Chapter © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11 International Human Resource Management

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Human Resource Management (HRM) Human Resource Management (HRM): deals with the overall relationship of the employee with the organization Basic HRM functions: Recruitment, Selection, Training, Performance Appraisal, Compensation, Labor Relations Human Resource Management (HRM): deals with the overall relationship of the employee with the organization Basic HRM functions: Recruitment, Selection, Training, Performance Appraisal, Compensation, Labor Relations

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Human Resource Management (IHRM) In the international arena, the basic HRM activities take on an added complexity, for two reasons: Employees of MNCs include a mixture of workers of different nationalities. HR Managers must decide the necessary extent of adaptation to local business & national cultures. In the international arena, the basic HRM activities take on an added complexity, for two reasons: Employees of MNCs include a mixture of workers of different nationalities. HR Managers must decide the necessary extent of adaptation to local business & national cultures.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Types of Employees in Multinational Organizations Expatriate : Employees who come from a country that is different from the one in which they are working Home Country Nationals : Expatriate employees who come from the parent firm’s home country Third Country Nationals : Expatriate workers who come from neither the host nor the home country. Host Country Nationals : Local workers who come from the host country where the MNC unit is located. Expatriate : Employees who come from a country that is different from the one in which they are working Home Country Nationals : Expatriate employees who come from the parent firm’s home country Third Country Nationals : Expatriate workers who come from neither the host nor the home country. Host Country Nationals : Local workers who come from the host country where the MNC unit is located.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Types of Employees in Multinational Organizations Inpatriate : Employees from foreign countries who work in the country where the parent company is located. Flexpatriates: Employees who are sent on frequent but short-term international assignments. International Cadre (Globals) : Managers who specialize in international assignments. Commuter Assignments Employees : Employees who live in one country, but spend part of the work week in another country. Inpatriate : Employees from foreign countries who work in the country where the parent company is located. Flexpatriates: Employees who are sent on frequent but short-term international assignments. International Cadre (Globals) : Managers who specialize in international assignments. Commuter Assignments Employees : Employees who live in one country, but spend part of the work week in another country.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Multinational Managers: Expatriate or Host Country Deciding whether to use expatriate or local mangers depends mostly on a firm’s multinational strategy. Transnational strategists see their managerial recruits as employable anywhere in the world. Multidomestic strategists tend to favor local managers. For a particular position, the firm should ask: Given our strategy, what is our preference for this position (host, home, or third country national)? Deciding whether to use expatriate or local mangers depends mostly on a firm’s multinational strategy. Transnational strategists see their managerial recruits as employable anywhere in the world. Multidomestic strategists tend to favor local managers. For a particular position, the firm should ask: Given our strategy, what is our preference for this position (host, home, or third country national)?

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Multinational Managers: Expatriate or Host Country For expatriate managers (parent or third country): Is there an available pool of managers with appropriate skills for the position? Are they willing to take expatriate assignments? Do any laws affect the assignment of expatriate managers? For host country managers: Do they have the expertise for the position? Can we recruit them from outside our firm? For expatriate managers (parent or third country): Is there an available pool of managers with appropriate skills for the position? Are they willing to take expatriate assignments? Do any laws affect the assignment of expatriate managers? For host country managers: Do they have the expertise for the position? Can we recruit them from outside our firm?

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Is the Expatriate Worth It? IHRM decisions regarding use of expatriate managers must take into account the costs of such assignments. The total compensation of expatriate managers is often 3-4 times higher than home-based salaries. In addition to high costs of relocating expatriates, more multinationals are now concerned with expatriate safety worldwide. IHRM decisions regarding use of expatriate managers must take into account the costs of such assignments. The total compensation of expatriate managers is often 3-4 times higher than home-based salaries. In addition to high costs of relocating expatriates, more multinationals are now concerned with expatriate safety worldwide.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Potential Reasons for Expatriate Failure Individual: Personality of the manager; Lack of technical proficiency; No motivation for international assignment Family: Spouse or family members fail to adapt to local culture; Spouse or family members do not want to be there. Organizational: Excess of difficult responsibilities in the assignment Failure to provide cultural and other important pre-assignment training, like language and culture Failure of company to pick the right person Failure to provide the level of technical support that domestic managers are used to Failure to consider gender equity Individual: Personality of the manager; Lack of technical proficiency; No motivation for international assignment Family: Spouse or family members fail to adapt to local culture; Spouse or family members do not want to be there. Organizational: Excess of difficult responsibilities in the assignment Failure to provide cultural and other important pre-assignment training, like language and culture Failure of company to pick the right person Failure to provide the level of technical support that domestic managers are used to Failure to consider gender equity

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Reasons for U.S. Expatriate Failure (2 of 3) Cultural: The Manager fails to adapt to local culture or environment. The Manager fails to develop relationships with key people in the new country because of the complexity of cultivating networks with diverse people. Cultural: The Manager fails to adapt to local culture or environment. The Manager fails to develop relationships with key people in the new country because of the complexity of cultivating networks with diverse people.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Strategic Role of Expatriate Assignments Help managers acquire skills necessary to develop successful strategies in a global context Help the company coordinate and control operations that are dispersed geographically and culturally Provide important strategic information. Provide crucial information about local markets Provide opportunities for management development Provide important network knowledge Help managers acquire skills necessary to develop successful strategies in a global context Help the company coordinate and control operations that are dispersed geographically and culturally Provide important strategic information. Provide crucial information about local markets Provide opportunities for management development Provide important network knowledge

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Selecting Expatriate Managers Selecting the wrong person for the job leads to failure. Selecting the wrong person can be a major expense, costing more than $1 million per expatriate failure. Improperly selected employees who cannot perform but who remain on assignment can be more damaging to the firm than those who leave prematurely. Domestic performance does not predict expatriate performance. Selection criteria may differ. Selecting the wrong person for the job leads to failure. Selecting the wrong person can be a major expense, costing more than $1 million per expatriate failure. Improperly selected employees who cannot perform but who remain on assignment can be more damaging to the firm than those who leave prematurely. Domestic performance does not predict expatriate performance. Selection criteria may differ.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Key Success Factors for Expatriate Assignments Technical and managerial skills Personality traits (flexible, willing to learn) Relational abilities (ability to adapt to other cultures) Family situation (spouse & family willingness to go) Stress tolerance (ability to maintain composure) Language ability (speak, read & write the language) Emotional intelligence (empathize, relate to others) Technical and managerial skills Personality traits (flexible, willing to learn) Relational abilities (ability to adapt to other cultures) Family situation (spouse & family willingness to go) Stress tolerance (ability to maintain composure) Language ability (speak, read & write the language) Emotional intelligence (empathize, relate to others)

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 11.5: Selecting Expatriates: Priorities for Success Factors by Assignment

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Training and Development Predeparture cross-cultural training reduces expatriate failure rates and increases job performance. The main objective of Cross-Cultural Training is to increase the relational abilities of the future expatriate and the spouse and family. The training rigor depends on the assignment. Training Rigor : The extent of effort by both trainees and trainers to prepare the expatriate for work abroad Low rigor training: Short time period; lectures and videos on local cultures; Briefings on company operations High rigor training: Lasts over a month; More experiential learning; Extensive language training; Includes interactions with host country nationals Predeparture cross-cultural training reduces expatriate failure rates and increases job performance. The main objective of Cross-Cultural Training is to increase the relational abilities of the future expatriate and the spouse and family. The training rigor depends on the assignment. Training Rigor : The extent of effort by both trainees and trainers to prepare the expatriate for work abroad Low rigor training: Short time period; lectures and videos on local cultures; Briefings on company operations High rigor training: Lasts over a month; More experiential learning; Extensive language training; Includes interactions with host country nationals

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 11.7: Training Needs and Expatriate Assignment Characteristics

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Performance Appraisal for the Expatriate Seldom can the firm use same performance criteria. Challenges: Fit of international operation in multinational strategy Unreliable data Complex and volatile environments Time differences and distance separation To overcome these difficulties: Fit the evaluation criteria to the strategy. Fine-tune the evaluation criteria. Use multiple sources of evaluation with varying periods of evaluation. Seldom can the firm use same performance criteria. Challenges: Fit of international operation in multinational strategy Unreliable data Complex and volatile environments Time differences and distance separation To overcome these difficulties: Fit the evaluation criteria to the strategy. Fine-tune the evaluation criteria. Use multiple sources of evaluation with varying periods of evaluation.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Expatriate Compensation Compensation packages must be attractive to skilled managers, but also consider the increasing costs. Compensation packages have many common factors: Local market cost of living Housing Taxes Benefits Compensation packages must be attractive to skilled managers, but also consider the increasing costs. Compensation packages have many common factors: Local market cost of living Housing Taxes Benefits

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Balance-Sheet Approach Provides a compensation package that attempts to balance purchasing power in the host country with that in the home country: The expatriate should not be in a better or worse position financially because of the assignment. The firm provides allowances for adjustments for differences in taxes, cost of living, housing, food, recreation, personal care, clothing, education, home furnishing, transportation, and medical care. In addition to matching purchasing power, firms may provide additional allowances: Foreign service premiums (often 10-20% of base pay); Hardship allowance (extra money for difficult postings); Relocation allowances (miscellaneous costs of move); Home-leave allowances (transportation costs to return home once or twice per year) Provides a compensation package that attempts to balance purchasing power in the host country with that in the home country: The expatriate should not be in a better or worse position financially because of the assignment. The firm provides allowances for adjustments for differences in taxes, cost of living, housing, food, recreation, personal care, clothing, education, home furnishing, transportation, and medical care. In addition to matching purchasing power, firms may provide additional allowances: Foreign service premiums (often 10-20% of base pay); Hardship allowance (extra money for difficult postings); Relocation allowances (miscellaneous costs of move); Home-leave allowances (transportation costs to return home once or twice per year)

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Repatriation Problem Repatriation Problem: the difficulties that mangers face coming back to their home countries and reconnecting with their old jobs. Three basic cultural problems “reverse culture shocks:” Adapting to new work environment and culture of home office Relearning to communicate with others in home and organizational cultures Adapting to their basic living environment Repatriation Problem: the difficulties that mangers face coming back to their home countries and reconnecting with their old jobs. Three basic cultural problems “reverse culture shocks:” Adapting to new work environment and culture of home office Relearning to communicate with others in home and organizational cultures Adapting to their basic living environment

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Strategies for Successful Repatriation These strategies may help firms to successfully repatriate their managers: Provide a strategic purpose for the repatriation. Establish a team to aid the expatriate. Provide parent country information sources. Provide training and preparation for the return. These strategies may help firms to successfully repatriate their managers: Provide a strategic purpose for the repatriation. Establish a team to aid the expatriate. Provide parent country information sources. Provide training and preparation for the return.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Assignments for Women Estimates are that women represent only 12% of expatriate managers, but 45% of management. Women face a glass ceiling at home, and an expatriate glass ceiling worldwide, because of 2 myths: Myth 1: Women do not wish to take international assignments. Myth 2: Women will fail because of the foreign culture’s prejudices against local women. Don’t assume that people from foreign cultures apply the same gender role expectations to foreign workers that they do to local women. Successful women expatriates emphasize nationality, not gender. The issues that arise in cross-cultural interactions depend more on how foreigners react to those of a different nationality. Estimates are that women represent only 12% of expatriate managers, but 45% of management. Women face a glass ceiling at home, and an expatriate glass ceiling worldwide, because of 2 myths: Myth 1: Women do not wish to take international assignments. Myth 2: Women will fail because of the foreign culture’s prejudices against local women. Don’t assume that people from foreign cultures apply the same gender role expectations to foreign workers that they do to local women. Successful women expatriates emphasize nationality, not gender. The issues that arise in cross-cultural interactions depend more on how foreigners react to those of a different nationality.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. What Can Companies Do to Ensure Female Expatriate Success? What firms can do to ensure the success of women: Provide mentors, networking with other women Identify and remove sources of barriers to international assignment. What firms can do to ensure the success of women: Provide mentors, networking with other women Identify and remove sources of barriers to international assignment.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Multinational Strategy and IHRM Multinational companies have several options for developing the appropriate IHRM policies for the implementation of their multinational strategies. IHRM Orientation : A company’s basic tactics and philosophy for coordinating IHRM activities for managerial and technical workers. Ethnocentric : All aspects of HRM tend to follow the parent organization’s home country HRM practices. Regiocentric & Polycentric : HRM is more responsive to the host country differences in HRM practices. Global : The firm assigns its best managers to international assignments, recruiting worldwide. Multinational companies have several options for developing the appropriate IHRM policies for the implementation of their multinational strategies. IHRM Orientation : A company’s basic tactics and philosophy for coordinating IHRM activities for managerial and technical workers. Ethnocentric : All aspects of HRM tend to follow the parent organization’s home country HRM practices. Regiocentric & Polycentric : HRM is more responsive to the host country differences in HRM practices. Global : The firm assigns its best managers to international assignments, recruiting worldwide.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Ethnocentric IHRM: Benefits and Costs Benefits: Little need to recruit qualified host country nationals for higher management Greater control and loyalty of home country nationals Little need to train home country nationals Key decisions centralized Costs: May limit career development for host country nationals Host country nationals may never identify with the home company Expatriate managers are often poorly trained for international assignments and make mistakes Benefits: Little need to recruit qualified host country nationals for higher management Greater control and loyalty of home country nationals Little need to train home country nationals Key decisions centralized Costs: May limit career development for host country nationals Host country nationals may never identify with the home company Expatriate managers are often poorly trained for international assignments and make mistakes

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Regiocentric & Polycentric IHRM: Benefits and Costs Benefits: Reduces training expenses Fewer language and adjustment issues Lessened hiring and relocation costs Costs: Coordination problems with headquarters based on cultural, language, and loyalty differences Limited career-path opportunities for host country and regional managers Limited international experiences for home country managers Benefits: Reduces training expenses Fewer language and adjustment issues Lessened hiring and relocation costs Costs: Coordination problems with headquarters based on cultural, language, and loyalty differences Limited career-path opportunities for host country and regional managers Limited international experiences for home country managers

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Global IHRM Benefits & Costs Benefits Bigger talent pool High international expertise Development of transnational organizational cultures Costs Difficulty in importing managerial and technical employees Added expense Benefits Bigger talent pool High international expertise Development of transnational organizational cultures Costs Difficulty in importing managerial and technical employees Added expense