International Management

Human Resource Selection and Development across Cultures Chapter 14 Human Resource Selection and Development across Cultures

Learning Objectives Identify the three basic sources that MNCs can tap when filling management vacancies in overseas operations in addition to options of subcontracting and outsourcing Describe the selection criteria and procedures used by organizations and individual managers when making final decisions

Learning Objectives (continued 1) Discuss the reasons why people return from overseas assignments, and present some of the strategies used to ensure a smooth transition back into the home-market operation Describe the training process, the most common reasons for training, and the types of training that often are provided

Learning Objectives (continued 2) Explain how cultural assimilators work and why they are so highly regarded

Challenge of Talent Retention in India MNCs mistakenly use the same methods to try to retain employees in India as in the home country Key to high retention - Employee engagement HR practices to keep employees engaged Performance management Professional development Manager support Organizational commitment to a larger social purpose

Importance of International Human Resources Human resource management is key to an efficient and productive workplace Understanding how employees feel they are being treated is important Retention and commitment to the organization is achieved by focusing on employees and tailoring human resource management to the individual

Importance of International Human Resources (continued) Success of firms depends on attracting the most qualified employees and matching them to the jobs for which they are best suited Sending employees overseas can be expensive Investment in recruiting and training is required Nature of the human resources process is changing as a result of ongoing pressures for reduced costs and increased efficiencies

Sources for Human Resources Home-country nationals Host-country nationals Third-country nationals Inpatriates Other potential sources Subcontracting Offshore outsourcing

Home-Country Nationals Managers who are citizens of the country where the MNC is headquartered Called headquarters nationals or expatriates Reasons to use home-country nationals Start up operations Provide technical expertise Develop promising managers Facilitate coordination and control

Host-Country Nationals Local managers hired by the MNC Reasons to use host-country nationals Countries expect the MNC to hire local talent Cut cost of transferring and maintaining home-country personnel

Third-Country Nationals (TCNs) Managers who are citizens of countries other than the country in which: MNC is headquartered Managers are assigned to work by the MNC Advantages of using TCNs Salary and benefit package is less than that of a home-country national Good working knowledge of the region or familiarity with the local language

Third-Country Nationals (TCNs) (continued) Achieve corporate objectives is more effective than with expatriates or local nationals Substitute for expatriates and offer new perspectives to viewpoints of local nationals and headquarters personnel during rapid expansion Possible to demonstrate a global or transnational image and bring unique cross-cultural skills to the relationship in joint ventures

Inpatriates Individuals from a host country or third country who are assigned to work in the home country Called inpats Help MNCs develop their global core competencies Global managers or transnational managers are now emerging

Offshore Outsourcing Presents significant opportunities for cost savings, lower overhead, and access to qualified personnel Politically controversial - Union groups, politicians, and NGOs have challenged MNCs’ right to engage in labor arbitrage Can create quality control problems Tool for managing and deploying international human resources

Selection Criteria for International Assignments General criteria Adaptability to cultural change Physical and emotional health Age, experience, and education Language training Motivation for a foreign assignment Spouse and family adaptability Leadership ability

Expat Assignments Objective - To fill a managerial or technical gap Employee benefits - Faster promotions, higher pay, stronger performance ratings, and more mobility within the company Rejected due to family and spouse's career concerns Extremely expensive and return on investment is difficult to quantify

International Human Resource Selection Procedures Tests and interviews Adjustment model Anticipatory adjustments - Carried out before the expat leaves for the assignment In-country adjustments - Takes place once the expatriate is on site

Factors Influencing Anticipatory and In-Country Adjustments Anticipatory adjustments Pre-departure training Previous experience the expat may have had with the assigned country In-country adjustments Ability to maintain a positive outlook The job itself Organizational culture and how easily the expat can adjust to it Nonwork matters Ability to develop effective socialization tactics

Compensation Base salary - Amount of money that an expatriate receives in the home country Benefits - One-third of compensation for regular employees Allowances - Expensive feature that covers a variety of expenses Cost-of-living, relocation, housing, education, and hardship allowances

Compensation (continued) Incentives - Ongoing premiums are replaced with a one-time, lump-sum premium Tax equalization - Any taxes that exceed what would have been imposed in the home country are paid by the MNC

Approaches to Tailor the Compensation Package Balance-sheet approach: Ensures the expat does not lose money by taking the assignment Negotiation approach - Involves working out a special, ad hoc arrangement that is acceptable to both the company and the expat Localization: Pays the expat a salary comparable to that of local nationals

Approaches to Tailor the Compensation Package (continued) Lump-sum method: Gives expats a predetermined amount of money and lets them decide how to spend it Cafeteria approach: Gives expats a series of options and lets them decide how to spend the available funds Regional system: Sets a compensation system for all expats who are assigned to a particular region

Individual and Host-Country Viewpoints Candidate motivations Greater demand for their talents abroad than at home Individual achievement and advancement Security and good working conditions Earning and fringe benefits Host-country desires Preference for a managerial style similar to that of their own country

Repatriation Return to one’s home country from an overseas assignment Reasons for returning Agreed-on tour of duty is over Family concerns Difficulty faced by spouses in acclimating to a new culture Desire to educate children in a home-country school Company restructuring

Repatriation: Readjustment Problems Demotion of permanent position Lack of opportunities to put foreign experience to work Lack of communication about what would happen after return Loss of salary and fringe benefits Difficulty in adjusting to lower standard of living Absence of cultural lifestyles Less significance on international experiences

Transition Strategies Help smooth the adjustment from an overseas to a stateside assignment Repatriation agreements: Firm: Agrees with the individual the duration of overseas posting Promises to give the individual, on return, a job that is mutually acceptable Some firms rent or maintain expatriates’ homes until they return

Transition Strategies (continued 1) Arranging an event to welcome and recognize the employee and family Establishing support to facilitate family reintegration Offering repatriation counseling or workshops to ease the adjustment Assisting the spouse with job counseling, résumé writing, and interviewing techniques

Transition Strategies (continued 2) Providing educational counseling for the children Providing the employee with a thorough debriefing by a facilitator Offering international outplacement to the employee and reentry counseling Arranging a postassignment interview with the expatriate and spouse

Training in International Management Helps ensure that employees' full potential is tapped in overseas assignments Aids in understanding the customs, cultures, and work habits of the local culture Simplest training - Placing a cultural integrator in each foreign operation Topics in cultural training - Social and business etiquette, customs, economics, history, and politics

Philosophies That Influence Training Programs Ethnocentric MNC Stresses nationalism and puts home-office people in charge of key international management positions Polycentric MNC Places local nationals in key positions and allows these managers to appoint and develop their own people

Philosophies That Influence Training Programs (continued) Regiocentric MNC Relies on local managers from a particular geographic region to handle operations in and around that area Geocentric MNC Seeks to integrate diverse regions of the world through a global approach to decision making

Reasons for Training Organizational reasons Help overcome ethnocentrism Ethnocentrism: Belief that one’s way of doing things is superior to that of others Improve the flow of communication Increase overall efficiency and profitability

Reasons for Training (continued) Personal reasons Improve overseas managers' ability to interact effectively with local people and their personnel Develop foreign language skills Deal with arrogance, overruling of decisions, and criticism Improve overall management style

Types of Training Programs Small firms rely on standard training programs Example - Quantitative analysis Tailor-made training programs Employed by larger firms Created for the specific needs of the participants Designed to provide a new set of skills for a new culture

Cultural Assimilators Expose members of one culture to some of the concepts, attitudes, role perceptions, customs, and values of another culture Include critical incidents and alternative responses that are validated for their effectiveness Expensive but can be applied to nearly all cultures

Positive Organizational Behavior (POB) Study and application of positively oriented human resource strengths and psychological capacities Can be measured, developed, and effectively managed for performance improvement in today’s workplace

Positive Organizational Behavior (POB) (continued) Positivity in workplace has been linked to employee satisfaction Positive individual traits, internal and external states, and systems promote positive behavior Results in positive organizational citizenship behavior (OCB)

Future Trends Localization of expatriates Integration of talent management and international assignment mobility Emergence of cross-border commuters Employees who regularly move back and forth between countries Rise and growth of emerging markets

Be the Management Consultant Given the Russian government’s history of interfering with private business, would you make as large an investment in Russia as BP has done? What are the pros and cons of this investment? Does the fact that BP’s investment is suffering from Ukraine-related sanctions affect your decision to invest in the country in any sense?

Review and Discuss A New York-based MNC is in the process of staffing a subsidiary in New Delhi, India Why would it consider using expatriate managers, local managers, or third-country managers in the unit?

Review and Discuss (continued 1) What selection criteria are most important in choosing people for an overseas assignment? Identify and describe the four that you judge to be of most universal importance, and defend your choice What are the major common elements in an expat’s compensation package? Besides base pay, which would be most important to you? Why?

Review and Discuss (continued 2) Why are individuals motivated to accept international assignments? Which of these motivations would you rank as positive reasons? Which would you regard as negative reasons? Why do expatriates return early? What can MNCs do to prevent this from happening? Identify and discuss three steps they can take

Review and Discuss (continued 3) What kinds of problems do expatriates face when returning home? Identify and describe four of the most important What can MNCs do to deal with these repatriation problems effectively?

Review and Discuss (continued 4) How do the following types of MNCs differ: ethnocentric, polycentric, regiocentric, and geocentric? Which type is most likely to provide international management training to its people? Which is least likely to provide international management training to its people?

Review and Discuss (continued 5) IBM is planning on sending three managers to its Zurich office, two to Madrid, and two to Tokyo, and none of these individuals has any international experience Would you expect the company to use a standard training program or a tailor-made program for each group?

Review and Discuss (continued 6) Zygen Inc., a medium-sized manufacturing firm, is planning to enter into a joint venture in China Would training be of any value to those managers who will be part of this venture? If so, what types of training would you recommend?

Review and Discuss (continued 7) Hofstadt & Hoerr, a German-based insurance firm, is planning on expanding out of the EU and opening offices in Chicago and Buenos Aires How would a cultural assimilator be of value in training the MNC's expatriates? Is the assimilator a valid training tool?

Review and Discuss (continued 8) Ford is in the process of training managers for overseas assignments Would a global leadership program be a useful approach? Why or why not?

Review and Discuss (continued 9) Microsoft is weighing setting up a new R&D facility in India to develop new software applications Should it staff it with Microsoft employees or Indian employees? Or should it subcontract with an Indian firm? Explain your answer and some of the potential challenges in implementing it