1. International Business Functions
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Chapter 17: Global Human Resource Management

2. Introduction 1 of 2 Human resource management (HRM)
The activities an organization carries out to utilize its human resources effectively
Determining human resource strategy
Staffing
Performance evaluation
Management development
Compensation
Labor relations

3. Introduction 1 of 2
Gardner: Typical Life Cycle of an International Firm
Work through outside representatives in other countries – HR issues are primarily on the domestic side.
Open the company’s own international operations abroad, probably led by expatriates and perhaps with expatriate staff (ethnocentric)
Turn operations over to host-country managers to reduce costs and respond to local culture (polycentric).
A fully global organization will attempt to assign employees to locations where they can best use their skills (geocentric).

4. Staffing Policy 2 of 11 Types of Staffing Policies
The ethnocentric approach: key management positions are filled by parent-country nationals
The polycentric approach: host country nationals manage local subsidiaries and parent country nationals hold positions at HQ
The geocentric approach: the best people are sought for key jobs throughout the organization, regardless of their nationality
The most attractive policy is the geocentric approach, however it is not always easy to implement

5. Staffing Policy 3 of 11 Types of Staffing Policies continued
The Ethnocentric Approach: makes sense for firms with an international strategy
Attractive when:
There is a lack of qualified individuals in the host country to fill senior management positions
A unified corporate culture is desired
The firm wants to transfer knowledge of core competencies to the foreign operation
Unattractive because:
It limits the advancement of host country nationals
It can lead to cultural myopia
an ethnocentric policy can lead to cultural myopia, the firm’s failure to understand host-country cultural differences that require different approaches to marketing and management

6. Staffing Policy 4 of 11 Types of Staffing Policies continued
The Polycentric Approach: best suited to firms pursuing a localization strategy
Minimizes the dangers of cultural myopia, but can create a gap between home and host country operations
Attractive because:
The firm is less likely to suffer from cultural myopia
It may be less expensive to implement
Unattractive because:
Host country nationals do not gain foreign experience and cannot progress beyond senior positions in their own subsidiaries
A gap can form between host country and parent managers

7. Staffing Policy 5 of 11 Types of Staffing Policies continued
The Geocentric Approach: makes sense for firms with global or transnational strategies
Consistent with building a strong unifying culture and informal management network
Advantages:
Makes the best use of human resources
Builds a cadre of international executives who feel at home working in a number of different cultures
Disadvantages:
Difficulties with immigration laws
Costs associated with implementing the strategy

8. Table 17.1 Comparison of Staffing Approaches
Strategic Appropriateness
Advantages
Disadvantages
Ethnocentric
International
Overcomes lack of qualified managers in host nation
Unifies culture
Helps transfer core competencies
Produces resentment in host country
Can lead to cultural myopia
Polycentric
Localization
Alleviates cultural myopia
Inexpensive to implement
Limits career mobility
Isolates headquarters from foreign subsidiaries
Geocentric
Global standardization and transnational
Uses human resources efficiently
Helps build strong culture and informal management networks
National immigration policies may limit implementation
Expensive

9. Staffing Policy 6 of 11 Expatriate Managers Expatriate Failure Rates
Ethnocentric and geocentric approaches rely on expatriate managers
Firms that use expatriates must consider the problem of expatriate failure: the premature return of an expatriate manager to the home country
Expatriate Failure Rates
U.S. firms have higher expatriate failure rates than either European or Japanese firms
Research shows that 76% of U.S. MNEs had expatriate failure rates of 10% or more and 7% had failure rates as high as 20%
Failure rates may have dropped, but estimates of the cost of expatriate failure range from $40,000 to $1 million
LO 17-3 Explain why managers may fail to thrive in foreign postings.
Management Focus: Managing Expatriates at Royal Dutch/Shell
Summary
This feature examines how Royal Dutch/Shell, a global petroleum company employing over 100,000 people manages its some 5,500 expatriates. The international mobility of its workforce is an important part of Shell’s overall philosophy. However, in the early 1990s, the company found that it was having an increasingly difficult time recruiting personnel for foreign postings. Discussion of the feature can begin with the following questions:
Suggested Discussion Questions
1. Shell’s commitment to the success of its foreign assignments is demonstrated by its efforts to uncover expatriate concerns. Discuss the results of Shell’s survey to its present and past expatriates and families. How do these results compare to the results of other studies exploring expatriate failure?
Discussion Points: Shell discovered that there were five key issues that were important to its expatriates. First, the division of families that occurred when children were sent to boarding schools while their parents were on foreign assignments, second, the harm done to a spouse’s career during the foreign assignment, third, the lack of consideration for a spouse during the expatriate assignment process, fourth, the failure to provide adequate relocation assistance, and fifth, health issues. Students should recognize the similarities between the results of this study and the results of other studies that have found difficulties with the spouse and family’s ability to adapt to be a central reason for expatriate failure.
2. Shell has implemented several changes to its expatriate program including providing education assistance to families with children, and establishing a Spouse Employment Center to help locate employment opportunities. In your opinion, will these programs “solve” Shell’s problems, or is there still more to be done?
Discussion Points: Most students will suggest that Shell’s programs are a good start to ensuring the success of its expatriate program. They may also note that Shell may well be ahead of the game in even thinking about the situation. Expatriate failure can be very costly for companies, and so taking steps to ensure that expatriates are successful is an important component in a firm’s international strategy, especially for a company like Shell that relies heavily on expatriates.
Teaching Tip: To learn more about Shell, go to the company’s web site at {

10. Staffing Policy 7 of 11 Expatriate Failure Rates continued
The main reasons for expatriate failure for U.S. MNEs
The inability of an expatriate's spouse to adjust
The inability of the manager to adjust
Other family problems
The manager’s personal or emotional maturity
The inability to cope with larger overseas responsibilities

11. Staffing Policy 8 of 11 Expatriate Failure Rates continued
For European firms, only one reason was found to consistently explain expatriate failure
The inability of the manager’s spouse to adjust to a new environment
For Japanese firms, the reasons for failure were
The inability to cope with larger overseas responsibility
Difficulties with the new environment
Personal or emotional problems
A lack of technical competence
The inability of a spouse to adjust
The most striking difference between these lists is that “inability of spouse to adjust” was the top reason for expatriate failure among U.S. and European multinationals but only the fifth reason among Japanese multinationals.

12. Staffing Policy 7 of 11 Expatriate Failure Rates continued
Why is it difficult for spouses to adjust?
Limited network of family/friends (perhaps web communication is helping?)
Language limitations
Immigration limitations and other barriers that may prevent employment. 49% of spouses were employed before the assignment, but only 11% during the assignment.

13. Staffing Policy 9 of 11 Expatriate Selection
Expatriate failure rates can be reduced through better selection procedures
Mendenhall and Oddou identified four dimensions that predict expatriate success
Self-orientation
Others-orientation
Perceptual ability
Cultural toughness

14. Training & Management Development 2 of 4
Training for Expatriate Managers
Cultural training: seeks to foster an appreciation for the host country's culture
Language training: improves the effectiveness of managers and helps them better relate to the foreign country
Practical training: helps the expatriate manager and family ease into day-to-day life of the host country

15. Training & Management Development 3 of 4
Repatriation of Expatriates
Managers need to be prepared for reentry into their home country organization
This involves HRM planning
The role of the employee in the home country at the end of the assignment
How to utilize the knowledge the employee acquired while abroad
Management Focus: Monsanto's Repatriation Program
Summary
This feature describes Monsanto’s repatriation program for its expatriate managers. The program is very sophisticated, and is designed to provide a supportive environment for the company’s managers who are returning from overseas assignments. The feature describes the details of the repatriation program, which is a model program for the repatriation of expatriate managers. Discussion of the feature can begin with the following questions:
Suggested Discussion Questions
1. How does Monsanto’s repatriation program provide an incentive for high-potential managers to accept overseas assignments?
Discussion Points: One question that managers often have when accepting a foreign assignment is how the assignment will help their career. At Monsanto, foreign assignments are clearly linked to business objectives allowing managers to understand what the assignment means to their future. In addition, managers are explicitly told about their position in the firm once the assignment is over, eliminating questions over how the manager might fit in when the foreign assignment ends. Students will note that these steps will help alleviate some of the stress that may come with accepting a foreign assignment.
2. According to the feature, after they return home, Monsanto’s expatriate managers are given the opportunity to showcase their experience to their peers, subordinates, and superiors, in special information exchange. Why is this important? What function does this serve in the repatriation process?
Discussion Points: Students will probably recognize that Monsanto’s program allows expatriates to “show their stuff” to the home country staff. This can help avoid the problem of “out of sight, out of mind” that can make it difficult for expatriates to fit back into the headquarters. The program also allows home country staff to identify new ways the expatriate might be able to fit into the home country structure. Students will probably also note the program offers home country staff the opportunity to learn from the expatriate’s experiences.
3. How does Monsanto’s repatriation program help an expatriate manager adjust his personal life to returning home? Is this an important component of a firm’s repatriation program?
Discussion Points: Studies show that expatriates go through reverse culture shock when they return home. By ensuring that expatriates have a clearly defined role at their job, the adjustment to being home can be easier. Monsanto believes that because personal matters can affect job performance, making an investment in this area benefits the firm.
Teaching Tip: To learn more about Monsanto and its international operations, go to {

16. Training & Management Development 3 of 4
Sent Abroad? Plan Your Return Now --- A hard landing can await an expatriate manager headed home; some firms help soften the re-entry, Lublin, Joann S., Wall Street Journal, 06 Sep 2017 Taking an overseas assignment can vault your management career into the next level and test your skills in unfamiliar territory. But coming home can be the hardest part… People who have successfully made the return trip credit advance planning, disciplined networking and sponsors back home. To better manage the transition, some companies work to plan managers' return roles even before they leave. But some experts warn it's still largely up to the individual. Cosmetics giant L'Oreal SA invites repatriated U.S. staffers to go through orientation and integration programs as if they were brand-new hires. The idea is "to feel reintegrated into the company," says Jacob Bonk, a human-resources executive for its U.S. unit in New York… Mr. Black suggests finding out which leadership skills your employer wants you to develop during a foreign stint. "If your company does not know how they will utilize you or your hard-won international experience before you leave, the odds they will miraculously discover the answer just before your return are not good," he says. To ensure that Monsanto Co. will benefit from skills developed abroad, the seed and pesticide maker identifies potential return positions before people move overseas, according to Bridget Walsh, a global talent mobility manager. Monsanto says its approach has lowered attrition; some 7% of repatriates leave within two years, down from approximately 13.5% a decade ago, according to the company.
Management Focus: Monsanto's Repatriation Program
Summary
This feature describes Monsanto’s repatriation program for its expatriate managers. The program is very sophisticated, and is designed to provide a supportive environment for the company’s managers who are returning from overseas assignments. The feature describes the details of the repatriation program, which is a model program for the repatriation of expatriate managers. Discussion of the feature can begin with the following questions:
Suggested Discussion Questions
1. How does Monsanto’s repatriation program provide an incentive for high-potential managers to accept overseas assignments?
Discussion Points: One question that managers often have when accepting a foreign assignment is how the assignment will help their career. At Monsanto, foreign assignments are clearly linked to business objectives allowing managers to understand what the assignment means to their future. In addition, managers are explicitly told about their position in the firm once the assignment is over, eliminating questions over how the manager might fit in when the foreign assignment ends. Students will note that these steps will help alleviate some of the stress that may come with accepting a foreign assignment.
2. According to the feature, after they return home, Monsanto’s expatriate managers are given the opportunity to showcase their experience to their peers, subordinates, and superiors, in special information exchange. Why is this important? What function does this serve in the repatriation process?
Discussion Points: Students will probably recognize that Monsanto’s program allows expatriates to “show their stuff” to the home country staff. This can help avoid the problem of “out of sight, out of mind” that can make it difficult for expatriates to fit back into the headquarters. The program also allows home country staff to identify new ways the expatriate might be able to fit into the home country structure. Students will probably also note the program offers home country staff the opportunity to learn from the expatriate’s experiences.
3. How does Monsanto’s repatriation program help an expatriate manager adjust his personal life to returning home? Is this an important component of a firm’s repatriation program?
Discussion Points: Studies show that expatriates go through reverse culture shock when they return home. By ensuring that expatriates have a clearly defined role at their job, the adjustment to being home can be easier. Monsanto believes that because personal matters can affect job performance, making an investment in this area benefits the firm.
Teaching Tip: To learn more about Monsanto and its international operations, go to {

17. Performance Appraisal 1 of 2
Performance appraisal systems are used to evaluate employees
These systems are important components in the firm’s control system
Performance Appraisal Problems
Unintentional bias
Host country managers can be biased towards their own frame of reference
Tend to rely on hard data: productivity, profitability, market share
Due to such biases, many expatriate managers believe that headquarters management evaluates them unfairly and does not fully appreciate the value of their skills and experience. This could be one reason many expatriates believe a foreign posting does not benefit their careers

18. Performance Appraisal 2 of 2
Guidelines for Performance Appraisal
More weight should be given to an on-site manager's appraisal than to an off-site manager's appraisal
A former expatriate who has served in the same location should be involved in the appraisal process
Home office managers should be consulted before an on- site manager completes a formal termination evaluation

19. Compensation 2 of 5 National Differences in Compensation
Firms using a geocentric policy that want to develop an international cadre of managers must pay executives the same salary regardless of their country of origin
If a firm does not equalize pay, it could create resentment among foreign nationals
A recent Mercer Management Consulting survey showed that some 85% of companies in the survey have a global compensation strategy in place
Management Focus: Global Compensation Practices at McDonald’s
Summary
This feature explores McDonald’s efforts to develop a global compensation and performance appraisal strategy. McDonald’s, which has some 400,000 managers and senior employees working in 118 different countries wants its new program to provide some standardization of compensation and performance appraisal for the firm, but at the same time, allow subsidiaries to tailor the program to local market conditions. Discussion of the feature can begin with the following questions:
Suggested Discussion Questions
1. What does McDonald’s hope to gain from having a global compensation and performance appraisal system in place?
Discussion Points: With hundreds of thousands of managers and senior employees working in more than 100 countries around the world, compensation and performance appraisal at McDonald’s has the potential to become a nightmare of inconsistencies and complexities. To try to reduce the potential for such a situation, McDonald’s began to implement a global compensation and performance appraisal system in The new system was developed after extensive consultation with managers all over the world, and thus reflects differing perspectives on the process. McDonald’s hope that its new program will give the firm greater control, and at the same time, provide subsidiaries with the tools necessary to develop fair policies. Under the new program, performance and compensation for an individual is based in part on how well local units meet their self-selected goals as well as their individual performance.
2. How does the compensation and performance appraisal system introduced at McDonald’s allow managers to take local market differences into account? Why is this type of approach important to employees?
Discussion Points: The compensation and performance appraisal system introduced recently at McDonald’s was specifically designed to allow local market conditions to be considered. So, for example, rather than simply setting a specific performance appraisal scales, the company has issued general guidelines that allow local managers some flexibility. Similarly, McDonald’s issues a set of business principles to focus on that each local subsidiary then tailors to the conditions in its market. Employees seem to like the new approach. Turnover is down, and surveys show that employees feel the new program is fair and reflects local market conditions.
Teaching Tip: To learn more about McDonald’s global operations, go to {

20. Compensation 3 of 5 Expatriate Pay
The most common approach to expatriate pay is the balance sheet approach
Equalizes purchasing power across countries so employees can have the same standard of living in the foreign country as they do at home
Typical compensation packages include
Base salary
A foreign service premium
Allowances of various types
Benefits
Tax differentials

21. Compensation 4 of 5 Expatriate Pay continued
Base Salary: normally in the same range as the base salary for a similar position in the home country
Foreign Service Premium: extra pay the expatriate receives for working outside his country of origin
Offered as an inducement to accept foreign postings
Allowances:
Hardship allowances
Housing allowances
Cost-of-living allowances
Education allowances
Gardner: See key findings of the Expat Explorer

22. International Labor Relations 1 of 3
The Concerns of Organized Labor
Multinationals can counter union bargaining power by threatening to move production to another country
Multinationals will keep highly skilled tasks in the home country and farm out only low skilled tasks
Imported employment practices and contractual agreements will reduce its influence and power
LO Understand how organized labor can influence strategic choices in international business firms.

23. International Labor Relations 2 of 3
The Strategy of Organized Labor
Trying to set-up their own international organizations
Lobbying for national legislation to restrict multinationals
Trying to achieve regulations of multinationals through international organization such as the United Nations
So far, these efforts have had only limited success
Although national unions may want to cooperate, they also compete with each other to attract investment from international businesses and hence jobs for their members. A further impediment to cooperation has been the wide variation in union structure. Organized labor has also met with only limited success in its efforts to get national and international bodies to regulate multinationals

24. International Labor Relations 2 of 3
Although national unions may want to cooperate, they also compete with each other to attract investment from international businesses and hence jobs for their members. A further impediment to cooperation has been the wide variation in union structure. Organized labor has also met with only limited success in its efforts to get national and international bodies to regulate multinationals

25. International Labor Relations 3 of 3
Approaches to Labor Relations
Traditionally, most labor relations have been decentralized to individual subsidiaries
The trend is toward greater centralized control
Some firms threaten unions with moving production in order to limit wage increases
In addition, many firms are realizing how work is organized within a plant can be a source of competitive advantage

26. Summary In this chapter we have
Summarized the strategic role of human resource management in the international business.
Identified the pros and cons of different approaches to staffing policy in the international business.
Explained why managers may fail to thrive in foreign postings.
Recognized how management development and training programs can increase the value of human capital in the international business firm.
Explained how and why performance appraisal systems might vary across nations.
Understood how and why compensation systems might vary across nations.
Understood how organized labor can influence strategic choices in international business firms.