Chapter 18
Global Human Resource
Management
What Is Human
Resource Management?
Human resource management
(
HRM
) refers to
the activities an organization carries out to utilize
its human resources effectively
These activities include
determining the firm's human resource strategy
staffing
performance evaluation
management development
compensation
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What Is The Strategic Role Of
HRM In International Firms?
HRM can help the firm reduce the costs of value creation
and add value by better serving customer needs
more complex in an international business
differences between countries in labor markets, culture, legal systems,
economic systems, etc.
HRM must also determine when to use expatriate
managers - citizens of one country working abroad
who should be sent on foreign assignments how they should be compensated
how they should be trained
What Is The Strategic Role Of
HRM In International Firms?
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What Is A Staffing Policy?
A firm’s staffing policy is concerned with the selection of
employees who have the skills required to perform a particular job
can be a tool for developing an promoting the firm’s corporate
culture - the organization’s norms and value system
a strong corporate culture can help the firm implement its
strategy
There are three main approaches to staffing policy within
international businesses
1. The ethnocentric approach
2. The polycentric approach
What Is An Ethnocentric
Staffing Policy?
The ethnocentric approach to staffing fills key
management positions with parent-country nationals
makes sense for firms with an international strategy
Firms that pursue an ethnocentric policy believe that
there is a lack of qualified individuals in the host country to fill
senior management positions
it is the best way to maintain a unified corporate culture
value can be created by transferring core competencies to a foreign
operation via parent country nationals
But
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What Is A Polycentric
Staffing Policy?
The polycentric approach recruits host country nationals
to manage subsidiaries in their own country, and parent country nationals for positions at headquarters
makes sense for firms pursuing a localization strategy can minimize cultural myopia
may be less expensive to implement than an ethnocentric policy
But
host country nationals have limited opportunities to gain
experience outside their own country and so cannot progress beyond senior positions in their own subsidiaries
a gap can form between host country managers and parent country
What Is A Geocentric
Staffing Policy?
The geocentric approach seeks the best people,
regardless of nationality for key jobs
consistent with building a strong unifying culture and informal
management network
makes sense for firms pursuing a global or transnational strategy enables the firm to make the best use of its human resources
builds a cadre of international executives who feel at home
working in a number of different cultures
But
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Which Staffing Policy Is Best?
What Is Expatriate Failure?
Firms using an ethnocentric or geocentric staffing
strategy will have expatriate managers
Expatriate failure
is the premature return of an
expatriate manager to the home country
each expatriate failure can cost between $250,000 and
$1 million
between 16 and 40% of all American expatriates in
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What Is The Rate Of
Expatriate Failure?
Why Do
Expatriate Managers Fail?
The main reasons for U.S. expatriate failure are
the inability of an expatriate's spouse to adapt the manager’s inability to adjust
other family-related reasons
the manager’s personal or emotional maturity
the manager’s inability to cope with larger overseas responsibilities
The reason for European expatriate failure is
the inability of the manager’s spouse to adjust
The main reasons for Japanese expatriate failure are
the inability to cope with larger overseas responsibility difficulties with the new environment
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How Can Firms Reduce
Expatriate Failure?
Firms can reduce expatriate failure through improved
selection procedures
Four dimensions that predict expatriate success are
1. Self-orientation - the expatriate's esteem, self-confidence, and mental well-being
2. Others-orientation - the ability to interact effectively with host-country nationals
3. Perceptual ability - the ability to understand why people of other countries behave the way they do
Why Is A
Global Mindset Important?
A
global mindset
may be the fundamental
attribute of a global manager
cognitive complexity
cosmopolitan outlook
A global mindset is often acquired early in life
from
a family that is bicultural
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What Is Training And
Management Development?
After selecting a manager for a position, training
and development programs should be
implemented
Training
focuses upon preparing the manager for
a specific job
Management development
is concerned with
developing the skills of the manager over his or
her career with the firm
gives the manager a skill set and reinforces
organizational culture
Historically, most firms focus more on training
Why Is Training Important For
Expatriate Managers?
Training can reduce expatriate failure
Cultural training - fosters an appreciation for the host
country's culture
Language training - an exclusive reliance on English
diminishes an expatriate's ability to interact with host country nationals
Practical training - helps the expatriate and her family
ease themselves into day-to-day life in the host country
But, studies show only about 30% of managers sent on
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What Happens When
Expatriates Return Home?
Training and development should include
preparing and developing expatriate
managers for reentry into their home
country organization
need good programs for re-integrating
expatriates back into work life within their
Why Is Management Development
Important To Firm Strategy?
Management development programs increase the
overall skill levels of managers through
ongoing management education
rotations of managers through jobs within the firm to
give them varied experiences
Management development can be a strategic tool
to build a strong unifying culture and informal
management network, both of which are
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How Should
Expatriates Be Evaluated?
Evaluating expatriates can be especially complex
typically, both host nation managers and home office
managers evaluate the performance of expatriate managers
But, both types of managers are subject to
unintentional bias
home country managers tend to rely on hard data when
evaluating expatriates
host country managers can be biased towards their own
How Can Performance
Appraisal Bias Be Reduced?
To reduce bias in performance appraisal
more weight should be given to an on-site
manager's appraisal than to an off-site
manager's appraisal
a former expatriate who has served in the same
location should be involved in the process
home office managers should be consulted
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What Are The Key Issues In
Compensating Expatriates?
Two key issues on compensation
1.
How to adjust compensation to reflect
differences in economic circumstances and
compensation practices
How Should National Differences
In Compensation Be Treated?
Currently, there are substantial differences in executive
compensation across countries
a top U.S. executive made an average of $525,923 in the 2005-2006
period, compared to $237,697 in Japan, and $158,146 in Taiwan
Question: Should pay be equalized across countries?
Many firms have recently moved toward a compensation
structure that is based on global standards
especially important in firms with a geocentric staffing policy
But, most firms still set pay according to the prevailing
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How Should
Expatriates Be Paid?
Most firms use the balance sheet approach - equalizes
purchasing power across countries so employees have the same living standard in their foreign posting as at home
A compensation package has five components
1. Base salary - normally in the same range as the base salary for a similar position in the home country
can be paid either in the home currency or in the local currency
2. Foreign service premium - extra pay the expatriate receives for working outside his country of origin
How Should
Expatriates Be Paid?
3. Various allowances
- hardship, housing,
cost-of-living, education
4. Tax differentials
- may have to pay income tax
to both the home country and the host-country
governments if the host country does not have a
reciprocal tax treaty with the expatriate’s home
country
company usually covers extra tax assessments
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Why Are International Labor
Relations Important?
Question:
Can organized labor limit the
choices available to an international
business?
Labor unions can limit a firm's ability to
pursue a transnational or global strategy
HRM needs to foster harmony and minimize
What Are The Concerns Of
Organized Labor?
Organized labor is concerned that
1. Multinationals can counter union bargaining power by
threatening to move production to another country
2. Multinationals will farm out only low-skilled jobs to
foreign plants making it easier to switch production locations
3. Multinationals will import employment practices and
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How Does Organized Labor
Respond To MNC Power?
Organized labor has responded to the increased
bargaining power of multinational corporations
by
1. Trying to set-up their own international organizations
2. Lobbying for national legislation to restrict
multinationals
3. Trying to achieve regulation of multinationals through
international organizations such as the United Nations
How Are MNCs Responding To
Organized Labor?
Many firms are centralizing labor relations to
enhance the bargaining power of the multinational
vis-à-vis organized labor
in the past, labor relations were usually decentralized to
individual subsidiaries
The way in which work is organized within a plant
can be a major source of competitive advantage so
it is important for management to have a good
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Review Question
The three types of staffing approaches for
international firms include all of the following
except
Review Question
Firms using _______ fill all key management
positions with parent-country nationals.
a)
An ethnocentric staffing policy
b)
A geocentric staffing policy
c)
A polycentric staffing policy
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Review Question
When a firm wants to pursue a transnational
strategy, a _________ approach to staffing makes
sense.
Review Question
The most common reason for expatriate
failure is
a) The manager’s inability to adjust
b) The manager’s emotional or personal maturity
c) The inability of the spouse to adjust
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