International Human Resources Management by Jamshed Khursig Ara Head Human Resource Car Plant Tata...

8/3/2019 International Human Resources Management by Jamshed Khursig Ara Head Human Resource Car Plant Tata Motors Ltd 3234

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Globalization

The process of integrating world economies; growth in the functional

integration of national economies

International HRM

« is the process of procuring, allocating & effectively using HR in a

multinational organization is the way in which work organizations deal

with people management issues occuring in more than one nationalcontext



Culture

« is customs, beliefs, norms & values that guide them to behaviorof people in society and that are passed on from one generation to

another

CULTURE

Political

System

Economic

ProsperityReligious

BeliefsLanguageValuesEducation

System



Organization Culture

« is collective beliefs & principles of an organization·s employees andis a product of such factors as history, tehnology, management style &

national culture

Types of Business Culture:

Ethnocentric Culture: Senior Managers are from home country & home

country practices are prevalent & subsidiary country units comply with

centralized directions

Polycentric Culture: Local managers are employed to implement strategies

& subsidiaries are allowed to operate in more diverse ways including HR

Geocentric Culture: Staffing is undertaken on a worldwide basis. HR

practices emerge from staff from HO & subsidiary units

Regio-centric Culture: Managers are recruited regionally & HR practicesare consistent within the specific regions



Societal Clusters

Anglo: UK, USA, Australia, Ne Zealand, Ireland, Canada, South Africa

South Asia: India, Malaysia, Philippines, Thailand, Indonesia

Arab: Egypt, Kuwait, UAE

Asian: China, Japan, South Korea, Singapore

Germanic: Germany, Austria, Netherlands



Drivers of globalization

Developing economies have huge markets

MNCs locating their subsidiaries in low-wage and low-cost countries

Changing demographics ² India, Thailand, China

Regional trading blocs ² WTO, EU, NAFTA minimize trade and investment

barriers and facilitate movement of people

Declining trade and investment barriers

Technology



Dimensions of multi-cultural management

Motivation Teams

HR PracticesCommunication

Leadership

Work Values

Managing Global, Diverse Workforce

Building a multi-cultural organization

Minimum

Inter-

group

conflicts

PluralismIdentifi-

cationBias Free

Structural

Integration

Leadership

Diversity



Effective communication across cultures

Learn the language of the host country

Be aware that cross-cultural barriers do exist

Speak clearly

Be sensitive to non-verbal communication

Cultural sensitivity



Work Values

Independence Conformity

Individualism Collectivism

Authority Equality

Compliance Empowerment

Managing Culturally Diverse Teams

1. Adaptation ² Acknowledging cultural gaps & working around them

2. Structural Intervention ² Changing the composition of a team

3. Managerial Intervention ² Bringing in a higher level manager

4. Exit ² Removing a team member



Terminology

Home Country: The native country to which the MNC belongs

Host Country: The country in which an MNC has set up its operations

Expatriate: Inhabitant of the home country sent on an assignment to a

Host Country

Local Country National ( LCN ): Native of the Host Country. Also called as

Host Country National ( HCN )

Third Country National ( TCN ): Native of one country which is not thehome country and being sent on an assignment to the host country which

may be either the home country or a third country

Eg: A U.S based company sending a Belgium employee to Singapore



Background

Internationalization of marketing

Globalization of jobs

- Companies now have production, marketing & servicing

facilities all over the world

- Overseas staffing can be done using three different kind

of people:a) LCN

b) Expatriate

c) TCN

- Each of these types of employees needs a compensation

programme different from the Home Country and from

each other



Types of Expatriates for the purpose of compensation:

Expatriate, TCN, LCN

Expatriate Compensation

Companies send current employees on international assignments for ano. of reasons, like:

a)LCNs lack the required skills and knowledge

b) Home Country employee has knowledge of the company for

co-ordinating activities in foreign branch with the home country

c) Employees chosen for this reason may be at an early stage of

their careers and are thus being groomed for a higher responsibility



Components of Expatriate Compensation and some concern areas

Base Pay:

The job is evaluated using the company·s job evaluation plan Pay decided on either of these two methods:

a) Home Country based method: Setting the base in relation to how

the person would be paid for doing the job in the home country

b) Host Country based method: Setting the base pay in relation to

how the job is paid in the host countryAdvantage: Creates parity amongst HCNs

Concern: Disparity with one·s own income in home country

Variable Pay:

For expats can be similar to domestic programmesConcern: a) Supervisor is at a remote location & may not fully be

apprised of the expat·s performance; b) Many a times, goals & perf.

standards for expat. assignments are not clearly spelled out



Components of Expatriate Compensation and some concern areas ( contd..

)

Bonuses:Offered to entice an employee to take up foreign assignment.

Various ways in which bonus is included in compensation:

i) A percentage added to base pay ranging from 10% - 30% of

base pay

Concern: On repatriation bonus lost is seen as pay cut

ii) Lumpsum payment at the beginning of the assignment

Concern: Raises employee·s income & therefore taxes in one

year

Allowances:

A) Cost-of-living-allowance: paid to ´keep the employee wholeµ ² is a

percentage of base pay ² calculated upon the difference in the cost of

living between the HQ & the Host Country

B) Education Allowance



Components of Expatriate Compensation and some concern areas ( contd..

)

Allowances ( contd.. ):

C) Hardship & Danger Allowance: paid where the overseas assignment

is at a location with extraordinary difficult living conditions & unhealthy

conditions

D) Automobile Allowance

E) Other Allowances

Benefits:

a) Required Benefits mandated by law

b) Discretionary Benefits like health insurance, retirals



TCN Compensation

TCN Compensation components are similar to that of Expatriate

Compensation package. The basic difference of compensation plans for TCNsis the question of "equalization to where?" There are four alternatives:

A)Host Country Equalization: This is paying a TCN the same amount that a local

country national would be paid

B)Headquarters Equalization: This type of equalization treats TCNs as if

they all worked in and are citizens of the headquarters country

C) Home Country Equalization: This alternative means paying TCNs their regular

home country compensation package. Then a housing allowances is added, if the cost

of living is higher in the country where the employee is being transferred

D) Modified Home Country Equalization: This final approach uses the home

country method for calculating living costs but uses a headquarters approach forcalculating base pay. This approach works best if the company uses a split pay system.

Otherwise TCNs from different countries would still be receiving different paycheques



LCN Compensation

Base Pay: Base pay in subsidiary companies depends on internal business

factors, differences in prosperity and purchasing power, and social factors,unions, government, etc.

Bonuses: Bonuses are common throughout the world as a part of the basic

employment contract. In some cases it is even mandated by law.

Eg: Payment of BonusAct, 1965 in India

Variable Pay: It is a form of profit-sharing practice and is mostly called as

¶Performance Pay·

Allowances: The term allowances has a different meaning for LCN's than

expatriates. In other countries allowances are additions to base pay given fora variety of reasons. They can increase an employee's pay by 20% or more.



Benefits:

A) Required: Such as ²

i) Old age, invalidity & survivors

ii) Sickness & maternity

iii) Work injury

iv) Unemploymentv) Family Allowance

B) Discretionary: Such as ²

i) Transportation

ii) Meals

iii) Loansiv) Executive Perquisites

LCN Compensation ( contd.. )



A pproaches to International Compensation:

1. Going Rate Approach: Paid according to the Host Country Salary

2. Balance Sheet Approach: Equates purchasing power in foreign country

with home country. Additional compensation given for tax adjustments,

housing, etc.

3. Global Salary Approach: Applies to global managers in the international

cadre. This is based on worldwide job evaluation systems



Compensation A dministration:

- Establish salary bands

- Salary increase reviews

- Starting salary for new employees

- Linkage to performance appraisal

- Developing rates of pay for job



erformance Management

Performance Management is a means of getting of getting better results

from the organization, teams, and individuals within the agreed

framework of planned goals, objectives and standards

What is International Performance Management System?

It is a strategic HRM process that enables the multinational corporation

(MNC) to evaluate and improve continuously individual, subsidiary unit,

and corporate performance against clearly defined, preset objectives.

Effective IPA ( International Performance Appraisal ) creates an incentive

system that can ensure international employees and overseas subsidiaries

are acting in accordance with the home company·s interests

SOME DEFINITIONS



PERFORM A NCE M A N AG EMENT FLOW



PERFORM A NCE CRITERIA

Hard Goals: are objective, quantifiable, and can be directly measured such asReturn-on-Investment ( ROI ), market share, so on

Soft Goals: tend to be relationship-based or trait-based such as leadership

style, interpersonal skills, etc.

Contextual Goals: attempt to take into consideration factors

that result from the situation in which performance occurs.



FA CTORS TO BE CONSIDERED IN INDIVIDU AL PERFORM A NCE

& A PPR A ISAL PROCESS

1. Expatriate Performance Management System

- Who conducts the appraisal, how frequently, Appraisal System ( whether

multi-rater, MBO, Balanced Scorecard, etc. )

2. Compensation Package

- How is individual compensation revised in line with organizational

performance

- How is variable decided

3. Task

- The complexity of the job itself

4. Headquarters· support

- How frequently did HQ intervene and on what matters

- Whether subsidiaries were visited by HQ staff and frequency of meetings

with executives from the parent company



FA CTORS TO BE CONSIDERED IN INDIVIDU AL PERFORM A NCE

& A PPR A ISAL PROCESS ( contd... )

5

. Host Environment:- Social, political, economic factors

6. Cultural Adjustment

- ¶Blending in· with the host country organizational culture

- Reflected through interpersonal relations, people management,

conflict resolution, etc.



CHALLEN G ES IN A PPR A ISIN G EXPA TRIA TE M A N AG ERS

Challenges in appraising Overseas Managers: Determining who should be the appraiser ² In most cases two

groups evaluate the performance of the expatriate managers ² host

nation managers & home office managers ² and both are subject to

unintentional bias

Home country managers rely too much on Hard Goals whileevaluating an expat·s performance

Deciding on which factors to base the appraisal

Fit of international operation in multinational strategy

Unreliable data

Complex and volatile environments

Time difference and distance separation

Local cultural situation



A PPR A ISAL OF HCN EMPLOYEES

Subsidiary managers tend to be assessed according to subsidiary

performance, with a reliance on hard criteria similar to that applied toheads of domestic units or Divisions

There is a danger that a PCN or TCN subsidiary managers will make

decisions and implement local strategies that favor short-term performance

to the detriment of longer term organizational goals ² her or his subsidiaryperformance will not be affected if the expatriate assignment has been

completed before the consequences of those decisions and strategies begin

to take effect

Host-country managers may have a clearer picture of expatriate

performance and can take into consideration contextual criteria, but theymay have culturally bound basis (e.g. about role behavior) and lack an

appreciation of the impact of the expatriate·s performance in the broader

organizational context



A PPR A ISAL OF HCN EMPLOYEES ( contd.. )

Some expatriates may prefer to have parent-company evaluators given

that their future career progression may depend on how the evaluationdata is utilized back at headquarters; this may be especially so in cases

where foreign operations are relatively less important

Others, may prefer host-country evaluation if they perceive it as a more

accurate reflection of their performance. Multiple raters are sometimesused in the domestic context³ such as the technique referred to as ´360-

degree feedback.µ



Repatriation

Termination of an overseas assignment or ¶homecoming·

Reasons for Repatriation

Completion of period of posting

Family compulsions

Move on to another assignment

Inability to adjust

Failure to do a good job



Challenges of Repatriation:

Many a times organizations do not address the issue of repatriation in

the same manner as expatriationVery few organizations hold re-entry sessions to discusses issues like

career objectives, performance, plan for re-entry on account of reasons

like:

Lack of expertise

Cost of program to train repatriatesNo perceived need for repatriation training by top management

Repatriation problems are not dramatic, visible.

Challenges for an organization

The way an organization handles repatriation has an impact on staff

availability for international assignments

If a repatriate gets a promotion / a position with immense value , other

employees see international assignments as a positive career move

If an MNC does not reward expatriate performance, tolerates high

turnover among expatriates, its workforce may interpret it as a high

career risk



Challenges for an individual

-´Reverse culture shockµ ² Political, social, economic factors havechanged. Person himself has changed and so have family members.

Work place environment has itself changed. The person may end up

feeling like a ´Martianµ at home and work

- Reduced income: Many attractive components of the compensation

may get exluded from the compensation ( bonuses, hardship

allowance, etc. ) leading to a reduced income

- Professional ² not in sync with his experience / not in the

mainstream

- Finding an interesting job with career advancement: Many

expatriate jobs are highly challenging and autonomous. ( start-ups,

clean-ups ). Finding positions ´back homeµ with similar challenge and

autonomy may be difficult.

Challenges of Repatriation ( contd.. ) :



Need for a Repatriation Process:If approx. 25% of employees exit the firm within a year of repatriation it

amounts to a substantial loss financially as well as of human captial

The skills, knowledge and experience gained by the individual on

international assignment may be rare and scarce

Challenges of Repatriation ( contd.. ) :

Challenges for an individual ( contd.. )

-Having a job ready at the right time

Eg: A person was sent on an overseas assignment for 3 years but was

called back after 2 years since the assignment was over. Became very

difficult to find an appropriate assignment when he came back suddenly

-Logistics: Finding a good school, realtor, etc, can be challenging and

unnerving

- Handing off the old job and transitioning into a new one: Thinking about

and planning a transition out when one is still fully engaged in one·s

position is difficult. One does not want to ´check outµ prematurely.



Issues to be addressed through the Repatriation Process:

Study your repatriate retention rate over 2-5 years

Find from repatriates their opinion on the relation between expatriate

experience and current job.

Based on the above develop a Repatriation Policy which stresses on points

like:

Preparation, physical relocation, transition information

Financial and tax assistance ( including benefit and tax changes, loss of

overseas allowance )

Re-entry position and career path assistance

Adjustment to ¶Reverse culture shock· ( including family disorientation)

School systems and children·s education

Contd..



Issues to be addressed through the Repatriation Process ( contd.. ):

Helping adjust to workplace changes such as corporate culture,

structure, de-centralization

Stress management, communication-related training

Establishing networking opportunities, helping in forming new social

contacts

If repatriation coincides with retirement then such individuals might

require special counseling to assist in the transition in both ² back to

home country & to retirement

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