1. Global Human Resource Management
Chapter 18
Global Human Resource Management

2. Learning Objectives Discuss the strategic role of HRM
Examine HRM major functions
Staffing policy
Training and development
Performance appraisal
Compensation policy
Labor relations
Identify issues and problems in staffing and managing expatriates
IBUS 330 Dr. Nini Yang

3. The Strategic Role of International Human Resource Management
To insure that HRM policies are congruent with and in support of the firm’s strategy, structure and controls.
IBUS 330 Dr. Nini Yang

4. Strategy, Structure and Control Systems
International Strategy
Structure Multi-domestic International Global Transnational & Controls
Centralization of operating decision
Decentralized Core competency Some Mixed centralized
centralized centralized and decentralized
Rest decentralized Informal matrix
Horizontal differentiation
Worldwide area Worldwide Worldwide Informal
structure product division product division matrix
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
IBUS 330 Dr. Nini Yang

5. Staffing Policy Staffing policy: Types of staffing policy:
Selecting individuals with requisite skills to do a particular job.
Also as tools for developing and promoting corporate culture.
Types of staffing policy:
Ethnocentric.
Polycentric.
Geocentric.
IBUS 330 Dr. Nini Yang

6. Types of Staffing Policy
Geocentric
Ethnocentric
Polycentric
Seek best
people, regardless
of nationality
Key management
positions filled by
parent-country
nationals
Host-country
nationals manage
subsidiaries,
parent company
nationals hold key
Headquarter
positions
IBUS 330 Dr. Nini Yang

7. Comparison of Staffing Approaches
Staffing Strategic
myopia
Approach Appropriateness Advantages Disadvantages
Ethnocentric International
Polycentric Multi-domestic
Geocentric Global and
Overcomes lack of Produces resentment
in host nation
Unified culture Can lead to cultural
Helps transfer core competencies
myopia Isolates headquarters
implement subsidiaries
efficiently policies may limit
implementation
Helps build strong culture and informal management network
Expensive
qualified managers in host country
Higher cost
Alleviates cultural Limits career mobility
Inexpensive to from foreign
Uses human resources National immigration
Transnational
Table 18.2
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8. The Expatriate Problem
Citizens of the firm’s home country working in another country
Expatriate failure:
Premature return of the expatriate manager to his/her home country
Cost of failure is high:
Estimate at three times of an expatriate’s annual salary plus the cost of relocation (impacted by currency exchange rates and assignment location)
$250,000-1million
IBUS 330 Dr. Nini Yang

9. Expatriate Failure Rates
Recall Rate Percent Percent of Companies
US Multinationals
% % %
<
European Multinationals
% %
<
Japanese Multinationals
% %
<
Table 18.3
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10. Reason for Expatriate Failure
U.S. 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.
IBUS 330 Dr. Nini Yang

11. Expatriate Selection Self-orientation: Others-orientation:
An executive’s domestic performance does not
necessarily equate to his/her overseas performance.
Self-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
Mendenhall & Oddou’s Predictors of success
IBUS 330 Dr. Nini Yang

12. Training and Management Development
Obtain skills for
a particular
(foreign) posting.
Development:
Develop
manager’s skills
over his/her career
in the Firm.
IBUS 330 Dr. Nini Yang

13. 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
IBUS 330 Dr. Nini Yang

14. 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
percent
IBUS 330 Dr. Nini Yang

15. Management and Development Strategy
Programs designed to increase overall skill through a mix of education and assignment rotations
Provides varied experience
Attempt to improve firm’s management productivity and quality
Particularly true for transnational strategy
Unifying corporate culture and management networks
Socialize norms and value systems
Foster esprit de corps
Build informal networks
Strengthen identification with company
IBUS 330 Dr. Nini Yang

16. 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.
IBUS 330 Dr. Nini Yang

17. Guidelines for Performance Appraisal
More weight given to onsite
manager’s evaluation.
Expat who worked in same
location should assist home-office
manager with evaluation.
If foreign on-site manager preparing
evaluation, home-office manager should
be consulted before finalization.
IBUS 330 Dr. Nini Yang

18. Compensation Two issues:
How to adjust compensation to reflect national differences in economic circumstances and compensation practices.
How expatriate managers should be paid.
IBUS 330 Dr. Nini Yang

19. National Differences in Compensation
Country
CEO
HR Director
Accountant
Mfg. Employee
Japan
$545,233
$235,536
$59, 107
$51, 994
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
United Kingdom
719,665
268,302
107,839
28,874
United States
1,403,899
306,181
66,377
44,680
Table 18.4
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20. Geocentric/Transnational
Compensation Issues
Ethnocentric
How much home-country expatriates should be paid
Polycentric
Pay can and should be country-specific
Geocentric/Transnational
May have to pay its international cadre of managers the same
IBUS 330 Dr. Nini Yang

21. Expatriate Pay Typically use balance sheet approach.
Equalizes purchasing power across countries.
Provides financial incentives to offset qualitative differences between assignment locations.
Components of a typical expatriate compensation package include:
Base salary.
Foreign service premium.
Various allowances.
Tax differentials.
Benefits.
IBUS 330 Dr. Nini Yang

22. A Typical Balance Sheet
Reserve
Goods and Services
Housing
Income Taxes
Home and Host-Country Income Taxes
Premiums and Incentives
Home-Country Salary
Host-Country Costs
Host-Country Costs Paid by Company and from Salary
Home- Country Equivalent Purchasing Power
Additional Costs Paid by Company
Figure 18.1
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23. International Labor Relations
Foster harmony and minimize conflict between the firm and organized labor.
Key issue:
Degree to which organized labor can limit the choices of an international business.
IBUS 330 Dr. Nini Yang

24. Concerns of Organized Labor
Firms can counter bargaining power by threatening to move production to another country.
International business will keep highly skilled tasks in home country and farm out only low-skilled tasks to foreign plants.
Importing employment practices and contractual agreements from home country that may diminish union’s influence and power.
IBUS 330 Dr. Nini Yang

25. 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.
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26. Multinationals’ Approach to Labor Relations
Decentralize: labor laws, union power and nature of collective bargaining vary from country to country
Now a trend toward centralization:
Want to rationalize global operations
Need to control labor costs and maximize threat of move to lower cost country
Competitive advantage can come from the way work is organized in a plant. Bargaining with local unions is, therefore, a priority
Before move, get new union approval for work practices
IBUS 330 Dr. Nini Yang

27. Implication for Effective IHR
Human Resource Management practices vary across borders.
Both home-country and host-country economic, social, cultural, political, and legal factors influence and constrain HR functions.
Corporate strategies guide and determine how HR works in an organization.
Global experience and good knowledge of IHR can enhance one’s career as a successful manager whether one works at the home-country headquarters or overseas.
IBUS 330 Dr. Nini Yang