Managing Global Human Resources 17 Managing Global Human Resources This chapter outlines some of the HR problems and issues involved with international businesses. The subjects covered include understanding inter-country differences, using selection to improve international assignments, and training and maintaining international employees. Many companies desire to rotate managers through international assignments. However, work visa requirements of the host countries (including the U.S.) can sometimes greatly hinder these efforts. Federal anti-terrorism laws also make moving employees across borders more challenging. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Learning Objectives List the HR challenges of international business. Illustrate with examples how inter-country differences affect HRM. List and briefly describe the main methods for staffing global organizations. At the conclusion of this chapter, you will be able to: List the HR challenges of international business. Illustrate with examples how inter-country differences affect HRM. List and briefly describe the main methods for staffing global organizations. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Learning Objectives Discuss some important issues to keep in mind in training, appraising, and compensating international employees. Explain with examples how to implement a global human resource management program. You also will be able to: Discuss some important issues to keep in mind in training, appraising, and compensating international employees. Explain with examples how to implement a global human resource management program. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

The HR challenges of international business The global challenges for management include deployment, knowledge, and innovation dissemination. They also include identifying and developing talent on a global basis. Complicating these decisions are the cultural, political, legal, and economic differences among countries and their peoples. This is a role for global HR. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

The Manager’s Global Challenge Marketing and managing abroad Control systems Financial HR Cultural difference Economic systems Legal issues With the globalization of the world economy, even small firms are discovering that success depends on marketing and managing abroad. Management systems to control overseas activities include managerial controls, planning systems, and, of course, HR management systems. The HR components include recruiting, selecting, training, appraising, and compensating workers abroad. Differences in cultures, economic and legal systems also contribute to challenges in managing abroad. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How inter-country differences affect HRM A company operating multiple units abroad does not have the luxury of dealing with a relatively limited set of economic, cultural, and legal variables. We’ll discuss some of the differences in HR management and practices next. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Adapting HR Activities to Inter-Country Differences Countries differ widely in their cultures, which are based on values to which their citizens adhere. Cultural differences from country to country necessitate corresponding differences in management practices among a company’s subsidiaries. Differences in economic systems translate into differences in HR practices. In Europe, for example, variances in HR practices affect minimum European Union wages, working hours, and employee representation. In China, there are relatively scarce employment services, and there is an active union movement. Sporadic labor shortages are fairly widespread. Employers with transnational operations should have set policies on things like discrimination, harassment, bribery, and Sarbanes-Oxley. U.S. law applies to U.S. citizens working overseas but local laws govern locals overseas. It is a good practice for transnational companies to adjust their procedures and practices to the local laws while respecting U.S. laws. Let’s discuss some common HR practices and how they work in various countries. RECRUITING - Because of governmental constraints on migration and other legal constraints, it is relatively difficult to recruit, hire, and retain good employees in China. Their Employment Contract Law requires that employers report the names, sexes, identification numbers, and contract terms for all employees they hire within 30 days of hiring. SELECTION - The dominant employee selection method involves analyzing the applicant’s résumé and then interviewing him or her. APPRAISING - Employee appraisal is particularly sensitive to the cultural realities in China. The appraisal therefore needs to follow the formalities of saving face and avoiding confrontational, tension-producing situations. COMPENSATION - Although many managers endorse performance-based pay in China, many employers, to preserve group harmony, make incentive pay a small part of the pay package Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Review Culture Economics Politics Labor relations The law So far, we have covered several issues that managers and HR must confront when a company goes global. These include marketing, managing control systems, and differences in cultural, economic and legal issues. We also discussed differences in labor relations, culture, and economic, political and legal issues. We primarily used examples from the European Union and China. For example, reporting hiring within 30 days to the local labor bureaus is required in China. The important take away from this section is that an organization must study and understand the culture, economics, politics, and other aspects of a country in order to be successful in international expansion. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

The main methods for staffing global organizations Employers’ focus today is increasingly on managing human resource activities locally. In other words, their main concern is on selecting, training, appraising, and managing the in-country employees where they do business. However, deciding whether to fill local positions with local versus expatriate (“imported”) employees has been and continues to be a major concern. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Staffing the Global Organization International staffing: home or local? Using expats Other solutions Using transnational virtual teams Offshoring Multinational companies (MNCs) employ several types of international managers. Locals are citizens of the countries where they are working. Expatriates (“expats”) are non-citizens of the countries in which they are working. Home-country nationals are citizens of the country in which the multinational company has its headquarters. Third-country nationals are citizens of a country other than the parent or the host country. More flexible expatriate assignments involving no formal relocation such as virtual teams are becoming increasingly popular and are aided by technological advances. Having local employees outside the home country perform jobs that the firm’s domestic employees previously did in-house is known as offshoring. Offshoring can occur, for example, if some of a product is created in the U.S., completed in Mexico (or an overseas firm) and then returned to the U.S. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Staffing the Global Organization Management values and international staffing policy Ethnocentric practices Polycentric practices Geocentric practices Ethnocentric-run firms staff foreign subsidiaries with parent-country nationals. They believe that home country attitudes, management styles, and knowledge are superior to the host country. Polycentric-run firms staff foreign subsidiaries with host-country nationals. They believe they are the only ones that can really understand the culture and the behavior of the host country market. Geocentric-run firms staff foreign subsidiaries with the best people for key jobs regardless of nationality. They believe that the best manager for any specific position anywhere on the globe may be in any of the countries in which the firm operates. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Staffing the Global Organization Selecting expatriate managers Selection testing Legal issues Avoiding early expatriate returns Traits Family pressures What employers can do Selecting expatriate managers is similar to selecting domestic managers, but firms need to determine whether managers for foreign assignments can cope internationally. International assignments fail for various reasons including personality, the person’s intentions, and non-work factors. Family pressures are frequent. Three things help the adjustment: language fluency, having preschool age children rather than school-age or no children, and a strong bond between spouse and ex-pat partner. Employers can help make ex-pat assignments more successful by providing realistic previews, facilitating self-selection, and using traditional selection procedures focusing on traits such as openness. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Review Staffing: home or local? Offshoring Management values Selecting expatriate managers Avoiding early expatriate returns When staffing international operations, companies must decide whether they will fill their vacancies with expatriates or local personnel. Of course, the strategy and philosophy of the firm makes a difference as well as the local cultural and legal practices. And, when selecting expatriate managers, care must be taken to make sure the foreign experience is valued by the employee and valuable to the company’s operations. Finally, the firm must support the manager while away from the “home” company and ensure he or she has a formal re-integration program upon their return. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Important issues in training, appraising, and compensating international employees Executives tend to agree that international assignees do best when they receive the special training (in things like language and culture) that they require. Fewer actually provide it. Let’s talk about what will help. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Training and Maintaining Employees Abroad Orienting and training employees on international assignment Appraising managers abroad Compensating managers abroad The balance sheet approach Incentives Steps in establishing a system Orienting and training employees slated for possible ex-pat assignments should include: The basics of the new country’s history, politics, business norms, education system, and demographics; How cultural values affect perceptions, values, and communications; Why moving to a new country can be difficult and how to manage the challenges. The appraisal process can be improved by: Stipulating the assignment’s difficulty level; Weighting the evaluation toward the on-site manager; and Having the home office manager use a same-country former expatriate for advice. Compensation presents some tricky problems due to the question of whether or not to maintain companywide pay scales and policies. The Balance Sheet Approach refers to equalizing purchasing power across countries. Long-term incentives that are tied more closely to performance at the foreign subsidiary level can be helpful. Balancing global consistency in compensation with local considerations starts with establishing a rewards program that makes sense in terms of the employer’s overall strategic needs. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Training and Maintaining Employees Abroad Labor relations abroad Terrorism, safety, and global HR Taking protective measures Kidnapping and ransom (K&R) insurance Repatriation: problems and solutions Labor relations abroad differ from those in the U.S. Four issues have been identified as characteristics of European labor practices: 1) centralization, 2) employer organization, 3) union recognition, and 4) content and scope of bargaining. New federal anti-terrorism laws are affecting an employer’s ability to import and export workers. To help, many firms retain crisis management team services. Firms face resistance from employees who are reluctant to accept foreign assignments for many reasons. One reason is that kidnappings have been on the rise, including short-term kidnappings until an ATM can be used for ransom demands. Kidnapping and Ransom (K&R) Insurance covers several costs associated with kidnappings, abductions, or extortion attempts. These costs might include, for instance, hiring a crisis team or the actual cost of the ransom. One of the most worrisome facts about sending employees abroad is that 40% to 60% of them will probably quit within 3 years of returning home. To improve repatriates’ retention employers need to value their experience more highly and provide a systematic repatriation program. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Review Orienting and training Appraisals Compensation Labor relations Terrorism, safety Repatriation Orienting and training programs should include The basics of the new country, cultural values , and Why moving to a new country can be difficult. The appraisal process can be made more effective if it includes the assignment’s difficulty level, weighting the evaluation more heavily with the on-site manager’s input, and home-managers who make use of same-country former expatriates for advice. Labor relations abroad require thorough preparation about differences between U.S. labor relations and those of foreign countries. Compensation has its own set of challenges that include companywide pay scales, equalizing purchasing power, long-term incentives and a rewards program balanced with overall strategic needs. Terrorism and safety have had an impact on overseas assignments. Many employees resist such assignments due to possible danger or severe injury. Some do not prefer to leave their families behind. It is helpful if the company has extensive experience and solid procedures in place to manage such assignments. Repatriation requires a systematic process that clearly communicates that the company values the contributions made by the returning ex-pat. The process should show that it has an important place waiting for ex-pats when they return. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

How to implement a global human resource management program With employers increasingly relying on local rather than expatriate employees, transferring one’s human resource practices abroad is a top priority. Employers may have to defer to local managers on some specific human resource management policy issues. One study suggests that big inter-country HR practice differences are often not necessary or even advisable. The important thing is how you implement the global human resource management system. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Putting a Global HR System into Practice Managing HR Locally Putting a Global HR System into Practice Global HR system effectiveness Global HR system acceptability Implementation Global companies that are truly effective in their HR practices engage in two best practices in developing their worldwide human resource policies and practices. They form global HR networks and they create a sense of partnership with onsite HR managers. They also know that it’s more important to standardize ends and competencies than specific methods. Next, employers engage in three best practices so that the global human resource systems they develop will be acceptable to local managers around the world. They know that truly global organizations find it easier to install global systems. They investigate pressures to differentiate and determine their legitimacy. Finally, they work within the context of a strong corporate culture. Finally, two best practices helped ensure success in actually implementing the globally consistent human resource policies and practices. They learn to communicate actively and effectively and they dedicate adequate and ongoing resources to the effort. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Review Effectiveness Acceptance Implementation We discussed the two best practices companies must use to create and maintain effective global HR systems, namely, networks and partnerships. Acceptance is achieved by using the three best practices of being truly global, investigating pressures, and operating within a strong, widely-known and understood corporate culture. Finally, effective implementation requires active communication and sufficient resources. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

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