PowerPoint Presentation by Charlie Cook Copyright © 2004 South-Western. All rights reserved.

15–2 Objectives After studying this chapter, you should be able to: 1.Identify the types of organizational forms used for competing internationally. 2.Explain how domestic and international HRM differ. 3.Discuss the staffing process for individuals working internationally. 4.Identify the unique training needs for international assignees. 5.Reconcile the difficulties of home-country and host- country performance appraisals.

Copyright © 2004 South-Western. All rights reserved.15–3 Objectives (cont’d) After studying this chapter, you should be able to: 6.Identify the characteristics of a good international compensation plan. 7.Explain the major differences between U.S. and European labor relations.

Copyright © 2004 South-Western. All rights reserved.15–4 Increasing Importance of Global Human Resource Understanding International Mergers and Acquisitions Importance of Global Human Resources Management Importance of Global Human Resources Management Foreign Human Resources Global Competition Market Access Opportunities Presentation Slide 15–1

Copyright © 2004 South-Western. All rights reserved.15–5 Managing Across Borders International corporation  Domestic firm that uses its existing capabilities to move into overseas markets. Multinational corporation (MNC)  Firm with independent business units operating in multiple countries. Global corporation  Firm that has 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.

Copyright © 2004 South-Western. All rights reserved.15–6 Types of Organizations Figure 15.1 GLOBAL Views the world as a single market; operations are controlled centrally from the corporate office. GLOBAL TRANSNATIONAL Specialized facilities permit local responsiveness; complex coordination mechanisms provide global integration. TRANSNATIONAL MULTINATIONAL Several subsidiaries operating as stand-alone business units in multiple countries. MULTINATIONAL INTERNATIONAL Uses existing capabilities to expand into foreign markets. INTERNATIONAL LOCAL RESPONSIVENESS LowHigh GLOBAL EFFICIENCY Low High Presentation Slide 15–2

Copyright © 2004 South-Western. All rights reserved.15–7 Top Ten Global Companies Figure 15.2 MARKET VALUE COMPANYHEADQUARTERS(MILLIONS USD) 1.General ElectricUnited States $309,462 2.MicrosoftUnited States275,701 3.Exxon MobilUnited States271,228 4.Wal-Mart StoresUnited States240,907 5.CitigroupUnited States223,040 6.PfizerUnited States216,777 7.BPBritain192,116 8.Johnson & JohnsonUnited States186,942 9.IntelUnited States184, American International GroupUnited States174,986 Source: Business Week Global 1000.

Copyright © 2004 South-Western. All rights reserved.15–8 How International Companies Affect the World Economy Production and distribution extend beyond national boundaries, making it easier to transfer technology. They have direct investments in many countries, affecting the balance of payments. They have a political impact that leads to cooperation among countries and to the breaking down of barriers of nationalism.

Copyright © 2004 South-Western. All rights reserved.15–9 How Does the Global Environment Influence Management? Unified Economies  Closely partnered nations such as the European Union have developed into strong competitors.  Promotes job growth in trading nations. Cultural environment  The communication patterns, religion, values and ideologies, education, and social structure of a host country influence how HR is conducted in that country.

Copyright © 2004 South-Western. All rights reserved.15–10 The Nations of the European Union Figure 15.3

Copyright © 2004 South-Western. All rights reserved.15–11 Cultural Environment of International Business Figure 15.4 Presentation Slide 15–3 Values/Ideologies Work ethic Time orientation Individualism/ collectivism Risk propensity Achievement Social Structure Kinship/family Mobility Nationalism Urbanization Social stratification Paternalism/ materialism Communication Language(s) Dialects Nonverbal Media Technology Education/ Human Capital Primary/ secondary Vocational Professional Literacy Religious Beliefs Denominations Totems/taboos Rituals Holy days

Copyright © 2004 South-Western. All rights reserved.15–12 Domestic versus International HRM Issues in international HRM in helping employees adapt to a new and different environment outside their own country:  Relocation  Orientation  Objective  Translation services

Copyright © 2004 South-Western. All rights reserved.15–13 HR Strategy Development HRM 2 Source: Nancy Wong, “Mark Your Calendar! Important Tasks for International HR,” Workforce 79, no. 4 (April 2000): 72–74.

Copyright © 2004 South-Western. All rights reserved.15–14 International Staffing Expatriates, or Home-country Nationals  Employees from the home country who are on international assignment. Host-country Nationals  Employees who are natives of the host country. Third-country Nationals  Employees who are natives of a country other than the home country or the host country.

Copyright © 2004 South-Western. All rights reserved.15–15 Advantages in Sources of Overseas Managers Host-country Nationals  Less cost  Preference of host-country governments  Intimate knowledge of environment and culture  Language facility Home-country Nationals (Expatriates)  Talent available within company  Greater control  Company experience  Mobility  Experience provided to corporate executives Figure 15.5 Third-country Nationals  Broad experience  International outlook  Multilingualism Presentation Slide 15–4

Copyright © 2004 South-Western. All rights reserved.15–16 Changes in International Staffing over Time Figure 15.6

Copyright © 2004 South-Western. All rights reserved.15–17 Overseas Recruitment Issues Work Permit, or Work Certificate  Government document granting a foreign individual the right to seek employment. Guest Workers  Foreign workers invited to perform needed labor. Transnational teams  Teams composed of members of multiple nationalities working on projects that span multiple countries.

Copyright © 2004 South-Western. All rights reserved.15–18 Selecting Expatriates Begin with self-selection. Create a candidate pool. Assess core skills. Assess augmented skills and attributes.

Copyright © 2004 South-Western. All rights reserved.15–19 Measured Expatriate Characteristics Core Skills  Skills that are considered critical to an employee’s success abroad. Augmented Skills  Skills that are helpful in facilitating the efforts of expatriate managers. Failure rate  Percentage of expatriates who do not perform satisfactorily.

Copyright © 2004 South-Western. All rights reserved.15–20 Expatriate Selection Criteria Figure 15.7

Copyright © 2004 South-Western. All rights reserved.15–21 Causes of Expatriate Assignment Failure Figure 15.8 Why Do Expats Fail? Family adjustmentPoor performance Lifestyle issuesOther opportunities arise Work adjustmentBusiness reasons Bad selectionRepatriation issues

Copyright © 2004 South-Western. All rights reserved.15–22 Skills Of Expatriate Managers Core Skills  Experience  Decision making  Resourcefulness  Adaptability  Cultural sensitivity  Team building  Maturity Augmented Skills  Computer skills  Negotiation skills  Strategic thinking  Delegation skills  Change management HRM 3

Copyright © 2004 South-Western. All rights reserved.15–23 Boosting ROI of Expatriates Better candidate selection32% Career planning skills26 Communicating objectives24 Assignment preparation20 Monitoring program17 Cross-cultural training10 Developing or expanding intranet7 Communication/recognition6 Web-based cultural training5 Mandating destination support4 Other17 Figure 15.9 Major initiatives planned to improve assignment return on investment (ROI): Source: Andrea Poe, “Selection Savvy,” HRMagazine 47, no. 4 (April 2002): 77–83.

Copyright © 2004 South-Western. All rights reserved.15–24 Training and Development Global Manager  A manager equipped to run an international business. Skills of a Global Manager  Ability to seize strategic opportunities  Ability to manage highly decentralized organizations  Awareness of global issues  Sensitivity to issues of diversity  Competence in interpersonal relations  Skill in building community

Copyright © 2004 South-Western. All rights reserved.15–25 Training Programs for International Managers Essential training program content to prepare employees for working internationally:  Language training  Cultural training  Assessing and tracking career development  Managing personal and family life Culture shock  Perpetual stress experienced by people who settle overseas.

Copyright © 2004 South-Western. All rights reserved.15–26 Preparing for an International Assignment 1.Social and business etiquette 2.History and folklore 3.Current affairs, including relations between the host country and the 4.United States 5.Cultural values and priorities 6.Geography, especially its major cities 7.Sources of pride and great achievements of the culture 8.Religion and the role of religion in daily life 9.Political structure and current players 10.Practical matters such as currency, transportation, time zones, hours of business 11.The language Figure To prepare for an international assignment, one should become acquainted with the following aspects of the host country:

Copyright © 2004 South-Western. All rights reserved.15–27 Training Methods Reviewing available information about the host company: books, magazines, video tapes. Conversations with host country natives. Sensitivity training to become familiar with the customs and overcome prejudices. Temporary assignments to encourage shared learning.

Copyright © 2004 South-Western. All rights reserved.15–28 A Synthesis of Country Clusters Figure Source: Simcha Ronen and Oded Shenkar, “Clustering Countries on Attitudinal Dimensions: A Review and Synthesis,” Academy of Management Review 10, no. 3 (July 1985): 435–54. Copyright Academy of Management Review. Reprinted with permission of the Academy of Management Review and the authors; permission conveyed through the Copyright Clearance Center, Inc.

Copyright © 2004 South-Western. All rights reserved.15–29 Selected Foreign-Born Executives Figure COUNTRY OF COMPANY—TITLE NAME ORIGIN Alcoa—President & CEOAlain BeldaMorocco* A-Med—FounderWalid Aboul-HosnLebanon American International Underwriters—Martin J. SullivanUnited Kingdom President & CEO Aramark—Chairman & CEOJoseph NeubauerIsrael Baker & McKenzie—ChairmanChristine LagardeFrance Becton Dickinson—Chairman & CEOClateo CastelliniItaly Case Corporation—Chairman & CEOJean-Pierre RossoFrance Computer Associates—Chairman & CEOCharles WangTaiwan eBay—Founder & ChairmanPierre OmidyarFrance Eli Lilly and Company—President & COOSidney TaurelMorocco Source: Denis Lyons and Spencer Stuart, “International CEOs on the Rise,” Chief Executive 152 (February 2000): 51–53.

Copyright © 2004 South-Western. All rights reserved.15–30 Returning from an Overseas Assignment Repatriation  The process of an employee transitioning home from an international assignment.  Throw a “welcome home” party.  Offer counseling to ease the transition.  Arrange conferences and presentations to make certain that knowledge and skills acquired away from home are identified and disseminated.  Get feedback from the employee and the family about how well the organization handled the repatriation process.

Copyright © 2004 South-Western. All rights reserved.15–31 Performance Appraisal of International Managers Who Should Appraise Performance?  Home-country evaluations  Host-country evaluations Adjusting Performance Criteria  Augmenting job duties  Individual learning  Organizational learning Providing Feedback  Debriefing interview Presentation Slide 15–5

Copyright © 2004 South-Western. All rights reserved.15–32 Forces Driving Global Pay Cultural Preferences  Importance of status  Role of individual vs. organization vs. government  Equality vs. disparity  Achievement vs. relationships Economic Conditions  Size of economy  Types of industries, natural resources  Inflation, unemployment  Protectionism vs. open market Personal Preferences  Attitudes toward risk  Quality of life vs. work  Short- vs. long-term  Competitiveness vs. solidarity Social Constraints  Income tax rates, social costs  Laws and regulations  Collective bargaining, worker participation  Skills, education of work force Figure Source: Steven Gross and Per Wingerup, “Global Pay? Maybe Not Yet!” Compensation and Benefits Review 31, no. 4 (July/August 1999): 25–34.

Copyright © 2004 South-Western. All rights reserved.15–33 Hourly Wages * in Different Countries Figure *Hourly compensation costs in U.S. dollars for production workers in manufacturing Source: Department of Labor. Presentation Slide 15–6 COUNTRY$/HOUR Germany23.84 Norway23.13 Switzerland21.84 Belgium21.04 United States20.32 Japan19.59 Sweden18.35 Britain16.14 France15.88 Canada15.64 Italy13.76 Hong Kong13.53 Israel13.53 Australia13.15 Spain10.88 Korea8.09 Taiwan5.70 Brazil3.02 Mexico2.30 Sri Lanka0.48 COUNTRY$/HOUR Germany23.84 Norway23.13 Switzerland21.84 Belgium21.04 United States20.32 Japan19.59 Sweden18.35 Britain16.14 France15.88 Canada15.64 Italy13.76 Hong Kong13.53 Israel13.53 Australia13.15 Spain10.88 Korea8.09 Taiwan5.70 Brazil3.02 Mexico2.30 Sri Lanka0.48

Copyright © 2004 South-Western. All rights reserved.15–34 Compensation of Expatriate Managers To be effective, an international compensation program must:  Provide an incentive to leave the United States.  Allow for maintaining a U.S. standard of living.  Facilitate reentry into the United States.  Provide for the education of children.  Allow for maintaining relationships with family, friends, and business associates. Presentation Slide 15–7

Copyright © 2004 South-Western. All rights reserved.15–35 Expatriate Compensation Programs Balance-Sheet Approach A compensation system designed to match the purchasing power in a person’s home country 1.Calculate base pay. 2.Figure cost-of-living allowance (COLA) 3.Add incentive premiums 4.Add relocation assistance programs

Copyright © 2004 South-Western. All rights reserved.15–36 International Organizations and Labor Relations International Differences in Unions  The level at which bargaining takes place (national, industry, or workplace)  The degree of centralization of union-management relations  The scope of bargaining  The degree to which government intervenes  The degree of unionization.