

HRM Functions (2) Training and development: giving employees the knowledge, skills, and abilities to perform successfully Performance appraisal: system to measure and assess employees’ work performance

HRM Functions (3) Compensation (pay and benefits): organization’s entire reward package, including financial rewards, benefits, and job security Labor relations: ongoing relationship between an employer and those employees represented by labor organizations

International Human Resource Management All HRM functions, adapted to the international setting Two added complexities compared to domestic HRM Must choose a mixture of international employees Must decide the extent of adaptation to local conditions

Key Questions about Adapting HRM Practices How can we identify talented local employees? How can we attract these employees to apply for jobs? Can we use our home country’s training methods with local employees? What types of appraisal methods are customary and legal?

Key Questions about Adapting HRM Practices (2) What types of rewards do local people value? How can we retain and develop employees with a high potential as future managers? Do any local laws affect staffing, pay, benefits, and training decisions?

Types of Employees in Multinational Companies Home country nationals Host country nationals Third-country nationals Inpatriates

Home-country Nationals Are citizens of the country where the company is headquartered but live and work elsewhere Often used To start up operations (most common reason) To provide technical or managerial expertise To help the company maintain financial control In top management positions Companies sometimes start with home-country nationals and switch to host-country nationals as qualified people become available.

Host-country Nationals Citizens of the country where they live and work They are familiar with the culture and know the language They are less expensive than home-country personnel Host-country governments often prefer use of host-country nationals and some require it Hiring them is good public relations U. S. companies tend to rely heavily on host-country nationals

Third-country Nationals People who are citizens of neither the home country or the host country Example: A Mexican, employed by an American company, working in Argentina The employee's native country and the country where he works are often in the same geographic region

Advantages of Third-Country Nationals They often require less compensation than home-country nationals They usually have experience with the company. They know the company's culture, values, and policies. If they are from the same geographic region as the host country and also know the company's culture, they can often achieve objectives better than other types of managers.

Inpatriates Persons who work in the home country and are citizens of a different country Advantages of inpatriates Help to develop global core competencies Provide diversity and an international perspective in the home office Improve career opportunities for company managers who are not from the home country – avoids the "glass ceiling"

Passports and Visas A passport is a document that identifies its owner as the citizen of a particular country. A visa is a document from a foreign government that allows the visa owner to enter the foreign country for a particular purpose or reason, such as personal travel, work, or study. Most visas are valid for a specified period of time. Some visas can be renewed. Many governments have different rules for people from different countries.

Expatriate Any person who lives and works outside the country of which he or she is a citizen Includes home-country nationals, third-country nationals, and inpatriates In most countries, expatriates must have work visas in order to work. Exception: By 2011, citizens of most EU countries will be able to work in any EU country without a visa.

Expatriate or Host Country Manager? Using expatriate managers Do they have the appropriate skills? Are they willing to take expatriate assignments? Do any laws affect the assignment of expatriate managers? Using host country managers Do they have the expertise for the position? Can we recruit them from outside the company?

Is the Expatriate Worth It? Consider costs, risks, and benefits High financial costs High failure rate of expatriates Benefits of international experience to the company Expatriate failure occurs when An expatriate is recalled to the home country because of poor performance OR An expatriate comes home early because the manager or family cannot adjust to the foreign country.

Reasons for U.S. Expatriate Failure Individual Personality of the manager – poor interpersonal relationships or communication Lack of technical proficiency No motivation for assignment Family Spouse or family members fail to adapt Spouse cannot find a job Family members or spouse do not want to be there

Reasons for U.S. Expatriate Failure (2) Cultural Manager fails to adapt Manager fails to develop relationship with key people (company, customers, suppliers, government). Poor performance may result. Organizational Excessively difficult responsibilities Company fails to pick the right person Company fails to provide technical support or training

Reasons for Expatriate Failure Cross-country Comparison A study of American, European, and Japanese managers found that: Expatriate failure is highest among Americans, somewhat lower among Europeans, and lowest among Japanese. For Americans and Europeans, family issues are the most common cause of expatriate failure. For Japanese managers, not having the needed job skills is the most common cause of failure

How Companies Benefit from Managers' International Experience Helps managers acquire international skills Helps coordinate and control operations dispersed activities Communication of local needs/strategic information to headquarters In-depth knowledge of local markets These benefits can be strategically important to the company. Some companies now require international experience for high-level managers.

International Cadre: Another Choice Separate group of expatriate managers who specialize in a career of international assignments Have permanent international assignments Move from one international assignment to another May be recruited from any country Sent to worldwide locations to develop cross-cultural skills

Key Success Factors for Expatriate Assignments Technical and managerial skills to do the job Personality traits Ability to relate well to people from different cultures Family situation International motivation Language ability

Matching the Candidate and the Job Assignment length For short assignments, technical and professional skills are usually the most important criteria For longer assignments, other factors are also important Cultural similarity: it is easier to work in a culture similar to your own.

Matching the Candidate and the Job Amount of interaction with local people – higher levels of interaction require better skills in developing relationships across cultures. Job complexity and responsibility – high-level jobs require a higher level of experience. Cultural acceptance in the host country Employees and business contacts in Asian countries may feel insulted if they have to deal with older managers in high-level positions