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Issues in Global Human Resource

Management

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Session Objectives

Identify with the strategic role of HRM.

Examine HRMs four major tasks:Staffing policy.

Management training and development.

Performance appraisal.

Compensation policy.

Tasks are complicated by:Varying compensation policies among countries.

Labor laws may prohibit unions in one country and mandate themin another.

Equal employment legislation may be pursued in one country andnot in another.

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The Strategic Role of International HRM

Ensure that HRM policies are congruentwith the firms strategy, structure and

controls.

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High

Costpressures

Low

Low High

GlobalStrategy

TransnationalStrategy

Multi domesticStrategy

InternationalStrategy

Pressures for local responsiveness

Four Basic Strategies in InternationalBusiness

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Strategy, Structure and Control Systems

Global area Global Global Informal matrixstructure product division product division

centralized and decentralized

International Strategy

Structure Multidomestic International Global Transnationaland Controls

Centralizationof operating

decision

Decentralized Core competency Some centralized Mixed centralized

Horizontaldifferentiation

Rest decentralized Informal matrix

Need forcoordination Low Moderate High Very high

Integrating

mechanisms

None Few Many Very many

PerformanceAmbiguity

Low Moderate High Very high

Need forcultural controls

Low Moderate High Very high

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Staffing PolicyStaffing policy:

Selecting individuals with requisite skills to doa particular job.

Tool for developing and promoting corporateculture.

Types of staffing policy:

Ethnocentric.Polycentric.

Geocentric.

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Types of Staffing Policy

Ethnocentric

Key managementpositions filled by

parent-countryationals Philips, Matsushita

& P&G

Polycentric

Host-countrynationals manage

subsidiaries,

parent companynationals hold keyHeadquarter

Positions eg Unilever

Geocentric

Seek bestpeople, regardless

of nationality

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Comparison of Staffing Approaches

Staffing Strategic

qualified managers in host country

Alleviates cultural Limits career mobility

Inexpensive to from foreign

TransnationalUses human resources National immigration

myopia

Approach Appropriateness Advantages Disadvantages

Ethnocentric International

Polycentric Multidomestic

Geocentric Global and

Overcomes lack of Produces resentment

host nationUnified culture Can lead to cultural

Helps transfer corecompetencies

myopia Isolates headquarters

implement subsidiaries

efficiently policies may limitimplementationHelps build strong

culture and informalmanagement network

Expensive

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The Expatriate ProblemCitizens of one country working in another.

Inpatriates:expatriates who are citizens of a foreign countryworking working in the home country of their multinationalemployer.

Expatriate failure:Premature return of the expatriate manager to his/her homecountry.

Cost of failure is high:

Estimate = 3X the expatriates annual salary plus the cost ofrelocation (impacted by currency exchange rates and assignmentlocation).

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Reason for Expatriate Failure

US MultinationalsInability of spouse to adjust.Managers inability to adjust.Other family problems.Managers personal or

emotional immaturity.Inability to cope with largeroverseas responsibilities.

Japanese FirmsInability to cope with largeroverseas responsibilities.Difficulties with the newenvironment.

Personal or emotionalproblems.Lack of technicalcompetence.Inability of spouse to adjust.

European Multinationals: Inability of spouse to adjust.

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Expatriate Selection

Four dimensions that predict success in foreign posting

Self-orientation:

Strengthen self-esteem, self-confidence and mental well-

being.

Others-orientation:

Enhance ability to interact with host-country nationals.

Perceptual ability:

The ability to empathize - understand why people in host-country behave the way theydo.

Cultural toughness:

How well an expatriate adjusts to a particular posting tendsto be related to the countryof assignment.

According to Mendenhall & Oddou an executives domestic performance does not

(necessarily) equate to his/her overseas performance.

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Training for Expatriate Managers

Cultural:Seeks to foster an appreciation of the host-countrys culture.

Language:

Can improve expatriates effectiveness, relatemore easily to culture and fostered a better firmimage.

Practical:

Ease into day-to-day lifeof the host country.

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Repatriation of Expatriates

Didnt know what positionthey hold upon return.

Firm vague about return,role and career progression.

Took lower leveljob.

Leave firm withinone year.

Leave firm withinthree years

10 20 30 40 50 60 70

percent

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Management and Development StrategyPrograms designed to increase overall skill through mix ofeducation and assignment rotations.

Provides varied experience.

Attempt to improve firms management productivity and quality.Particularly true for transnational strategy.

Unifying corporate culture and management networks.

Socialize norms and value systems.

Foster esprit de corps.Build informal networks

Strengthen identification with company.

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Performance Appraisal

Problems:

Unintentional bias.

Host-nation biased by cultural frame of reference.

Home-country biased by distance and lack ofexperience working abroad.

Expatriate managers believe that headquartersunfairly evaluates and appreciates them.

Many believe a foreign posting does not benefittheir career.

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Guidelines for Performance Appraisal

More weight given to onsitemanagers evaluation.

Expat who worked in samelocation should assist home-office

manager with evaluation.

If foreign on-site manager preparingevaluation, home-office manager should

be consulted before finalization.

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Compensation

Two issues:

How to adjust compensation to reflect nationaldifferences in economic circumstances andcompensation practices.

How expatriate managers should be paid.

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National Differences in Compensation

Country/Designation

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

UnitedKingdom

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

UnitedStates

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

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Compensation Issues

EthnocentricHow much home-countryexpatriates should be paid.

PolycentricPay can and should be country-specific.

Geocentric/Transnational

May have to pay its

international cadre of managersthe same.

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A Typical Balance Sheet

Reserve Reserve Reserve Reserve

Goods andServices

Goods andServices

Goods andServices

Goods andServices

Housing

Housing

HousingHousing

Income

Taxes

IncomeTaxes

IncomeTaxes

Home andHost-

CountryIncomeTaxes

Premiumsand

Incentives

Home-CountrySalary

Host-CountryCosts

Host-CountryCosts Paid byCompany andfrom Salary

Home- CountryEquivalentPurchasing

Power

AdditionalCosts Paid by

Company

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International Labor Relations

Foster harmony and minimize conflict betweenthe firm and organized labor.

Key issue: degree to which organized labor can limit thechoices of an international business.

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Concerns of Organized Labor

Firms can counter bargaining power by threatening tomove production to another country.

International business will keep highly skilled tasks inhome country and farm out only low-skilled tasks toforeign plants.

Importing employment practices and contractual

agreements from home country that may diminishunions influence and power.

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Strategy of International Labor

Try to establish international labor organizations.

Lobby legislatures to restrict multinationals.

Use United Nations to regulate multinationals.

Efforts have not been

successful.

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Multinationals Approach to Labor

Relations

Decentralize: labor laws, union power and nature ofcollective bargaining varies from country to country.

Now a trend toward Centralize:

Want to rationalize global operations.

Need to control labor costs and maximize threat of move tolower cost country.

Competitive advantage can come from the way work isorganized in a plant. Bargaining with local unions is,

therefore, a priority.Before move, get new union approval for work practices.