Managing Human Resources in an International Context Chapter 16 Managing Human Resources in an International Context McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

The Global Mind-set A prerequisite for global industry dominance “Combines an openness to and an awareness of diversity across markets and cultures with a propensity and ability to synthesize across this diversity” Global managers are open minded, respect how different countries do things, have imagination and appreciation for them, push the limits of culture, and never just accept what people say. 16-2

Recruitment and Selection of Employees Ethnocentric Staffing Policy “related to hiring and promoting employees on the basis of the parent company’s home-country frame of reference” Polycentric Staffing Policy “related to hiring and promoting employees on he basis of the specific local context in which the subsidiary operates” Regiocentric Staffing Policy “related to hiring and promoting employees on the basis of the specific regional context in which the subsidiary operates” Geocentric Staffing Policy “related to hiring and promoting employees on the basis of ability and expertise without considering race or citizenship” 16-3

Recruitment and Selection of Employees Ethnocentric Staffing Policy International Strategic Orientation Decisions made at headquarters with home country frame of reference Use Parent Country Nationals (PCNs) in key expatriate foreign management & technical positions Issues: Expatriates have difficulty with cultural bias toward host country Specialized teams need to be sent to deal with specific problems Prepares Managers for higher level positions at headquarters 16-4

Recruitment and Selection of Employees Polycentric Staffing Policy Multidomestic Strategic Orientation HR policies created at local level for local operations context Some governments demand employment at all levels to reflect racial composition of the society Issues: Familiarity with local customs, culture & language Hiring costs lower Training costs may be high Unfamiliar with ICs home country and corporate culture, policies and culture Best people may be pirated by other firms 16-5

Recruitment and Selection of Employees Regiocentric Staffing Policy Regional Strategic Orientation Regional employees selected for key positions from HCNs and TCNs Issues: Problems of using home or host country nationals can be avoided An executive adapting to one language and culture make adapting to another easier Potential cost savings 16-6

Recruitment and Selection of Employees Geocentric Staffing Policy Transnational Strategic Orientation Find the best person for the job regardless of national origin Capitalize on advantages of each staffing policy Issues: HRM strategy must be consistent across all subsidiaries HRM borrows best practices from wherever found HRM does not show any preferences to Headquarters practices 16-7

Training and Development Home- or Parent-County National (PCNs) Trained in home country before being sent abroad Host-Country National (HCNs) HNCs hired in home country HNCs hired in host country Third Country National (TCNs) Host-country attitudes Generalizations about TCNs are difficult More common as more companies take a geocentric view International agencies are a source for TCNs 16-8

Expatriates Expatriate Inpatriates Flexpatriates Why use expatriates? LO4 Expatriates Expatriate “a person living outside his/her country of citizenship” Inpatriates “Employees hired in the host country” Flexpatriates “home or third-country employees on short term assignments” Why use expatriates? Bring technical or managerial skills that might be scarce in host country Transfer and install companywide systems/cultures Trusted connection for oversight and control of foreign operations Develop skills/experiences for promotion 16-9

Culture Shock Culture Shock Symptoms: Reverse Culture Shock LO4 Culture Shock Culture Shock “anxiety people often experience when they move from a culture they are familiar with to one that is entirely different” Symptoms: Lack of direction from not know how to do things in new culture Feelings/emotional discomfort Disorientation or confusion Reverse Culture Shock Occurs when returning home Three dimensions of cross-cultural adjustment: Work Context job clarity, role conflict, discretion in job completion Adjustment to General Environment Differences in housing, food, education, health, safety, transportation Interaction with Local Nationals Differences with behavioral norms, conflict communication patterns 16-10

The Expatriate’s Family LO4 The Expatriate’s Family LO5 Facts: 90% expatriate failures are family related 81% who decline give family concerns as reason Unhappy spouses are a major reason for early return An expatriate failure translates into a loss of a “million-dollar corporate-training investment” in the executive Trailing Spouses in Two-Career Families are a Challenge for ICs Offer help in adjustment Assistance with job hunting in host country Identifying career opportunities Cultural training Expatriate Children May Suffer the Most Third Culture Kids (TCKs) are multilingual and hold several passports 16-11

Preparation for the Transition: Language Training LO4 Preparation for the Transition: Language Training English is the world’s lingua franca and common 2nd language Expatriate & family need host country language skill for effective adjustment Many foreign customers speak English but will hide behind their language in negotiations Mandarin Chinese is the new “hot” language LEARN ANOTHER LANGUAGE!! 16-12

LO4 Expatriate Services Health care programs exist to assist companies and expatriates with: Claims administration Language translations Currency conversions Service standardization Websites for expat issues: www.ExpatExpert.com www.branchor.com Other expatriate services include assistance with: banking services culture and language training house hunting, utilities hook-up, grocery and hardware shopping long-distance care for relatives schools clubs, organizations, and memberships 16-13

Repatriation – the Shock of Returning Home LO4 Repatriation – the Shock of Returning Home Issues to Address: Reverse culture shock Autonomy abroad but restrictive work context at home Headquarters' people and attitudes will change Returning expatriate’s skills and knowledge are valuable but may be unappreciated Positions of responsibility similar to that of expatriate position may not be available home Promotion or career expectations may not happen Family adjustment at home can be problematic 16-14

Compensation Compensation & Salary Trends: LO6 Compensation Compensation & Salary Trends: Paying HCNs the same salaries as their domestic counterparts – permits worldwide consistency add allowances & bonuses Trend to use “local terms” package equal to local manager “Equal-pay-for-equal-work” concept with extra payments to expats 16-15

Allowances & Bonuses Allowances Bonuses Examples: Examples: “employee compensation payments added to base salaries because of higher expenses encountered when living abroad” Examples: Housing Allowances Cost-of-Living Allowances Allowances for Tax Differentials Education Allowances Moving and Orientation Allowances Bonuses “Expatriate employee compensation payments in addition to base salaries and allowances, because of hardship, inconvenience, or danger” Examples: Overseas Premiums Contract Termination Payments Home Leave 16-16

Compensation Packages Can Be Complicated LO6 Compensation Packages Can Be Complicated Compensation Packages “for expatriate employees, packages that incorporate many types of payments or reimbursements and must take into consideration exchange rates and inflation” Issues: Expensive – can add 50+% to base salary What Percentage? Allowances and percentage of base salary are usually paid in host country currency Percentage is usually 65 to 75 percent, with the remainder banked where employee directs What Exchange Rate? Firms must decide which exchange rate to use This is more difficult in countries with exchange controls and nonconvertible currencies 16-17

Compensation of Third-Country Nationals LO6 Compensation of Third-Country Nationals There is a trend toward applying the same compensation plan to third country nationals as home country expatriates Problems can arise in The calculation of the income tax differential when an American expatriate is compared with an expatriate from another country Home leave bonus Use of third-country national is growing. They get jobs because they are multilingual, know industry, and country well. 16-18

International Status International Status LO6 International Status International Status “Entitles expatriate employee to all the allowances and bonuses applicable to the place of residence and employment” Being from another country does not always qualify for international status Host-country employees can be promoted to international status without being sent abroad Rewards are used to retain valuable employees International status means receiving some or all available allowances and bonuses Complexity of compensation requires international personnel management specialists or consultants 16-19

Perks Cars, including chauffeurs for high level executives LO6 Perks Cars, including chauffeurs for high level executives Private pension plan Retirement payment Life insurance Health insurance Emergency evacuation services (for medical or other reason) Kidnapping, ransom, & extortion insurance Company housing or apartment Directorship of a foreign subsidiary Seminar holiday travel Club memberships 16-20