Chapter © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11 International Human Resource Management

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objectives Know the basic functions of human resource management Define international human resource management Understand the difference between international and domestic human resource management Know the types of workers used by multinationals Know the basic functions of human resource management Define international human resource management Understand the difference between international and domestic human resource management Know the types of workers used by multinationals

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objectives Know how and when to use expatriate managers Know the skills necessary for a successful expatriate assignment Understand how expatriate managers are compensated and evaluated Appreciate the issues regarding expatriate assignments of women managers Know how and when to use expatriate managers Know the skills necessary for a successful expatriate assignment Understand how expatriate managers are compensated and evaluated Appreciate the issues regarding expatriate assignments of women managers

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objectives Know what companies can do to make the expatriate assignment easier for their female expatriates Understand the relationship between choice of a multinational strategy and international human resource management Know what companies can do to make the expatriate assignment easier for their female expatriates Understand the relationship between choice of a multinational strategy and international human resource management

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Human Resource Management and Functions Human resource management (HRM): deals with the overall relationship of the employee with the organization Recruitment: process of identifying and attracting qualified people to apply for vacant positions Selection: process of filling vacant positions in the organization Human resource management (HRM): deals with the overall relationship of the employee with the organization Recruitment: process of identifying and attracting qualified people to apply for vacant positions Selection: process of filling vacant positions in the organization

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Basic HRM Functions Training and development: giving employees the knowledge, skills, and abilities to perform successfully Performance appraisal: system to measure and assess employees’ work performance Compensation: organization’s entire reward package, including financial rewards, benefits, and job security Labor relations: ongoing relationship between an employer and those employees represented by labor organizations Training and development: giving employees the knowledge, skills, and abilities to perform successfully Performance appraisal: system to measure and assess employees’ work performance Compensation: organization’s entire reward package, including financial rewards, benefits, and job security Labor relations: ongoing relationship between an employer and those employees represented by labor organizations

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Human Resource Management (IHRM) All HRM functions, adapted to the international setting Two added complexities compared to domestic HRM - Must choose a mixture of international employees - Must decide the extent of adaptation to local conditions All HRM functions, adapted to the international setting Two added complexities compared to domestic HRM - Must choose a mixture of international employees - Must decide the extent of adaptation to local conditions

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Types of Employees in Multinational Organizations Expatriate: employee who comes from a different country that is different from the one in which they are working Home country nationals: expatriate employees who come from the parent firm’s home country Third country nationals: expatriate workers who come from neither the host nor home country Expatriate: employee who comes from a different country that is different from the one in which they are working Home country nationals: expatriate employees who come from the parent firm’s home country Third country nationals: expatriate workers who come from neither the host nor home country

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Types of Employees in Multinational Organizations Host country nationals: local workers who come from the host country where the unit is located Inpatriate: employees from foreign countries who work in the country where the parent company is located Flexpatriates: employees who are sent on frequent but short-term international assignments International cadre: managers who specialize in international assignments. Also called “globals” Host country nationals: local workers who come from the host country where the unit is located Inpatriate: employees from foreign countries who work in the country where the parent company is located Flexpatriates: employees who are sent on frequent but short-term international assignments International cadre: managers who specialize in international assignments. Also called “globals”

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Expatriate or the Host Country Manager Multinationals must decide whether to use expatriates or host country nationals Need to consider some questions - Given the firm’s strategy, what is the preference (host, home, or third country national) for the position? Multinationals must decide whether to use expatriates or host country nationals Need to consider some questions - Given the firm’s strategy, what is the preference (host, home, or third country national) for the position?

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Expatriate or the Host Country Manager For expatriate managers (parent or third country) -Is there an available pool of managers with appropriate skills for the position? -- Are they willing to take expatriate assignments? - Do any laws affect the assignment of expatriate managers? For host country managers - Do they have the expertise for the position? - Can we recruit them from outside our firm? For expatriate managers (parent or third country) -Is there an available pool of managers with appropriate skills for the position? -- Are they willing to take expatriate assignments? - Do any laws affect the assignment of expatriate managers? For host country managers - Do they have the expertise for the position? - Can we recruit them from outside our firm?

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Is the Expatriate Worth It? IHRM decisions regarding use of expatriate managers must take into account the costs of such assignments. Cost of living abroad is often considered. - High cost due to unusual compensation packages -High failure rate IHRM decisions regarding use of expatriate managers must take into account the costs of such assignments. Cost of living abroad is often considered. - High cost due to unusual compensation packages -High failure rate

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 11.1: Paying for the Expatriate Manager: Indices of Cost of Living Abroad

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Reasons for U.S. Expatriate Failure Individual - Personality of the manager - Lack of technical proficiency - No motivation for assignment Family - Spouse or family members fail to adapt - Family members or spouse do not want to be there Individual - Personality of the manager - Lack of technical proficiency - No motivation for assignment Family - Spouse or family members fail to adapt - Family members or spouse do not want to be there

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Reasons for U.S. Expatriate Failure (cont.) Cultural - Manager fails to adapt - Manager fails to develop relationship with key people Cultural - Manager fails to adapt - Manager fails to develop relationship with key people

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Reasons for U.S. Expatriates Failure (cont.) Organizational -Excess of difficult responsibilities -Failure to provide cultural and other important pre- assignment training - Company fails to pick the right person -Company fails to provide the technical support that domestic managers are used to -Failure of company to consider gender equity Organizational -Excess of difficult responsibilities -Failure to provide cultural and other important pre- assignment training - Company fails to pick the right person -Company fails to provide the technical support that domestic managers are used to -Failure of company to consider gender equity

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Strategic Role of Expatriate Assignments Helps managers acquire skills to develop successful strategies in a global context Helps company coordinate and control operations that are dispersed culturally and geographically Global assignments provide important strategic information Provides critical, detailed information about local markets Provide important network knowledge Helps managers acquire skills to develop successful strategies in a global context Helps company coordinate and control operations that are dispersed culturally and geographically Global assignments provide important strategic information Provides critical, detailed information about local markets Provide important network knowledge

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Selection Selection of expatriate managers Selecting wrong person leads to failure Costs the company Estimated to cost more that $1 million per expatriate failure Domestic performance does not predict expatriate performance. Selection criteria may differ. Selection of expatriate managers Selecting wrong person leads to failure Costs the company Estimated to cost more that $1 million per expatriate failure Domestic performance does not predict expatriate performance. Selection criteria may differ.

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Key Success Factors for Expatriate Assignments Technical and managerial skills Personality traits Relational abilities Family situation Stress tolerance Language ability Emotional intelligence Technical and managerial skills Personality traits Relational abilities Family situation Stress tolerance Language ability Emotional intelligence

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 11.2: Expatriate Success Factors and Selection Methods

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Priority of Success Factors Assignment length - Short assignments focus on technical and professionals skills Cultural similarity Required interaction and communication with locals Job complexity and responsibility Assignment length - Short assignments focus on technical and professionals skills Cultural similarity Required interaction and communication with locals Job complexity and responsibility

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 11.3: Selecting Expatriates: Priorities for Success Factors by Assignment Characteristics

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Training and Development Cross-cultural training: increases the relational abilities of future expatriates and their spouses and families Training rigor: extent of effort by both trainees and trainers required to prepare the expatriate Cross-cultural training: increases the relational abilities of future expatriates and their spouses and families Training rigor: extent of effort by both trainees and trainers required to prepare the expatriate

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Training and Development (cont.) Low rigor training - Short time period - Lectures and videos on local cultures - Briefings on company operations High rigor training - Last over a month - Experiential learning - Extensive language training - Includes interactions with host country nationals Low rigor training - Short time period - Lectures and videos on local cultures - Briefings on company operations High rigor training - Last over a month - Experiential learning - Extensive language training - Includes interactions with host country nationals

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 11.4: Training Rigor: Techniques and Objectives

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 11.5: How the Rigor of Training Relates to the Expatriate Assignment

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Expatriate Performance Appraisal Conducting reliable performance appraisal for the expatriate is very challenging Challenges Fit of international operation in multinational strategy Unreliable data Complex and volatile environments Time difference and distance separation Conducting reliable performance appraisal for the expatriate is very challenging Challenges Fit of international operation in multinational strategy Unreliable data Complex and volatile environments Time difference and distance separation

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Steps to Improve the Expatriate Performance Appraisal 1.Fit the evaluation criteria to strategy 2.Fine-tune the evaluation criteria 3.Use multiple sources of evaluation with varying periods of evaluation 1.Fit the evaluation criteria to strategy 2.Fine-tune the evaluation criteria 3.Use multiple sources of evaluation with varying periods of evaluation

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 11.6: Evaluation Sources, Criteria, and Time Periods for Expatriate Performance Appraisals

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Expatriate Compensation Compensation packages present challenges. Has to be attractive to skilled managers, but also consider the issue of costs. Tend to include many common factors: - Local market cost of living - Housing - Taxes - Benefits Compensation packages present challenges. Has to be attractive to skilled managers, but also consider the issue of costs. Tend to include many common factors: - Local market cost of living - Housing - Taxes - Benefits

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Balance-Sheet Approach Provides a compensation package that equates purchasing power (host country with home country) Aim is that expatriate should not be better or worse position financially as a result of the assignment Allowances for adjustments for differences in taxes, cost of living, housing, food, recreation, personal care, clothing, education, home furnishing, transportation, and medical care Provides a compensation package that equates purchasing power (host country with home country) Aim is that expatriate should not be better or worse position financially as a result of the assignment Allowances for adjustments for differences in taxes, cost of living, housing, food, recreation, personal care, clothing, education, home furnishing, transportation, and medical care

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 11.7: Balance Sheet Approach To Expatriate Compensation

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Additional Allowances and Perquisites In addition to equating purchasing power, additional allowances often provided Foreign service premiums Hardship allowance Relocation allowances Home-leave allowances In addition to equating purchasing power, additional allowances often provided Foreign service premiums Hardship allowance Relocation allowances Home-leave allowances

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Other Approaches to Expatriate Compensation Headquarters-based compensation: paying home country wages regardless of location Host-based compensation system: adjusting wages to local lifestyles and costs of living Global pay systems: worldwide job evaluations, performance appraisal methods, and salary scales are used Headquarters-based compensation: paying home country wages regardless of location Host-based compensation system: adjusting wages to local lifestyles and costs of living Global pay systems: worldwide job evaluations, performance appraisal methods, and salary scales are used

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Repatriation Problem Difficulties that managers face coming back to their home country and reconnecting to home organization Three basic cultural problems -“reverse culture shocks” - Adapt to new work environment and culture of home office - Relearn to communicate with others in home and organizational cultures - Need to adapt to basic living environment Difficulties that managers face coming back to their home country and reconnecting to home organization Three basic cultural problems -“reverse culture shocks” - Adapt to new work environment and culture of home office - Relearn to communicate with others in home and organizational cultures - Need to adapt to basic living environment

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Strategies for Successful Repatriation Provide a strategic purpose for the repatriation Establish a team to aid the expatriate Provide parent country information sources Provide training and preparation for the return Provide a strategic purpose for the repatriation Establish a team to aid the expatriate Provide parent country information sources Provide training and preparation for the return

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Assignments for Women: Two Myths Women strikingly rare: estimated to be 12%, men 88% Myth 1: Women do not wish to take international assignments. Myth 2: Women will fail in international assignments because of the foreign culture’s prejudices against local women. Successful women expatriates - Foreign not female—emphasize nationality not gender Women strikingly rare: estimated to be 12%, men 88% Myth 1: Women do not wish to take international assignments. Myth 2: Women will fail in international assignments because of the foreign culture’s prejudices against local women. Successful women expatriates - Foreign not female—emphasize nationality not gender

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Assignments for Women: Advantages More visible Excel in relational skills More visible Excel in relational skills

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. International Assignments for Women: Disadvantages Face the glass ceiling - Isolation and loneliness - Constant proving of themselves, working harder than male Need to balance work and family responsibilities Need to worry about accompanying spouse Face the glass ceiling - Isolation and loneliness - Constant proving of themselves, working harder than male Need to balance work and family responsibilities Need to worry about accompanying spouse

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. More Women in the Future? Women expatriate managers are expected to grow Acute shortage of high-quality multinational managers Increasing number of women provide role models What companies can do to ensure success of women: Provide mentors Provide opportunities for networking with other women Identify and remove sources of barriers Women expatriate managers are expected to grow Acute shortage of high-quality multinational managers Increasing number of women provide role models What companies can do to ensure success of women: Provide mentors Provide opportunities for networking with other women Identify and remove sources of barriers

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Multinational Strategy and IHRM IHRM orientation: company’s basic tactics and philosophy for coordinating IHRM activities for managerial and technical workers

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 11.8a: IHRM Orientation and IHRM Practices for Managers and Technical Workers

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 11.8b: IHRM Orientation and IHRM Practices for Managers and Technical Workers

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Multinational Strategy and IHRM Ethnocentric IHRM: all aspects of HRM for managers and technical workers tend to follow the parent organization’s home-country HRM practices

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Benefits of Ethnocentric IHRM Little need to recruit qualified host country nationals for higher management Greater control and loyalty of home country nationals Little need to train home country nationals Key decisions centralized Little need to recruit qualified host country nationals for higher management Greater control and loyalty of home country nationals Little need to train home country nationals Key decisions centralized

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Costs of Ethnocentric IHRM May limit career development for host country nationals Host country nationals may never identify with the home company Expatriate managers are often poorly trained for international assignments and make mistakes May limit career development for host country nationals Host country nationals may never identify with the home company Expatriate managers are often poorly trained for international assignments and make mistakes

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Regiocentric and Polycentric IHRM Regiocentric IHRM: region-wide HRM policies are adopted Polycentric IHRM: firm treats each country-level organization separately for HRM purposes Greater responsiveness to host country differences Regiocentric IHRM: region-wide HRM policies are adopted Polycentric IHRM: firm treats each country-level organization separately for HRM purposes Greater responsiveness to host country differences

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Benefits of Polycentric and Regiocentric HRM Policies Reduces training expenses Fewer language and adjustment issues Lessened hiring and relocation costs Reduces training expenses Fewer language and adjustment issues Lessened hiring and relocation costs

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Costs of Polycentric and Regiocentric IHRM Policies Coordination problems with headquarters based on cultural, language, and loyalty differences Limited career-path opportunities for host country and regional managers Limited international experiences for home country managers Coordination problems with headquarters based on cultural, language, and loyalty differences Limited career-path opportunities for host country and regional managers Limited international experiences for home country managers

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Global IHRM Orientations Recruiting and selecting worldwide Assigning the best managers to international assignments regardless of nationality Recruiting and selecting worldwide Assigning the best managers to international assignments regardless of nationality

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Global IHRM Orientations Benefits - Bigger talent pool - High international expertise - Development of transnational organizational cultures Costs - Difficulty in importing managerial and technical employees - Added expense Benefits - Bigger talent pool - High international expertise - Development of transnational organizational cultures Costs - Difficulty in importing managerial and technical employees - Added expense

© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Conclusion When basic HRM practices are applied to a company’s international operations, they become IHRM Chapter focused on HRM practices for expatriate s Expatriates present special challenges for MNCs Successful IHRM a challenge in 21 st century Globalization allows MNCs to hire from worldwide pool It is important for multinationals to find ways to properly manage expatriates to benefit from their experiences When basic HRM practices are applied to a company’s international operations, they become IHRM Chapter focused on HRM practices for expatriate s Expatriates present special challenges for MNCs Successful IHRM a challenge in 21 st century Globalization allows MNCs to hire from worldwide pool It is important for multinationals to find ways to properly manage expatriates to benefit from their experiences