INTERNATIONALHRM

International HRM Differences

• Greater Number of Services

• Special Services to Unique Group

• Compensation Complexity

• Foreign Exchange Rate Attention

• Language and Cultural Differences

International Mergers and Acquisitions

Global Competition

Importance of Global Human

Resources Management

Foreign Human

Resources

Market Access

Opportunities

Increasing Importance of Global Human Resources Understanding

Composition of the Cultural Environment of International Business

Religionsacred objectsphilosophicalsystemsbeliefs & normsprayertaboosholidaysrituals

Technology and Material Culturetransportationenergy systemstools & objectscommunicationsurbanizationscienceinvention

Values and AttitudesToward:timeachievementworkwealthchangescientific methodrisk-taking

Educationformal educationvocational trainingprimary educationsecondary educationhigher educationliteracy levelhuman resources planning

Social Organizationkinship social institutionsauthority structuresinterest groups social mobilitysocial stratificationstatus systems

Languagespokenwritten languageofficial languagelinguistic pluralismlanguage hierarchyinternational languagesmass media

Lawcommon lawcode lawforeign lawhome country lawantitrust policyinternational lawregulation

Politicsnationalismsovereigntyimperialismpowernational interestsideologiespolitical risk

Key Issues in International HRM1. Worldwide Human Resources

Planning– Recruiting and Selection– Expatriate orientation and

training– Repatriation– Performance appraisal

2. Compensation– Dealing with inflation and

unexpected changes in exchange rates

– Providing sufficient pay to keep individuals

– Should company pay hardship allowance?

– Dissatisfaction with cost of living allowances

3. Housing (Complex problems at home and overseas)

Key Issues in International HRM4. Benefits Planning

– Developing equity among employees– Several plans necessary for different

categories of personnel

5. Taxation (Proliferation of new laws)

6. Communication of HR Policies and Programs Worldwide– Treat communication as a

continuous process– Face-to-Face contact frequently– Make policy manuals brief and

simple– Be sensitive to needs of receiver– Send regular written explanations of

policy changes– Periodic rotation of overseas HR

managers desirable– Security

Global Manufacturing

International Corporation

Domestic firm that uses its existing capabilities to move into overseas markets.

Multinational Corporation (MNC)

Firm which independent business units operating in multiple countries.

Global Corporation

Firm that had integrated worldwide operations through a centralized home office.

Transnational Corporation

Firm that attempts to balance local responsiveness and global scale via a network of specialized operating units.

Types of Organizations

Global Efficiency

High

Global

Views the world as a single market; operations are controlled centrally from the corporate office.

Transnational

Specialized facilities permit local responsiveness; complex coordination mechanisms provide global integration.

Low

International

Uses existing capabilities to expand into foreign markets.

Multinational

Several subsidiaries operating as stand-alone business units in multiple countries.

Low High

Local Responsiveness

The Multi-National Corporation (MNC)

• Home Country Employment

• External Country Employment

Managing in a Foreign Environment

• Attitudes Vary• Motivational Tools

are Distinctly Different

Cultural Environmentof International Business

Clustering Nations Approach

• Geography• Languages• Religion• Job Attitudes

• Work Goals

• Values• Needs

Managerial Values

• Role of Competition• Role of Blame• Role of Shame• Role of Participation:

Japan (hi)• Role of Autocratic:

Europe (hi) and South America (hi)

Sources of Managerial Talent

• Home Country Nationals (Expatriates)

• Host Country Nationals (Natives)

• Third Country Nationals (Non-Home/Host)

Advantages of Different Sourcesfor Overseas Managers

Host Country

Home Country

Third Country

•Less cost

•Preference of host country government

•Knowledge of environment

•Language facility

•Talent available within company

•Greater control

•Company experience

•Mobility

•Experience provided to corporate executives

•Broad experience

•International outlook

•Multi-lingualism

SOME OF THE LARGEST U.S. MULTINATIONALS

AT&T General Electric Microsoft

Cisco General MotorsProcter and

Gamble

Citicorp. Hewlett-Packard RJR Nabisco

Coca-Cola IBM Texaco

DuPont IntelUnited

Technologies

Exxon/Mobil Oil J.P. Morgan Wal-mart

Ford Motor Johnson & Johnson Xerox

Motorola

6 Major Reasons for American Expatriate Failures in Foreign

Environment

• Inability of the manager’s spouse to adjust to a different cultural environment.

• The manager’s inability to adapt to a different physical or cultural environment. Other family-related problems.

• The manager’s personality or emotional immaturity.

• The manager’s inability to cope with the responsibilities posed by the overseas work.

• The manager’s lack of technical competence.

• The manager’s lack of motivation to work overseas.

Selection Methods

• Interviews (executives and psychologists)

• Assessment Centers (exercises)

• Tests (language and special tests)

• Role of Family

Flowchart of the Selection-Decision Process

Start the Selection Process

Can the position be filled by a local national?

Identify degree of interaction required with local community – using a 7- or 9- point scale, ranging from low to high, indicate the degree

of interaction with local community required for successful performance on the job.

Select local national and subject him/her to training basically aimed at improving technical

and managerial skills.

Emphasis* on tasks variables.

Second but by no means unimportant question is to ask whether the individual is willing to

serve abroad.

Is candidate willing?

Probably not suitable for position

Emphasis* on task variables

Identify degree of similarity / dissimilarity between cultures –

using a 7- or 9-point scale, ranging from similar to highly

diverse, indicate the magnitude of differences between the two

cultures,

Emphasis* on “relational abilities” factor.

“Family situation” factor must also be taken into consideration.

Start orientation (most rigorous)

Start orientation(moderate to high rigor)

Start orientation(moderate to high rigor)

Probably not suitable for position

YES

NO

YES

YES NO

NO

HIGH

LOW

HIGHLY DIVERSE

VERY SIMILAR

Preparing for an International Assignment

Study the following subjects:• Social and business etiquette.• History and folklore.• Current affairs, including relations between

the country and the United States.• The culture’s values and priorities.• Geography, especially the cities.• Sources of pride: artists, musicians,

novelists, sports, great achievements of the culture, including things to see and do.

• Religion and the role of religion in daily life.• Political structure and current players.• Practical matters such as currency,

transportation, time zones, hours of business.

• The language.

Cultural Shock

• "A Disorientation that Causes Perpetual Stress"

– Disorienting Incidents– Impossible

Communication– Telephone Difficulties– Family Frustrations

Special Considerations

• Career Development Risks

• Reentry Problems• Managing Family Life• Terrorism

Recruitment

• Government Regulations

• Work Permits Universally Required

• Recruitment of Locals Varies

• Guest Workers• Role of Church, Family,

Politics

Selection

• Merit Versus Best Family

• Family Ties• Social Standing• Origin• Industrialized versus

Less Developed

Training Issues

• Local Resources• Less Technical

Capabilities• Apprenticeship

Strengths in Europe• Management

Development (US Leader)

• Language (English Need)

Compensation

• Host Country Employees– Production Standard or

Time or Combination– Benefits (often higher

than U.S.)– Profit Sharing (may be

Required)

• Managers– Narrowing of Salary

Gap with USA

Expatriate Compensation

• Base Pay• Differentials• Incentives• Company Assistance• Cost: 3-4 times USA

Rate

Compensation of Expatriate Managers

1. Provide an incentive to leave the united states.

2. Maintain an American standard of living.

3. Facilitate reentry into the united states.

4. Provide for the education of children.

5. Maintain relationships with family, friends, and business associates.

To be effective, a compensationprogram must:

Compensation Elements of an Expatriate

• Programs used by most U.S. Based MNCs have four elements:

• Base pay – equal to pay of domestic counterparts in comparably evaluated jobs.

• Differentials – to offset the higher costs of overseas goods, services, and housing.

• Incentives – to compensate the person for separation from family, friends, and domestic support systems.

• Company assistance programs – to cover added costs such as moving and storage costs, automobile, and education expenses.

The Price of an Expatriate

An employer’s typical first-year expensesof sending a U.S. executive abroad.

Direct Compensation Costs

Base Salary 100%

Foreign-service premium 15%

Goods and services differential 20%

Housing costs 20-40%

Transfer Costs

Relocation allowance 5%

Air fare 2%

Moving household goods 25%

Other Costs

Company Car 15%

Schooling (two children) 20%

Annual home leave (four people) 5%

Personal income tax abroad 50%

Total = Salary plus 187-207%

Note: Additional costs often incurred aren’t listed above, including language and cross-cultural training for employee and family, and costs of selling home and cars in the U.S. before moving.

*Figures take into account payments by employee to company based on hypothetical U.S. income tax and housing costs.

*It is not unusual to triple costs compared to USA earnings.

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