Copyright © 2015 Pearson Education, Inc.

Copyright © 2015 Pearson Education, Inc.
17 Managing Global Human Resources This chapter outlines some of the HR problems and issues involved with international businesses. The subjects covered include understanding inter-country differences, using selection to improve international assignments, and training and maintaining international employees. Copyright © 2015 Pearson Education, Inc.

Learning Objectives List the HR challenges of international business. Illustrate with examples how inter- country differences affect HRM. List and briefly describe the main methods for staffing global organizations. After studying this chapter, you will be able to: 1. List the HR challenges of international business. 2. Illustrate with examples how inter-country differences affect HRM. 3. List and briefly describe the main methods for staffing global organizations. Copyright © 2015 Pearson Education, Inc.

Learning Objectives Discuss some important issues to keep in mind in training, appraising, and compensating international employees. Explain with examples how to implement a global human resource management program. After studying this chapter, you will be able to: 4. Discuss some important issues to keep in mind in training, appraising, and compensating international employees. 5. Explain with examples how to implement a global human resource management program. Copyright © 2015 Pearson Education, Inc.

List the HR challenges of international business. The global challenges for management include deployment, knowledge, and innovation dissemination. They also include identifying and developing talent on a global basis. Complicating these decisions are the cultural, political, legal, and economic differences among countries and their peoples. This is a role for global HR. Copyright © 2015 Pearson Education, Inc.

The Manager’s Global Challenge
The global employer faces Political Social Legal Cultural differences What Is International Human Resource Management? Employers rely on international human resource management (IHRM) to deal with global HR challenges like these. We can define IHRM as the human resource management concepts and techniques employers use to manage the human resource challenges of their international operations. IHRM generally focuses on three main topics: 1. Managing human resources in global companies (for example, selecting, training, and compensating employees who work abroad) 2. Managing expatriate employees (those the employer sends abroad) 3. Comparing human resource management practices in different countries Copyright © 2015 Pearson Education, Inc.

Review In spite of inter-country differences, the employer must : Create for each country’s local facility And for the company a workable set of human resource policies and practices An incentive plan may work in the United States, but backfire in some Eastern Europe country where workers need a predictable weekly wage to buy necessities. Distance adds to the challenge. For example, Starbucks’ chief HR officer, based in Seattle, has to monitor Starbucks’ HR managers abroad. Copyright © 2015 Pearson Education, Inc.

Illustrate with examples how inter-country differences affect HRM.
A company operating multiple units abroad does not have the luxury of dealing with a relatively limited set of economic, cultural, and legal variables. We’ll discuss some of the differences in HR management and practices next. Copyright © 2015 Pearson Education, Inc.

Adapting HR Activities to Inter-Country Differences
A company operating multiple units abroad does not have the luxury of dealing with a relatively limited set of economic, cultural, and legal variables. We’ll discuss some of the differences in HR management and practices next. Countries differ widely in their cultures, which are based on values to which their citizens adhere. Cultural differences from country to country necessitate corresponding differences in management practices among a company’s subsidiaries. Studies by Professor Geert Hofstede illustrate international cultural differences. Hofstede says societies differ in five values, which he calls power distance, individualism, masculinity, uncertainty avoidance, and long-term orientation. For example, power distance represents the degree to which less powerful people accept the unequal distribution of power in society. He concluded that acceptance of such inequality was higher in some countries (such as Mexico) than in others (such as Sweden). In turn, such differences manifest themselves in different behaviors. To see how your country’s culture compares with others, go to Such cultural differences influence human resource policies and practices. Legal factors require employers expanding abroad to be familiar with the labor laws in the countries they’re entering. For example, in India, companies with more than 100 workers need government permission to fire anyone. Similarly, the U.S. practice of employment at will doesn’t exist in Europe, where firing or laying off workers is usually expensive. Codetermination is the rule in Germany and several other countries. Codetermination means employees have the legal right to a voice in setting company policies. Workers elect their own representatives to the supervisory board of the employer. There is also the European Union (EU) to consider. The EU are separate countries of the former European Community (EC) that unified into a common market for goods, services, capital, and even labor. This interplay of EU directives and country laws means that an employer’s human resource practices must vary from country to country. For example: ● Minimum EU wages. Most EU countries have minimum wage systems. Some set national limits. Others allow employers and unions to work out their own minimum wages. ● Working hours. The EU sets the workweek at 48 hours, but most EU countries set it at 40 hours. ● Termination of employment. Required notice periods when dismissing employees in Europe range from none in Spain to 2 months in Italy. Differences in economic systems translate into differences in HR practices. In Europe, for example, variances in HR practices affect minimum European Union wages, working hours, and employee representation. In China, there are relatively scarce employment services, and there is an active union movement. Sporadic labor shortages are fairly widespread. Employers with transnational operations should have set policies on things like discrimination, harassment, bribery, and Sarbanes-Oxley. U.S. law applies to U.S. citizens working overseas but local laws govern locals overseas. It is a good practice for transnational companies to adjust their procedures and practices to the local laws while respecting U.S. laws. Let’s discuss some common HR practices and how they work in various countries. RECRUITING - Because of governmental constraints on migration and other legal constraints, it is relatively difficult to recruit, hire, and retain good employees in China. Their Employment Contract Law requires that employers report the names, sexes, identification numbers, and contract terms for all employees they hire within 30 days of hiring. SELECTION - The dominant employee selection method involves analyzing the applicant’s résumé and then interviewing him or her. APPRAISING - Employee appraisal is particularly sensitive to the cultural realities in China. The appraisal therefore needs to follow the formalities of saving face and avoiding confrontational, tension-producing situations. COMPENSATION - Although many managers endorse performance-based pay in China, many employers, to preserve group harmony, make incentive pay a small part of the pay package Copyright © 2015 Pearson Education, Inc.

IMPROVING PERFORMANCE: HR Tools for Line Managers and Entrepreneurs
Jobs in small Chinese companies tend to be more narrowly defined than those in small U.S. businesses More emphasis is on incentive pay Less emphasis is on guaranteed salaries in China’s small businesses Comparing Small Businesses, HR Practices in the United States and China Similarly, the researchers found significant differences in performance appraisal practices between U.S. and Chinese firms. In Chinese firms, compared to the United States, performance appraisals more often focus on the bottom line; appraisal feedback is evaluative rather than developmental; the appraisal focuses on objective, quantifiable results; and the main objective is to improve performance (rather than to develop the employee). Perhaps surprisingly, therefore, performance appraisals in small Chinese companies tend to be more hard-nosed than are those in the United States. Employees in the Chinese firms are more likely to receive bonuses based on the company’s profits, to receive bonuses based on companywide gainsharing plans, to get stock or stock options as incentives, and to be paid based mostly on an incentive plan rather than on a guaranteed income plan. On the other hand, there tends to be less variation among Chinese employees in pay, and more emphasis on seniority. Discussion Question 17-2: Why do you think appraisal in these Chinese firms seems to be tougher than in the United States Copyright © 2015 Pearson Education, Inc.

Review Culture Economics Politics Labor relations The law So far, we have covered several issues that managers and HR must confront when a company goes global. These include marketing, managing control systems, and differences in cultural, economic and legal issues. We also discussed differences in labor relations, culture, and economic, political and legal issues. We primarily used examples from the European Union and China. For example, reporting hiring within 30 days to the local labor bureaus is required in China. With the globalization of the world economy, even small firms are discovering that success depends on marketing and managing abroad. Management systems to control overseas activities include managerial controls, planning systems, and, of course, HR management systems. The HR components include recruiting, selecting, training, appraising, and compensating workers abroad. Differences in cultures, economic and legal systems also contribute to challenges in managing abroad. The important take away from this section is that an organization must study and understand the culture, economics, politics, and other aspects of a country in order to be successful in international expansion. Copyright © 2015 Pearson Education, Inc.

List and briefly describe the main methods for staffing global organizations. Employers’ focus today is increasingly on managing human resource activities locally. In other words, their main concern is on selecting, training, appraising, and managing the in-country employees where they do business. However, deciding whether to fill local positions with local versus expatriate (“imported”) employees has been and continues to be a major concern. Copyright © 2015 Pearson Education, Inc.

Staffing the Global Organization
International staffing: home or local? Using expats Other solutions Offshoring Using transnational and virtual teams Multinational companies (MNCs) employ several types of international managers. Locals are citizens of the countries where they are working. Expatriates (“expats”) are non-citizens of the countries in which they are working. Home-country nationals are citizens of the country in which the multinational company has its headquarters. Third-country nationals are citizens of a country other than the parent or the host country. More flexible expatriate assignments involving no formal relocation such as virtual teams are becoming increasingly popular and are aided by technological advances. Having local employees outside the home country perform jobs that the firm’s domestic employees previously did in-house is known as offshoring. Offshoring can occur, for example, if some of a product is created in the United States, completed in Mexico (or an overseas firm) and then returned to the United States. Managing internationally may require using a “transnational” team, a team composed of employees whose locations span several countries. For example, a European beverage manufacturer formed a 13-member “European Production Task Force,” with members from its facilities in five countries, to analyze what factories the firm should operate in Europe. Such teams often work in virtual environments. Virtual teams are groups of geographically dispersed coworkers who interact using a combination of telecommunications and information technologies to accomplish an organizational task. Copyright © 2015 Pearson Education, Inc.

IMPROVING PERFORMANCE: Copyright © 2015 Pearson Education, Inc.
HR as a Profit Center Survey by Mercer shows some of the steps HR managers are taking to reduce expat expenses Mercer provides consulting, outsourcing, and investment services to employers worldwide Reducing Expatriate Costs First, companies are upping the numbers of short-term assignments they make. This lets them use short-term expats to replace some long-term expats (and their families) who the company must maintain abroad for extended periods. Fifty percent of the companies Mercer surveyed are also replacing some expatriate postings with local hires. With an eye on cutting costs, many employers were also reviewing their firms’ policies regarding such things as housing, education, and home leave, along with expatriate allowances and premiums (cost-of-living allowance and mobility/quality-of-living premiums). The bottom line is that there’s a lot human resource managers can do to cut costs and boost profits by better managing expat assignments. Discussion Question 17-3: Might not some of these policies make it harder to get employees to move abroad? Why? Copyright © 2015 Pearson Education, Inc.

IMPROVING PERFORMANCE: HR Practices Around the Globe (1) HR managers play a central role in offshoring decisions IBM Business Consulting Services surveyed employers to see what roles HR was actually playing in these decisions What Human Resource Management Can Do to Facilitate Offshoring Operations For example, employees performing strategic customer-related tasks (such as engineering) might best become employees. Others (such as call centers) might best remain independent Contractors or employees of vendor firms. IBM found that “perhaps the greatest HR challenge facing globally distributed back-office and customer care centers is the retention of talented employees.” The high-pressure nature of these jobs combines with skill shortages to produce high attrition rates. Copyright © 2015 Pearson Education, Inc.

IMPROVING PERFORMANCE: HR Practices Around the Globe (2)
HR has a role in choosing the offshoring site HR has a role in offshoring recruitment and selection HR has a role in offshoring employee retention HR helps top management: ● To determine total labor costs. These include direct wages and benefits, as well as potential costs such as severance payments. ● To understand the local labor markets, for example, in terms of their size, education levels, unions, and language skills. ● To understand how the firm’s current employment-related reputation in the locale may affect outsourcing to this locale. ● To decide how much the firm should integrate the local workforce into the parent firm’s corporate organization. In IBM’s discussions with offshoring employers, the latter emphasized three recruitment issues: ● Skill shortages. “Despite large candidate pools for entry-level workers, there is an ongoing ‘war for talent’ in many of these [low-wage] labor markets.” This often requires getting employees from other local firms using signing bonuses, higher wages, and improved employee retention policies (for instance, improved promotion opportunities). ● In-bulk hiring. The need to hire hundreds or thousands of employees at once complicates hiring. Employers turn to employment agencies, employee referrals, and college recruiting. ● Screening. The large number of potential candidates often overwhelmed the firms’ capacity to screen and evaluate candidates. To reduce high attrition, HR managers are taking steps such as: ● Deciding what is an acceptable target attrition rate, to measure the employer’s retention performance. ● Identifying what “levers” reduce attrition. These include more training and development, better compensation and benefits, and improved career opportunities. Discussion Question 17-4: Discuss two factors that a manufacturer abroad, such as China’s Lenovo, might encounter when “offshoring” jobs to the United States. Copyright © 2015 Pearson Education, Inc.

Management values and international staffing policy Ethnocentric practices Polycentric practices Geocentric practices Ethics and Codes of Conduct Ethnocentric-run firms staff foreign subsidiaries with parent-country nationals. They believe that home country attitudes, management styles, and knowledge are superior to the host country. Polycentric-run firms staff foreign subsidiaries with host-country nationals. They believe they are the only ones that can really understand the culture and the behavior of the host country market. Geocentric-run firms staff foreign subsidiaries with the best people for key jobs regardless of nationality. They believe that the best manager for any specific position anywhere on the globe may be in any of the countries in which the firm operates. Instead of exporting the employee handbook, some create and distribute a global code of conduct. Often, the employer’s main concern is establishing global standards for adhering to U.S. laws that have cross-border impacts. For example, IBM paid $10 million to settle accusations that it had bribed Chinese and South Korean officials to get $54 million in government contracts. Global employers need global codes of conduct on things like discrimination, harassment, bribery, and Sarbanes-Oxley. Copyright © 2015 Pearson Education, Inc.

Selecting International Managers Testing and being realistic Screening and selection trends Sending women Legal Issues Avoiding early expatriate returns Family pressures Selecting expatriate managers is similar to selecting domestic managers, but firms need to determine whether managers for foreign assignments can cope internationally. International assignments fail for various reasons including personality, the person’s intentions, and non-work factors. Family pressures are frequent. Three things help the adjustment: language fluency, having preschool age children rather than school-age or no children, and a strong bond between spouse and ex-pat partner. Employers can help make ex-pat assignments more successful by providing realistic previews, facilitating self-selection, and using traditional selection procedures focusing on traits such as openness and willingness to go. Women represent about 50% of the middle management talent in U.S. companies, however they represent only 21% of managers sent abroad. Many misperceptions still exist. Line managers make these assignments, and many assume that women don’t want to work abroad, are reluctant to move their families abroad, or can’t get their spouses to move. In fact, this survey found, women do want international assignments, they are not less inclined to move their families, and their male spouses are not necessarily reluctant. Safety is another issue. Employers tend to assume that women abroad are more likely to become crime victims. However, most surveyed women expats said that safety was no more an issue with women than it was with men. Fear of cultural prejudices against women is another issue. In some cultures, women do have to follow different rules, for instance, in terms of attire. But as one expat said, “Even in the more harsh cultures, once they recognize that the women can do the job it becomes less of a problem.” If equal employment opportunity laws conflict with the laws of the country in which the U.S. employer is operating, the laws of the local country generally take precedence. Copyright © 2015 Pearson Education, Inc.

IMPROVING PERFORMANCE: HR Tools for Line Managers and Entrepreneurs
Expat failure is expensive Managers can take practical steps Expat’s success abroad can be improved Some Practical Solutions to the Expatriate Challenge ● Provide realistic previews of what to expect abroad, careful screening (of both the prospective expat and his or her spouse), improved orientation, and improved benefits packages. ● Shorten the length of the assignment. ● Use Internet-based video technologies and group decision-making software to enable global virtual teams to conduct business without relocation. ● Form “global buddy” programs. Here local managers assist new expatriates with advice on things such as office politics, norms of behavior, and where to receive emergency medical assistance. ● Use executive coaches to mentor and work with expatriate managers. Discussion Question 17-5: Choose one country abroad and write 200 words on this topic: “Here is what we should cover in our realistic preview to someone we are sending to this country.” Copyright © 2015 Pearson Education, Inc.

Review Staffing: home or local? Offshoring Management values Selecting expatriate managers Avoiding early expatriate returns When staffing international operations, companies must decide whether they will fill their vacancies with expatriates or local personnel. Of course, the strategy and philosophy of the firm makes a difference as well as the local cultural and legal practices. And, when selecting expatriate managers, care must be taken to make sure the foreign experience is valued by the employee and valuable to the company’s operations. The person must have the ability to adapt. Finally, the firm must support the manager while away from the “home” company and ensure he or she has a formal re-integration program upon their return. Copyright © 2015 Pearson Education, Inc.

Discuss some important issues to keep in mind in training, appraising, and compensating international employees. Executives tend to agree that international assignees do best when they receive the special training (in things like language and culture) that they require. Fewer actually provide it. Let’s talk about what will help. Copyright © 2015 Pearson Education, Inc.

Training and Maintaining Employees Abroad
Orienting and training employees on international assignment Appraising managers abroad Compensating managers abroad The balance sheet approach Incentives Steps in establishing a system Orienting and training employees slated for possible ex-pat assignments should include: The basics of the new country’s history, politics, business norms, education system, and demographics; How cultural values affect perceptions, values, and communications; Why moving to a new country can be difficult and how to manage the challenges. The appraisal process can be improved by: Stipulating the assignment’s difficulty level; Weighting the evaluation toward the on-site manager; and Having the home office manager use a same-country former expatriate for advice. Compensation presents some tricky problems due to the question of whether or not to maintain companywide pay scales and policies. The Balance Sheet Approach refers to equalizing purchasing power across countries. Long-term incentives that are tied more closely to performance at the foreign subsidiary level can be helpful. Balancing global consistency in compensation with local considerations starts with establishing a rewards program that makes sense in terms of the employer’s overall strategic needs. Expatriate Pay Example As an example, expats working for the company CEMEX: . . . get foreign service premium equal to a 10% increase in salary. Some get a hardship premium, depending on the country; it ranges from zero in a relatively comfortable posting to, for example, 30% in Bangladesh. We pay for their housing. We pay for their children’s schooling up to college. There’s home leave—a ticket back to their home country for the entire family once a year. There are language lessons for the spouse. And we gross up the pay of all expats, to take out the potential effects of local tax law. Say you have an Executive earning $150,000. This person would cost close to $300,000 as an ex-pat. Copyright © 2015 Pearson Education, Inc.

Training and Maintaining Employees Abroad
Labor relations abroad Terrorism, safety, and global HR Taking protective measures Kidnapping and ransom (K&R) insurance Repatriation: problems and solutions Labor relations abroad differ from those in the U.S. Four issues have been identified as characteristics of European labor practices: 1) centralization, 2) employer organization, 3) union recognition, and 4) content and scope of bargaining. New federal anti-terrorism laws are affecting an employer’s ability to import and export workers. To help, many firms retain crisis management team services. Firms face resistance from employees who are reluctant to accept foreign assignments for many reasons. One reason is that kidnappings have been on the rise, including short-term kidnappings until an ATM can be used for ransom demands. Kidnapping and Ransom (K&R) Insurance covers several costs associated with kidnappings, abductions, or extortion attempts. These costs might include, for instance, hiring a crisis team or the actual cost of the ransom. One of the most worrisome facts about sending employees abroad is that 40% to 60% of them will probably quit within 3 years of returning home. To improve repatriates’ retention employers need to value their experience more highly and provide a systematic repatriation program. Copyright © 2015 Pearson Education, Inc.

Review Orienting and training Appraisals Compensation Labor relations Terrorism, safety Repatriation Orienting and training programs should include the basics of the new country, cultural values, and why moving to a new country can be difficult. The appraisal process can be made more effective if it includes the assignment’s difficulty level, weighting the evaluation more heavily with the on-site manager’s input, and home-managers who make use of same-country former expatriates for advice. Labor relations abroad require thorough preparation about differences between U.S. labor relations and those of foreign countries. Compensation has its own set of challenges that include companywide pay scales, equalizing purchasing power, long-term incentives and a rewards program balanced with overall strategic needs. Terrorism and safety have had an impact on overseas assignments. Many employees resist such assignments due to possible danger or severe injury. Some do not prefer to leave their families behind. It is helpful if the company has extensive experience and solid procedures in place to manage such assignments. Repatriation requires a systematic process that clearly communicates that the company values the contributions made by the returning ex-pat. The process should show that it has an important place waiting for ex-pats when they return. Copyright © 2015 Pearson Education, Inc.

Explain with examples how to implement a global human resource management program. With employers increasingly relying on local rather than expatriate employees, transferring one’s human resource practices abroad is a top priority. Employers may have to defer to local managers on some specific human resource management policy issues. One study suggests that big inter-country HR practice differences are often not necessary or even advisable. The important thing is how you implement the global human resource management system. Copyright © 2015 Pearson Education, Inc.

Managing HR Locally Putting a Global HR System into Practice Global HR system effectiveness Global HR system acceptability Implementation Global companies that are truly effective in their HR practices engage in two best practices in developing their worldwide human resource policies and practices. They form global HR networks and they create a sense of partnership with onsite HR managers. They also know that it’s more important to standardize ends and competencies than specific methods. Next, employers engage in three best practices so that the global human resource systems they develop will be acceptable to local managers around the world. They know that truly global organizations find it easier to install global systems. They investigate pressures to differentiate and determine their legitimacy. Finally, they work within the context of a strong corporate culture. Finally, two best practices helped ensure success in actually implementing the globally consistent human resource policies and practices. They learn to communicate actively and effectively and they dedicate adequate and ongoing resources to the effort. Copyright © 2015 Pearson Education, Inc.

Review Effectiveness Acceptance Implementation We discussed the two best practices companies must use to create and maintain effective global HR systems, namely, networks and partnerships. Acceptance is achieved by using the three best practices of being truly global, investigating pressures, and operating within a strong, widely-known and understood corporate culture. Finally, effective implementation requires active communication and sufficient resources. Copyright © 2015 Pearson Education, Inc.

Improving Performance at Copyright © 2015 Pearson Education, Inc.
The Hotel Paris List what managers should know to help employees from abroad adapt to their new surroundings. Choose a prior Hotel HR practice, explain why they could take this program abroad, and how to do it. With hotels in 11 cities in Europe and the United States, Lisa knew that the company had to do a better job of managing its global human resources. For example, there was no formal means of identifying or training management employees for duties abroad (either for those going to the United States or to Europe). As another example, recently, after spending upwards of $200,000 on sending a U.S. manager and her family abroad, they had to return her abruptly when the family complained of missing their friends back home. Lisa received approval to institute new global human resources programs and practices. In instituting these new programs and practices, Lisa had several goals in mind. She wanted an integrated human resource information system (HRIS) that allowed her and the company’s top managers to monitor and assess, on an ongoing basis, the company’s global performance on strategically required employee competencies and behaviors such as attendance, morale, commitment, and service-oriented behavior. She also contracted with an international HR training company to offer expatriate training for Hotel Paris employees and their families before they left for their foreign assignments, and to provide short-term support after they arrived. That training company also helped create a series of weeklong “Managers’ Seminars.” Held once every 6 months at a different hotel in a different city, these gave selected managers from throughout the Hotel Paris system an opportunity to meet and to learn more about the numerous new HR programs and practices that Lisa and her team had been instituting for the purpose of supporting the company’s strategic aims. With the help of their compensation specialist, Lisa and her team also instituted a new incentive program for each of the company’s local managers, to focus their attention more fully on the company’s service- oriented strategic aims. By the end of the year, the Hotel Paris’s performance on metrics such as percent of expatriates receiving pre- departure screening, training, and counseling were at or above those of high-performing similar companies. She and the CFO believed, rightly, that they had begun to get their global HR system under control. Discussion Question: Choose one essential practice for achieving high- quality-service, explain how to implement it worldwide. Copyright © 2015 Pearson Education, Inc.

Copyright © 2015 Pearson Education, Inc.

Similar presentations

Presentation on theme: "Copyright © 2015 Pearson Education, Inc."— Presentation transcript:

Similar presentations

About project

Feedback

Log in

Auth with social network:

Copyright © 2015 Pearson Education, Inc.

Similar presentations

Presentation on theme: "Copyright © 2015 Pearson Education, Inc."— Presentation transcript:

Similar presentations

About project

Feedback