1. International Business: The New Realities by Cavusgil, Knight and Riesenberger Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

2. Learning Objectives 1.The strategic role of human resources in international business 2.International staffing policy 3.Preparation and training of international employees 4. International performance appraisal 5.Compensation of employees 6. International labor relations 7. Diversity in the international workforce Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-2

3. Challenges of International Human Resource Management Recruiting, managing, and retaining human resources at a firm with extensive global operations is especially challenging. For example, German firm Siemens has more than 400,000 employees in some 190 countries: 230,000 throughout Europe, 90,000 in the Americas, 70,000 in the Asia-Pacific region, and 12,000 in Africa, the Middle East, and Russia. Volkswagen, Nestle, IBM, Unilever, Wal-mart, McDonald’s, and Matsushita each has more than 150,000 employees outside the firm’s home country. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-3

4. International Human Resource Management The planning, selection, training, employment, and evaluation of employees for international operations. How a firm recruits, trains, and places skilled personnel in its worldwide value chains sets it apart from its competition. The combined knowledge, skills, and experiences of employees are distinctive and provide myriad advantages to the firm’s operations worldwide. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-4

5. Three Employee Categories in the MNE Host-country nationals (HCNs): Citizens of the country where the subsidiary or affiliate is located. HCNs make up largest proportion of employees that the firm hires abroad. Examples: The labor force in manufacturing, assembly, basic service activities, clerical work, and other non-managerial functions Parent-country nationals (PCNs): Also known as home-country nationals, PCNs are citizens of the country where the MNE is headquartered. Third-country nationals (TCNs): Employees who are citizens of countries other than the home or host country. Most work in management and have unique skills Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-5

6. Factors Contributing to the Complexity of International Human Resource Management Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-6

7. Differences Between Domestic and International IHRM 1.New HR responsibilities, such as international taxation, international relocation and orientation, services for expatriates, host government relations, and language translation services 2.Need for a broader perspective, such as establishing fair, comparable compensation, when there is a mix of PCNs, HCNs, and TCNs 3.Greater involvement in employees’ personal lives, such as housing arrangements, health care, children’s education, safety, security, appropriate compensation, and higher living costs Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-7

8. Differences Between Domestic and International IHRM (cont.) 4.Managing the mix of expatriates versus locals. Each location may be staffed with a mix of HCNs, PCNs, and TCNs, depending on firm’s international experience, cost of living abroad, local laws, and availability of qualified local staff. 5.Greater risk exposure, such as political risk and terrorism 6.External influences of government and culture, such as taxes, local work regulations, traditional work practices, and cultural conditions Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-8

9. Key Tasks of IHRM 1.International staffing policy: Activities directed at recruiting, selecting, and placing employees 2.Preparation and training of international employees 3.International performance appraisal: Providing feedback for employees’ professional development 4.Compensation of employees: Includes formulation of benefit packages that vary greatly from country to country 5.International labor relations: Managing relationships with unions; collective bargaining processes, known as industrial relations 6.Diversity in the international workforce Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-9

10. Criteria for Selecting Employees for Foreign Operations Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-10

11. Staffing: Searching for Talent Recruitment: Searching for and locating potential job candidates to fill the firm’s needs Selection: Gathering information to evaluate and decide who to employ in particular jobs Managers must proactively identify potential candidates, groom them to become corporate leaders, train personnel to meet evolving business needs, and ensure that the talent supply keeps pace with the growth of the firm. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-11

12. Employee Characteristics That Facilitate International Effectiveness Technical competence: Must have adequate managerial and technical capabilities Self-reliance: Entrepreneurial, proactive mindset; ability to function with considerable independence and limited support from headquarters Adaptability: Ability to adjust to foreign cultures, cultural empathy, flexibility, diplomacy, and a positive attitude Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-12

13. Characteristics That Facilitate International Effectiveness (cont.) Interpersonal skills: Ability to build relationships is key. Leadership ability: Must view change positively, and proactively manage threats and opportunities Physical and emotional health: Must handle stresses of life abroad Spouse/dependents prepared for living abroad Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-13

14. Expatriate An employee who goes to work abroad for an extended period, usually years Repatriation: Return of the expatriate to the home country Requires advance preparation Unless managed well, returning expatriate may encounter problems, such as career disruptions and “reverse culture shock” Expatriate assignment failure: The premature return of an expatriate, due to an inability to perform well abroad Costly to the firm (lost productivity and relocation costs) and to expatriates themselves (family stress and career disruption) Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-14

15. Culture Shock The confusion and anxiety, often akin to mental depression, that can result from living in a foreign culture for an extended period; often affects family members most. A leading cause of expatriate failure Especially a factor for those assigned to culturally dissimilar countries, such as China and Yemen Can be reduced via advance preparation, training, language skills, deep interest in the new country Helpful activities: Regular exercise, relaxation techniques, or keeping a detailed journal of experiences Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-15

16. Key Features of Preparation and Training for International Employees Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-16

17. Three Components of Training Personnel for International Assignments 1.Area studies: Factual knowledge of the historical, political, and economic environment of the host country 2.Practical information: Knowledge and skills necessary to function effectively in a country, including housing, health care, education, and daily living 3.Cross-cultural awareness: Ability to interact effectively and appropriately with people from different language and cultural backgrounds Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-17

18. Training In order of increasing rigor, training methods include: Videos, lectures, assigned readings, case studies, books, web-based instruction, critical incident analyses, simulations, role-playing, language training, field experience, and long-term immersion. Role-playing and simulations involve the employee acting out typical encounters with foreigners. Long-term immersion places the employee in the country for several months or more, often for language and cultural training. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-18

19. Cultivating a Geocentric Orientation Ethnocentric views are common in many MNEs. More progressive MNEs follow a geocentric orientation, staffing HQ and subsidiaries with the most competent personnel, regardless of nationality. These are characterized by an openness to, and articulation of, multiple cultural and strategic realities on both global and local levels. It is best to hire, develop, nurture, and recognize employees who possess a global mindset and offer global leadership potential. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-19

20. Performance Appraisal Performance appraisal: Formal process of assessing how effectively employees perform their jobs. Helps identify problem areas where an employee needs to improve and additional training is warranted. Determines compensation and firm performance. MNEs devise procedures to assess the performance of individual employees; ascertain if any problems are attributable to inadequate skill levels; provide additional training and resources; and terminate employees who consistently fail to achieve goals. Often very challenging in international business. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-20

21. Compensation of Personnel Compensation varies internationally due to differences in legally mandated benefits, tax laws, cost of living, local tradition, and culture. Employees posted abroad expect to be compensated at a level that allows them to maintain their usual standard of living, which can make compensating expatriates very costly. Compensation includes base remuneration, benefits (e.g., health care plans), allowance (e.g., for housing, children’s education, travel), and incentives. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-21

22. Cost of Living in Selected Cities, 2009 (Index scale; New York = 100) Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-22

23. Labor Unions and Collective Bargaining Management and workers determine the job relationships that will be in effect at the workplace. Collective bargaining involves negotiations between management and workers regarding wages and working conditions. Labor regulations vary substantially, from minimum regulations in Africa and India to very detailed regulations in Northern Europe. Union membership has declined in most countries, but remains high in several European countries. Strikes can disrupt international operations. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-23

24. Percentage of Workers Who Belong to Labor Unions,1997 and 2007 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-24

25. Average Annual Days Not Worked Due to Labor Disputes (per 1,000 employees, 1998–2008) Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-25

26. Wage Rate of Manufacturing Labor, in US Dollars per Hour, 2008 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-26

27. Trends in International Labor Mobility of labor across national borders has increased substantially. Reasons include: Growing interconnectedness of national economies Rapid expansion of multinational firms Rise of international collaborative ventures Greater emphasis on global teams Many countries are coping with an influx of immigrants, both legal and illegal, who compete with established workers by providing low-cost labor. Trend is significant in Europe, Persian Gulf countries, and the United States (but not in Japan ). Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-27

28. Average Percentage of Women in Senior Management Positions Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-28

29. Women in International Business Women currently occupy relatively few top management positions (in Europe, women occupy only 15% of senior executive posts). Reasons for scarcity of women in international jobs include: Senior managers often assume women do not make suitable leaders abroad (e.g., due to cultural challenges). Some female managers prefer to remain in the home country to fulfill family obligations or avoid disrupting partner’s career. Most companies do not accommodate child-rearing or other family responsibilities. There are fewer women with sufficient experience to be sent abroad for senior jobs. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-29

30. Recent Positive Trends Many more women are obtaining university degrees in business. Female graduates account for some 50% of recruits joining European firms. Businesswomen increasingly form their own networks, such as Women Directors on Boards in Britain and The Alliance of Business Women International in the United States (www.abwi.org).www.abwi.org Overall trend is positive (except in strongly Islamic countries). Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-30

31. Success Strategies for Women in IB In many countries, being a foreign woman can be an advantage. Women stand out more, and competent women earn respect. Smart women leverage their gender to their advantage. Women overcome biases abroad by acquiring managerial, language, and international skills. Over time, managerial competence wins out over bias. Gaining substantial experience as a domestic manager or in short international assignments can greatly improve prospects for working abroad. Once abroad, women report the reaction of surprise is often replaced by professionalism and respect. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-31

32. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall 19-32 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.