INTERNATIONAL HRM

International HRM Differences Greater Number of Services Special Services to Unique Group Compensation Complexity Foreign Exchange Rate Attention Language and Cultural Differences

Increasing Importance of Global Human Resources Understanding International Mergers and Acquisitions Importance of Global Human Resources Management Foreign Human Resources Global Competition Market Access Opportunities

Composition of the Cultural Environment of International Business Language spoken written language official language linguistic pluralism language hierarchy international languages mass media Religion sacred objects philosophical systems beliefs & norms prayer taboos holidays rituals Technology and Material Culture transportation energy systems tools & objects communications urbanization science invention Values and Attitudes Toward: time achievement work wealth change scientific method risk-taking Law common law code law foreign law home country law antitrust policy international law regulation Education formal education vocational training primary education secondary education higher education literacy level human resources planning Politics nationalism sovereignty imperialism power national interests ideologies political risk Social Organization kinship social institutions authority structures interest groups social mobility social stratification status systems

Key Issues in International HRM Worldwide Human Resources Planning Recruiting and Selection Expatriate orientation and training Repatriation Performance appraisal Compensation Dealing with inflation and unexpected changes in exchange rates Providing sufficient pay to keep individuals Should company pay hardship allowance? Dissatisfaction with cost of living allowances Housing (Complex problems at home and overseas)

Key Issues in International HRM Benefits Planning Developing equity among employees Several plans necessary for different categories of personnel Taxation (Proliferation of new laws) Communication of HR Policies and Programs Worldwide Treat communication as a continuous process Face-to-Face contact frequently Make policy manuals brief and simple Be sensitive to needs of receiver Send regular written explanations of policy changes Periodic rotation of overseas HR managers desirable Security

Global Manufacturing

International Corporation Domestic firm that uses its existing capabilities to move into overseas markets.

Multinational Corporation (MNC) Firm which independent business units operating in multiple countries.

Global Corporation Firm that had 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 Efficiency High Global Views the world as a single market; operations are controlled centrally from the corporate office. Transnational Specialized facilities permit local responsiveness; complex coordination mechanisms provide global integration. Low International Uses existing capabilities to expand into foreign markets. Multinational Several subsidiaries operating as stand-alone business units in multiple countries. Local Responsiveness

The Multi-National Corporation (MNC) Home Country Employment External Country Employment

Managing in a Foreign Environment Attitudes Vary Motivational Tools are Distinctly Different

Cultural Environment of International Business

Clustering Nations Approach Geography Languages Religion Job Attitudes Work Goals Values Needs

Managerial Values Role of Competition Role of Blame Role of Shame Role of Participation: Japan (hi) Role of Autocratic: Europe (hi) and South America (hi)

Sources of Managerial Talent Home Country Nationals (Expatriates) Host Country Nationals (Natives) Third Country Nationals (Non-Home/Host)

Advantages of Different Sources for Overseas Managers Host Country Home Country Third Country Less cost Preference of host country government Knowledge of environment Language facility Talent available within company Greater control Company experience Mobility Experience provided to corporate executives Broad experience International outlook Multi-lingualism

SOME OF THE LARGEST U.S. MULTINATIONALS AT&T General Electric Microsoft Cisco General Motors Procter and Gamble Citicorp. Hewlett-Packard RJR Nabisco Coca-Cola IBM Texaco DuPont Intel United Technologies Exxon/Mobil Oil J.P. Morgan Wal-mart Ford Motor Johnson & Johnson Xerox Motorola

6 Major Reasons for American Expatriate Failures in Foreign Environment Inability of the manager’s spouse to adjust to a different cultural environment. The manager’s inability to adapt to a different physical or cultural environment. Other family-related problems. The manager’s personality or emotional immaturity. The manager’s inability to cope with the responsibilities posed by the overseas work. The manager’s lack of technical competence. The manager’s lack of motivation to work overseas.

Selection Methods Interviews (executives and psychologists) Assessment Centers (exercises) Tests (language and special tests) Role of Family

Flowchart of the Selection-Decision Process Start the Selection Process Can the position be filled by a local national? Select local national and subject him/her to training basically aimed at improving technical and managerial skills. YES NO Identify degree of interaction required with local community – using a 7- or 9- point scale, ranging from low to high, indicate the degree of interaction with local community required for successful performance on the job. Emphasis* on tasks variables. Second but by no means unimportant question is to ask whether the individual is willing to serve abroad. LOW HIGH YES NO Is candidate willing? Probably not suitable for position YES Identify degree of similarity / dissimilarity between cultures – using a 7- or 9-point scale, ranging from similar to highly diverse, indicate the magnitude of differences between the two cultures, NO Probably not suitable for position VERY SIMILAR Start orientation (moderate to high rigor) Emphasis* on task variables HIGHLY DIVERSE Emphasis* on “relational abilities” factor. “Family situation” factor must also be taken into consideration. Start orientation (moderate to high rigor) Start orientation (most rigorous)

Preparing for an International Assignment Study the following subjects: Social and business etiquette. History and folklore. Current affairs, including relations between the country and the United States. The culture’s values and priorities. Geography, especially the cities. Sources of pride: artists, musicians, novelists, sports, great achievements of the culture, including things to see and do. Religion and the role of religion in daily life. Political structure and current players. Practical matters such as currency, transportation, time zones, hours of business. The language.

Cultural Shock "A Disorientation that Causes Perpetual Stress" Disorienting Incidents Impossible Communication Telephone Difficulties Family Frustrations

Special Considerations Career Development Risks Reentry Problems Managing Family Life Terrorism

Recruitment Government Regulations Work Permits Universally Required Recruitment of Locals Varies Guest Workers Role of Church, Family, Politics

Selection Merit Versus Best Family Family Ties Social Standing Origin Industrialized versus Less Developed

Training Issues Local Resources Less Technical Capabilities Apprenticeship Strengths in Europe Management Development (US Leader) Language (English Need)

Compensation Host Country Employees Managers Production Standard or Time or Combination Benefits (often higher than U.S.) Profit Sharing (may be Required) Managers Narrowing of Salary Gap with USA

Expatriate Compensation Base Pay Differentials Incentives Company Assistance Cost: 3-4 times USA Rate

Compensation of Expatriate Managers To be effective, a compensation program must: Provide an incentive to leave the united states. Maintain an American standard of living. Facilitate reentry into the united states. Provide for the education of children. Maintain relationships with family, friends, and business associates.

Compensation Elements of an Expatriate Programs used by most U.S. Based MNCs have four elements: Base pay – equal to pay of domestic counterparts in comparably evaluated jobs. Differentials – to offset the higher costs of overseas goods, services, and housing. Incentives – to compensate the person for separation from family, friends, and domestic support systems. Company assistance programs – to cover added costs such as moving and storage costs, automobile, and education expenses.

The Price of an Expatriate Note: Additional costs often incurred aren’t listed above, including language and cross-cultural training for employee and family, and costs of selling home and cars in the U.S. before moving. *Figures take into account payments by employee to company based on hypothetical U.S. income tax and housing costs. *It is not unusual to triple costs compared to USA earnings. An employer’s typical first-year expenses of sending a U.S. executive abroad. Direct Compensation Costs Base Salary 100% Foreign-service premium 15% Goods and services differential 20% Housing costs 20-40% Transfer Costs Relocation allowance 5% Air fare 2% Moving household goods 25% Other Costs Company Car Schooling (two children) Annual home leave (four people) Personal income tax abroad 50% Total = Salary plus 187-207%