Copyright Atomic Dog Publishing, 2004 Chapter 14 Establishing HRM Practices Overseas

Copyright Atomic Dog Publishing, 2004 Outline 14-1 Gaining Competitive Advantage 14-2 HRM Issues and Practices 14-3 The Manager’s Guide

Copyright Atomic Dog Publishing, Gaining Competitive Advantage International business operations appear in a variety of forms:  Wholly owned subsidiaries -The most common want medium to large companies “go international” is simple to set up operations overseas that they own  Joint ventures -When a firm joins up with foreign firms and creates a new company

Copyright Atomic Dog Publishing, HRM Issues and Practices Understanding cultural differences The use of expatriates Developing HRM practices in host-national countries

Copyright Atomic Dog Publishing, 2004 Understanding Cultural Differences Artifacts  Tangible things that represent the superficial aspects of a country’s culture Values  The rules of societal propriety and impropriety that are shared by people within a culture Assumptions  A society’s beliefs that have evolved from its attempts to adjust to the world around it Culture  A society’s set of assumptions, values, and rules about social interaction

Copyright Atomic Dog Publishing, 2004 Cross-Cultural Differences in the Workplace How interviews should be conducted How managers should act with their subordinates How negotiations should be conducted How new information should be packaged for training purposes How people should be paid for their work

Copyright Atomic Dog Publishing, 2004 How People React to Cultural Improprieties Degree of condemnation depends on two factors:  The extent to which the broken rule is widely shared among a cultural group’s members  The extent to which the rule is deeply held and viewed as being important or sacred

Copyright Atomic Dog Publishing, 2004 Degree of Condemnation Types of cultural rules and the typical condemnation associated with each:  Widely shared, deeply held -Severe punishment  Widely shared, shallowly held -Minor condemnation  Narrowly shared, deeply held -Disapproval or censure  Narrowly shared, shallowly held -Slight or none

Copyright Atomic Dog Publishing, 2004 Expatriates & Competitive Advantage Definition  A professional/managerial employee moved from one country to, and for employment in, another country Use of expatriates and competitive advantage  Succession planning  Coordination and control systems  Informational needs

Copyright Atomic Dog Publishing, 2004 Expatriates Rights Under the Civil Rights Act of 1991 “…coverage [to] U.S. citizens employed in a foreign country, provided that compliance with this provision would not cause the employer to violate the law of the foreign country in which the workplace is located. TO be covered under this provision, the U.S. citizen must be employed overseas by a firm controlled by an American employer. Control can be determined in several ways: interrelation of operations, common management, centralized control of labor relations, or common ownership or financial control of the corporation and the employer”

Copyright Atomic Dog Publishing, 2004 Selecting Expatriates Personality traits that a successful expatriate should possess:  Ability to handle stress  Reinforcement substitution  Ability to develop relationships  Perceptual skills

Copyright Atomic Dog Publishing, 2004 Ability to Develop Relationships Two skills are associated with expatriates developing relationships with host nationals:  Be willing to communicate in the host language  Conversational currency -Collecting social and cultural tidbits and trivia -Strategically insert into conversations with host nationals

Copyright Atomic Dog Publishing, 2004 Perceptual Skills Flexibility of one’s belief systems Ability to avoid being judgmental about the belief and value systems of the host culture Ability to make flexible attributions about why host nationals behave the way they do High tolerance for uncertainty

Copyright Atomic Dog Publishing, 2004 Training Expatriates Expatriates should be taught:  How to understand and work effectively with people from different cultural, religious, and ethnic backgrounds  How to manage multicultural teams  How to understand global markets, global customers, global suppliers, and global competitors

Copyright Atomic Dog Publishing, 2004 Problems Appraising Expatriates’ Job Performance Invalid performance criteria  Performance criteria do not make sense in the foreign culture Rater competence  Lacking an understanding of the social and business contexts in the foreign culture Rater bias  Cultural misinterpretations

Copyright Atomic Dog Publishing, 2004 Overcoming Performance Appraisal Problems Utilize multiple raters Make sure that some of those raters have lived and worked in the country in which the expatriate is working

Copyright Atomic Dog Publishing, 2004 Compensating Expatriates Foreign service premiums Hardship allowance Cost of living allowances Housing allowances Utility allowances Furnishing allowances Education allowances Home leave allowances Relocation allowances Medical allowances Car and driver allowances Club membership allowances Taxes

Copyright Atomic Dog Publishing, 2004 Repatriates Expatriates who return home Problems with repatriates  Not told what their job assignments will be prior to returning home  Return home to jobs that require less autonomy and authority  Difficulty readjusting to their native culture  Loss of premiums -No more elite private schools, no company cars, no allowances for recreational activities

Copyright Atomic Dog Publishing, 2004 HRM Interventions for Expatriates Mentoring Formalized career planning Communication systems

Copyright Atomic Dog Publishing, 2004 Developing HRM Practices in Host-National Countries Adjust HRM practices to the norms and culture of the host country Develop training programs that understand how the culture views the educational process Develop compensation systems that understand what motivates employees in each culture

Copyright Atomic Dog Publishing, The Manager’s Guide International HRM issues and line managers International HRM issues and the HRM department

Copyright Atomic Dog Publishing, 2004 International HRM Issues and Line Managers Managing expatriate subordinates  Managers must successfully navigate “long-distance managing” Expatriate service  A manager must be able to adapt his or her management behavior to the culture of the host country

Copyright Atomic Dog Publishing, 2004 International HRM Issues and the HRM Department Who should be sent overseas? What kind of training will they need, both before they leave and once they are abroad? What kind of compensation package will be needed to induce candidates to go overseas?

Copyright Atomic Dog Publishing, 2004 International HRM Issues and the HRM Department In what ways do the company’s human resource policies and procedures need to be adjusted overseas? How do performance appraisal systems need to be modified due to international differences? How many global management development programs will be created?