Human ResourcesSelection and Development

Chapter 14

Sources of Human Resources

Home country nationals Host country nationals Third-country nationals Inpatriates Outsourcing

Expatriate

Any person who lives and works outside the country of which he/she is a citizen

Includes home-country nationals, third-country nationals, and inpatriates

In most countries, expatriates must have work visas from the government of the country where they live & work

Home-country Nationals

Are citizens of the country where the MNC is headquartered but live & work elsewhere

Often used To start up operations (most common reason) To provide technical expertise To help the MNC maintain financial control

over the operation In top management positions

Host-country Nationals

Citizens of the country where they live & work They are familiar with the culture and know the

language They are less expensive than home-country

personnel Host-country governments often prefer use of

host-country nationals and some require it (nativization)

Hiring them is good public relations U. S. companies tend to rely heavily on host-

country nationals

Third-country Nationals

People who are citizens of neither the home country or the host country Example: A Mexican, employed by an

American company, working in Argentina The employee's native country and the

country where he works are often in the same geographic region

Advantages of Third-Country Nationals

They often require less compensation than home-country nationals

If they are from the same geographic region as the host country and also know the company's culture, they can often achieve objectives better than other types of managers

Have cross-cultural skills Provide a global or transnational image

Inpatriates

Persons who work in the home country and are citizens of a different country

Advantages of inpatriates Help to develop global core competencies Provide diversity and an international

perspective in the home office Improve career opportunities for company

managers who are not from the home country

Outsourcing

Buying goods or services from a firm in one country for use in another

Can significantly reduce overhead & labor costs Quality and timeliness are sometimes problems Can create public relations problems in the

home country Job losses in the home country Abuse of foreign workers by overseas contractors

Liability issues from unsafe products

Criteria for Selecting Managersfor Overseas Assignments

Adaptability to change Independence Self-reliance Physical & emotional

health Age Experience

Education Knowledge of local

language Motivation Adaptability of spouse

and family Leadership skills

Adaptability to Cultural Change

Work experiences with cultures other than one’s own

Previous overseas travel Knowledge of foreign languages Recent immigration background or

heritage Ability to integrate with different

people, cultures, and types of business organizations

Adaptability to Cultural Change (2)

Ability to sense and accurately evaluate events in the host country

Ability to solve problems within different frameworks and perspectives

Sensitivity to differences of culture, politics, religion, and ethics

Flexibility in managing operations on a continuous basis despite lack of assistance and gaps in information

Indicators of Successful Adaptation

to Another Culture

Feeling comfortable that their work challenges can be met

Being able to adjust to new living conditions Learning how to interact well with host-country

nationals outside of work Feeling reasonably happy and being able to

enjoy day-to-day activities

Adjustment to Another Culture

Anticipatory adjustment occurs before the foreign assignment begins Results from training and previous experience

In-country adjustment starts when the employee begins to work in the new country.

Factors in In-country Adjustment

Individual’s ability to adjust effectively Ability to maintain a positive outlook, interact

well with host nationals, and to perceive and evaluate the host country’s cultural values and norms correctly

Clarity of expatriate’s role in the host management team

Expatriate’s adjustment to the organizational culture

Non-work matters, such as how well the expatriate's family adapts

Selection Procedures

Both technical competence and adaptability should be considered

Interviews are a common selection tool. Both the employee and the spouse may be

interviewed Home-country and host-country

interviewers may be used Adaptability screening: the process of

evaluating how well the employee's family is likely to stand up to the stress of overseas life

Selection Procedures (2)

Adjustment model: explains the factors in successful adjustment to the employee and sometimes the spouse Some employees withdraw from

consideration Psychological testing of the employee

Used less often than interviews Many managers believe that interviews are

more effective than testing.

Compensation

Compensating expatriates can be difficult because there are many variables to consider

Most compensation packages are designed around four elements: Base salary Benefits Allowances Taxes

Compensation Details

Base salary: the amount of money that an expatriate would receive for doing the same job in the home country Used as a basis to establish salary in the

host country Serves as benchmark against which

bonuses and benefits are calculated Salary may be paid in home country

currency, host country currency, or a combination of the two

Compensation Details (2)

Benefits: a substantial portion of expatriate compensation Is the home country or the host country

responsible for the expatriate's social security benefits?

Should home-country benefits programs be available to host-country nationals?

Compensation Details (3)

Allowances Relocation allowance Cost-of-living allowances are paid when the

employee must incur extra costs that he would not pay in the home country

Examples: housing allowance, and the costs of private schools for the employee's children

Hardship allowance: Often paid to employees who work in a country with difficult living conditions

Compensation Details (4)

Allowances (continued) Foreign service premium

In the past, a foreign-service premium was often a monthly payment that continued as long as the employee worked overseas

Many firms have eliminated the ongoing foreign-service premium.

Today, a one-time, lump sum foreign service premium is often paid at the start of the overseas assignment to provide cash for immediate expenses.

Compensation Details (5)

Taxes An expatriate may be required to pay

income taxes to both the host country and his/her native country

The company compensates the employee for the extra amount of tax

Compensation Details Summary

The cost of an expatriate employee =salary costs

+ benefit costs+ allowance costs+ tax costs

Compensation Approaches

The compensation package must be cost-effective and should be seen as fair

Balance-sheet approach: ensure that the expatriate does not lose money from the foreign assignment

Complementary (negotiation) approach: Negotiate compensation with each employee

Localization: Pay the expatriate a salary comparable to local nationals

Compensation Approaches (2)

Lump sum method: give expatriate a pre-determined amount of money. Employee decides how to spend it.

Cafeteria approach: Offer the employee a choice among various compensation options, with a limit on total costs

Regional system: Set up a compensation system for all expatriates who are assigned to a particular region

Expatriate Motivations forAccepting a Foreign Assignment

Greater demand for their talents abroad than at home

Enhancement of an international business career

Attraction of living overseas Motives are affected by occupation and

by the home country of the employee

Desires of Host-Country Employees

Usually prefer local managers They set such high levels of expectation

regarding the desired characteristics of expatriates that anyone sent by the MNC is unlikely to measure up

Repatriation of Expatriates

Reasons for returning to the home country Most expatriates return home when their

agreed-on tour of duty is over Some want their children educated in a

home-country school Some are not happy in the overseas

assignment Some return early because they failed to do

a good job

Repatriation of Expatriates (2)

Readjustment problems “Out of sight, out of mind” syndrome: the

expatriate may not have been considered for jobs that he/she could do well

Organizational changes may have: eliminated the jobs for which the

expatriate is well-qualified reduced the importance of the

expatriate's position or department The new job may be seen as a demotion.

Repatriation of Expatriates (3)

Readjustment problems Technological advances may have made the

expatriate's skills obsolete The former expatriate may not have an

opportunity to use skills gained abroad. The former expatriate's salary and benefits

may be lower than they were abroad. The former expatriate has to readjust to

home-country culture and adjust to a new job

Repatriation of Expatriates (4)

Transition strategies: Help smooth the adjustment from an overseas to a home-country assignment Repatriation agreement: addresses the

concerns of the individual and the company before the foreign assignment begins.

Keep the expat involved in home office communication and projects during the foreign assignment.

Appoint a higher-level manager as a career mentor for the expatriate (helps to avoid "out of sight, out of mind" problem).