chapter 4 Global Human Resource Management

Integration of the world’s economies and the globalization of business continue unabated at the beginning of the 21st century.

Indicators of Globalization International trade is growing at a more rapid rate than world output Foreign direct investment (FDI) flows have set record levels in recent years Cross-border inter-firm agreements have risen dramatically during the last 20 years Social, economic, and political developments throughout the world have changed the way global business is conducted

The People Factor Firms need to strengthen their presence, involvement, and relative positions in the domestic and global marketplace This can be done by utilizing their global human resources in a manner that helps them establish and sustain competitive advantage

Global Human Resource Management (GHRM) Refers to the policies and practices related to managing people in an internationally oriented organization Includes the same functions as domestic HRM There are many unique aspects to human resource management in the international organization

Major HRM Problems for the International Corporation (1 of 2) Selecting and training local managers Companywide loyalty and motivation Speaking local language and understanding local culture Appraising managers’ overseas performance Planning systematic management succession Hiring local sales personnel

Major HRM Problems for the International Corporation (2 of 2) Compensating local foreign managers Hiring and training foreign technical employees Selecting and training American managers for overseas Dealing with foreign unions and labor laws Promoting or transferring foreign managers Compensating American managers for an overseas assignment

Comparison of Hourly Compensation Costs of Manufacturing (in U. S Comparison of Hourly Compensation Costs of Manufacturing (in U.S. dollars)

The Cultural Nature of Global HRM The cultural differences between nations influence the effectiveness of HRM policies and practices Of critical importance: understanding these differences ensuring that HRM and the cultural orientation of workers are congruent with one another

Hofstede’s Dimensions of Culture Avoidance of Uncertainty Masculinity Long-term versus Short-term Orientation Individualism Collectivism Power Distance 9

The Concept of “Fit” in Global HRM Internal Fit Concerned with making sure that HRM policies facilitate the work values and motivations of employees Policies must be structured in ways that allow headquarters and foreign subsidiaries to interact efficiently External Fit The degree to which HRM matches the context in which the organization is operating The organization must understand the cultural and socioeconomic environment of the foreign subsidiary

HRM Focus for Multinational and Global Corporations HRM Philosophy Corporate Structure Critical HRM Focus Expatriate Adjustment Ethnocentric Multinational The International Decision Selection & Training Appraisal & Compensation Repatriation Utilizing Global Managerial Talent Geocentric Global Local Recruiting Methods Managing Cultural Diversity

Sources of Employees for International Assignment: (1 of 2) Host Country Nationals (HCNs) employees from the local population referred to as local nationals Parent Country Nationals (PCNs) employees sent from the country in which the organization is headquartered referred to as expatriates

Sources of Employees for International Assignment: (2 of 2) Third Country Nationals (TCNs) employees from a country other than where the parent organization’s headquarters or operations are located

Major reasons for the high failure rates of American expatriates: Selection processes that focus too much on technical skills and too little on cultural factors Lack of systematic training for the overseas assignment Too little involvement of family members in the selection process Lack of clear expectations about the role of the overseas assignment in the manager’s career plans

Selecting the Expatriate Manager Technical competency is necessary but not sufficient for the manager’s success Expatriate manager selection should focus on three other major categories of skills: 1. Manager’s self-image 2. Manager’s normal way of interacting with others 3. Manager’s perceptual orientation

Characteristics of the Expatriate Manager: High Probability for Success Strong analytical skills Good language skills Strong desire to work overseas Specific knowledge of overseas culture Well-adjusted family situation Complete support of spouse Behavioral flexibility Adaptability and open-mindedness Good relational ability Good stress management skills Low Probability for Success Uncertain technical competency Weak language skills Unsure about going overseas Family problems Low spouse support Behavioral rigidity Unadaptability – closed to new ideas Poor relational ability Weak stress management skills

Culture Shock and the Expatriate Manager Culture Shock – the frustration and confusion that result from being constantly subjected to strange and unfamiliar cues about what to do and how to get it done Does not typically occur during the earliest days of an overseas assignment

Training the Expatriate Manager Overseas Assignment Predeparture Repatriation Language skills Nation & culture orientation Personal & family orientation Career planning Language skills Local mentoring Stress training Business issues Financial management Reentry shock Career management

Compensating the Expatriate Manager Maintaining an expatriate manager on an overseas assignment is very expensive Base salary Foreign service premiums Cost-of-living premium Home maintenance allowance Transportation differential allowances Educational allowances Hardship premiums for hazardous assignments

Sample Costs of a Short-Term Expatriate in London Monthly Expenses Accompanied (2-bedroom, 2 adults) Unaccompanied (1-bedroom, 1 adult) Housing US $3,718 US $2,091 Food 1,524 791 Car Rental and Fuel 1,986 Miscellaneous 343 216 Total monthly living expenses $7,571 $5,084 Total annual living expenses $90,852 $61,008

Host Country Nationals and the Global Corporation Managers who are host country nationals have distinct advantages over expatriates cultural sensitivity understanding of local employees’ motivations and needs Careful recruitment, selection, and training of HCNs can reduce or eliminate the potential problems with using HCNs

The Legal and Ethical Climate of Global HRM Business practices that are considered unethical or illegal in the U.S. might be considered part of the national conduct of business in other countries Foreign Corrupt Practices Act of 1977 (FCPA) Employment discrimination

The Sullivan Principles to Promote Racial Equality in International Employment (1 of 2) Nonsegregation of the races in all work facilities Equal and fair employment practices for all employees Equal pay for all employees performing equal work

The Sullivan Principles to Promote Racial Equality in International Employment (2 of 2) Training programs to prepare (in substantial numbers) Blacks and other nonwhites for supervisory and technical jobs Increasing the number of Blacks and other nonwhite minorities in management Improving the quality of employees’ lives outside the work environment

Labor Relations and the International Corporation Labor laws and relations are unique and vary across every nation in which an organization wishes to do business Differences in how much participation employees are entitled to Government regulation of business Establishment of global organizations to represent labor

Summary Global human resource management is an important component of an organization’s success in a global marketplace Organizations must be sure that their HRM policies can accommodate a culturally diverse workforce