CHALLENGES

OF
OPERATING GLOBALLY

Human Resource
 International HRM
• Scope much broader than managing
domestic HR
• Issues :
• International taxation
• International orientation/relocation
• Admn services for expatriates
• Host government regulations
• Language translation service
• Each function of HRM has a new dimension
 Objectives
After studying this chapter,
you should be able to:
1. Identify the types of organizational forms used
for competing internationally.
2. Explain how domestic and international HRM
differ.
3. Discuss the staffing process for individuals
working internationally.
4. Identify the unique training needs for
international assignees.
5. Reconcile the difficulties of home-country and
host-country performance appraisals.
 Objectives (cont’d)
After studying this chapter,
you should be able to:
6. Identify the characteristics of a good
international compensation plan.
7. Explain the major differences
between U.S. and European labor
relations.
 Need to broaden the
perspective
• Much broader perspective
• Pay system in different countries
• Health insurance in other countries
• Fringe benefits
• The definition of “family” may vary in
different countries
 Increasing Importance of
Global Human Resource Understanding
International
Mergers and
Acquisitions

Importance of
Foreign Human Global Human Global
Resources Resources Competition
Management

Market Access
Opportunities

Presentation Slide 15–1

 Managing Across Borders
• International
corporation
– Domestic firm that uses
its existing capabilities
to move into overseas
markets.
• Multinational
corporation (MNC)
– Firm with independent
business units operating
in multiple countries.
• Global corporation
– Firm that has 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 TRANSNATIONAL
Views the world as a single Specialized facilities permit
High

market; operations are local responsiveness;

GLOBAL EFFICIENCY

controlled centrally from complex coordination

the corporate office. mechanisms provide
global integration.

INTERNATIONAL MULTINATIONAL
Uses existing capabilities Several subsidiaries
Low

to expand into foreign operating as stand-alone

markets. business units in multiple
countries.

Low High
LOCAL RESPONSIVENESS Figure 15.1
Presentation Slide 15–2
How International Companies
Affect the World Economy

• Production and distribution extend beyond

national boundaries, making it easier to
transfer technology.
• They have direct investments in many
countries, affecting the balance of payments.
• They have a political impact that leads to
cooperation among countries and to the
breaking down of barriers of nationalism.
 How Does the Global
Environment Influence
Management?
• Unified Economies
– Closely partnered nations such as the European
Union have developed into strong competitors.
– Promotes job growth in trading nations.
• Cultural environment
– The communication patterns, religion, values and
ideologies, education, and social structure of a
host country influence how HR is conducted in
that country.
Brief survey report- Far Eastern
Economic survey
• Gender based pay – One-third of
respondents in Asia Pacific countries
agreed that a family man should be
paid more for the same job than a
single woman – strongly in Korea,
Singapore, Japan/Indonesia
• Conviction is weak and opposed by
female employees in Asia
 survey
• Nepotism – traditionally, hiring relations has
been accepted practice, especially in smaller
businesses = this is changing – In Hongkong
and singapore where non relatives are seen
as being easier to manage
• As for romance at work, Koreans see it as a
natural social development, while
Indonesians, Malaysians and Filipions feel
that that becoming romantically involved
with co-workers is inappropriate
 survey
• When workload increases, Australians
and Singaporean firms are mostly
likely to add staff, while Koreans and
Japanese firms are most willing to
insist that existing staff work longer
hours.
• Promotions: Difference of opinion
whether seniority or merit is to be
recognized
 Growing interest in
International HRM
• Globalization
• HR as a major determinant of
success
• Underperformance in overseas
assignments is costly
• Competency of HR professionals
• Network organization
• Implementation strategy
Cultural
Environment of Education/ Social Structure

International Human Capital

• Primary/
• Kinship/family
• Mobility

Business secondary
• Vocational
• Nationalism
• Urbanization
• Professional • Social stratification
• Literacy • Paternalism/
materialism
Values/Ideologies
Communication
• Work ethic • Language(s)
• Time orientation
• Dialects
• Individualism/
• Nonverbal
collectivism
• Media
• Risk propensity
• Technology
• Achievement
Religious Beliefs
• Denominations
• Totems/taboos
• Rituals
• Holy days

Figure 15.4
Presentation Slide 15–3
 Domestic versus
International HRM
• Issues in international HRM in helping
employees adapt to a new and
different environment outside their
own country:
– Relocation
– Orientation
– Objective
– Translation services
 Challenges in HRP
• Identifying top mgt potential early
• Critical success factors for future
international managers
• Providing dev. Opportunities
• Tracking and monitoring
commitment to individuals in
international career paths
 Challenges in recruitment
• Right number and right type
• Mix with organizational culture

• GE is just not hiring people who have

skills – it wants to have employees
whose styles, beliefs and value
systems are consistent with those of
the firm
 International Staffing
• Expatriates, or Home-country Nationals
– Employees from the home country who are
on international assignment.
• Host-country Nationals
– Employees who are natives of the host
country.
• Third-country Nationals
– Employees who are natives of a country
other than the home country or the host
country.
 Ethnocentric approach
• Key manager positions are held by
parent country nationals
• Appropriate initially
• P&G, Philips and Matsushita follow this
approach
• In Dutch film Philips all imp. Positions
were held by Dutch nationals who were
referred by others as “ Dutch Mafia”
 Ethnocentric approach
• Japanese and South Korean firms
today such as Toyota, Matsushita and
Samsung – key positions in most
operations are still held today by the
home country nationals
• According to Japanese overseas
Enterpreuners Association, in 1996,
only 29% of Japanese companies had
presidents who were not Japanese
 Polycentric
• Host country nationals to be hired
• Parents co. nationals occupy key positions
in Corporate hqs
• Many MNCs use home country managers to
get the operations started and then hand
them over to home country managers – HUL
• In Brazil, two-third of employees in any
foreign subsidiary to be Brazilians
 Geographic approach
• Best people, regardless of nationality
• Colgate Palmolive is a good example
• 60% of the companies expatriates
are from countries other than US
• Coca Cola believes in “ think globally
and act locally” approach
 Advantages/disadvantages
• PCN – Parent Company nationals

• HCN – Host country nationals

• TCN – third country nationals

 Advantages in Sources of
Overseas Managers
• Third-
• Host-country • Home-country country
Nationals Nationals Nationals
– Less cost
(Expatriates)
– Talent – Broad
– Preference of
host-country available experience
governments within
company
– Intimate – Internation
knowledge of – Greater
environment control al outlook
and culture – Company
experience – Multilingua
– Language
facility
– Mobility
lism
– Experience
provided to
corporate
executives

Figure 15.5
Presentation Slide 15–4
Changes in International Staffing
over Time

Figure 15.6
 Overseas Recruitment
Issues
• Work Permit, or Work Certificate
– Government document granting a foreign
individual the right to seek employment.
• Guest Workers
– Foreign workers invited to perform needed
labor.
• Transnational teams
– Teams composed of members of multiple
nationalities working on projects that span
multiple countries.
 Selecting Expatriates
• Begin with self-selection.
• Create a candidate pool.
• Assess core skills.
• Assess augmented skills and
attributes.
 Measured Expatriate
Characteristics
• Core Skills
– Skills that are considered
critical to an employee’s
success abroad.
• Augmented Skills
– Skills that are helpful in
facilitating the efforts of
expatriate managers.
• Failure rate
– Percentage of
expatriates who do not
perform satisfactorily.
Expatriate
Selection
Criteria

Figure 15.7
 challenges- expatriates
• Technical ability
• Cross-cultural sensitivity
• Family requirements
• Country cultural requirements
• Languages
• MNC requirements
 Causes of Expatriate
Assignment Failure

Why Do Expats Fail?

Family adjustment Poor performance

Lifestyle issues Other opportunities arise
Work adjustment Business reasons
Bad selection Repatriation issues

Figure 15.8
 Skills Of Expatriate
Managers
• Core Skills • Augmented Skills
– Experience – Computer skills
– Decision making – Negotiation skills
– Resourcefulness – Strategic thinking
– Adaptability – Delegation skills
– Cultural sensitivity – Change management
– Team building
– Maturity

HRM 3
 Boosting ROI of
Expatriates
Major initiatives planned to improve assignment return on
investment (ROI):
• Better candidate selection32%
• Career planning skills 26
• Communicating objectives 24
• Assignment preparation 20
• Monitoring program 17
• Cross-cultural training 10
• Developing or expanding intranet
7
• Communication/recognition 6
• Web-based cultural training 5
• Mandating destination support 4
• Other 17
Source: Andrea Poe, “Selection Savvy,” HRMagazine 47, no. 4 (April 2002): 77–83. Figure 15.9
 Training and Development
• Global Manager
– A manager equipped to run an international
business.
• Skills of a Global Manager
– Ability to seize strategic opportunities
– Ability to manage highly decentralized
organizations
– Awareness of global issues
– Sensitivity to issues of diversity
– Competence in interpersonal relations
– Skill in building community
 Training Programs for
International Managers

• Essential training program content to

prepare employees for working
internationally:
– Language training
– Cultural training
– Assessing and tracking career development
– Managing personal and family life
• Culture shock
– Perpetual stress experienced by people who
settle overseas.
 Preparing for an International
Assignment
To prepare for an international assignment, one should
become acquainted with the following aspects of the host
country:
7. Sources of pride and great
achievements of the
1. Social and business culture
etiquette
8. Religion and the role of
2. History and folklore religion in daily life
3. Current affairs, including 9. Political structure and
relations between the
host country and the current players
4. United States 10.Practical matters such as
currency, transportation,
5. Cultural values and time zones, hours of
priorities business
6. Geography, especially its
major cities 11.The language

Figure 15.10
 Challenges – T&D
• Cross cultural training
• Language training
• Practical training
• Managing dev. strategy
 Training Methods
• Reviewing available information about the
host company: books, magazines, video
tapes.
• Conversations with host country natives.
• Sensitivity training to become familiar with
the customs and overcome prejudices.
• Temporary assignments to encourage
shared learning.
 Challenges - PMS
• Linking with organizational strategy
• Setting performance goals
• Variables impacting poor appraising
• Feedback
• Opportunity for improvement
• Linking rewards and results
 compensation
• Base pay
• Benefits
• Allowances
• Incentives
• Taxes
• Tailoring the packages
• Repatriation
 A
Synthesi
s of
Country
Clusters

Figure 15.11
Source: Simcha Ronen and Oded Shenkar,
“Clustering Countries on Attitudinal Dimensions:
A Review and Synthesis,” Academy of
Management Review 10, no. 3 (July 1985): 435–54.
Copyright Academy of Management Review.
Reprinted with permission of the Academy of
Management Review and the authors; permission
conveyed through the Copyright Clearance Center,
Inc.
 Returning from an Overseas
Assignment
• Repatriation
– The process of an employee transitioning home
from an international assignment.
• Throw a “welcome home” party.
• Offer counseling to ease the transition.
• Arrange conferences and presentations to make
certain that knowledge and skills acquired away from
home are identified and disseminated.
• Get feedback from the employee and the family
about how well the organization handled the
repatriation process.
 Performance Appraisal of
International Managers

• Who Should Appraise Performance?

– Home-country evaluations
– Host-country evaluations
• Adjusting Performance Criteria
– Augmenting job duties
– Individual learning
– Organizational learning
• Providing Feedback
– Debriefing interview

Presentation Slide 15–5

 Forces Driving Global Pay

• Cultural Preferences • Personal Preferences

– Importance of status – Attitudes toward risk
– Role of individual vs. – Quality of life vs. work
organization vs. – Short- vs. long-term
government
– Competitiveness vs.
– Equality vs. disparity solidarity
– Achievement vs. • Social Constraints
relationships
– Income tax rates, social
• Economic Conditions costs
– Size of economy – Laws and regulations
– Types of industries, – Collective bargaining,
natural resources worker participation
– Inflation, unemployment – Skills, education of
– Protectionism vs. open work force
market
Source: Steven Gross and Per Wingerup, “Global Pay? Maybe Not Yet!”
Compensation and Benefits Review 31, no. 4 (July/August 1999): 25–34. Figure 15.13
 Compensation of Expatriate
Managers
• To be effective, an international
compensation program must:
– Provide an incentive to leave the United
States.
– Allow for maintaining a U.S. standard of
living.
– Facilitate reentry into the United States.
– Provide for the education of children.
– Allow for maintaining relationships with
family, friends, and business associates.
Presentation Slide 15–7
 Expatriate Compensation
Programs
• Balance-Sheet
Approach
1. Calculate base pay.
A compensation
system designed 2. Figure cost-of-living
to match the allowance (COLA)
purchasing power 3. Add incentive
in a person’s premiums
home country
4. Add relocation
assistance programs
 International Organizations
and Labor Relations

• International Differences in Unions

– The level at which bargaining takes place
(national, industry, or workplace)
– The degree of centralization of union-
management relations
– The scope of bargaining
– The degree to which government intervenes
– The degree of unionization.