1. International Business Environments & Operations
Daniels ● Radebaugh ● Sullivan
International Business Environments and Operations 14e by Daniels, Radebaugh, and Sullivan
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2. International Human Resources
Chapter 20
International Human Resources
Chapter 20: International Human Resources
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Learning Objectives
To discuss the importance of human resource management
To explain the types of expatriates
To profile the staffing frameworks used by MNEs
To assess how MNEs select, prepare, compensate, and retain expatriates
The Learning Objectives for this chapter are
To discuss the importance of human resource management
To explain the types of expatriates
To profile the staffing frameworks used by MNEs
To assess how MNEs select, prepare, compensate, and retain expatriates
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Introduction
Learning Objective 1:
To discuss the importance of human resource management
Learning Objective 1: To discuss the importance of human resource management.
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Introduction
In addition to insightful strategies, great supply chains, sharp financial systems, and so on, successful MNEs have great people
It is important to get the right person in the right job in the right place at the right time for the right compensation
Successful MNEs have insightful strategies, great supply chains, sharp financial systems, and great people.
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What is HRM?
Human resource management (HRM)
the activities that staff the MNE
HRM is more difficult in international companies because of
Environmental differences
Strategic contingencies
Organizational challenges
MNEs need to figure out how to build, develop, and retain a cadre of managers to lead the company. In today’s global economy, managers that can succeed and thrive despite environmental differences, strategic contingencies, and organizational challenges can give their firm a competitive advantage.
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7. What is HRM? Factors Influencing HRM in International Business
This Figure shows the factors influencing HRM in international business. Notice that a fit between strategy and HRM is essential to success.
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Strategizing HRM
Superior human resources are essential to
high productivity
competitive advantage
value creation
MNEs need to integrate strategy and HRM
Today, companies see HRM as a driver of company strategy, responsible for providing the people who can leverage the firm’s core competencies across the global market.
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9. The Perspective of the Expatriate
Learning Objective 2:
To explain the types of expatriates
Learning Objective 2: To explain the types of expatriates.
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10. The Perspective of the Expatriate
MNE executives can be
locals
expatriates
leave their own country to live and work in another
Home country nationals
Third-country nationals
MNE executives are classified as being locals – those who are hired by the company in their own country to staff local operations, or expatriates.
An expatriate is an employee who leaves her or his native country to live and work in another. A home country national is a citizen of the country where the firm is headquartered, while a third-country national is an employee who is a citizen of neither the home nor the host country.
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11. The Perspective of the Expatriate
Trends in expatriate assignments
most expatriate assignments are short term lasting less than a year
more assignments are going to younger and older workers than in the past
the number of female expatriates, third-country nationals, and reverse expatriates is rising
Traditionally, expatriate assignments were for three to five years and involved mid-level managers, but today, most assignments last less than a year and may involve younger workers or older employees.
Similarly, more women and third-country nationals are being sent on foreign assignments.
A new type of expatriate - the reverse expatriate - is also becoming more common. These managers are from emerging countries who are sent to developed countries to learn the ropes and are then reassigned to their home country.
Keep in mind that the high cost of expat assignments is forcing companies to rethink how to structure their assignments and look for ways to economize.
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12. Staffing Frameworks in the MNE
Learning Objective 3:
To profile the staffing frameworks used by MNEs
Learning Objective 3: To profile the staffing frameworks used by MNEs.
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13. Staffing Frameworks in the MNE
There are three approaches to staffing policy
Ethnocentric
fill key management positions with home-country nationals
Polycentric
use host-country nationals to manage local subsidiaries
Geocentric
seek the best people for key jobs throughout the organization, regardless of nationality
There are three approaches to staffing in an MNE: ethnocentric, polycentric, and geocentric.
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14. Staffing Frameworks in the MNE
The Ethnocentric Framework: Key Benefits
This Table shows the advantages of an ethnocentric approach to staffing.
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15. Staffing Frameworks in the MNE
The Polycentric Framework: Key Benefits
This Table shows the advantages of the polycentric approach.
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16. Staffing Frameworks in the MNE
The key advantage of the geocentric approach is that managers can move between countries and cultures without losing their personal effectiveness
But, this approach is difficult to develop and maintain
A geocentric staffing policy helps companies pursue a global and, especially, a transnational strategy. Both types of strategies rely on exploiting learning opportunities around the world to generate and leverage ideas.
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17. Staffing Frameworks in the MNE
Comparing Approaches to Staffing Foreign Operations
Which framework is best? Well, no approach is superior in all cases. It’s important to look at what the company is trying to accomplish. This Table compares the different approaches to staffing and where each approach works well.
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Managing Expatriates
Learning Objective 4:
To assess how MNEs select, prepare, compensate, and retain expatriates
Learning Objective 4: To assess how MNEs select, prepare, compensate, and retain expatriates.
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Managing Expatriates
Expatriate selection
screening executives to find those with the greatest inclination and highest potential for a foreign assignment
Candidates are screened according to
Technical competence
Adaptiveness
self-maintenance
satisfactory relationships with host nationals
sensitivity to host environments
Leadership
When selecting an individual for a foreign assignments, MNEs consider the individual’s technical competence, ability to adapt to the host country and relate with host nationals, and leadership qualities.
Keep in mind that while technical competence is important, so too is the expatriate’s personal resourcefulness and sensitivity to the host environment. Note also that leadership skills are essential because the expatriate often has broader responsibilities in the foreign subsidiary.
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20. Managing Expatriates Key Competencies of Expatriates
This Figure shows the key competencies of expatriates. Notice the high importance of a global mindset and cultural intelligence/sensitivity.
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Managing Expatriates
Expatriate failure
a manager’s premature return home due to poor performance
The rate of failure is dropping in general, but is higher in emerging economies
China and India
The cost of failure can easily reach $1 million
The rate of expatriate failure is falling thanks to better selection processes, but is still high in emerging economies particularly China and India. Keep in mind though, that because failure is costly from both a monetary and a personal perspective, companies are continually looking for ways to improve success rates.
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22. Managing Expatriates
Concerns of Expatriates Ahead of Moving to Foreign Assignments
This Figure shows the leading concerns of expatriates prior to their foreign assignments.
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Managing Expatriates
Common reasons for expatriate failure
inability of the spouse and family to adapt to the host country
To prevent expatriate failure, companies may provide preparation programs to provide
General country understanding
Cultural sensitivity
Practical skills
Preventing expatriate failure is important. Many companies have developed training programs for both the manager and the manager’s family to help the adjustment process go more smoothly.
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Managing Expatriates
Compensation packages should
Motivate employees
Allow employees to maintain their standard of living
Reflect the responsibilities of the position
Ensure that after-tax income will not fall
Maintain pay equity among peers
Compete with industry packages
Be easily administered
How should expatriates be paid? This is a question that challenges many international companies. Companies need to ensure that the employee is paid enough to be motivated to accept the foreign assignment, yet not let costs get out of hand or create inequities. In general, the higher the pay, the longer the expatriate assignment lasts.
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Managing Expatriates
Types of compensation plans
Balance sheet approach
equalizes purchasing power across countries so expatriates have the same living standard in their foreign posting that they had at home
Home-based method
Headquarters-based method
Host-based method
The most common approach to expatriate compensation is the balance sheet approach.
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Managing Expatriates
A typical compensation package includes
Base salary
Foreign service allowance
Fringe benefits
Tax differentials
Expatriates typically negotiate their salary in terms of base salary, foreign service premiums, various allowances, fringe benefits, and tax differentials.
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27. Managing Expatriates What Does an Expatriate Cost?
This Table shows a typical expatriate compensation package. Keep in mind that current trends show that companies are reducing some of the allowances as expatriate assignments become more common.
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28. Managing Expatriates
Top Five Most Expensive Cities for Expatriates by Region
This Table shows the most expensive cities for expatriates. Managers being transferred to these cities are likely to receive cost-of-living allowances.
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Managing Expatriates
Repatriation
the process of reintegrating the expatriate into the home country upon completion of the foreign assignment
Can pose problems
Work
Financial
Social
The challenge is to find the right job for the returning manager
The repatriation process is often paid little attention or ignored completely, yet it can be one of the most important elements in the expatriate assignment process. While some managers find that they are promoted upon their successful completion of a foreign assignment, as many as one third return to temporary assignments, and some 80 percent to assignments with less responsibility. This prompts many managers to look for new positions. In 2010, for example 40 percent left their company within one year, and another 25 percent between the first and second year after returning.
To prevent this, and the loss of knowledge and experience to the firm, companies must work hard to find the right job for the returning expatriate. It’s important to manage the repatriation process.
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30. Brainpower: Drains, Circulation, or Returns?
Trends
worker populations will grow faster in developing countries
wealthier countries will continue to grow in the number of retirees
MNEs must adapt
Brain drain
Labor-saving threats
Brain circulation
The growing mobility of capital, technology, and information among countries and companies presents new challenges for companies. Access to and retention of more qualified personnel will become even more important for companies seeking to recruit and retain skilled workers.
Worker population trends in developed and developing countries suggest that there will be fewer people to do productive work in the wealthier countries. These countries are already trying to adjust, engaging in a range of education and training programs. MNEs must adapt to the social and economic consequences of these programs.
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