28012959 Introduction to International HRM

8/9/2019 28012959 Introduction to International HRM

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Guide

To

International Human ResourceManagement

By

Santosh Bagwe

[email protected]

+91 99676 42282
mailto:[email protected]:[email protected]


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Index

Introduction to International HRM

Definition Difference between IHRM and Domestic HRM

Difference between Domestic and International Managers

Type of International Employees

Issues in IHRM

Barriers to Effective Global HRM

Understanding Culture

Elements of Culture

Factors encouraging convergence of Cultures

Factors encouraging change of culture

Determinants of Culture

Importance of cultural sensitivity for global business and diplomacy

Impact of culture on management approaches

Cross Culture Business Communication and Behaviour

Deal Focus VS Relationship Focus

Formal VS Informal

Rigid Time VS Fluid Time

Expressive VS Reserved Cultures

Business Protocol

Cross Cultural Negotiations

Need for cross cultural negotiations

Anatomy of negotiations

Prepare for international negotiations

Parameters of negotiations

Planning for negotiations

Importance of trust in negotiations

Negotiation styles of major cultural groups and countries

International Business and IHRM Approaches

Stages of Internationalisation of Business

Management Philosophy/Approaches to IHRM

Competencies Required in International Managers


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Recruitment and Selection by Multinationals

International Labour Market Sources

Selection Procedure of Expatriates

Expatriate Success Factors

Adaptability to cultural change

Expatriate Training and Development

Need for training to Expatriate

Cultural Integrator

Cultural Awareness Training

Types of Cross Cultural Training

Cultural Assimilators

Organising Multinational Structures

Stages of Structural Evolution of Multinationals

New Types of Multinational Structures

Role of Human Resource

Compensation Management

Factors Influencing Compensation Programmes

Paying Expatriates Approaches to Expatriates Compensation

Cultural Impact and Compensation Policy

Performance Management in International Organisations

Performance Management and its link with other HR processes

Multinational Performance Management

Performance Management of Expatriates

Variables that Influence Performance of Expatriate

Organisational Ethics

Ethics

Ethical Issues Facing Multinationals

What can Organisations do to foster Ethical Behaviour

Good Corporate Citizen


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Introduction to International HRM

Definition

General : Procurement, allocation, utilisation and motivation of Human Resources in

International business.

P Morgan: Two groups of variables that affects basic HR process

1st Types of employees

2nd Political, economic, legal environment, labour laws and practices prevailing in

different countries

Accordingly IHRM can be defined as an interplay between these two group of factors.

But in other model, one more group is added i.e. multinationals operational

philosophy.

Difference between IHRM and Domestic HRM

Responsible for a greater number of functions and activities

Broader knowledge of foreign county employment law

Closely involved with employees lives

Cope with more external influences

Exposure to problems and liabilities

Management of differential compensation

Diversity management More liasoning activities

More coordination and travel

More risk management

Difference between Domestic and International Managers

Global mindset

Communication skills

Conflict management skills

Oriented towards a process of continual change

International experience

Political, economical and social sensitivity and knowledge of many countries

Knowledge of culture shock and how to minimise it

Leadership and team building skills


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Types of International employees

1) Foreing parent expatriates

2) Host Country nationals

3) Third Country expatriates of foreign parent

4) Third Country expatriates of new venture

Issues in IHRM

Managing international assignments

Employee and family adjustment

Selecting the right person for a foreign assignment

Culture, communication and gauge

Language and communication

Barriers to effective global HRM

Variations

Perception of HR

Attitude and actions of headquarters towards HR

Resistance to change

Cultural differences in learning and teaching styles


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Understanding Culture

Elements of Cultures

Values form the bedrock of a culture

Norms Folkways actions of little more significance, the way people

are expected to behave

Mores Central to the functioning of a society and to its social

life

Cultural traits unique aspects of individual cultures

Enculturation the process of acquiring cultural traits

Diffusion the process through which cultures change

Acculturation traits borrowed over short term become permanently adopted

Assimilation immigrants or other newcomers adopt the culture of society inwhich they have settled

Factors encouraging convergence of Cultures

Improvements in transport and communications

Globalization of media

Similarities in the tastes and consumption patterns of young people

The operation of multinationals across the world

Consumers willingness to accept fresh ideas and try new products Adoption of similar technologies in several countries

Factors encouraging change of culture

Rising living standards

Urbanization of population

Immigration and emigration

Economic and political destabilization

Improvement in the education system

Opening of foreign trade

Introduction of new technologies


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Determinants of Culture

Religion a system of shared beliefs and rituals that are concerned with the

realm of the sacred. What is important for management is how religion shapes

the attitude of a society towards work and entrepreneurship.

Social Structure It is the degree of relative importance to individualism orgroup that differentiates different cultures.

Social Mobility The extent to which individuals can move out of the caste or

class in which they are born.

Language It distinguishes one culture from another.

Education Learning and sharing cultural values happens through the

education system.

Aesthetics the things such as designs, forms, colours, shapes, sound,

conveying the concept of beauty and good taste. These are reflected in the

music, art and architecture of a society.

Importance of cultural sensitivity for global business and diplomacy

Communicate effectively with customers, suppliers, business associates in

other countries and with foreign employees

Conduct negotiations and understand body language of other parties

Predict trends in social behavior likely to affect the firms foreign operations

Realize social responsibility in various countries

Predict impact of cultural differences on consumer reactions to advertisements

Foster relationship between union and employees

Understand local govt. policies

Conduct efficient meetings in different meetings and encourage employee

participation

Impact of culture on management approaches

Centralized vs decentralized decision making

Safety vs risk

Individual vs group rewards

Informal vs formal procedures High vs low organizational loyalty

Cooperation vs competition

Short term vs long term horizon

Stability vs innovation


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Cross Culture Business Communication and Behaviour

Deal Focus VS Relationship Focus

Deal Focus Culture Relationship Focus Culture

Task oriented People Oriented

DF find RF dilatory, vague and

inscrutable

RF find DF as pushy, aggressive and

offensively blunt.

Open to do business with strangers. They

straight away talk business and get down

to facts.

Prefer to deal with family, friends and

persons who can be well known and

trusted

DF value direct, frank, straightforward

language

RF favours an indirect, subtle,

roundabout style. They give priority to

maintaining harmony and avoid saying

anything that may cause embarrassment

or loss of face.

Country wise distribution

DF: German, North America, Australia and New Zealand

Moderately DF: UK, SA, Brazil, Mexico, Hong Kong and Singapore

RF: Arab World, Africa, Latin America and Asia

Formal VS Informal

Formal Culture Informal Culture

Organized in steep hierarchies which

reflects major differences in status and

power

Egalitarian organization with smaller

differences in status and power

Formal way of addressing people and

maintaining proper protocol are ways of

showing respect to people.

RF dont know how to show respect to

high-ranking persons from formal

cultures.


Formal: Most of Europe, Asia, Arab, Latin America

Informal: Australia, USA, Canada, New Zealand, Denmark, Norway, Israel


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Rigid Time VS Fluid Time

Rigid Time Fluid Time

Punctuality is critical, schedules are set in

concrete, agendas are fixed and businessmeetings are rarely interrupted.

Less emphasis on punctuality and not

obsessed with deadlines. Meeting withinmeeting.


Monochronic Business Culture: North America, Japan, German

Moderately Monochronic Business Culture: Australia, New Zealand, Singapore,

Taiwan, China, South Korea, South Africa, Southern Europe

Polychronic Business Culture: Arab World, Africa, Latin America, SE Asia

Expressive VS Reserved Culture

Expressive Reserved

Expressive people tend to be

uncomfortable with more than a second

of silence during conversation.

Reserved cultures feel at ease with much

longer silence.


Very Expressive Culture: Latin Europe, Latin America

Variably Expressive Culture: USA, Canada, Australia, New Zealand, South Asia,

Africa

Reserved Culture: East and SE Asia, Nordic Europe

Business Protocol

Dress Code Business Cards

Gifts

Form of Address


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Cross Cultural Negotiations

Need of cross cultural negotiations

Govt. often imposes restrictions on repatriation of profits and ownership of

raw material resources and requires employment of local people and use ofindigenous input.

MNCs have resources, technology and management skills and they want tax

concessions and protection of their patents and technology.

Hence the two must interact and negotiate with each other to settle terms.

Seeking to enter a market via an agent or distributor

Setting up sales network

Establishing a joint venture or production facility

Licensing a technology or seeking technology transfer

Mergers and acquisition

Anatomy of negotiation

Negotiations involve two levels

Rational decision-making level

Psychological and social level

Psychological and social elements are affected by culture, therefore, negotiations are

as much to do with psychological as with the rational.

Preparation for negotiation

Taxation and legal data

Commercial data

Financial and economic data

Infrastructure data

Labour force data

Political data

Trade unions

Cultural data

Parameters of negotiation

When to negotiate

When to negotiate

Who negotiates

Who has the authority to decide

Why negotiate

How to negotiate

How much time is needed for negotiation


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Planning for negotiations

What is the minimum I can accept to resolve the conflict What is the maximum that I can ask for without appearing outrageous

What is the maximum I can give away

What is the least I can offer without appearing outrageous

What answers is the other person likely to have these questions

How to conduct successful negotiations

Separate people from the problem

Emphasise win-win solutions

Find underlying interests Use an objective standard

Understand the other party

Negotiation as a sequence of events

The intangibles

Personalities

Physical space

Time pressure

Who has the authority to decide

Goals

Importance of Trust

This means accepting that they will

Negotiate in good faith

Exchange information that is needed to solve problems

Not resort to unethical behaviour, for example, tapping your communication

with HO

Respect the secrecy of information and opinions expressed in confidence

Do their best to convince their members to accept any agreement that they

make with you

Do their best to implement the agreement


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Guidelines for negotiating in different cultural zones

Japan (China, South Korea, Taiwan, Singapore) A relationship-focused,

formal, monochromic and reserved culture

Germany (UK, Denmark, Finland, Netherlands, Czech Republic) A deal-

focused, moderately formal, monochromic and reserved culture France (Belgium, Italy, Spain, Hungary) A moderately deal focused, formal,

variably expressive and monochromic culture

Russia (Poland, Romania) A relationship-focused, formal, polychromic and

expressive culture

Brazil (Argentina, Mexico and other Latin American Countries) A

relationship-focused, formal, polychromic and expressive culture

Saudi Arabia (Egypt, Greece, Other Middle-eastern Countries) A

relationship-focused, polychromic and expressive culture

Australia (Canada, USA, New Zealand) A deal-focused, informal,

monochromic and variable expressive culture


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International Business and IHRM Approaches

Stages of Internationalisation of Business

Domestic Firms

Many well-known firms were domestic firms.Companies understand their markets, customers, perfect their technologies and

products, and learn to operate business.

International Firms

A domestic firm begins the internationalisation process when it is involved in

direct and indirect exporting, importing, and licensing, franchising,

manufacturers contract, technical agreements or joint ventures.

Multinational Firms

Any firms that performs its operations in at least two countries.

A firm that owns income-generating assets in more than one country.

A manufacturing company that does business in several countries.

Control is largely decentralised and it is expected to make decisions on local R

& D, production, distribution and marketing. The MNC HQ exercises

worldwide financial control.

Transnational Firms

Advanced stage of MNC in which nationals of different countries hold shares

in Company

Strategies focus on the simultaneous attainment of local and experience

economiesCriteria for assessing the globalisation levels Share of foreign assets, shares

of sales beyond the national boundaries and % of employment of foreign

nationals.

Global

A corporation develops a coordinated system that searches the world to

borrow money at the lowest interest rates, purchases raw materials from

anywhere at the lowest price, manufactures at the lowest costs, sells at the

highest profits and invests in gains for highest return.

The world is a single entity for them.

Selects best people for management regardless of nationality.It offers globally standardised products that are advanced, functional, reliable

and at low price.

It doesnt completely reject product customisation and differentiation, but

adjusts to differences in product preferences only after exhausting all efforts to

retain standardisation.

Transnational Confederations

Primarily organised around technology, design and marketing

A small or medium sized company rather than a large company

Stages of production performed by subcontractors, rather than by subsidiaries

or branches

Primarily a managing or marketing company


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Composed of two parts, one that designs and market product worldwide and

the other that manufactures the products

Management philosophy/approaches to IHRM

Ethnocentric OrganisationHome oriented organisation. This works in my country; therefore, it must

work in other countries also.

They believe that home country nationals are more intelligent, reliable and

trustworthy.

All key positions in HQ and international are for Home Country nationals

When rewards are distributed, home country nationals receive the lions share.

Polycentric Organisation

Host country oriented. When in Rome do as the Romans do

Local people know what is best for them. Lets give them some money and

leave them alone as long as they make us a profit.

Home Country nationals at HQ and local nationals at respective local

subsidiary.

HQ keeps check through financial and posting of key persons.

Regioncentric Organisation

Regionally oriented organisation

Eg. Japanese subsidiary will manage its Asian operations and a French

subsidiary will manage European operations

Regional insiders know what neighbouring countries want

Regional HQ will be responsible local R & D, local executive selection ,cashmanagement, brand policy, capital expenditure.

HQ will manage world strategy, country analysis, Intercompany loan, long

term financing, selection of top management

Geocentric Organisation

World oriented

All for one and one for all. We will work together to solve problems

anywhere in the world.

The entire organisation focuses on worldwide and local objectives.

They integrate diverse regions through global decision making, making

possible flow of ideas between countries, allocate resources on a global basis,erase geographical boundaries and globalise functional and product line.

Reward system motivates managers to surrender national biases and work for

worldwide objetives.


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Competencies required in international managers

Knowledge of Ones own country

A global perspective Global mindset

Knowledge of other country

Understanding of international business environment

Understanding international business partners

Knowledge of Customers

Knowledge of the silent and spoken international language

Knowledge of business etiquettes of the host country


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Recruitment and Selection by Multinationals

International Labour Market Sources

Parent Country Nations (PCNs)

PCNs are managers who are citizens of the Country where the MNC isheadquartered.

The reasons for using PCNs include

- The desire to provide the companys more promising managers with

international experience

- The need to maintain and facilitate organisational coordination and control

- The unavailability of managerial talent in the host country

- The companys view of the foreign operation as short lived

- The host countrys multi-racial population

- The belief that a parent country manager is the best person for the job.

Host Country Nationals (HCNs)

HCNs are local managers hired by MNCS

The reasons for using HCNs

- Familiar with the culture, language

- Less expensive, know the way things done, rules of local market

- Hiring them is good public relation

Third Country Nationals (TCNs)

TCNs are managers who are citizens of countries other than the one in which

the MNC is headquartered or the one in which it is assigned to work by the

MNC.The reason for using TCNs

- These people have the necessary expertise

- They were judged to be the best ones for the job.

Selection procedure of Expatriates

Use of selection test

Technical Ability

Cross cultural requirements

Following traits are identified s predictors of expatriate success

- Cultural empathy

- Adaptability- Diplomacy

- Language ability

- Positive attitude

- Emotional stability and maturity

Family requirements

Multinational requirements

- Management philosophy or approach

- The mode of operation involved

- The duration of assignment


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- The amount of knowledge transfer inherent in the expatriates job in

foreign operation

Language skills

Expatriate Success factors

Willing and motivated to go overseas

Technically able to do the job

Adaptable

Good interpersonal skills and be able to form relationship

Good communication ability

Supportive families

Adaptability to cultural change

Work experience with cultures other than ones own

Previous overseas travel

Knowledge of foreign language

Ability to integrate with different people, cultures, and type of business

organisation

The ability to sense developments in the host country and accurately evaluate

them

The ability to solve problems within different frameworks an from different

perspectives Sensitivity to subtle differences of culture, politics, religion and ethics in

addition to individual differences

Flexibility in managing operations on a continuous basis, despite of lack of

assistance and gaps in information

An adjustment model

Two major types of adjustments that an expatriate must make when going on

an overseas assignment.

Anticipatory adjustmentCarried on before he leaves for the assignment

It is influenced by following factors

- predeparture training

- pervious experience

In-country adjustment

Takes place on site

It is influenced by following factors

- Ability to maintain a positive outlook in high pressure

- Jobs as reflected by the role he plays in managing, authority he has to

make decisions, newness of work-related challenges and the amount of

role conflicts


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- Organisation culture

- Non work factors toughness with he faces new cultural experience,

family adjustment with new country

- Socialisation factor to know what is what and who is who


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Expatriate Training and Development

Need for Training to Expatriate

Cost of expatriate failure is very high

To build a team of internationally oriented, committed and competentpersonnel

Minimize personal problems such as politeness, punctuality, tactfulness,

orderliness, sensitivity, reliability, tolerance and empathy

Improve overall management style

Pre-departure Training- Emphasises on cultural awareness and business customs of

the country of posting to cope with unexpected events in a new country.

Post-departure Training helps in minimising culture shock and depression that

usually sets in a new country and culture.

Cultural Integrator

An individual who is responsible for ensuring that the operations and systems

are in accordance with the local culture.

He advises guides and recommends action needed to ensure this

synchronisation.

Even though expatriate are trained before being sent abroad, they are still not

totally prepared to deal with the day-to-day cultural challenges because they

lack field experience.

He is responsible for handling problems between the subsidiary and host

cultures. He may be from parent country or host country who has intimate knowledge

of the companys culture and can view operations from both sides.

He can only advice ore recommend a course of action.

Management philosophy and training

Ethnocentric companies will provide all training at the HQ.

Polycentric companies will rely on local managers to assume responsibilities

for seeing that the training function is carried our wherever appropriate.

Geocentric companies organise training courses in different parts of the world,

where a particular function is best carried out. Regiocentric companies organise training courses in different countries of the

region.

Cultural Awareness Training

There are five types of pre-departure training

o Area studies that include environmental briefing and cultural

orientation

o Cultural assimilators

o Language training

o Sensitivity training and

o Field experience


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To decide the rigour and level of training, following factors are important

o degree of interaction required in the host culture

o similarities between home and host cultures

If interaction is low and similarities are high, then training should be on task

and job related issues rather than culture related issues.

If interaction is high and similarities are low, then training should be on cross

cultural skill development as well as task.

Preliminary visits

o average duration will be about one week

o A well planned overseas trip for candidate and spouse provides a

preview to access their suitability for job, introduction to host country

management, accommodation required, and schooling facilities

available.

Language training

Types of cross cultural training

Environment briefing about geography, climate, housing and schools

Cultural orientation to familiarise with cultural institutions and value system

of host country

Cultural assimilators to provide intercultural encounters

Language training

Sensitivity training to develop attitudinal flexibility

Field experience to make expatriate familiarise with the challenges of

assignment

Cultural Assimilators

It is a programmed learning technique that is designed to expose members of

one culture to some of the basic concepts, attitudes, role perceptions, customs

and values of another culture.

These assimilators are developed for one culture where the candidate is

currently working and the other culture is where he is proposed to be posted.

Type of assimilators

o The trainee read a short episode of cultural encounter and choose an

interpretation of has happened and why.

o Critical incidents: to be identified as a critical incident, a situation must

meet at least of the following conditions:An expatriate and a host interact in the situation

The situation is puzzling or likely to be misinterpreted by the

expatriate

The situation can be accurately interpreted if sufficient knowledge

about the culture is available

The situation is relevant to the expatriates task or mission requirements


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Organising Multinational Structures

Stages of Structural Evolution of Multinationals

Stage 1 Export

o An export or import or franchising arrangemento Company appoints an export manager who reports to chief of

marketing and all operations concerning export and imports are

controlled by the home office

Stage 2 Initial Division Structure

o At this stage, company creates an export division at the corporate home

office and the export division head directly reports to CEO.

o As international sales increases, the local government exert pressure to

set up manufacturing facilities. This prompts the company to set up a

subsidiary.o Each subsidiary will be responsible for operations within its own

geographic area. Subsidiary manager reports directly to the export

division head

o The role of subsidiary manager is

To transfer of managerial and technical know-how to subsidiary

Communicate, coordinate and implement corporate policies

Assist corporate office by keeping HQ informed of political, economic

development, opportunities and threats in its market.

Liaising with local government

Stage 3 - Global Product/Area/Functional Structureo When companies start acquiring and allocating resources on the basis

of global opportunities and threats, global structures are necessary

either on product, geographical area or functional patterns

Global Product Division:

- In this structure, the company treat each of its major products as

distinct SBUs.

- The logic behind this structure is that products and services of the

company should be sufficiently distinct in product technologies,

requiring different marketing skills to deal with different types of

customers and markets.

- Each product division is treated as a separate profit centre.

- The corporate HQ will maintain control in terms of budgetary

constraints, approval of certain decisions like launching of new

product, total profit and contribution.

- Benefits

It improves client satisfaction because product responsibility and

contact points are clear

Helps to integrate marketing, production and finance globally on

product basis

It provides a direct link from customers to policy makers anddirects R & D efforts into new products


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- Disadvantage

Duplication of personnel within each division

Neglecting areas with long-range potential

o Global Area Division

- In this structure, MNC prefers to divisionalise the foreign

operations on the basis of geographical unit.- This structure is useful when

economic and political environment in different countries is fast

changing

product range is not too broad

common resources can be shared,

product lines are in the maturity stage

- Disadvantage

Lack of centralised management and control

R & D is ignored

o Global functional Structure

- Not very common except in mining and construction fields

- The operations are divided worldwide on the basis of function.

- Marketing, finance, operations and HRM functions directly report

to corporate functional chief.

Stage 4 Global Matrix Structure

o When a MNC is trying to integrate its operations in more than one

dimensions, like product as well as area, or customers and technology,

it resorts to the matrix structure.

o Both product and area division share joint responsibility.o In this structure, there is a pressure from horizontal matrix managers

for equal allocation of resources; however the vertical managers are

supposed to balance this by organisational priorities and other long

term consideration

o Advantage

Better quality decisions

Better customer focus or response to local needs

o Disadvantage

Coordination becomes difficult

Dual reporting can cause frustration and confusion

Matrix forces managers to spend time on meetingsInformation logjams due to proliferation of communication

New types of Multinational Structure

Heterarchy

o A MNC might have a no of different kinds of centres apart from the

traditional centre HQ

o The argument is that competitive advantage does not necessarily reside

in any one country

o E.g. Centralised R & D in a particular subsidiary

o Control is less reliant on the top-bottom mechanism of previoushierarchical modes and more reliant on mutual cooperation and


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coordination, organisation culture and widely shared awareness of

central goals and strategy.

Transnational

o It is characterised by an interdependence resources and responsibilitiesacross all business units regardless of national boundaries.

o The transnational copes with large flows of components, products,

services, resources, people and information among its subsidiaries,

while simultaneously recognising the specialised resources and

capabilities of each business unit.

o It demands a complex process of coordination and cooperation

involving strong cross-unit integrating devices, a strong corporate

identity, and a well developed worldwide management perspective.

Networked Firmo Subsidiaries have developed into significant centres for investment,

activities and influence, and cannot be regarded as at the periphery.

o Interaction between HQ and each subsidiary is likely to be dyadic,

taking place between various actors at many different organisationa

level and covering different exchanges, the outcome of which is

important for effective global performance.

o Such MNCs are loosely coupled political systems rather than tightly

bonded homogenous, hierarchical systems.

o One subsidiary may act as a nodal unit linking a cluster of satellite

organisation. Thus one centre can assume responsibility for other units

in its country or region.

Keiretsu

o It is a large often vertically integrated group of companies that

cooperate and work closely with each other.

o E.g. Mitsubishi

o These companies are bound together by cross-ownership, longterm

business dealings, interlocking directorates and social ties.

Role of Human Resource plays a key role in control and coordination process

The key means for vital knowledge generation and diffusion is through

personal contact. Organisation needs processes to facilitate contacts.

Staffing decisions are very crucial. Very high importance should be given to

communication and interpersonal relationship ability in selection process.

Staff transfer

Visit of the CEO to different countries.


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Compensation Management

Factors Influencing Compensation Programmes

Compensation decisions are strategic decisions and play a key role

It should be consistent with overall strategy, structure and business needs ofMNC

It must attract and retain the best staff

It must facilitate the transfer of international employees in a cost effective

manner.

It should give due consideration to equity and ease at administration.

It requires the knowledge of employment and taxation laws, customs, cost of

living index, environment and employment practices, the knowledge of labour

markets and industry norms, foreign currency fluctuations.

Paying Expatriates: unique problems Discrepancies in pay between PCN, HCN and TCN

The need to vary expatriate compensation depending on the life cycle of the

expatriates family

Compensation issues related to re-entry into the parent country organisation

Approaches to Expatriates Compensation

Going Rate Approach

o Base salary remains linked to the salary structure of the host country.

o Required information is obtained through compensation surveys and

published information.

o This approach is favoured by polycentric organisation

o Advantage

Equality with local nationals and expatriates of different nationals

Simple approach

Attract the nationals of PCN and TCN if location is a high-pay country

o Disadvantage

Transfer from a developed country to a developing country

Fighting for getting favourable posting and resisting low pay country

postings

Problems when the expatriates repatriated to the home country

An export or import or franchising arrangemento Company appoints an export manager who reports to chief of

marketing and all operations concerning export and imports are

controlled by the home office

Balance Sheet Approach

o It links the salary of expatriates and TCNs to home country salary

structure.

o Assumption Foreign assignees should not suffer financially due to

transfer

o Salary package is divided into goods and services, housing, income

taxes and reserve.


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Cultural Impact and Compensation Policy

National cultural difference

High power-distance - the compensation system should reflect hierarchical

divisions in the firm. Low power-distance - the salary system should be more egalitarian and

performance based.

Individual cultures - rewards should be given on an individual basis.

Collectivist cultures - they should be team based.

Culture with high masculinity compensation policy focus on social benefits,

quality of work life and equity.

Culture with high uncertainty avoidance structured and consistent pay plans

are preferred with no variable plans and discretionary allocation.

Culture with low uncertainty avoidance pay should be linked to

performance.


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Performance Management in International Organisations

Performance Management and its link with other HR Processes

Reward Management

Human Resource Planning Training and Development Process

Relationship with strategy

Multinational Performance Management

Whole vs part

Non-comparable data

Volatility of the international environment

Separation by time and distance

HQ-subsidiary interdependence

Ethical and legal issues Market Maturity

Performance Management of expatriates decisions and play a key role

Setting clear goals for each unit, each department and each employee

Goals must be mutually supportive and balanced for long and short term

needs.

Setting standard and measurement criteria for evaluating each type of goal

Formal monitoring and review of progress towards these objectives

Using the outcomes of the review process to reinforce desired employee

behaviour through differential rewards and identifying training anddevelopment needs.

Variables that Influence Performance of Expatriate

Compensation Package

Nature of Assignment

Role Clarity

Psychological Contract HQs support

Environment of the Host Country

Cultural Adjustment


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Organisational Ethics

Ethics

It is the discipline that examines the moral standards practised by an individual

or a corporate or society It is function of oness consciousness

It is concerned with concept of right and wrong

Purpose to determine whether the actions and activities of an individual or

corporate are within the framework of moral standards and value systems

embedded in a particular society.

It is beyond the boundaries of law, some activities may be legal but may not

be ethical.

Ethics is best expressed by the seven sins of which are as under

Politics without principle

Wealth without workPleasure without conscience

Knowledge without character

Commerce without morality

Science without humanity

Worship without sacrifice

Ethical Issues Facing Multinationals

Manipulation of stock Market

Lobbying

Fudging of accounts and balance sheet

Product piracy

Surrogate and deceptive advertising

Discrimination in selection, compensation and promotion

What can organisations do to foster Ethical Behaviour

Selection of top members after thorough investigation into their background

and reputation for acting ethically

Ethical behaviour should constitute an essential component of the performance

appraisal system

Training programmes on ethical practices and related topics

Establish an ethical code and insist that managers commit to it

Good Corporate Citizen

The foreign subsidiary should take care of

Adulteration and loss of quality for any reason

Employment of women, children and minorities

Employment of local citizens

Personal issues including remuneration, pension or severance benefits

Management-union relationship

Taxation and financial controls

Purchase of local and foreign materials


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Purchase, lease and location of buildings and plant

28012959 Introduction to International HRM

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Transcript of 28012959 Introduction to International HRM