INTERNATIONAL HRM

International HRM Differences

Greater Number of Services Special Services to Unique Group Compensation Complexity Foreign Exchange Rate Attention Language and Cultural Differences

Increasing Importance of Global Human Resources Understanding

International Mergers and Acquisitions

Foreign Human Resources

Importance of Global Human Resources Management

Global Competition

Market Access Opportunities

Composition of the Cultural Environment of International Business

Language spoken written language official language linguistic pluralism language hierarchy international languages mass media Law common law code law foreign law home country law antitrust policy international law regulation Politics nationalism sovereignty imperialism power national interests ideologies political risk Technology and Material Culture transportation energy systems tools & objects communications urbanization science invention Religion sacred objects philosophical systems beliefs & norms prayer taboos holidays rituals Values and Attitudes Toward: time achievement work wealth change scientific method risk-taking Education formal education vocational training primary education secondary education higher education literacy level human resources planning

Social Organization kinship social institutions authority structures interest groups social mobility social stratification status systems

Key Issues in International HRM

1. Worldwide Human Resources Planning
Recruiting and Selection Expatriate orientation and training Repatriation Performance appraisal 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

2. Compensation

3. Housing (Complex problems at home and overseas)

Key Issues in International HRM

4. 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
High

Transnational

Global Efficiency

Specialized facilities permit Views the world as a single local responsiveness; market; operations are complex coordination controlled centrally from the mechanisms provide global corporate office. integration.

International
Low

Multinational

Several subsidiaries Uses existing capabilities to operating as stand-alone expand into foreign business units in multiple markets. 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 Environment of 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 Sources for 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 Cisco Citicorp. General Electric General Motors Hewlett-Packard Microsoft Procter and Gamble RJR Nabisco

Coca-Cola
DuPont Exxon/Mobil Oil Ford Motor

IBM
Intel J.P. Morgan Johnson & Johnson Motorola

Texaco
United Technologies Wal-mart Xerox

6 Major Reasons for American Expatriate Failures in Foreign Environment

Inability of the managers spouse to adjust to a different cultural environment. The managers inability to adapt to a different physical or cultural environment. Other family-related problems. The managers personality or emotional immaturity. The managers inability to cope with the responsibilities posed by the overseas work. The managers lack of technical competence. The managers 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?

YES

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

NO
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. Emphasis* on tasks variables.

LOW

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

HIGH
Is candidate willing?

YES YES
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,

NO

Probably not suitable for position

NO
Probably not suitable for position

VERY SIMILAR
Emphasis* on task variables

HIGHLY

DIVERSE

Start orientation (moderate to high rigor)

Start orientation (moderate to high rigor)

Emphasis* on relational abilities factor.

Family situation factor must also be taken into consideration.

Start orientation (most rigorous)

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 cultures 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

To be effective, a compensation program must: 1. 2. 3. 4. 5. Provide an incentive to leave the united states. Maintain an American standard of living. Facilitate reentry into the united states. Provide for the education of children. Maintain relationships with family, friends, and business associates.

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

Note: Additional costs often incurred arent listed above, including language and crosscultural 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.
An employers typical first-year expenses of sending a U.S. executive abroad.
Direct Compensation Costs
Base Salary Foreign-service premium Goods and services differential Housing costs 100% 15% 20% 20-40%

Transfer Costs Relocation allowance Air fare 5% 2%

Moving household goods

Other Costs Company Car Schooling (two children) Annual home leave (four people)

25%

15% 20% 5%

Personal income tax abroad

Total = Salary plus

50%
187-207%