1. International HRM Challenge
Chapter 17
With the increase of globalization, organizations are facing more and more interaction with those from other countries and cultures. Additionally, firms are hiring and working with an international workforce. Thus, HR managers are having to establish policies and procedures related to international activities, ramp up training and development, become familiar with international laws regarding hiring practices, and effectively manage expatriates, to name a few items now facing organizations and HRMs.
International HRM Challenge
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2. Chapter Challenges
Specify the HRM strategies that are most appropriate for firms at different stages of internationalization
Identify the best mix of host-country and expatriate employees given the conditions facing a firm
Explain the challenges of expatriate assignments
After reading Chapter 17, you will be able to specify the HRM strategies that are most appropriate for firms at different stages of internationalization, identify the best mix of host-country and expatriate employees given the conditions facing a firm, and explain the challenges of expatriate assignments.
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3. Chapter Challenges
Learn how to effectively manage expatriate assignments and minimize the chances of failure
Develop HRM policies and procedures that match the needs and values of different cultures
Consider ethical implications of HRM policies and procedures on a global basis
Additionally, after reading Chapter 17, you will be able to learn how to effectively manage expatriate assignments and minimize the chances of failure, develop HRM policies and procedures that match the needs and values of different cultures, and consider ethical implications of HRM policies and procedures on a global basis.
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4. International Involvement
Expatriate
Multinational Corporation (MNC)
Transnational Corporation
When a company is involved internationally, it will usually employ expatriates and possibly be considered a multinational corporation or a transnational corporation.
An expatriate is a citizen on one country living and working in another country.
A multinational corporation (MNC) is a firm with assembly and production facilities in several countries and regions of the world.
A transnational corporation is a firm with operations in many countries and highly decentralized operations. The firm owes little allegiance to its country of origin and has weak ties to any given country.
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5. The Stages of International Involvement
This slide shows how firms may progress through five stages as they internationalize their operations:
Stage 1, the firm’s market is exclusively domestic.
Stage 2, the firm is expands its market to include foreign countries but retains its production facilities within domestic borders.
Stage 3, the firm physically moves some of its operations out of the home country.
Stage 4, the firm becomes a full-fledged multinational corporation, with assembly and production facilities in several countries and regions of the world.
Stage 5, the most advanced stage of internationalization, firms are often called transnational corporations because they owe little allegiance to their country of origin and have weak ties to any given country. Operations are highly decentralized; each business unit is free to make personnel decisions with very loose control from corporate headquarters.
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6. International Involvement
Outsourcing
Falling Barriers
Small- and Medium-Size Enterprises Going Global
The Global Manager
Outsourcing: Firms in stages 3 through 5 often outsource their production and services to countries where they find a competitive advantage lower labor costs. Fewer firms can grow or even survive unless they engage in some form of outsourcing. Outsourcing has occurred in many firms in which they employ employees in countries such as Brazil, China, and India, where labor costs are low. Although some believe that exporting jobs to less-developed countries keeps salaries and benefits at home low, most experts believe it’s not realistic to turn back the clock on wages. However, consumers benefit from lower prices achieved by outsourcing, and countries that are the recipients of outsourcing use increased earnings to purchase goods and services from the United States.
The Internet is one of the reasons for the growth of outsourcing. However, online security is one issue in that may be compromised in other countries. Another issue is safety is with drug companies subcontracting with China and other countries. Human resources can help to reduce these problems with outsourcing by having a role in determining how workers are selected, the type of training they receive, and reward programs for quality.
Falling barriers: Although the world has always had some degree of economic interdependence, the economic meltdown at the end of the prior decade demonstrates how the barriers of separate countries have largely disappeared when it comes to trade, production, services, and finances.
At the firm level, whatever happens to a multinational company in one country will affect many other countries simultaneously. One other issue is that as operations move elsewhere, governments face more limits than ever in enacting and implementing domestic labor legislation.
Small- and medium-size enterprises are also going global: Many small and medium businesses are looking abroad for more of a customer base. However, it is challenging, as many family owned representatives are new to the international environment and are not as familiar with other laws and other complexities involved in navigating through foreign taxes and regulations.
The Global Manager: Advances in technology and communication and fewer bureaucratic hurdles for short-term, cross-border mobility mean that companies don’t need to rely as much on traditional long-term assignments overseas. With mobile phones, calls are much easier and free as opposed to difficult and costly just two decades ago. Additionally, virtual meetings are now possible due to technology. Most managers are also literate in a second language as opposed to years ago and are expected to learn cultural differences. Part of HR’s challenges now include attracting and retaining talent and that includes prospective employees that are diverse and flexible, adaptable to overseas assignments.
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7. Determining the Mix Host-Country and Expatriates
Wholly owned subsidiaries
Joint venture
Ethnocentric approach
Polycentric approach
Geocentric approach
Once a firm passes from exporting stage to wholly owned subsidiary or a joint venture, it must decide who will be responsible for managing the unit.
Wholly owned subsidiary: In international business, a foreign branch owned fully by the home office.
Joint venture: In international business, a foreign branch owned partly by the home office and partly by an entity in the host country (a company, a consortium of firms, an individual, or the government).
Ethnocentric approach: An approach to managing international operations in which top-management and other key positions are filled by people from the home country.
Polycentric approach: An approach to managing international operations in which subsidiaries are managed and staffed by personnel from the host country.
Geocentric approach: An approach to managing international operations in which nationality is downplayed and the firm actively searches on a worldwide or regional basis for the best people to fill key positions.
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8. Advantages and Disadvantages
This slide shows that there are both advantages and disadvantages to using local nationals and expatriates in foreign subsidiaries. Most firms use expatriates only for key positions such as senior managers, high-level professionals, and technical specialists.
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9. Reliance on Expatriates Increases When:
Local talent is not available
Overall business strategy is global vision
International units and domestic operations are highly interdependent
Technology has reduced need for expatriate to link the international units to home office
The political situation is unstable
Significant cultural differences exist between host and home countries
In general, reliance on expatriates increases when:
Sufficient local talent is not available.
An important part of the firm’s overall business strategy is the creation of a corporate-wide global vision.
International units and domestic operations are highly interdependent.
Technology has dramatically reduced the need for expatriates to link the international units to the firm’s home office.
The political situation is unstable.
There are significant cultural differences between the host country and the home country.
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10. The Challenges of Expatriate Assignments
Why International Assignments Fail
Career blockage
Culture shock
Lack of pre-departure cross-cultural training
Overemphasis on technical qualifications
Troublesome employees
Family problems
Six factors account for most failures, although their relative importance varies by firms.
Career blockage: Initially, many employees see the opportunity to work and travel abroad as exciting. But once the initial rush wears off, many feel that the home office has forgotten them and that their career has been sidetracked while their counterparts at home are climbing the corporate ladder.
Culture shock is the inability to adjust to a different cultural environment.
Lack of pre-departure cross-cultural training: Surprisingly, only about one-third of MNCs provide any cross-cultural training to expatriates, and those that do tend to offer rather cursory programs.
Overemphasis on technical qualifications: The person chosen to go abroad may have impressive credentials and an excellent reputation in the home office for getting things done. However, the same traits that led to success at home can be disastrous in another country, as cultural differences exists.
Getting rid of a troublesome employee: Unfortunately, some companies send their troubled manager abroad to deal with the problems.
Family problems: More than half of all early returns can be attributed to family problems. Thus, it is important to ensure that the family and the employee are truly a fit for an international assignment.
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11. The Challenges of Expatriate Assignments
Difficulties on Return
Lack of respect for acquired skills
Loss of status
Poor planning for return position
Reverse culture shock
The expatriates’ return home may also be fraught with difficulties. Between 20% and 40% of returning expatriates, called repatriates, leave the organization shortly after returning home. Some employers report that nearly half of employees leave the country within two years.
Here are difficulties when returning to home:
Lack of respect for acquired skills: The expatriate who has gathered a wealth of information and valuable skills on a foreign assignment may be frustrated by the lack of appreciation shown by peers and supervisors at corporate headquarters.
Loss of status: Returning expatriates often experience a substantial loss of prestige, power, independence, and authority.
Poor planning for return position: Uncertainties regarding their new career assignment may provoke much anxiety in returning employees.
Reverse culture shock: Living and working in another culture for a long time changes a person, especially if he or she has internalized some of the foreign country’s norms and customs.
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12. Using HRM to Effectively Manage Expatriates
Selection
Emphasize cultural sensitivity as a selection criterion
Establish a selection board of expatriates
Require previous international experience
Explore the possibility of hiring foreign-born employees
Carefully consider expatriate’s ethical values
Screen candidate’s spouses and families
Develop an effective selection program
The choice of an employee for an international assignment is a critical decision. To choose the best employee for the job, management should:
Emphasize cultural sensitivity as a selection criterion.
Establish a selection board of expatriates.
Require previous international experience.
Explore the possibility of hiring foreign-born employees.
Carefully consider the expatriate’s ethical values.
Screen the candidate’s spouses and families.
Develop an effective selection program.
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13. Training Cross-cultural training 9 to 12 months before the assignment
Expatriate family training
Approaches to training
Information-giving approach
Affective approach
Impression approach
Cross-cultural training sensitizes candidates for international assignment to local culture, customs, language, tax laws, and government. Ideally, the training process should begin 9 to 12 months in advance of the international assignment.
Family members also undergo several days of cross-cultural training that consists of country history, business practices, social customs, and nonverbal gestures. The need to train family members is equally important as it is for the expatriate employee.
The least expensive types of cross-cultural training are (1) the information-giving approach (less than a week; briefing), (2) the affective approach (one to four weeks; psychological and managerial skills training), and the (3) impression approach (one to two months; prepares for long assignments).
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14. Career Development Important Guidelines:
Position the international assignment as a step toward advancement
Provide support for the expatriate
Provide support for the spouse
The expatriate’s motivation to perform well on an international assignment, to remain in the post for the duration of the assignment, and to be a high performer upon returning to the home office will depend to a large extent on the career development opportunities offered by the employer. Successful career planning includes:
Position the international assignment as a step toward advancement.
Provide support for the expatriate.
Provide support for the spouse.
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15. Compensation Important Guidelines:
Provide the expatriate with disposable income equivalent to home disposable income
Provide explicit “add-on” incentive for accepting international assignment
Avoid having expatriate fill the same jobs held by locals or lower-ranking jobs
Firms can use compensation packages to enhance the effectiveness of expatriate assignments. Planning compensation requires management to follow three important guidelines:
Provide the expatriate with disposable income equivalent to home disposable income.
Provide explicit “add-on” incentives for accepting international assignment.
Avoid having the expatriate fill the same jobs held by locals or lower-ranking jobs.
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16. Using HRM to Effectively Manage Expatriates
Role of HR Department
Women and International Assignments
The role of HR department: A recent survey asked expatriates what advice they would give HR departments about handling expatriates. Key answers were that they wanted to HR departments to eliminate unnecessary uncertainty d, to remove unnecessary obstacles, to handle logistics better, and be better aware of sensitivities of the international workplace.
Women and international assignments: Although in 2014 women represented almost half of all managers in the United States, only 13% o U.S. managers sent abroad are women. Here are three misconceptions: (1) companies assume that women are not as internationally mobile as men, (2) companies assume that women encounter more work–life conflict when working on a global schedule, and (3) most companies believe clients outside the United States are not as comfortable doing business with women as they are with men.
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17. Hofstede’s Five Cultural Dimensions
Power Distance
Individualism
Uncertainty Avoidance
Geert Hofstede is a renowned cultural expert and social scientist who developed five cultural dimensions as a way for understanding and explaining the differences among cultures. These are:
1. Power distance: Extent to which individuals expect a hierarchical structure that emphasizes status differences between subordinates and supervisors.
2. Individualism: Degree to which a society values personal goals, autonomy, and privacy over group loyalty, commitment to group norms, involvement in collective activities, social cohesiveness, and intense socialization.
3. Uncertainty avoidance: Extent to which a society places a high value on reducing risk and instability.
4. Masculinity/femininity: Degree to which a society views assertive or masculine behavior as important to success and encourages rigidity stereotyped gender roles.
5. Long-term/short-term orientation: Extent to which values are oriented toward the future as opposed to the past or present.
Masculinity/Femininity
Orientation
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18. EEO in the International Context
Prohibition of basing employment decisions race, sex, and age
Foreign-national employees are not covered by U.S. law
The globalization of industry raises numerous equal employment opportunity (EEO) issues, only some of which the U.S. courts have addressed. However, here are principles in working in the international context regarding EEO:
U.S. companies are prohibited from basing employment decisions on employee characteristics such as race, sex, and age.
Foreign-national employees of U.S. companies working in their own country or in some other foreign country are not covered by U.S. employment law.
Under the Immigration Control and Reform Act of 1986, people who are not U.S. citizens but who are living and have legal work status in the United States may not be discriminated against.
Immigration Control and Reform Act of 1986
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19. Important Caveats National culture may be an elusive concept
Cultures change over time
Blame is sometimes placed on cultural factors
Hard data are not present
Right and wrong values vary
Business laws vary
The need to find the right balance of HRM policies
The effectiveness of an HRM practice depends on how well it matches a culture’s value system. Even so, managers need to keep several caveats in mind:
National culture may be an elusive concept.
Cultures change over time.
Blame is sometimes placed on cultural factors.
Hard data are not present.
Right and wrong values vary.
Business laws vary.
Organizations need to find the right balance of HRM policies.
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20. HRM and Exporting Firms
HRM Practices for International Activity
Ethics and Social Responsibility
Dealing with Political Risks
Reinforcing international activities in HRM practices requires a company to:
Explicitly consider international experience when making promotion and recruitment decisions, particularly to the senior management ranks.
Provide developmental activities designed to equip employees with the skills and knowledge necessary to carry out their jobs in an international context.
Create career ladders that take into account short- and long-term international strategies.
Design a reward structure that motivates key organizational players to take full advantage of the company’s export potential.
Ethics and social responsibility: Globalization increases the possibility that managers, especially those sent to regions very different from their home country, will face ethical dilemmas. What is ethical and legal may differ, and the differences are probably more pronounced when HR practices are considered on a global basis.
Dealing with political risks: When conducting business abroad, there is more political risk. Political risk is the possibility that social pressures in a foreign country may negatively affect the firm’s operation. If expatriates are thrown into unexpected political storms, they need to be able to respond appropriately to manage potentially damaging situations.
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21. Summary and Conclusions
The Stages of International Involvement
Determining the Mix of Host-Country and Expatriate Employees
The Challenge of Expatriate Assignments
Effectively Managing Expatriate Assignments with HRM Policies and Practices
Developing HRM Policies in a Global Context
Human Resource Management and Exporting Firms
To summarize, HRM will continue to work in a global environment and adjust organizational policies and procedures to work with an international workforce. In this chapter we looked at:
The Stages of International Involvement
Determining the Mix of Host-Country and Expatriate Employees
The Challenge of Expatriate Assignments
Effectively Managing Expatriate Assignments with HRM Policies and Practices
Developing HRM Policies in a Global Context
Human Resource Management and Exporting Firms
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22. Pearson Education, Inc. Copyright
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