International Human Resource Management (IHRM) and Labor Relations

1
International Human Resource Management (IHRM)
and Labor Relations

• Chapter 20

2
IHRM Labor Relations Topic Outline

• IHRM
• definition, complications, strategic significance
• International Managerial Staffing Needs
• scope of internationalization
• centralization vs decentralization of control
• staffing philosophy
• Recruitment Selection
• expatriate issues and repatriation
• Labor Relations
• labor relations around the globe
• labor relations and globalization

3
Definition

• Human resource management (HRM) is the set of
  activities directed at attracting, developing,
  and maintaining the effective workforce necessary
  to achieve a firms objectives. Recruiting and
  selecting employees, providing training and
  development, appraising performance, and
  providing compensation and benefits are all part
  of HRM.

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Complications for IHRM compared to HRM

• International HR managers face a more complex
  task than their domestic counterparts because
  differing cultures, levels of economic
  development, and legal systems among countries
  may require companies to adapt their hiring,
  firing, training, and compensation programs to
  each country.

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Complications for IHRM compared to HRM

• Firms must decide whether managers will be
  selected from the home country, from the host
  country or from third countries.
• Training and development in an international firm
  may be more complex than in a domestic firm.
• Compensation systems must be adapted to meet the
  needs of each countrys labor market.

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Strategic Significance

• The international HRM process involves
  understanding the strategic context of HRM within
  the firms overall strategy, recruiting and
  selecting appropriate managerial personnel,
  providing necessary training and development,
  assessing performance, providing compensation,
  and evaluating managerial retention and turnover.

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International Managerial Staffing Needs

• There are two broad categories of staffing needs
  facing international human resource managers (1)
  recruiting, training, and retaining managerial
  and executive employees and (2) recruiting,
  training, and retaining nonmanagerial employees
  such as blue-collar production workers and
  white-collar office staff.

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International Managerial Staffing Needs

• For nonmanagerial employees, international firms
  normally adapt their compensation and performance
  appraisal systems to local laws, customs, and
  cultures. The text notes for example, that while
  U.S. workers appreciate feedback from an
  appraisal system, German workers are resentful of
  feedback.

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International Managerial Staffing Needs

• Most firms begin their international expansion
  with small-scale exporting. Thus, during a
  firms initial foray into foreign markets a
  home-country citizen, who may or may not have
  special training in working in foreign markets,
  usually manages the firms international
  transactions.

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International Managerial Staffing Needs

• Later when the firm establishes an international
  department, subsidiary managers (usually host
  country citizens) report to the vice-president of
  the international division (usually a home
  country citizen).

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International Managerial Staffing Needs

• As a firm further expands its operations in a
  global organization, a team of managers with
  expertise in the firms product lines, necessary
  functional skills, individual country markets,
  and the firms global strategy is usually
  assembled.

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International Managerial Staffing Needs

• Firms that centralize decision making at
  headquarters typically favor home-country
  managers while firms that decentralize decision
  making to the subsidiary level often employ host
  country nationals. Since most companies do not
  fall at one extreme or the other, most companies
  have a combination of both home and host country
  managers.

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International Managerial Staffing Needs

• Managers can be hired from three groups parent
  country nationals host country nationals and
  third country nationals. Parent country
  nationals (PCNs) are residents of the
  international businesss home country who are
  transferred to one of its foreign operations.

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International Managerial Staffing Needs

• Communications and coordination with corporate
  headquarters is typically facilitated when PCNs
  are employed because they normally share a common
  culture and education background with
  headquarters staff.

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International Managerial Staffing Needs

• PCNs may however, lack knowledge of local laws,
  culture, economic conditions, social structure,
  and political processes. Moreover, they may be
  expensive to relocate and maintain the host
  country. In addition, because a host country may
  impose restrictions on the number of employees
  that can be transferred, a company may not have
  the freedom to hire whom it wants.

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International Managerial Staffing Needs

• Host country nationals (HCNs) are residents of
  the host country, and are the most common choice
  for mid-level and lower-level jobs. Employing
  HCNs is popular because they are already familiar
  with local laws, culture, and economic
  conditions.

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International Managerial Staffing Needs

• Also, HCNs may be cheaper than PCNs because a
  firm can avoid the costs such as relocation
  expenses that are associated with PCNs.
• However, an HCN may not be familiar with the
  firms corporate culture nor its business
  practices.

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International Managerial Staffing Needs

• Third country nationals (TCNs) are citizens of
  neither the firms home country nor of the host
  country. TCNs are most likely to employed in
  upper-level or technical positions. TCNs and
  PCNs are collectively known as expatriates
  (people working and residing in countries other
  than their native country).

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International Managerial Staffing Needs

• An ethnocentric staffing model may be used to
  help a firm choose among HCNs, PCNs, and TCNs for
  various positions. The model indicates that PCNs
  staff most higher-level positions.

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International Managerial Staffing Needs

• Other firms may follow a polycentric staffing
  model where, based upon the belief that HCNs know
  the local market best, the use of HCNs is high.
• Finally, firms that want to hire the most
  qualified person for the job, regardless of the
  individuals nationality, follow the geocentric
  staffing model.

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Recruitment Selection

• The skills and abilities needed by international
  managers fall into two general categories those
  needed to do the job and those needed to work in
  a foreign location.

22
Figure 20.2 Necessary Skills and Abilities for
Intl Managers
23
Recruitment Selection

• Today, as businesses globalize, the market for
  executive talent is also globalizing. Top
  management teams are increasingly diverse in
  their members.
• While most MNCs do not hire new college graduates
  to take foreign positions immediately, many hire
  graduates with the intention of sending them
  abroad in the future.

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Recruitment Selection

• The selection process in international firms is
  particularly important because of the high cost
  of expatriate failure. Expatriate failure is the
  early return of an expatriate manager to his or
  her country because of an inability to perform in
  the overseas assignment. The cost of expatriate
  failure ranges between 40,000-250,000.

25
Recruitment Selection

• Expatriate failure rates may be as high as 20-50
  percent in many U.S. companies, higher than for
  either European or Japanese companies.

26
Recruitment Selection

• Managers sent on foreign assignments may
  experience culture shock, a psychological
  phenomenon that may lead to feelings of fear,
  helplessness, irritability, and disorientation.
  Acculturation typically proceeds through four
  phases.

27

• Because an expatriate suffering from culture
  shock may be less effective and productive,
  companies typically take measures to limit its
  effects such as providing pre-departure language
  and cultural training.

28
Figure 20.3 Phases in Acculturation
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Recruitment Selection

• In most cases, expatriates fail to complete their
  foreign assignments because of an inability of
  the expatriate manager, or his or her spouse and
  family, to adapt to the new location.

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Recruitment Selection

• Firms are now beginning to pay more attention to
  repatriation--bringing a manager back home after
  a foreign assignment has been completed.
  Individuals that successfully adapted to the
  foreign environment may experience culture shock
  upon returning to their own country.

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Recruitment Selection

• Regarding non-cultural issues leading to
  success or failure overseas, managers tend to be
  more successful in foreign assignments when 5
  conditions are met
• 1. they can freely decide whether or not to
  accept a foreign assignment
• 2. they have a realistic understanding of the
  new job and assignment

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Recruitment Selection

• 3. they have a realistic expectation of a
  repatriation assignment
• 4. they have a mentor in the parent firm who
  will look out for their careers
• 5. there is a clear link between the foreign
  assignment and the managers long-term career
  path.

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Recruitment Selection

• Compensating expatriate managers can be a complex
  process because factors such as differences in
  currency valuation, standards of living,
  lifestyle norms, and so forth must be taken into
  consideration.

34
Recruitment Selection

• A cost-of-living allowance may be given to
  managers to offset differences in the
  cost-of-living in the home and host countries. A
  hardship premium (also known as a foreign service
  premium) may be paid to mangers who accept
  assignments in relatively unattractive locations.
  

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Recruitment Selection

• Special benefits packages that may be provided to
  expatriate managers include housing, education,
  medical treatment, travel to the home country,
  and club memberships. The text provides specific
  examples of how and why firms provide these
  benefits.

36
Recruitment Selection

• In many cases the total compensation package
  offered to an expatriate is much more lucrative
  than the package offered to his or her local
  counterpart.

37
Recruitment Selection

• The simplest and most useful advice for those
  considering an overseas assignment is to
  carefully weigh the flip side of all the issues
  just mentioned, from your perspective. And, to
  not take anything for granted about how
  conditions will be when you arrive (doing ones
  homework pays).

38
Labor Relations

• A countrys laws, culture, social structure, and
  economic conditions may impact labor relations.
  The text notes for example that the role of
  unions varies greatly among countries. In the
  U.S. membership in unions has been steadily
  decreasing, but over half the worlds workforce
  outside the U.S. belong to unions.

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Labor Relations

• Unions in the European countries tend to be
  aligned with political parties, but in Japan are
  created and run by the firms themselves. In fact,
  labor relations in Japan are so cordial that
  strikes are rare.

40
Labor Relations

• The premise of industrial democracy--the belief
  that workers should have a voice in how
  businesses are run--is an important influence in
  labor unions in Europe. In fact, in Germany an
  approach called codetermination provides for
  cooperation between management and labor in
  running a business.

41
Labor Relations

• The EUs implementation of its social charter (or
  social policy) whereby employment conditions and
  practices will be standardized throughout the
  community is addressing issues such as maternity
  leave, job training, and pension benefits.

42
Labor Relations

• Finally, labor unions have had their bargaining
  power reduced by globalization. However, there
  is very little coordination between unions in
  different countries to counter that reduction in
  bargaining power.

43
IHRM Labor Relations Topic Outline

• IHRM
• definition, complications, strategic significance
• International Managerial Staffing Needs
• scope of internationalization
• centralization vs decentralization of control
• staffing philosophy
• Recruitment Selection
• expatriate issues and repatriation
• Labor Relations
• labor relations around the globe
• labor relations and globalization