1. Managing Human Resources Globally
Abie Widyatmojo
Adrianus
Agus Belfrid P. Sihombing
Caroline Ekaputri
Donny
Ganjar Prabowo Widiastomo
Pamela Indrajati Suryoputro
Ulung GK Khoe
Vincent Ricky Tanubrata
William Suhaidir

2. Introduction
Indonesia with 250 million people where 66% are economically active* have always been proud of itself to have cheap and good labor. But is this an illusion? (Is our engineer and consultant better compare to India, China, malaysia or even australia? In summary can they give better results with cheaper price?)
How much cost do these expatriate talent actually cost? Since they need training, adjustment period, visa, culture shock. Do these additional cost actually in the end justify the lower paycheck and better resume?
We will try to answer some of these problems in the presentation and how in the end expatriate might be usefull or even costly to your business.
*Data from world bank 17/11/2014

3. Current Global Changes

4. Current Global Changes .. Cont.
European Economic Community (EEC)
Began in 1992
Commerce regulated by an overseeing body – European Commission (EC)
In 1999, introducing Euro as single currency for EEC members
By 2004, 27 European countries has joined EEC
North American Free Trade Agreement (NAFTA)
Initiated by free trade agreement of Canada and US in 1989
Now NAFTA covered Canada, US and Mexico
The Growth of Asia
Japan has become dominant economic force for over 20 years
Recently Singapore, Hong Kong and Malaysia have become significant economic forces in addition to China and India
ASEAN is one of the economic forces in south east asia
General Agreement on Tariffs and Trade (GATT)
An international framework of rules & principles for reducing trade barriers
Established World Trade Organization (WTO) to resolve disputes among GATT members

5. Factors Affecting HRM in Global Markets
Culture
Education – Human Capital
Political – Legal System
Economic System

6. Uncertainty Avoidance
Culture
Geert Hofstede’s Classic Study of Culture
Power Distance
the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally.
Individualism
the degree of interdependence a society maintains among its members
Masculinity
The fundamental issue here is what motivates people, wanting to be the best (masculine) or liking what you do (feminine).
Uncertainty Avoidance
The extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid.
Pragmatism
how every society has to maintain some links with its own past while dealing with the challenges of the present and future
Indulgence
the extent to which people try to control their desires and impulses

7. Education – Human Capital
Majorly determined by the educational opportunities available to the labour force
Countries with low human capital attract facilities that require low skills and low wage levels. The opposite to that will be an attractive sites for direct foreign investment that creates high skill jobs.
Indonesia ranks 61 out of 122 countries - Human Capital Report World Economic Forum.
Finland is on the top of the ranks followed by Singapore (3), Australia (13), Korea Republic (17), Germany (19), Israel (27), Japan (28), United Arab Emirates (29), Malaysia (34), Saudi Arabia (55), China (58), India (63), Phillipnes (65), Vietnam (73), Thailand (79), and Yemen on the bottom of the ranks (122).

8. Political – Legal System
The political/legal system often dictates requirements of certain HRM practices, such as training, compensation, hiring and layoffs.
Legal system is an outgrowth of the culture, reflecting societal norms.
U. S. has led the world in eliminating discrimination in the workplace and controlling the process of labor management negotiations.
Germany has provided employees with a legal right to "codetermination" in the workplace.
( Codetermination is a concept that involves the right of workers to participate in management of the companies they work for, Codetermination aims principally to give worker a voice in the company decisions )
The EEC (European Economic Community) provides fundamental social rights of workers: freedom of movement and freedom to choose one's occupation and be fairly compensated.

9. Economic System
A country's economic system influences HRM in a number of ways
In socialist economies, there is little economic incentive to develop human capital, but ample opportunity exists because education is free.
In capitalist systems, the opposite situation exists, with higher tuition at state universities but economic incentives exist through individual salaries.
Every country varies in terms of culture, human capital and their legal, political and economic systems.

10. Managing Employees in a Global Context
A parent country is the country in which the company's corporate headquarters is located.
A host country is the country in which the parent country organization seeks to locate (or has already located) a facility.
A third country is a country other than the host country or parent country.

11. Types of International Employees
Expatriate - employee sent by a company in one country to manage operations in a different country.
Parent-country nationals (PCNs) - employees who were born and live in a parent country.
Host-country nationals (HCNs) - employees who were born and raised in the host country.
Third-country nationals (TCNs) - employees born in a country other than the parent country or host country but who work in the host country.

12. Levels of Global Participation
Domestic International Multinational Global
Parent
Country
Host
Corporate
headquarters
Corporate
headquarters
Corporate
headquarters
Corporate
headquarters
Foreign
subsidiary
Foreign
subsidiary
Foreign
subsidiary
Foreign
subsidiary
Foreign
subsidiary
Increasing Participation in Global Markets

13. Levels of Global Participation (cont.)
Domestic
Begin by operating within a domestic marketplace
Recruiting, hiring, training, compensating from local labor market
Focus on technical competence and to some extent on interpersonal skills
One labor market – determining market rate of pay for various jobs is easy
Jakarta Office

14. Levels of Global Participation (cont.)
International
Entering international markets, initially by exporting products but ultimately by building production facilities in other countries
Different situation of culture, HC, political-legal, and economic system
Requires an extensive selection effort to identify individuals capable of adapting to new environments and an extensive training program
Jakarta Office
Singapore Branch

15. Levels of Global Participation (cont.)
Multinational
Build facilities in a number of different countries, attempting to capitalize on lower production and distribution costs in different locations
Still have 1 Headquarter
Employ inpatriates  need to integrate managers from different cultures into the culture of the parent company
Employ expatriates  need for cross cultural training to provide managerial skills for interaction with individual from different cultures
Jakarta Office
Singapore Branch
Malaysia Branch
Thailand Factory

16. Levels of Global Participation (cont.)
Global / Transnational
Have multiple headquarters spread across the globe; less hierarchically structured organizations that emphasize decentralized decision making.
Transnational HRM system:
Transnational Scope  make HRM decision from an international perspective
Transnational Representation  multinational composition of a company’s managers
Transnational Process  company’s planning and decision-making process include representatives and ideas from a variety of cultures
Rather than simply integrating foreigners into the domestic organization, a successful transnational company needs managers who will treat managers from other cultures as equals.

17. Managing Expatriates in Global Markets
Selection of Expatriate Managers
Successful expatriates have technical competence, flexibility and ability to adjust to, and be sensitive to, a new culture. These adaptive skills have been categorized into three dimensions:
Self  skills to maintain a positive self-image and psychological well-being.
Relationship  skills to foster relationships with the host-country nationals.
Perception  skills to accurately perceive and evaluate the host environment.
Determining which individuals in the organization are most capable of handling an assignment in a different culture is not easy.
Expatriate managers must hv technical competence in the area of operations; otherwise they will be unable to earn the respect of subordinates.
Technical competence has been almost the sole variable used in deciding who to send on overseas assignments, despite the fact that multiple skills are necessary for successful performance in these assignments.

18. Managing Expatriates in Global Markets (cont.)
A study found that international assignees considered the following five factors to be important (in descending order of importance):
Family situation
Flexibility and adaptability
Job knowledge and motivation
Relational skills
Extracultural openness

19. Managing Expatriates in Global Markets (cont.)
CQ = Cultural Intelligence: an individual’s ability to adapt across cultures through sensing the different cues regarding appropriate behavior across cultural settings or in multicultural settings.
Use of women in expatriate assignments has proven beneficial for companies.
Research suggests that men and women can perform equally well in international assignments.
For a long time, US firms believed that women would not be successful managers in countries where women hv not traditionally been promoted to mgmt positions like in Japan and other Asian countries.

20. Managing Expatriates in Global Markets (cont.)
Training & Development of Expatriates
Why they need it :
Ease the expatriates transition process, increase adaptability and job performance (effectiveness)
Help avoid costly mistakes
They don’t need job related skill, they need cross cultural training
Prepare beforehand, reduce learning/adaptation period, ready to work
Bring liquor to Moeslim country, personally : deported; company:”disinvited” damage company reputation

21. Managing Expatriates in Global Markets (cont.)
Training & Development of Expatriates
What they need :
Clear about their own cultural background as it is perceived by the host country
Understand the particular aspect of culture in the new work environment
Learn to communicate accurately in the new culture
Manager can modify their behavior to accentuate the effective characteristics while minimizing those that are dysfunctional
Identifying the type of behaviors and interpersonal styles that are considered acceptable in both business meetings and social gatherings. Ex : German value promptness for meeting more than Latin America, other example of body language in Bulgaria node head up&down = no while back&forth = yes, india whistling in the public is rudeness, argentina -> pointing a finger to the head and spin it means a phone call
Seldom the host country people speak the parent country language fluently, thus expatriates must be trained to communicate with others when language barrier exist. Ex: clear, slow speech, do not use everyday language, simple sentence, active verbs

22. Managing Expatriates in Global Markets (cont.)
Training & Development of Expatriates
What HR Department can do:
Make International assignment planning a part of the career development process
Encourage early international experience
Create learning opportunities during the assignment
User international assignments as a leadership development tool
Understand the business in one local area to lead the bigger regional area
Pre-departure training in the host country
Learn new culture, learn new process, make decision locally
Training to lead a remote area of the business, with their own judgment based on the local condition

23. Managing Expatriates in Global Markets (cont.)
Compensation of Expatriates
Determine compensation package equal with purchasing power of expatriates
Total package level can determine by balance sheet approach
Company provide a premium and/or incentive to compensate different environment troble of living

24. Managing Expatriates in Global Markets (cont.)
Balance Sheet for Determining Expatriate Compensation
Source: C. Reynolds, "Compensation of Overseas Personnel," in Handbook of Human Resource Administration, 2nd ed., ed. J. J. Famularo (New York: McGraw-Hill, 1986), p. 51

25. Managing Expatriates in Global Markets (cont.)
Compensation of Expatriates
Total Package Component:
Base Salary
Exchange rate, market rate
Tax equalization allowance
Benefit
Pension plan, health care
Allowances
Cost living: accommodation, education, relocation

26. Managing Expatriates in Global Markets (cont.)
Reacculturation of Expatriates
Reentry may result in culture shock.
60 to 70 % of expatriates do not know what their position will be upon their return.
25% leave the company within one year upon returning.
Transition process to help:
Communication
Validation
Training and rewards beyond salary and benefits are key.

27. THANK YOU!