International Business chapter 13

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ISG BBA PROGRAM Spring semester
BUS 470 International Business
Lecture 9 Global Human Resource Management
Staffing policy, Expatriates, Rapatriates, HRM
Strategies
Chapter 13
Tuesday, March 27th 2007
Guillaume Sarrat de Tramezaigues
www.gstblog.com
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Human Resource Management (HRM)

• Refers to the activities an organization carries
  out to use its human resources effectively
• Four major tasks of HRM
• Staffing policy
• Management training and development
• Performance appraisal
• Compensation policy

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International Human Resource Management

• Strategic role HRM policies should be congruent
  with the firms strategy and its formal and
  informal structure and controls
• Task complicated by profound differences between
  countries in labor markets, culture, legal, and
  economic systems

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Staffing Policy

• Staffing policy
• Selecting individuals with requisite skills to do
  a particular job
• Tool for developing and promoting corporate
  culture
• Types of Staffing Policy
• Ethnocentric
• Polycentric
• Geocentric

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Ethnocentric Policy

• Key management positions filled by parent-country
  nationals
• Best suited to international businesses
• Advantages
• Overcomes lack of qualified managers in host
  nation
• Unified culture
• Helps transfer core competencies
• Disadvantages
• Produces resentment in host country
• Can lead to cultural myopia

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Polycentric Policy

• Host-country nationals manage subsidiaries
• Parent company nationals hold key headquarter
  positions
• Best suited to multi-domestic businesses
• Advantages
• Alleviates cultural myopia
• Inexpensive to implement
• Helps transfer core competencies
• Disadvantages
• Limits opportunity to gain experience of host
  country nationals outside their own country
• Can create gap between home and host country
  operations

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Geocentric Policy

• Seek best people, regardless of nationality
• Best suited to global and trans-national
  businesses
• Advantages
• Enables the firm to make best use of its human
  resources
• Equips executives to work in a number of cultures
• Helps build strong unifying culture and informal
  management network
• Disadvantages
• National immigration policies may limit
  implementation
• Expensive to implement due to training and
  relocation
• Compensation structure can be a problem

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Comparison of Staffing Approaches
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The Expatriate Problem

• Expatriate citizens of one country working in
  another
• Expatriate failure premature return of the
  expatriate manager to his/her home country
• Cost of failure is high estimate 3X the
  expatriates annual salary plus the cost of
  relocation (impacted by currency exchange rates
  and assignment location)
• Inpatriates expatriates who are citizens of a
  foreign country working in the home country of
  their multinational employer

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Reasons for Expatriate Failure

• US multinationals
• Inability of spouse to adjust
• Managers inability to adjust
• Other family problems
• Managers personal or emotional immaturity
• Inability to cope with larger overseas
  responsibilities
• European multinationals
• Inability of spouse to adjust

• 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

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Expatriate Failure Rate
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Expatriate Selection

• Reduce expatriate failure rates by improving
  selection procedures
• An executives domestic performance does not
  (necessarily) equate to his/her overseas
  performance potential
• Employees need to be selected not solely on
  technical expertise, but also on cross-cultural
  fluency

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Four Attributes that Predict Success

• Self-Orientation
• Possessing high self-esteem, self-confidence and
  mental well-being
• Others-Orientation
• Ability to develop relationships with host
  country nationals
• Willingness to communicate

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Four Attributes that Predict Success

• Perceptual Ability
• The ability to understand why people of other
  countries behave the way they do
• Being nonjudgmental and flexible in management
  style
• Cultural Toughness
• Relationship between country of assignment and
  the expatriates adjustment to it

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Training and Management Development

• Training Obtaining skills for a particular
  foreign posting
• Cultural training Seeks to foster an
  appreciation of the host countrys culture
• Language training Can improve expatriates
  effectiveness, aids in relating more easily to
  foreign culture, and fosters a better firm image
• Practical training Ease into day-to-day life of
  the host country

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Training and Management Development

• Development Broader concept involving developing
  managers skills over his or her career with the
  firm
• Several foreign postings over a number of years
• Attend management education programs at regular
  intervals

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Repatriation of Expatriates

• A critical issue in the training and development
  of expatriate managers is preparing them for
  reentry into their home country
• Repatriation should be seen as the final link in
  an integrated, circular process that selects,
  trains, sends, and brings home expatriate
  managers
• Research shows that there is a problem with the
  repatriation process

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Repatriation of Expatriates
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Management Development and Strategy

• Development programs designed to increase the
  overall skill levels of managers through
• Ongoing management education
• Rotation of managers through a number of jobs
  within the firm to give broad range of
  experiences
• Used as a strategic tool to build a strong
  unifying culture and informal management network
• Above techniques support transnational and global
  strategies

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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 evaluate and under-appreciate them
• In a survey of personnel managers in U.S.
  multinationals, 56 stated foreign assignment
  either detrimental or immaterial to ones career

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Guidelines for Performance Appraisal

• More weight should be given to on-site managers
  evaluation as they are able to recognize the soft
  variables
• Expatriate who worked in same location should
  assist home-office manager with evaluation
• If foreign on-site managers prepare an
  evaluation, home-office manager should be
  consulted before completion of formal evaluation

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Compensation

• Two issues
• Pay executives in different countries according
  to the standards in each country or equalize pay
  on a global basis
• Method of payment

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Expatriate Pay

• Typically use balance sheet approach
• Equalizes purchasing power to maintain same
  standard of living across countries
• Provides financial incentives to offset
  qualitative differences between assignment
  locations

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Components of Expatriate Pay

• Base Salary
• Same range as a similar position in the home
  country
• Foreign service premium
• Extra pay for work outside country of origin
• Allowances
• Hardship, housing, cost-of-living, and education
  allowances
• Taxation
• Firm pays expatriates income tax in the host
  country
• Benefits
• Level of medical and pension benefits identical
  overseas

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International Labor Relations

• Key Issue
• Degree to which organized labor can limit the
  choices of an international business
• Aims to foster harmony and minimize conflicts
  between firms and organized labor

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Concerns of Organized Labor

• Multinational can counter union bargaining power
  with threats to move production to another
  country
• Multinational will keep highly skilled tasks in
  its home country and farm out only low-skilled
  tasks to foreign plants
• Easy to switch locations if economic conditions
  warrant
• Bargaining power of organized labor is reduced
• Attempts to import employment practices and
  contractual agreements from multinationals home
  country

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Strategy of Organized Labor

• Attempts to establish international labor
  organizations
• Lobby for national legislation to restrict
  multinationals
• Attempts to achieve international regulations on
  multinationals through such organizations as the
  United Nations