Hiring and Managing Employees

2 Human Resource Management (HRM) Refers to the activities an organization carries out to use its human resources effectively Four major tasks of HRM - Staffing policy - Management training and development - Performance appraisal - Compensation policy

3 International Human Resource Management Strategic role: HRM policies should be congruent with the firm’s strategy and its formal and informal structure and controls Task complicated by profound differences between countries in labor markets, culture, legal, and economic systems

4 International H.R.M. Often modified Expatriates Citizens of one country who are living and working in another country Expatriates Citizens of one country who are living and working in another country Recruitment and selection Training and development Compensation Labor relations

5 Factors Making International HR Difficult Different labor markets - Mix of available workers - Mix of labor costs International worker mobility problems National management styles and practices National orientations Strategy and control 21-1

6 International Managerial Terms Locals – citizens of the countries in which they are working Expatriates – non-citizen - Home-country national - Third-country national 21-1

7 Ethnocentric Staffing Advantages + Tight control over subsidiaries + Locally qualified people not always available + Re-create local operations in home-office image + Interests of home office may be better protected – Relocations are expensive – Create “foreign” image for the business Disadvantages Individuals from home country manage operations abroad

8 Polycentric Staffing Advantages + Responsibility on those knowing local business + Avoid expensive relocations from home nation – Potentially lose control of subsidiary Disadvantages Individuals from host country manage operations abroad

9 Geocentric Staffing Advantages + Develop global managers who can adjust easily to any business environment – These individuals command high salaries Disadvantages Best-qualified individuals, regardless of nationality, manage operations abroad

10 Filling Foreign Managerial Positions Typically more difficult to fill than domestic positions because: - People don’t like to move - There are legal impediments to using expatriates - Many are apprehensive about language issues - Many assignments are open-ended - Perception that assignment abroad will negatively affect family lifestyle - Living is more expensive abroad 21-1

11 Reasons to Use Expatriates Lack of locally qualified candidates Broaden the companies understanding of the overall corporate system Gain professional/foreign experience Can control operations according to headquarters’ preferences Need to transfer technology abroad Gain valuable educational experience 21-1

12 Human Resource Planning Phase 1Phase 2Phase 3 Take inventory of current human resources Estimate firm’s future human resource needs Develop plan to recruit and select people for vacant and anticipated new positions Forecasting human resource needs and supply

13 Recruiting Human Resources Recent college graduates Recent college graduates Local managerial talent Local managerial talent Nonmanagerial workers Nonmanagerial workers Current employees Current employees Process of identifying and attracting a qualified pool of applicants for vacant positions

14 Selecting Human Resources  Ability to bridge cultural differences is key  Expatriates must adapt to new ways of life  Cultural sensitivity raises odds for success Process of screening and hiring the best-qualified applicants with the greatest performance potential

15 Selecting the Proper Expatriate Technical competence Adaptiveness - Those needed for self-maintenance - Those related to development of satisfactory relationships Flexibility Tolerance - Cognitive skills Local acceptance Most common reason for failure is inability of the expatriate’s family to adjust 21-1

16 Allegiance of Expatriate Managers 21-1

17 The Expatriate Problem Expatriate failure: premature return of the expatriate manager to his/her home country Cost of failure is high: estimate = 3X the expatriate’s annual salary plus the cost of relocation (impacted by currency exchange rates and assignment location)

18 Reasons for Expatriate Failure US multinationals - Inability of spouse to adjust - Manager’s inability to adjust - Other family problems - Manager’s personal or emotional immaturity - Inability to cope with larger overseas responsibilities European multinationals Inability of spouse to adjust Japanese Firms - Inability to cope with larger overseas responsibilities - Difficulties with the new environment - Personal or emotional problems - Lack of technical competence - Inability of spouse to adjust

19 Stage I: Thrilling experience Stage II: Downward slide Stage III: Recovery begins Stage IV: Embrace local culture Culture Shock Psychological process affecting people living abroad that is characterized by homesickness, irritability, confusion, aggravation and depression

20 Training and Management Development Training: Obtaining skills for a particular foreign posting - Cultural training: Seeks to foster an appreciation of the host country’s culture - Language training: Can improve expatriate’s effectiveness, aids in relating more easily to foreign culture, and fosters a better firm image - Practical training: Ease into day-to-day life of the host country

21 Cultural Training Methods

22 Compiling a Cultural Profile CultureGrams Background Notes Country Studies Area Handbooks

23 Nonmanagerial workers Managerial employees Employee Compensation Bonus and tax incentives Bonus and tax incentives Cultural and social factors Cultural and social factors Greater labor mobility in some markets Greater labor mobility in some markets Cost-of-livingeffectsCost-of-livingeffects Greater cross-border investment investment

24 Components of Expatriate Pay Base Salary - Same range as a similar position in the home country Foreign service premium - Extra pay for work outside country of origin Allowances - Hardship, housing, cost-of-living, and education allowances Taxation - Firm pays expatriate’s income tax in the host country Benefits - Level of medical and pension benefits identical overseas

25 Repatriation of Expatriates A critical issue in the training and development of expatriate managers is preparing them for reentry into their home country Repatriation should be seen as the final link in an integrated, circular process that selects, trains, sends, and brings home expatriate managers Research shows that there is a problem with the repatriation process

26 Reverse Culture Shock Psychological process of readapting to one’s home culture  Methods of reducing its effects  Once-natural thoughts and feelings now strange Can be more unsettling than culture shock Many companies reabsorb expatriates poorly Once-natural thoughts and feelings now strange Can be more unsettling than culture shock Many companies reabsorb expatriates poorly Home-culture reorientation programs Career-counseling sessions Career-development program before posting abroad Home-culture reorientation programs Career-counseling sessions Career-development program before posting abroad

27 Repatriation of Expatriates Didn’t know what position they hold upon return. Firm vague about return, role and career progression. Took lower level job. Leave firm within one year. Leave firm within three years percent

28 Labor-Management Relations Rooted in local culture Often affected by political movements Directly influences workers’ lives Positive or negative condition of relations between a company’s management and its workers

29 Can affect selection of a location Can affect selection of a location Can affect company performance in a market Can affect company performance in a market Popularity of emerging markets in Asia Popularity of emerging markets in Asia Union power declining across much of Europe Union power declining across much of Europe Importance of Labor Unions

30 But generating support can be difficult because: Events in distant lands difficult to comprehend Workers in different nations often compete International Labor Movements International activities of unions are making progress in improving treatment of workers and reducing child labor