Establishing HRM Practices Overseas

1
Establishing HRM Practices in Foreign Countries
2
Globalization

• Increasing foreign competition has forced
  American firms to seek overseas markets.
• International business operations appear in a
  variety of forms
• Wholly owned subsidiaries
• The most common way medium to large companies go
  international

3
Globalization

• Joint ventures
• When a firm joins up with foreign firms and
  creates a new company
• Joint ventures have mushroomed for two reasons
• Local laws of some countries do not allow
  subsidiaries to be wholly owned by foreign
  companies.
• Joint ventures allow companies to draw on others
  expertise.

4
Impact

• Impact of International HRM practices on employee
  motivation, satisfaction, and performance
• Companies need to properly select, train, manage,
  compensate, and develop employees to work in
  cross-cultural environments.
• Companies can easily lose any competitive
  advantage if they try to superimpose American HR
  practices onto the subsidiary.
• Inappropriate HRM practices can profoundly affect
  the motivation, satisfaction, and performance of
  foreign and expatriate employees.

5
Understanding Cultural Differences

• Artifacts
• Tangible things that represent the superficial
  aspects of a countrys culture
• Values
• Rules of societal propriety and impropriety that
  are shared by people within a culture
• Assumptions
• A societys beliefs that have evolved from its
  attempts to adjust to the world around it.

6
Understanding Cultural Differences (cont.)

• Culture
• A societys set of assumptions, values, and rules
  about social interaction.
• Cross-cultural differences in the workplace
• How interviews should be conducted
• How managers should act with their subordinates
• How negotiations should be conducted
• How new information should be packaged for
  training purposes
• How people should be paid for their work

7
How people react to cultural improprieties

• When cultural rules are violated, the guilty
  party is often condemned or punished in some
  manner.
• Degree of condemnation depends on two factors
• The extent to which the broken rule is widely
  shared among a cultural groups members
• The extent to which the rule is deeply held and
  viewed as being important or sacred

8
Understanding Cultural Differences (cont.)

• Types of cultural rules and the typical
  condemnation associated with each
• Widely shared, deeply held
• Severe punishment
• Widely shared, shallowly held
• Minor condemnation
• Narrowly shared, deeply held
• Disapproval or censure
• Narrowly shared, shallowly held
• Slight or none

9
The Use of Expatriates

• Definition
• A professional/managerial employee moved from one
  country to, and for employment in, another
  country.
• An estimated 35 to 70 percent of American
  expatriates perform poorly in their overseas
  jobs.
• Use of expatriates and competitive advantage
• Succession planning
• Firms use overseas assignments to
  internationalize future top managers.

10
The Use of Expatriates (cont.)

• Coordination and control systems
• Open new markets
• Facilitate a merger or acquisitions
• Set up new technologies and systems
• Strategically coordinate and control foreign
  operations

11
The Use of Expatriates (cont.)

• Informational needs
• Source of information about important business
  functions overseas to assess and update global
  strategic plans
• Communicate subsidiaries needs and concerns
• Communicate useful market knowledge to corporate
  managers, who may be ignorant about global
  markets

12
Expatriates rights under the Civil Rights Act of
1991

• Provides coverage to U.S. citizens employed in a
  foreign country, provided that compliance with
  this provision would not cause the employer to
  violate the law of the foreign country
• The U.S. citizen must be employed overseas by a
  firm controlled by an American employer.

13
Expatriates rights under the Civil Rights Act of
1991

• Control can be determined in several ways
• Interrelation of operations
• Common management
• Centralized control of labor relations
• Common ownership or financial control of the
  corporation and the employer

14
The Use of Expatriates (cont.)

• Selecting expatriates
• Personality traits that a successful expatriate
  should possess
• Ability to handle stress
• Reinforcement substitution
• Ability to develop relationships
• Perceptual skills

15
The Use of Expatriates (cont.)

• Ability to develop relationships
• Two skills are associated with expatriates
  developing relationships with host nationals
• Willing to communicate in the host language
• Conversational currency
• Collecting social and cultural tidbits and trivia
• Strategically insert into conversations with host
  nationals

16
The Use of Expatriates (cont.)

• Perceptual skills
• Flexibility of ones belief systems
• Ability to avoid being judgmental about the
  belief and value systems of the host culture
• Ability to make flexible attributions about why
  host nationals behave the way they do
• High tolerance for uncertainty

17
Training Expatriates

• Expatriates should be taught
• How to understand and work effectively with
  people from different cultural, religious, and
  ethnic backgrounds
• How to manage multicultural teams
• How to understand global markets, global
  customers, global suppliers, and global
  competitors

18
Problems appraising expatriates job performance

• Invalid performance criteria
• Performance criteria do not make sense in the
  foreign culture.
• Companies must construct criteria according to
  each subsidiarys unique situation.
• Rater competence
• Lacking an understanding of the social and
  business contexts in the foreign culture
• Rater bias
• Cultural misinterpretations

19
Overcoming performance appraisal problems

• Utilize multiple raters
• Make sure that some of those raters have lived
  and worked in the country in which the expatriate
  is working
• Expatriates must understand that their
  performance may be misunderstood and go
  unappreciated.

20
Compensating expatriates

• Foreign service premiums
• Hardship allowance
• Cost of living Housing allowances
• Utility allowances
• Furnishing
• Education

• Home leave Relocation
• Medical allowances
• Car and driver allowances
• Club membership allowances
• Taxes

21
Repatriates

• Expatriates who return home
• Problems with repatriates
• Not told what their job assignments will be prior
  to returning home
• Return home to jobs that require less autonomy
  and authority
• Difficulty readjusting to their native culture
• Loss of premiums
• No more elite private schools, no company cars,
  no allowances for recreational activities

22
HRM Interventions

• Mentoring
• Keep track of the expatriates performance
• Keep expatriates updated regularly about what is
  going on in the parent company
• Assist the repatriate in finding a job in the
  parent company that would make use of
  international expertise
• Formalized career planning
• Integrate overseas assignments into their
  succession planning systems
• Communication systems
• Encourage a flow of information back and forth
  between expatriate managers and parent company
  managers

23
Developing HRM Practices in Host-National
Countries

• Adjust HRM practices to the norms and culture of
  the host country
• Develop training programs that understand how the
  culture views the educational process
• Develop compensation systems that understand what
  motivates employees in each culture