Chapter Copyright© 2007 Thomson Learning All rights reserved 11 International Human Resource Management
Copyright© 2007 South-Western/Thomson Learning All rights reserved Learning Objectives Know the basic functions of human resource management Define international human resource management Understand the difference between international and domestic human resource management Know the types of workers used by multinationals Know the basic functions of human resource management Define international human resource management Understand the difference between international and domestic human resource management Know the types of workers used by multinationals
Copyright© 2007 South-Western/Thomson Learning All rights reserved Learning Objectives Know how and when to use expatriate managers Know the skills necessary for a successful expatriate assignment Understand how expatriate managers are compensated and evaluated Appreciate the issues regarding expatriate assignments of women managers Know how and when to use expatriate managers Know the skills necessary for a successful expatriate assignment Understand how expatriate managers are compensated and evaluated Appreciate the issues regarding expatriate assignments of women managers
Copyright© 2007 South-Western/Thomson Learning All rights reserved Learning Objectives Know what to do to make the expatriate assignment easier for their female expatriates Understand e.HR systems and how they can be useful in IHRM Understand the relationship between choice of a multinational strategy and international human resource management Know what to do to make the expatriate assignment easier for their female expatriates Understand e.HR systems and how they can be useful in IHRM Understand the relationship between choice of a multinational strategy and international human resource management
Copyright© 2007 South-Western/Thomson Learning All rights reserved Human Resource Management and Functions Human resource management (HRM): deals with the entire relationship of the employee with the organization Recruitment: process of identifying and attracting qualified people to apply for vacant positions Selection: process of filling vacant positions in the organization Human resource management (HRM): deals with the entire relationship of the employee with the organization Recruitment: process of identifying and attracting qualified people to apply for vacant positions Selection: process of filling vacant positions in the organization
Copyright© 2007 South-Western/Thomson Learning All rights reserved Basic HRM Functions Training and development: giving employees the knowledge, skills, and abilities to perform successfully Performance appraisal: system to measure and assess employees’ work performance Training and development: giving employees the knowledge, skills, and abilities to perform successfully Performance appraisal: system to measure and assess employees’ work performance
Copyright© 2007 South-Western/Thomson Learning All rights reserved Basic HRM Functions Compensation: organization’s entire reward package, including financial rewards, benefits, and job security Labor relations: ongoing relationship between an employer and those employees represented by labor organizations Compensation: organization’s entire reward package, including financial rewards, benefits, and job security Labor relations: ongoing relationship between an employer and those employees represented by labor organizations
Copyright© 2007 South-Western/Thomson Learning All rights reserved International Human Resource Management (IHRM) All HRM functions, adapted to the international setting Two added complexities compared to domestic HRM - Must choose a mixture of international employees - Must decide the extent of adaptation to local conditions All HRM functions, adapted to the international setting Two added complexities compared to domestic HRM - Must choose a mixture of international employees - Must decide the extent of adaptation to local conditions
Copyright© 2007 South-Western/Thomson Learning All rights reserved Types of Employees in Multinational Organizations Expatriate: employee from a different country Home country nationals: expatriate employees from the parent firm’s home country Third country nationals: expatriate workers who come from neither the host nor home country Expatriate: employee from a different country Home country nationals: expatriate employees from the parent firm’s home country Third country nationals: expatriate workers who come from neither the host nor home country
Copyright© 2007 South-Western/Thomson Learning All rights reserved Types of Employees in Multinational Organizations Host country nationals: local workers who come from the host country where the unit is located 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 Host country nationals: local workers who come from the host country where the unit is located 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
Copyright© 2007 South-Western/Thomson Learning All rights reserved The Expatriate or the Host Country Manager Multinationals must decide whether to use expatriates or home country nationals Need to look at some questions - Given the firm’s strategy, what is the preference for the position? Multinationals must decide whether to use expatriates or home country nationals Need to look at some questions - Given the firm’s strategy, what is the preference for the position?
Copyright© 2007 South-Western/Thomson Learning All rights reserved The Expatriate or the Host Country Manager Using expatriate managers - Do parent country managers have the appropriate skills? - Are they willing to take expatriate assignments? - Do any laws affect the assignment of expatriate managers? Using host country managers - Do they have the expertise for the position? - Can we recruit them from outside the company? Using expatriate managers - Do parent country managers have the appropriate skills? - Are they willing to take expatriate assignments? - Do any laws affect the assignment of expatriate managers? Using host country managers - Do they have the expertise for the position? - Can we recruit them from outside the company?
Copyright© 2007 South-Western/Thomson Learning All rights reserved Is the Expatriate Worth It? Decisions must take into account costs of such assignments - High cost - High failure rate Decisions must take into account costs of such assignments - High cost - High failure rate
Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 11.1: Paying for the Expatriate Manager: Indices of Cost of Living Abroad
Copyright© 2007 South-Western/Thomson Learning All rights reserved Reasons for U.S. Expatriate Failure Individual - Personality of the manager - Lack of technical proficiency - No motivation for assignment Family - Spouse or family members fail to adapt - Family members or spouse do not want to be there Individual - Personality of the manager - Lack of technical proficiency - No motivation for assignment Family - Spouse or family members fail to adapt - Family members or spouse do not want to be there
Copyright© 2007 South-Western/Thomson Learning All rights reserved Reasons for U.S. Expatriate Failure (cont.) Cultural - Manager fails to adapt - Manager fails to develop relationship with key people Cultural - Manager fails to adapt - Manager fails to develop relationship with key people
Copyright© 2007 South-Western/Thomson Learning All rights reserved Reasons for U.S. Expatriates Failure (cont.) Organizational -Excessively difficult responsibilities -Failure to provide cultural training - Company fails to pick the right person -Company fails to provide the technical support -Excess of difficult responsibilities of international assignment -Failure of company to consider gender equity Organizational -Excessively difficult responsibilities -Failure to provide cultural training - Company fails to pick the right person -Company fails to provide the technical support -Excess of difficult responsibilities of international assignment -Failure of company to consider gender equity
Copyright© 2007 South-Western/Thomson Learning All rights reserved Strategic Role of Expatriate Assignments Helps managers acquire international skills Helps coordinate and control operations dispersed activities Communication of local needs/strategic information to headquarters In-depth knowledge of local markets Provide important network knowledge Helps managers acquire international skills Helps coordinate and control operations dispersed activities Communication of local needs/strategic information to headquarters In-depth knowledge of local markets Provide important network knowledge
Copyright© 2007 South-Western/Thomson Learning All rights reserved International Cadre International cadre (or Globals): Separate group of expatriate managers who specialize in a career of international assignments - Have permanent international assignments - Move from international assignments to international assignments - Recruited from any country - Sent to worldwide locations to develop cross-cultural skills International cadre (or Globals): Separate group of expatriate managers who specialize in a career of international assignments - Have permanent international assignments - Move from international assignments to international assignments - Recruited from any country - Sent to worldwide locations to develop cross-cultural skills
Copyright© 2007 South-Western/Thomson Learning All rights reserved Flexpatriates The frequent flyers who travel on short notice for shorter time durations while maintaining their family and personal lives at the home-country location Key functions - Sent to explore markets - Consider problem areas in the foreign subsidiary - Manage projects - Help with transfer of technology The frequent flyers who travel on short notice for shorter time durations while maintaining their family and personal lives at the home-country location Key functions - Sent to explore markets - Consider problem areas in the foreign subsidiary - Manage projects - Help with transfer of technology
Copyright© 2007 South-Western/Thomson Learning All rights reserved Flexpatriates Advantages - Do not experience many of the family and personal difficulties and stress associated with expatriate assignments - Much less expensive than expatriate – no relocation or repatriation costs Advantages - Do not experience many of the family and personal difficulties and stress associated with expatriate assignments - Much less expensive than expatriate – no relocation or repatriation costs
Copyright© 2007 South-Western/Thomson Learning All rights reserved Flexpatriate Disadvantages - Taxation issues can become complicated if the assignment exceeds six months – he company may end up paying the tax - Does not fully integrate into the local work environment and does not learn low to adapt locally - May be resented for neglecting the host-country culture Disadvantages - Taxation issues can become complicated if the assignment exceeds six months – he company may end up paying the tax - Does not fully integrate into the local work environment and does not learn low to adapt locally - May be resented for neglecting the host-country culture
Copyright© 2007 South-Western/Thomson Learning All rights reserved Key Success Factors for Expatriate Assignments Technical and managerial skills Personality traits Relational abilities Family situation International motivation Stress tolerance Language ability Emotional intelligence Technical and managerial skills Personality traits Relational abilities Family situation International motivation Stress tolerance Language ability Emotional intelligence
Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 11.2: Expatriate Success Factors and Selection Methods
Copyright© 2007 South-Western/Thomson Learning All rights reserved Priority of Success Factors Assignment length - Technical and professionals skills are key for short assignments Cultural similarity Required interaction with local people Job complexity and responsibility Assignment length - Technical and professionals skills are key for short assignments Cultural similarity Required interaction with local people Job complexity and responsibility
Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 11.3: Selecting Expatriates: Priorities for Success Factors by Assignment Characteristics
Copyright© 2007 South-Western/Thomson Learning All rights reserved Training and Development Cross-cultural training: increases the relational abilities of future expatriates and their spouses and families Training rigor: extent of effort by both trainees and trainers required to prepare the trainees for expatriate positions Cross-cultural training: increases the relational abilities of future expatriates and their spouses and families Training rigor: extent of effort by both trainees and trainers required to prepare the trainees for expatriate positions
Copyright© 2007 South-Western/Thomson Learning All rights reserved Training and Development (cont.) Low rigor training - Short time period - Lectures and videos on local cultures - Briefings on company operations High rigor training - Last over a month - Experiential learning - Extensive language training - Includes interactions with host country nationals Low rigor training - Short time period - Lectures and videos on local cultures - Briefings on company operations High rigor training - Last over a month - Experiential learning - Extensive language training - Includes interactions with host country nationals
Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 11.4: Training Rigor: Techniques and Objectives
Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 11.5: How the Rigor of Training Relates to the Basic Expatriate Assignment Conditions
Copyright© 2007 South-Western/Thomson Learning All rights reserved Expatriate Performance Appraisal Conducting reliable performance appraisal for the expatriate is very challenging Challenges Fit of international operation in multinational strategy Unreliable date Complex and volatile environments Time difference and distance separation Local cultural situation Conducting reliable performance appraisal for the expatriate is very challenging Challenges Fit of international operation in multinational strategy Unreliable date Complex and volatile environments Time difference and distance separation Local cultural situation
Copyright© 2007 South-Western/Thomson Learning All rights reserved Steps to Improve the Expatriate Performance Appraisal 1.Fit the evaluation criteria to strategy 2.Fine-tune the evaluation criteria 3.Use multiple sources of evaluation with varying periods of evaluation 1.Fit the evaluation criteria to strategy 2.Fine-tune the evaluation criteria 3.Use multiple sources of evaluation with varying periods of evaluation
Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 11.6: Evaluation Sources, Criteria, and Time Periods for Expatriate Performance Appraisals
Copyright© 2007 South-Western/Thomson Learning All rights reserved Expatriate Compensation Compensation packages tend to include many common factors includes: - Local market cost of living - Housing - Taxes - Benefits Compensation packages tend to include many common factors includes: - Local market cost of living - Housing - Taxes - Benefits
Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 11.7: Average Rent of Two- Bedroom, Unfurnished Apartments in Selected European Cities
Copyright© 2007 South-Western/Thomson Learning All rights reserved The Balance-Sheet Approach Provides a compensation package that equates purchasing power Allowances for cost of living, housing, food, recreation, personal care, clothing, education, home furnishing, transportation, and medical care Provides a compensation package that equates purchasing power Allowances for cost of living, housing, food, recreation, personal care, clothing, education, home furnishing, transportation, and medical care
Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 11.8: Balance Sheet Approach To Expatriate Compensation
Copyright© 2007 South-Western/Thomson Learning All rights reserved Additional Allowances and Perquisites Foreign service premiums Hardship allowance Relocation allowances Home-leave allowances Foreign service premiums Hardship allowance Relocation allowances Home-leave allowances
Copyright© 2007 South-Western/Thomson Learning All rights reserved Expatriate Manager Compensation: Other Approaches Headquarters-based compensation: paying home country wages regardless of location Host-based compensation system: adjusting wages to local lifestyles and costs of living Global pay systems: worldwide job evaluations, performance appraisal methods, and salary scales are used Headquarters-based compensation: paying home country wages regardless of location Host-based compensation system: adjusting wages to local lifestyles and costs of living Global pay systems: worldwide job evaluations, performance appraisal methods, and salary scales are used
Copyright© 2007 South-Western/Thomson Learning All rights reserved Repatriation Problem Difficulties faced coming back home Three basic cultural problems—“reverse culture shocks” - Adapt to new work environment and culture of home - Expatriates must relearn own national and organization culture - Need to adapt to basic living environment Difficulties faced coming back home Three basic cultural problems—“reverse culture shocks” - Adapt to new work environment and culture of home - Expatriates must relearn own national and organization culture - Need to adapt to basic living environment
Copyright© 2007 South-Western/Thomson Learning All rights reserved Strategies for Successful Repatriation 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 Provide a home-leave policy to encourage expatriates to make regular visits to the home office Provide support for the expatriate and family on return 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 Provide a home-leave policy to encourage expatriates to make regular visits to the home office Provide support for the expatriate and family on return
Copyright© 2007 South-Western/Thomson Learning All rights reserved International Assignments for Women: Two Myths Myth 1: Women do not wish to take international assignments. Myth 2: Women will fail in international assignments because of the foreign culture’s prejudices against local women. Successful women expatriates - Foreign not female—emphasize nationality not gender Myth 1: Women do not wish to take international assignments. Myth 2: Women will fail in international assignments because of the foreign culture’s prejudices against local women. Successful women expatriates - Foreign not female—emphasize nationality not gender
Copyright© 2007 South-Western/Thomson Learning All rights reserved International Assignments for Women: Advantages More visible Strong in relational skills Wider range of interaction options More visible Strong in relational skills Wider range of interaction options
Copyright© 2007 South-Western/Thomson Learning All rights reserved International Assignments for Women: Disadvantages Face the glass ceiling - Isolation and loneliness - Constant proving of themselves, working harder than male Need to balance work and family responsibilities Need to worry about accompanying spouse Face the glass ceiling - Isolation and loneliness - Constant proving of themselves, working harder than male Need to balance work and family responsibilities Need to worry about accompanying spouse
Copyright© 2007 South-Western/Thomson Learning All rights reserved More Women in the Future? Women expatriate managers are expected to grow Acute shortage of high-quality managers Increasing number of women provide role models Women expatriate managers are expected to grow Acute shortage of high-quality managers Increasing number of women provide role models
Copyright© 2007 South-Western/Thomson Learning All rights reserved What Can Companies Do To Ensure Female Expatriate Success? Provide mentors Provide opportunities for interpersonal networks as a form of organizational support Remove sources of barriers Provide support to cope with dual-career issues Provide mentors Provide opportunities for interpersonal networks as a form of organizational support Remove sources of barriers Provide support to cope with dual-career issues
Copyright© 2007 South-Western/Thomson Learning All rights reserved Multinationals and Electronic Human Resource Management Electronic human resources (e.HR): automation of various aspects of the human resources system of a company
Copyright© 2007 South-Western/Thomson Learning All rights reserved Strategic Benefits of e.HR Systems Reduce HR and administrative system cost Improve HR services to employees Employees take control of their own data Repository of the wealth of knowledge and skills of expatriates Employee tracking for career management and other HR purposes Reduce HR and administrative system cost Improve HR services to employees Employees take control of their own data Repository of the wealth of knowledge and skills of expatriates Employee tracking for career management and other HR purposes
Copyright© 2007 South-Western/Thomson Learning All rights reserved Proper Steps to e.HR Implementation Develop business case to justify using e.HR or upgrade to e.HR Make the system customer-focused Be proactive Organize collected data in ways that is useful to the organization Develop business case to justify using e.HR or upgrade to e.HR Make the system customer-focused Be proactive Organize collected data in ways that is useful to the organization
Copyright© 2007 South-Western/Thomson Learning All rights reserved Multinational Strategy and IHRM IHRM orientation: company’s basic tactics and philosophy for coordinating IHRM activities for managerial and technical workers
Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 11.9: IHRM Orientation and IHRM Practices for Managers and Technical Workers
Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 11.9: IHRM Orientation and IHRM Practices for Managers and Technical Workers
Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 11.9: IHRM Orientation and IHRM Practices for Managers and Technical Workers
Copyright© 2007 South-Western/Thomson Learning All rights reserved Multinational Strategy and IHRM Ethnocentric IHRM: all aspects of HRM for managers and technical workers tend to follow the parent organization’s home-country HRM practices
Copyright© 2007 South-Western/Thomson Learning All rights reserved Benefits of Ethnocentric IHRM Little need to recruit qualified host country nationals for higher management Greater control and loyalty of home country nationals Key decisions centralized Little need to recruit qualified host country nationals for higher management Greater control and loyalty of home country nationals Key decisions centralized
Copyright© 2007 South-Western/Thomson Learning All rights reserved Costs of Ethnocentric IHRM 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 Expatriates may have limited career development 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 Expatriates may have limited career development
Copyright© 2007 South-Western/Thomson Learning All rights reserved Regiocentric and Polycentric IHRM Regiocentric IHRM: region-wide HRM policies are adopted Polycentric IHRM: firm treats each country-level organization separately for HRM purposes Greater responsiveness to host country differences Regiocentric IHRM: region-wide HRM policies are adopted Polycentric IHRM: firm treats each country-level organization separately for HRM purposes Greater responsiveness to host country differences
Copyright© 2007 South-Western/Thomson Learning All rights reserved Benefits of Polycentric and Regiocentric HRM Policies Reduces costs for training of expatriate managers from headquarters No investment in language training Fewer problems with adjustments to local cultures Less expensive Reduces costs for training of expatriate managers from headquarters No investment in language training Fewer problems with adjustments to local cultures Less expensive
Copyright© 2007 South-Western/Thomson Learning All rights reserved Costs of Polycentric and Regiocentric IHRM Policies Coordination problems with headquarters - based on cultural, language, and loyalty differences Limited career-path opportunities for host country and regional managers Limited international experience for home country managers Coordination problems with headquarters - based on cultural, language, and loyalty differences Limited career-path opportunities for host country and regional managers Limited international experience for home country managers
Copyright© 2007 South-Western/Thomson Learning All rights reserved Global IHRM Orientations Recruiting and selecting worldwide Assigning the best managers to international assignments regardless of nationality Recruiting and selecting worldwide Assigning the best managers to international assignments regardless of nationality
Copyright© 2007 South-Western/Thomson Learning All rights reserved Global IHRM Orientations Benefits - Bigger talent pool - Develops international expertise - Helps build transnational organizational cultures Costs - Importing managerial and technical employees not always possible - Added expense Benefits - Bigger talent pool - Develops international expertise - Helps build transnational organizational cultures Costs - Importing managerial and technical employees not always possible - Added expense
Copyright© 2007 South-Western/Thomson Learning All rights reserved IHRM Orientation and Multinational Strategy Early stages of internationalization—ethnocentric IHRM Multilocal strategies—ethnocentric or regiocentric Regional strategy—regiocentric, polycentric or global Early stages of internationalization—ethnocentric IHRM Multilocal strategies—ethnocentric or regiocentric Regional strategy—regiocentric, polycentric or global
Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 11.10: IHRM Orientations and Multinational Strategies
Copyright© 2007 South-Western/Thomson Learning All rights reserved Conclusion When basic HRM practices are applied to a company’s international operations, they become International HRM Chapter focused on HRM practices as applied to the expatriate employees Expatriates present special challenges for multinationals It is important for multinationals to find ways to properly manage expatriates to benefit from their experiences When basic HRM practices are applied to a company’s international operations, they become International HRM Chapter focused on HRM practices as applied to the expatriate employees Expatriates present special challenges for multinationals It is important for multinationals to find ways to properly manage expatriates to benefit from their experiences