HRM Competitive

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Chapter 15

Managing Human Resources Globally

Human Resource Management:

Gaining a Competitive Advantage

Copyrig ht 2010 by the McGraw -Hil l Companies, Inc. All r igh ts reserved.McGraw-Hil l / I rwin


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Learning Objectives

Identify recent changes that have causedcompanies to expand into international markets.

Discuss four factors that most strongly influenceHRM in international markets.

List different categories of international employees.

Identify four levels of global participation and HRMissues faced within each level.

Discuss ways companies select, train, compensateand reintegrate expatriate managers.

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Introduction

Organizations function in a global economy.

International competition is #1 factor affectingHRM.

International expansioncan provide acompetitive advantage:

large numbers of potential customers.

low-cost labor

Maquiladoraplants

telecommunications and information technologyenables work to be done more rapidly,efficiently and effectively around the globe.

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Current Global Changes

European Economic Community

North American Free Trade Agreement (NAFTA)

Growth of Asia

Japan, China, Singapore, Hong Kong and

Malaysia are significant economic forces.

General Agreement on Tariffs and Trade (GATT)

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Factors Affecting HRMin International Markets

HumanResource

Management

Culture

PoliticalLegalSystem

EducationHuman Capital

EconomicSystem

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Hofstedes Cultural Dimensions

1. Individualism/collectivism - degree to which

people act as individuals rather than as members

of a group.

1. Power distance - how a culture deals withhierarchical power relationships.

2. Uncertainty avoidance - how cultures deal with

the fact that the future is not perfectly predictable.

1. Masculinity-femininitydescribes the division ofroles between the sexes within a society.

2. Long-term/short-term orientation - tendency of aculture to focus on long-term benefit or short-termoutcomes.

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Implications of Culture for HRM

1. Culture has an impact on approaches to managing.2. Culture differs on how employees expect leaders to

lead, how decisions are handled within the hierarchy

and what motivates individuals.

3. Culture may influence appropriateness of HRMpractices.

4. Cultures can influence compensation systems and

communication and coordination processes.

5. Cultural diversity programs foster understanding ofother cultures to better communicate with them.

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Education/Human Capital

Countries differ in their levels of human capital.

A country's human capitalis determined by anumber of variables, primarily, educationalopportunity.

Countries with low human capitalattract facilitiesthat require low skills and low-wage levels.

Countries with high human capitalare attractivesites for direct foreign investment that createshigh-skill jobs.

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Political/Legal System

Dictates requirements of certain HRM practices, such as

training, compensation, hiring, firing and layoffs.

Legal systemis an outgrowth of the culture, reflectingsocietal norms.

U. S. has led the world in eliminating discrimination in

the workplace and controlling the process of labormanagement negotiations.

Germany has provided employees with a legal rightto "codetermination" in the workplace.

The EEC provides fundamental social rights of

workers: freedom of movement and freedom tochoose one's occupation and be fairly compensated.

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Economic System

Under socialisteconomies, there is littleeconomic incentive to develop human capital,but ample opportunity exists becauseeducation is free.

In capitalist systems, the opposite situationexists, with higher tuition at state universitiesbut economic incentives exist throughindividual salaries.

Every country varies in terms of culture,human capital and their legal, political andeconomic systems.

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Managing Employees in a Global Context

A parent countryis the country in which thecompany's corporate headquarters is located.

A host countryis the country in which the

parent country organization seeks to locate (orhas already located) a facility.

A third country is a country other than the host

country or parent country.

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Types of International Employees

Expatriate- employee sent by a company in onecountry to manage operations in a different

country.Three types of expatriates:

1. Parent-country nationals(PCNs) - employees

who were born and live in a parent country.

2. Host-country nationals (HCNs)- employees who

were born and raised in the host country, as

opposed to the parent country.

3. Third-country nationals(TCNs)- employees

born in a country other than the parent country or

host country but who work in the host country.

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Levels of Global Participation

Increasing Participation in Global Markets

Parent

Country

Host

Country

Domestic International Multinational

Global

Foreignsubsidiary

CorporateheadquartersCorporateheadquartersCorporateheadquarters

Corporateheadquarters

Foreignsubsidiary Foreignsubsidiary ForeignsubsidiaryForeignsubsidiary

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Global Organizations

Global organizationscompete on top-qualityproducts and services with lowest costs.

3 Attributes of Transnational HRM System:

1. Transnational scope- HR decisions must be

made from a global rather than a national orregional perspective.

2. Transnational representation reflects themultinationalcomposition of a company's

managers.3. Transnational process- extent to which thecompany's planning and decision-makingprocesses include representatives and ideasfrom a variety of cultures.

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Selection of Expatriate Managers

Successful expatriates have technical

competence and ability to adjust to, and be

sensitive to, a new culture. Three dimensions

include:

1. Self

2. Relationship

3. Perception

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Use of women in expatriate assignments has provenbeneficial for companies; men and women can perform

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Training and Development of Expatriates

Cross Cultural Training

Behavior in Meetings and Social Settings

Interpersonal and Communication Skills

Culture in the New Work Environment

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Compensation of Expatriates

4 Components of Total Pay Packages:

1. Base Salary- annual salary, unadjusted.

2. Tax EqualizationAllowances- payments for

higher tax rates of other countries.

3. Benefits- continuation of, or substitute for,home benefits.

4. Allowances- cost-of-living, housing, education,

and relocation payments.

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Reacculturation of Expatriates

Reentrymay result in culture shock.

60 to 70 %of expatriates do not know what

their position will be upon their return.

25% leave the company within one year upon

returning.

Transition processnecessitates communication

of corporate changes while the expatriate is

overseas and validation of the importance of the

expatriate's international work.

Training and rewardsbeyond salary and

benefits are key.

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Summary

Companies competing globally requiretop-quality people.

Many factors affect HRM in global environment

such as culture, human capital and political,legal and economic systems.

Need to effectively manage HR, especially

regarding expatriates.

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HRM Competitive

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