INTERNATIONAL HRM

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Case: Molex

World’s second largest manufacturer of electronic components50 manufacturing plants, 21 countries

HRM viewed as most localized of all the functions

Hires experienced , educated foreign nationals in the US for foreign postings

Moves people around the worldIn house management development programs

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Human resource management (HRM)

Refers to the activities an organization carries out to use its human resources effectively

Four major tasks of HRM Staffing policyManagement training and developmentPerformance appraisal Compensation policy

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International human resource management

Strategic role: HRM policies should be congruent with the firm’s strategy and it’s formal and informal structure and controls

Right People, Right Place, Right TimeTask complicated by profound differences

between countries in labor markets, culture, legal and economic systems

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Strategy, structure and control systems

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Staffing policy

Staffing policySelecting individuals with requisite skills to do

a particular jobTool for developing and promoting corporate

cultureView People as Resource ($in profit out)

Types of Staffing PolicyEthnocentricPolycentricGeocentric

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Ethnocentric policy

Key management positions filled by parent-country nationals

Advantages:Overcomes lack of qualified managers in host

nationUnified cultureHelps transfer core competencies (and skills

back)Disadvantages:

Produces resentment in host countryCan lead to cultural myopia

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Polycentric policyHost-country nationals manage

subsidiariesParent company nationals hold key

headquarter positionsBest suited to multi-domestic businessesAdvantages:

Alleviates cultural myopia.Inexpensive to implementHelps transfer core competencies

Disadvantages:Limits opportunity to gain experience of host-

country nationals outside their own country.Can create gap between home-and host-country

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Geocentric policy

Seek best people, regardless of nationalitynot always possible

Best suited to Global and trans-national businesses

Advantages:Enables the firm to make best use of its human resourcesEquips executives to work in a number of culturesHelps build strong unifying culture and informal

management networkDisadvantages:

National immigration policies may limit implementationExpensive to implement due to training and relocationCompensation structure can be a problem.

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Comparison of staffing approaches

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The expatriate problem

Expatriate: citizens of one country working in anotherExpatriate failure: premature return of the

expatriate manager to his/her home country Cost of failure is high: estimate = 3X the

expatriate’s annual salary plus the cost of relocation (impacted by currency exchange rates and assignment location)

Inpatriates: expatriates who are citizens of a foreign country working in the home country of their multinational employer

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Expatriate failure rates

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Reasons for expatriate failureUS multinationals

Inability of spouse to adjust

Manager’s inability to adjust

Other family problemsManager’s personal or

emotional immaturityInability to cope with

larger overseas responsibilities

European multinationalsInability of spouse to

adjust

Japanese FirmsInability to cope

with larger overseas responsibilities

Difficulties with the new environment

Personal or emotional problems

Lack of technical competence

Inability of spouse to adjust.

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Expatriate selection

Reduce expatriate failure rates by improving selection procedures

An executive’s domestic performance does not (necessarily) equate his/her overseas performance potential

Employees need to be selected not solely on technical expertise but also on cross-cultural fluency

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Four attributes that predict successSelf-Orientation

Possessing high self-esteem, self-confidence and mental well-being

Others-OrientationAbility to develop relationships with host-country nationalsWillingness to communicate

Perceptual AbilityThe ability to understand why people of other countries

behave the way they doBeing nonjudgmental and being flexible in management

style

Cultural ToughnessRelationship between country of assignment and the

expatriate’s adjustment to it

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Training and management development

Training: Obtaining skills for a particular foreign postingCultural training : Seeks to foster an

appreciation of the host-country’s cultureLanguage training : Can improve expatriate’s

effectiveness, aids in relating more easily to foreign culture and fosters a better firm image

Practical training: Ease into day-to-day life of the host country

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Training & management development continued

Development: Broader concept involving developing manager’s skills over his or her career with the firm

Several foreign postings over a number of years

Attend management education programs at regular intervals

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18-18

Didn’t know what position they hold upon return.

Firm vague about return, role and career progression.

Took lower level job.

Leave firm within one year.

Leave firm within three years

10 20 30 40 50 60 70percent

Management development & strategy

Development programs designed to increase the overall skill levels of managers through:On going management educationRotation of managers through a number of jobs

within the firm to give broad range of experiencesUsed as a strategic tool to build a strong

unifying culture and informal management network

Above techniques support transnational and global strategies

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Performance appraisal

Problems:Unintentional bias

Host-nation biased by cultural frame of reference Home-country biased by distance and lack of experience

working abroad

Expatriate managers believe that headquarters unfairly evaluates and under appreciates them

In a survey of personnel managers in U.S. multinationals, 56% stated foreign assignment either detrimental or immaterial to one’s career.

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Guidelines for performance appraisal

More weight should be given to onsite manager’s evaluation as they are able to recognize the soft variables

Expatriate who worked in same location should assist home-office manager with evaluation

If foreign on-site managers prepare an evaluation, home-office manager should be consulted before completion of formal the terminal evaluation

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Compensation

Two issues:Pay executives in different countries according

to the standards in each country?or

Equalize pay on a global basis?

Method of payment

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Compensation for four positions in 26 countries

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National differences in compensation

CEO HR Director Accountant Mfg. Employee

Argentina $860,704 $326,874 $63, 948 $17, 884

Canada 742,228 188, 070 44,866 36,289

Germany 421,622 189,785 61,375 36,934

Taiwan 179,486 102,491 30,652 11,924

United Kingdom

719,665 268,302 107,839 28,874

United States 1,403,899 306,181 66,377 44,680

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Table 18.4 b

National differences in CEO pay for midsize companies

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Fig 18.1

Compensation issues

Type of Company Payment

EthnocentricHow much home-country

expatriates should be paid.

PolycentricPay can and should be

country-specific.

Geocentric/TransnationalMay have to pay its

international cadre of managers the same.

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Expatriate pay

Typically use balance sheet approachEqualizes purchasing power to maintain same

standard of living across countries Provides financial incentives to offset

qualitative differences between assignment locations.

Pay for Schools, health care, etc.

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Components of expatriate pay Base Salary

Same range as a similar position in the home country

Foreign service premiumExtra pay for work outside country of origin

AllowancesHardship, housing, cost-of-living and education

allowancesTaxation

Firm pays expatriate’s income tax in the host country

BenefitsLevel of medical and pension benefits identical

overseas

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The balance sheet

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International labor relations

Key IssueDegree to which organized labor can limit the

choices of an international business

Aims to foster harmony and minimize conflicts between firms and organized labor

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Concerns of organized labor

Multinational can counter union bargaining power with threats to move production to another country

Multinational will keep highly skilled tasks in its home country and farm out only low-skilled tasks to foreign plantsEasy to switch locations if economic conditions

warrantBargaining power of organized labor is reduced

Attempts to import employment practices and contractual agreements from multinationals home country

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Strategy of organized labor

Attempts to establish international labor organizations

Lobby for national legislation to restrict multinationals

Attempts to achieve international regulations on multinationals through such organizations as the United Nations

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