1. 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)

2. © 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)

3. 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)

4. © 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)

5. 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
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6. © 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
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7. © 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)

8. 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
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© Mike W. Peng (The Ohio State University)

9. 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)

10. 3. Training and development (III)
Language and
cultural training
Practical training
1. Culture
2. Language
3. Practical
Time
Departure/entry
Chapter 18
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11. 3. Training and development (IV)
(B) Repatriation training
Typically ignored
Dreadful results for many companies (see next slide)
Chapter 18
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12. 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 %
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18-10

13. © 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
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© Mike W. Peng (The Ohio State University)

14. 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
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15. © 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.
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16. © 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
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© Mike W. Peng (The Ohio State University)

17. 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
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© Mike W. Peng (The Ohio State University)
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18. 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)
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© Mike W. Peng (The Ohio State University)

19. 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)