Global Human Resource Management

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. Sit in groups after the break If there are less than 3 people from your group present, let’s merge groups

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. Reminder: Optional assignment A small but not trivial part of the grade for this class is class participation As discussed on the first day of class, students have the option of writing a self-evaluation of their class participation. -I may underestimate students who participate well, but rarely

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. I am partly evaluating how engaged you are in class In the self-evaluation, -summarize when you participated or communicated with the professor outside class (if you have) You may also discuss -how you prepare for class -what you did in group work -discuss the quality of your participation/ preparation

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. Self-evaluations should not exceed one page If you did not participate, simply writing that you “prepared for class” will not give you credit. -But attaching materials (e.g., samples of notes you prepared before class) may Self-evaluations are due by the last day of class -Do not bring a self-evaluation on final exam day – I may do class participation grades before the final

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. Should you write a self-evaluation? It’s probably not necessary if I’ve been calling on you at least once a week Do write a self-evaluation if -I’ve only called on you 2 or 3 times -You’ve prepared and raised your hand and I have not called on you

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. 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 – who will we hire? -Management training and development -Performance appraisal – How well is each individual doing? -Compensation policy – How much do we pay each person?

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. International Human Resource Management Strategic role: HRM policies should be congruent with the firm’s strategy -Global standardization – global experts on efficiency -Localization – need to understand radically different cultures But even a company committed to global standardization will have to find culturally sensitive people Task complicated by profound differences among labor markets, legal, and economic systems

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. Local employees usually can’t do everything a global firm needs They may have great technical skills They have great human relations skills within their own cultures But they don’t initially understand the systems of a foreign firm Corporate culture and institutions of the foreign firm maybe based on the culture of the home country. -And the problem may be hard for foreign managers to see

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. International business requires people to work outside their cultures Expatriate: citizens of one country working in another Inpatriates: expatriates who are citizens of a foreign country working in the home country of their multinational employer

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McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. Expatriates and Cost-of-Living Indexes Higher pay for assignments abroad Most global companies increase compensation when foreign cost is higher They do NOT decrease compensation when foreign cost is lower They remove the differential when the manager is repatriated 21-1

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McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. The Expatriate Problem Not all good managers make good expatriates -And some who are good contributors hate expatriate life (or have spouses who hate it) 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

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. 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 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

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. Expatriate Selection Reduce expatriate failure rates by improving selection procedures -An executive’s domestic performance does not (necessarily) equate to overseas performance potential Employees need to be selected not solely on technical expertise, but also on cross-cultural fluency

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McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. Headquarters Managers Deal at top levels in many countries -Some have broad duties -Some are technical specialists Experience the rigors of foreign travel 21-1

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. Repatriation of Expatriates A critical issue in the development of expatriate managers is preparing for reentry to home countries -Research shows that there are serious problems with the repatriation process

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. Staffing With Locals Locals usually cost less than do expatriates They understand local: -Language -Management styles -Labor policies and practices -Localized operations -May be legally required in some cases But they don’t understand the foreign company’s systems -Often they have more trouble with the foreign company’s systems than natives of the home country 21-1

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. An option: Locally hired expatriates Much cheaper than expatriates Understand the local culture and your home country culture But they don’t understand your business system -They may think your system is crazy

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. Material below here is optional

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. Guidelines for Performance Appraisal More weight should be given to on-site manager’s evaluation as they are able to recognize the soft variables Expatriate who worked in same location should assist home-office manager with evaluation

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. Expatriate Pay Typically use balance sheet approach -Equalizes purchasing power to maintain same standard of living across countries -Provides financial incentives to offset qualitative differences between assignment locations

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. International Labor Relations Key Issue -Degree to which organized labor can limit the choices of an international business Aims to foster harmony and minimize conflicts between firms and organized labor

McGraw-Hill/Irwin International Business, 6/e, 7/e Portions © 2007, 2009 The McGraw-Hill Companies, Inc., All Rights Reserved. Concerns of Organized Labor Multinational can counter union bargaining power with threats to move production to another country Multinational will keep highly skilled tasks in its home country and farm out only low-skilled tasks to foreign plants -Easy to switch locations if economic conditions warrant -Bargaining power of organized labor is reduced Attempts to import employment practices and contractual agreements from multinational’s home country

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