fundamentals of

Human Resource Management 4th edition

by R.A. Noe, J.R. Hollenbeck, B. Gerhart, and P.M. Wright

CHAPTER 15
Managing Human Resources
Globally

McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All Rights Reserved. 15-1
 What Do I Need to Know?

1. Summarize how the growth in international

business activity affects human resource
management.
2. Identify the factors that most strongly
influence HRM in international markets.
3. Discuss how differences among countries
affect HR planning at organizations with
international operations.

15-2
 What Do I Need to Know? (continued)

4. Describe how companies select and train

human resources in a global labor market.
5. Discuss challenges related to compensating
employees from other countries.
6. Explain how employers prepare managers for
international assignments and for their
return home.

15-3
 HRM in a Global Environment

• The environment in which organizations

operate is rapidly becoming a global one.
• Foreign countries can provide a business with
new markets.
• Companies set up operations overseas
because of lower labor costs.
• Technology makes it easier for companies to
spread work around the globe.

15-4
 As companies in the
United States and
Britain cut software
jobs and outsource to
other countries in
order to drive down
costs, countries such
as India continue to
see employment rise.

15-5
HRM in a Global Environment (continued)

• Global activities are simplified and

encouraged by trade agreements among
nations.
• As these trends and arrangements encourage
international trade, they increase and change
demands on human resource management.
– Organizations need employees who understand the
customers and suppliers in foreign countries.
– Organizations need to understand the laws and
customs that apply to employees in other countries.

15-6
Employees in an International Workforce

• Parent-country national – employee who was born

and works in the country in which an organization’s
headquarters is located.
• Host-country national – employee who is a citizen of
the country (other than parent country) in which an
organization operates a facility.
• Third-country national – employee who is a citizen
of a country that is neither the parent country nor
the host country of the employer.

15-7
Employees in an International Workforce
(continued)

• When organizations operate overseas, they

hire a combination of parent-country
nationals, host-country nationals, or third-
country nationals.
• Expatriates – employees assigned to work in
another country.

15-8
Figure 15.1: Levels of Global Participation

15-9
 Employers in the Global Marketplace

• International organization – an organization that

sets up one or a few facilities in one or a few foreign
countries.
• Multinational company – an organization that builds
facilities in a number of different countries in an
effort to minimize production and distribution costs.
• Global organization – an organization that chooses
to locate a facility based on the ability to effectively,
efficiently, and flexibly produce a product or service
using cultural differences as an advantage.

15-10
 Test Your Knowledge
• Hans works for a company who’s headquartered in
France and has foreign operations in Germany, only.
Hans is a citizen of the Netherlands. Which of the
following is most likely true?
a) Hans works for a domestic company and is from the parent
country.
b) Hans works for a multinational company and is from the
host country.
c) Hans works for a global company and is from a third
country.
d) Hans works for an international company and is from a third
country.

15-11
 Transnational HRM System

• Transnational HRM system:

– makes decisions from a global perspective
– includes managers from many countries
– based on ideas contributed by people
representing a variety of cultures
• Decisions that are the outcome of a
transnational HRM system balance uniformity
with flexibility.

15-12
 Factors Affecting HRM in
International Markets

Economic
Education
Systems

Political-
Culture Legal
Global Systems
HRM
15-13
 Culture

• Culture – a community’s set of shared

assumptions about how the world works and
what ideals are worth striving for.
• Culture can greatly affect a country’s laws.
• Culture influences what people value, so it
affects people’s economic systems and efforts
to invest in education.
• Culture often determines the effectiveness of
various HRM practices.
15-14
 Culture (continued)

• Cultural characteristics influence the ways

members of an organization behave toward one
another as well as their attitudes toward
various HRM practices.
• Cultures strongly influence the appropriateness
of HRM practices.
• Cultural differences can affect how people
communicate and how they coordinate their
activities.

15-15
 Hofstede’s Five Dimensions of Culture

1. Individualism/Collectivism Describes the strength of the relation

2. Power Distance
3. Uncertainty Avoidance
4. Masculinity/Femininity
5. Long-term/Short-term
Orientation
between an individual and other individuals in
the society.
Concerns the way the culture deals with
unequal distribution of power and defines the
amount of inequality that is normal.
Describes how cultures handle the fact that
the future is unpredictable.
The emphasis a culture places on practices or
qualities that have traditionally been
considered masculine or feminine.
Suggests whether the focus of cultural values
is on the future (long term) or the past and
present (short term).

15-16
 In Taiwan, a country that is high in
collectivism, coworkers consider
themselves more as group members
instead of individuals.

15-17
 Culture (continued)

• Organizations must prepare managers to

recognize and handle cultural differences.
– Recruit managers with knowledge of other
cultures
– Provide training
• For expatriate assignments, organizations may
need to conduct an extensive selection
process to identify individuals who can adapt
to new environments.
15-18
 Education and Skill Levels

• Companies with foreign operations locate in

countries where they can find suitable
employees.
• The educations and skill levels of a country’s
labor force affect how and the extent to which
companies want to operate there.
• In countries with a poorly educated
population, companies will limit their
activities to low-skill, low-wage jobs.

15-19
 Economic System

• The economic system provides many of the

incentives or disincentives for developing the
value of the labor force.
• In developed countries with great wealth,
labor costs are relatively high. This impacts
compensation and staffing practices.
• Income tax differences between countries
make pay structures more complicated when
they cross national boundaries.

15-20
 Political-Legal System

• The country’s laws often dictate the

requirements for HRM practices: training,
compensation, hiring, firing, and layoffs.
• An organization that expands internationally
must gain expertise in the host country’s legal
requirements and ways of dealing with its
legal system.
• Organizations will hire one or more host-
country nationals to help in the process.
15-21
 Human Resource Planning in a
Global Economy
• Human resource planning involves decisions
about where and how many employees are
needed for each international facility.
• Decisions about where to locate include
considerations such as the cost and availability of
qualified workers.
• These considerations must be weighed against
financial and operational requirements.
• Other location decisions involve outsourcing.

15-22
 Criteria for Selection of Employees for
Foreign Assignments
1. Competency in the employee’s area of expertise
2. Ability to communicate verbally and nonverbally in
the foreign country
3. Flexibility, tolerance of ambiguity, and sensitivity to
cultural differences
4. Motivation to succeed and enjoyment of challenges
5. Willingness to learn about the foreign country’s
culture, language, and customs
6. Support from family members

15-23
 Qualities associated with success in foreign
assignments are the ability to communicate in
the foreign country, flexibility, enjoying a
challenging situation, and support from family
members.
15-24
Figure 15.2: Emotional Cycle Associated
with a Foreign Assignment

15-25
 Test Your Knowledge

• Rachel, an expatriate working in Japan is

feeling very uncomfortable in her
surroundings. She often feels as if she has
said the wrong thing. Rachel is most likely in
which emotional stage of expatriation:
a) Honeymoon
b) Culture shock
c) Learning
d) Adjustment

15-26
 Training and Developing a
Global Workforce
• Training and development programs should be
effective for all participating employees,
regardless of their country of origin.
• When organizations hire employees to work in a
foreign country or transfer them to another
country, the employer needs to provide the
employees with training in how to handle the
challenges associated with working in a foreign
country.

15-27
Table 15.1: Effects of Culture on Training
Design

15-28
 Test Your Knowledge

• Employees from a high-power distance culture

would feel most comfortable in a training class
that:
a) Involved several group activities with classmates
b) The teacher was the expert and responded
definitively to all questions
c) The teacher acted as a facilitator of group
discussion
d) None of the above

15-29
 Delivering Training in Other Countries

• Know your goals – clarify what overseas training is

supposed to achieve.
• Consider international differences among trainees
when developing the training plan.
• Keep an eye on quality – overseas trainers should
meet the same quality standards as training at
headquarters.
• Be clear about standards for confidentiality and
intellectual property.
• Know the local laws that affect training programs.

15-30
 Foreign Assignments

• Would you consider taking a foreign

assignment for a 6 months to 1 year duration?
A = Yes B = No

• Before you took on a foreign assignment, what

would you want to know?

15-31
 Cross-Cultural Preparation

• This is training to prepare employees and their

family members for an assignment in a foreign
country.
• The training covers all three phases of an
international assignment:
1. Preparation for departure
2. The assignment itself
3. Preparation for the return home

15-32
 Performance Management Across
National Boundaries
• When establishing • Differences may
performance include:
management methods – Which behaviors are
in other countries, rated
organizations have to – How and the extent to
consider: which performance is
measured
– Legal requirements
– Who performs the rating
– Local business practices
– How feedback is
– National cultures
required

15-33
Compensating an International Workforce

• Market pay structures can differ substantially

across countries in terms of both pay level and
the relative worth of jobs.
• This creates a dilemma for global companies:
– Should pay levels and differences reflect what
workers are used to in their own countries?
– Should pay levels and differences reflect the
earnings of colleagues in the country of the
facility, or earnings at the company headquarters?

15-34
Figure 15.3: Earnings in Selected
Occupations in Three Countries

15-35
Compensating an International Workforce
(continued)

• Compensation decisions affect a company’s

costs and ability to compete.
• The challenge of competing with organizations
in low-wage countries can be very difficult.
• Decisions about benefits must take into
account the laws of each country involved, as
well as employees’ expectations and values in
those countries.

15-36
Figure 15.4: Average Hours Worked in
Selected Countries

15-37
 International Labor Relations
• Labor relations on an international scale involves
differences in laws, attitudes, economic systems,
and differences in negotiation styles.
• Organizations establish overall policies and goals
for labor relations, overseeing labor agreements,
and monitoring labor performance.
• The day-to-day decisions about labor relations
are usually handled by each foreign subsidiary.

15-38
Managing Expatriates:
Selecting Expatriate Managers
• Expatriate managers need technical
competence in the area of operations.
• In addition, many other skills are necessary to
be successful in an overseas assignment:
– Ability to maintain a positive self-image and feeling
of well-being
– Ability to foster relationships with host-country
nationals
– Ability to perceive and evaluate the host country’s
environment accurately

15-39
 Topics for Assessing Candidates for
Overseas Assignments
Resourcefulness
Motivation

Health Adaptability

Language ability Career Planning

Family Considerations
Financial

15-40
Managing Expatriates:
Preparing Expatriates
• Pre-assignment site visit
• Job orientation
• Country orientation
• Culture orientation
• Language training
• Compensation /
benefits / taxes
counseling
• Housing counseling
• Health care / schools /
shopping / recreation
counseling
• Counseling by returning
expatriates
• Local sponsorship from
host country
15-41
 Figure 15.5:
Impressions of
Americans –
Comments by
Visitors to the
United States

15-42
 Compensating Expatriates

• Balance sheet approach – this approach

adjusts the manager’s compensation so that it
gives the manager the same standard of living
as in the home country plus extra pay for the
inconvenience of locating overseas.
• This approach involves an effort by the global
organization to ensure that its expatriates are
“made whole.”

15-43
Figure 15.6: The Balance Sheet for
Determining Expatriate Compensation

15-44
Toyko Tops Priciest Cities

15-45
 Compensating Expatriates (continued)

• After setting the total pay, the organization

divides this amount into the four components
of the total pay package:
1. Base salary
2. Tax equalization allowance
3. Benefits
4. Allowances

15-46
 Figure 15.7:
International
Assignment
Allowance Form

15-47
 Helping Expatriates Return Home

• Repatriation – the process of preparing

expatriates to return home from foreign
assignment.
1. Communication: the expatriate receives
information and recognizes changes at home
while abroad
2. Validation: giving the expatriate recognition for
the overseas service when this person returns
home.

15-48
 Summary

• More and more companies are entering international

markets by exporting and operating foreign facilities.
• Organizations therefore need employees who
understand customers and suppliers in other countries.
• They need to understand local laws and customs and
be able to adapt their plans to local situations.
• To do this organizations may hire a combination of
parent-country, host-country, and third-country
nationals.

15-49
 Summary (continued)

• A global organization needs a transnational HRM

system, which:
– Makes decisions from a global perspective
– Includes managers from many countries
– Is based on ideas contributed by people representing a
variety of cultures
• The most important influence is the culture of each
market – its set of shared assumptions about how
the world works and what ideals are worth striving
for.

15-50
 Summary

• Another influence on international HRM is the

foreign country’s political-legal system.
• A country’s economic system, as well as the
government’s involvement in the economy, is a
strong factor determining HRM practices.
• HR planning involves decisions about where and how
many employees are needed for each international
facility.
• Most foreign operations positions are filled with
host-country nationals.
15-51
 Summary (continued)

• Foreign positions are also filled with parent-country

and third-country nationals.
• Pay structures can differ substantially among
countries in terms of pay level and the relative worth
of jobs.
• Laws may dictate differences in benefits packages,
and the value of benefits will differ if a country
requires them or makes them a government service.

15-52
 Summary (continued)

• The organization must prepare the manager selected

for an overseas assignment.
• Cross-cultural training for the assignment as well as
preparation for repatriation after the assignment are
critical success factors.
• Communication of changes at home and validation of
a job well done abroad help the expatriate through
the repatriation process.

15-53
 fundamentals of
Human Resource Management 4th edition
by R.A. Noe, J.R. Hollenbeck, B. Gerhart, and P.M. Wright

CHAPTER 16
Creating and Maintaining High-
Performance Organizations

McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All Rights Reserved. 15-54
 What Do I Need to Know?

1. Define high-performance work systems and

identify the elements of such a system.
2. Summarize the outcomes of a high-
performance work system.
3. Describe the conditions that create a high-
performance work system.
4. Explain how human resource management can
contribute to high performance.

15-55
 What Do I Need to Know? (continued)

5. Discuss the role of HRM technology in high-

performance work systems.
6. Summarize ways to measure the effectiveness
of human resource management.

15-56
 High-Performance Work Systems

• High-performance work system – the right

combination of people, technology, and
organizational structure that makes full use of
the organization’s resources and opportunities
in achieving its goals.
• To function as a high-performance work
system, each of these elements must fit well
with the others in a smoothly functioning
whole.
15-57
Figure 16.1:
Elements of a High-Performance Work
System

15-58
 Elements of a High-Performance
Work System
• Organizational structure: the way the organization
groups its people into useful divisions,
departments, and reporting relationships.
• Task design: determines how the details of the
organization’s necessary activities will be grouped,
whether into jobs or team responsibilities.
• People: well suited and well prepared for their jobs.

15-59
 Elements of a High-Performance
Work System (continued)
• Reward systems: contribute to high
performance by encouraging people to strive
for objectives that support the organization’s
overall goals.
• Information systems: modern information
systems have enabled organizations to share
information widely.

15-60
 In a high-performance work system, all
the elements – people, technology, and
organizational structure – work together
for success.

15-61
 Outcomes of a High-Performance
Work System
• Outcomes of a high-performance work system
include higher productivity and efficiency.
• These outcomes contribute to higher profits.
• Other outcomes include:
– High product quality
– Great customer satisfaction
– Low employee turnover

15-62
Figure 16.2:
Outcomes of a High-Performance Work
System

15-63
 Outcomes of a High-Performance
Work System (continued)
• The outcomes of each employee and work group
contribute to the system’s overall high
performance.
• The organization’s individuals and groups work
efficiently, provide high-quality goods and
services, etc., and in this way they contribute to
meeting the organization’s goals.
• When the organization adds or changes goals,
people are flexible and make changes to as
needed to meet the new goals.

15-64
 Conditions that Contribute to
High Performance
• Teams perform work.
• Employees participate in selection.
• Employees receive formal performance
feedback and are actively involved in the
performance improvement process.
• Ongoing training is emphasized and rewarded.
• Employees’ rewards and compensation relate
to the company’s financial performance.

15-65
 Conditions that Contribute to
High Performance (continued)
• Equipment and work processes are structured
and technology is used to encourage
maximum flexibility and interaction among
employees.
• Employees participate in planning changes in
equipment, layout, and work methods.
• Work design allows employees to use a variety
of skills.

15-66
 Conditions that Contribute to
High Performance (continued)
• Employees understand how their jobs
contribute to the finished product or service.
• Ethical behavior is encouraged.

15-67
 Learning Organizations

• Learning organization – an organization that

supports lifelong learning by enabling all
employees to acquire and share knowledge.
• The people in a learning organization have
resources for training, and they are encouraged
to share their knowledge with colleagues.
• Managers take an active role in identifying
training needs and encouraging the sharing of
ideas.

15-68
 Key Features of Learning Organizations

1. Continuous learning – each employee’s and each

group’s ongoing efforts to gather information and
apply the information to their decisions.
2. Knowledge is shared – one challenge is to shift the
focus of training away from teaching skills and
toward a broader focus on generating and sharing
knowledge.
3. Critical, systematic thinking – is widespread and
occurs when employees are encouraged to see
relationships among ideas and think in new ways.

15-69
 Key Features of Learning Organizations
(continued)

4. Learning culture – a culture in which learning is

rewarded, promoted, and supported by managers
and organizational objectives.
5. Employees are valued – the organization recognizes
that employees are the source of its knowledge. It
therefore focuses on ensuring the development and
well-being of each employee.

15-70
Job Satisfaction

15-71
 Test Your Knowledge

• Charlotte is a manager overseeing the work of

a team. Which of the following behaviors
would empower the team the least?
a) Opening lines of communication between the
team and other groups within the organization.
b) Directing the team and monitoring their day-to-
day activities.
c) Ensure the team has the resources they need.
d) Keep the team informed as new, relevant
information becomes available.

15-72
 Test Your Knowledge

• Kamran has worked for the same company for 3

years, is enthusiastic and passionate about his
work, hasn’t missed a day in two years, and has
several close friends he enjoys working with.
Which of the following best describes Kamran?
a) He is satisfied with his job.
b) He is empowered.
c) He is experiencing occupational intimacy.
d) He is probably going to quit soon.

15-73
Table 16.1: HRM Practices that Can Help
Organizations Achieve High Performance
• HRM practices match • Work design permits
organization’s goals flexibility in where and
• Individuals and groups when tasks are
share knowledge performed
• Work is performed by • Selection system is job
teams related and legal
• Organization • Performance
encourages continuous management system
learning measures customer
satisfaction and quality

15-74
Table 16.1: HRM Practices that Can Help
Organizations Achieve High
Performance(continued)
• Organization monitors • Skills and values of a
employees’ satisfaction diverse workforce are
• Discipline system is valued and used
progressive • Technology reduces
• Pay system rewards time and costs of tasks
skills and while preserving quality
accomplishments

15-75
• To develop future leaders, new IBM managers
participate in IBM’s Basic Blue program for an
intensive nine-month training program.
• IBM is considered one of the best companies in
the development of future leaders.

15-76
 Performance Management

• Each aspect of performance management should be

related to the organization’s goals.
• Business goals should influence the:
– kinds of employees selected and their training
– requirements of each job
– measures used for evaluating results
• This means the organization:
– identifies what each department must do to achieve the
desired results
– defines how individual employees should contribute to
their department’s goals

15-77
Figure 16.3: Employee Performance as a
Process

15-78
 Performance Management (continued)

Guidelines to make the performance management

system support organizational goals:
1. Define and measure performance in precise terms.
2. Link performance measures to meeting customer
needs.
3. Measure and correct for the effect of situational
constraints.

15-79
 HRM Technology

• New technologies – applications of knowledge,

procedures, and equipment that have not
previously been used.
– Transaction Processing: Computations and
calculations used to review and document HRM
decisions and practices. These include
documenting employee relocation, payroll
expenses, and training course enrollments.

15-80
 HRM Technology (continued)

– Decision Support Systems: These are systems

designed to help managers solve problems. They
usually include a "what if" feature.
– Expert Systems: Are computer systems
incorporating the decision rules of people deemed
to have expertise in a certain area.
– Relational Databases: Store data in separate files
that can be linked by common elements.

15-81
Human Resource Management Online:
E-HRM
• Improving HRM effectiveness through online
technology.
• The speed requirements of business force
HRM managers to explore how to leverage
technology for the delivery of HRM activities.
• With Internet technology, organizations can
use E-HRM to let all the organzation’s
employees help themselves to the HR
information they need whenever they need it.

15-82
Online Recruiting Offers Many Benefits

15-83
 Measuring the Effectiveness of
Human Resource Management
Customer-oriented approach to
HRM

Human resource management audit

Analyzing the effect of HRM

programs

15-84
 Customer-Oriented Perspective of
Human Resource Management

Who Are Our What Do Our How Do We Meet

Customers? Customers Need? Customer Needs?
• Line managers • Committed • Qualified
• Strategic employees staffing
planners • Competent • Performance
• Employees employees Management
• Rewards
• Training and
Development

15-85
Human Resource Management Audits

• HRM audit – a formal review of the outcomes

of HRM functions, based on identifying key
HRM functions and measures of business
performance.
• The audit may also look at any other measure
associated with successful management of
human resources.
– e.g., legal compliance, safety, labor relations

15-86
Table 16.3: Key
Measures of
Success for an
HRM Audit

15-87
 Analyzing the Effect of HRM Programs

• This analysis can measure a program’s success

in terms of whether it:
– achieved its objectives
– delivered value in an economic sense
• The analysis can measure the dollar value of
the program’s costs and benefits.
• Successful programs should deliver value that
is greater than the program’s costs.

15-88
 Analyzing the Effect of HRM Programs
(continued)

• HR departments should be able to improve their

performance through some combination of
greater efficiency and greater effectiveness.
• Greater efficiency – means the HR department
uses fewer and less-costly resources to perform
its functions.
• Greater effectiveness – means that what the HR
department does has a more beneficial effect on
employees and the organization’s performance.

15-89
 Test Your Knowledge
• The HR director of a medium-sized corporation
spends 90% of his time meeting and working with
fellow HR staff. He is primarily concerned with
ensuring the company meets all legal requirements
with regard to HR activities. This HR director:
a) Is a major contributor to a high-performance organization
b) Has a strategic focus
c) Is concerned with customer satisfaction
d) Has limited the utility and value he could bring to the
organization

15-90
 Summary

• A high-performance work system is the right

combination of people, technology, and
organizational structure that makes full use of the
organization’s resources and opportunities in
achieving its goals.
• A high-performance work system achieves the
organization’s goals, typically including growth,
productivity, and high profits.

15-91
 Summary (continued)

• Many conditions contribute to high-performance

work systems by giving employees skills, incentives,
knowledge, autonomy, and employee satisfaction.
• Organizations can improve performance by creating a
learning organization, in which people constantly
learn and share knowledge so that they continually
expand their capacity to achieve the results they
desire.

15-92
 Summary (continued)
• By taking a customer-oriented approach, HRM can
improve quality by defining the internal customers
who use its services and determining whether it is
meeting those customers’ needs.
• One way to do this is with an HRM audit.
• Another way to measure HRM effectiveness is to
analyze specific programs or activities.
• This analysis can measure success in terms of
whether a program met its objectives and whether it
delivered value in an economic sense.

15-93