1. International Business Environment
BBK3363 |
International Business Environment
by Dr Khairul Anuar
L4: Global Human Resource Management

2. Case: Molex
World’s second largest manufacturer of electronic components
50 manufacturing plants, 21 countries
HRM viewed as most localized of all the functions
Hires experienced, educated foreign nationals in the US for foreign postings
Moves people around the world
In house management development programs

3. Human Resource Management
It refers to the activities an organization carries out to use its human resources effectively.
These activities include:
Determine firm’s HR strategy
Staffing
Performance Evaluation
Management Development
Compensation
Labour relations
Ch 1

4. Importance of HRM Related to the strategy of the firm.
Influence on the character, development, quality and productivity of firm’s HR
Helps firms to achieve strategic goal of reducing cost of value creation
Helps firms add value by serving customer needs better.
Ch 1

5. How different is Global HRM?
Several key factors make Global HRM different from domestic management:
Different labour markets
Mobility problems: legal, economic, cultural barriers
Different management styles
Varied compensation practices
Labour laws.
Ch 1

6. Key Issues How to staff key management posts in the Co.?
How to develop managers, who can do business in different countries?
How to compensate people in different nations?
How to evaluate the performance of managers in different countries?
Expatriate managers
Ch 1

7. Strategic Role of Global HRM
Strategy is implemented through organizational architecture.
Right people at right postings.
Effective training to acquire right skill set to help perform jobs effectively.
Behaviour, congruent with the desired organizational culture.
Compensation must create incentives for actions inline with the strategy.
Performance appraisal to measure the behaviour, firm wants to encourage.
Ch 1

8. Key Issues Staffing Policy Training and Management Development
Performance Appraisal
Compensation
Ch 1

9. Staffing Policy
Staffing policy is concerned with the selection of employees for particular jobs.
Selecting individuals who have the skill to do a particular job.
Tool for developing and promoting the desired corporate culture (norms & value system) of the firm.
Ch 1

10. Types of staffing policies
There are three types of staffing policies in IB:
Ethnocentric approach
Polycentric approach
Geocentric approach
Ch 1

11. Ethnocentric approach
All key management positions are filled by parent – country nationals.
One’s own culture is superior
Overlooks important cultural factors
Host country lacks qualified professionals
Maintain a unified corporate culture
Create value by transferring core competencies
Limits advancement opportunities for host country nationals
Leads to resentment, lower productivity, and high turnover in employees.
E.g.: Procter & Gamble, Toyota and Matushita
Ch 1

12. Ethnocentric approach
Advantages:
Overcomes lack of qualified managers in host nation
Unified culture
Helps transfer core competencies (and skills back)
Disadvantages:
Produces resentment in host country
Can lead to cultural myopia
Ch 1

13. Polycentric approach Decentralized control
Business Units in different countries have autonomy from home office, like a local Co.
No standard forms or procedures
Recruits host country nationals to manage subsidiaries, while parent country nationals occupy key positions at corporate HQ.
Firm is less likely to suffer from cultural myopia.
Less expensive to implement
Host country nationals have limited opportunities to gain experience outside their own countries
Gap due to language barriers, cultural differences may isolate corporate HQ from foreign subsidieries.
Ch 1

14. Polycentric approach Advantages: Disadvantages:
Alleviates cultural myopia.
Inexpensive to implement
Helps transfer core competencies
Disadvantages:
Limits opportunity to gain experience of host-country nationals outside their own country.
Can create gap between home-and host-country operations
Ch 1

15. Geocentric approach
It seeks the best people for key jobs, throughout the organization, regardless of nationality.
Hybrid of Ethno and Poly
Based on informed knowledge of home and host countries.
Enables firms to make best use of its HR
Helps the firm to build a cadre of international executives, who feel at home working in No. of countries.
Helps building a strong unifying corporate culture and informal management network.
Reduces cultural myopia
Enhance local responsiveness
Ch 1

16. Geocentric approach Advantages: Disadvantages:
Enables the firm to make best use of its human resources
Equips executives to work in a number of cultures
Helps build strong unifying culture and informal management network
Disadvantages:
National immigration policies may limit implementation
Expensive to implement due to training and relocation
Compensation structure can be a problem.
Ch 1

17. Training and Management Development
After selection, the next step is training the manager to do the specific job.
Management development plan (MDP) is a broader concept, it is intended to develop a manager’s skills over her career in the firm, e.g., sending managers on various foreign postings over years to build her cross cultural sensitivity and experience.
To enhance management and leadership skills of executives.
MDP have a strategic purpose, and helps reinforce desired culture of the firm by creating an informal network.
Ch 1

18. Types of training
Cultural training – understanding the culture of host country, enhance effectiveness, familiarization trip before formal transfer.
Language training – manager’s ability to interact, help build rapport and improve manager’s effectiveness.
Practical training – adjust to day to day life in host country, establish a routine, successful adaptation, support network of friends
Ch 1

19. Performance Appraisal
These are the systems used to evaluate the performance of managers against some criteria, that the firm judges to be important for the implementation of strategy and attainment of competitive advantage.
Important elements of control system.
2 groups evaluate the performance of Expatriates, - Host country managers and home country managers.
Biasness by cultural frame of reference and expectations
Unfair evaluation
Due to proximity, onsite manager should evaluate soft variables of expatriate’s performance.
Consultation of home country manager to balance out.
Ch 1

20. Compensation National differences in compensation
Payments according to global standards or country specific standards.
Issues in compensation practices:
How compensation should be adjusted to reflect national differences in economic circumstances and practices?
How should the expatriate managers be paid?
Ch 1

21. Expatriate Managers
Expatriates are citizens of one country, who are working in another country.
Inpatriates is a subset of expatriates who are citizens of a foreign country, working in the home country of their multinational employer. (e.g., citizen of India, who moves to U.S to work for Microsoft)
Ch 1

22. Expatriate selection
Four dimensions that predict success in a foreign posting:
Self orientation – self esteem, self confidence, mental well being, adapt their interest in food, sports, music and hobbies.
Others orientation – ability to interact with host country’s nationals, relationship development and willingness to communicate by learning local language.
Perceptual ability – to understand the particular behaviour of people in host countries, empathise.
Cultural toughness – relationship between country of assignment and how well an expatriate adjusts
Ch 1

23. Expatriate Pay
Acc. To “Balance Sheet Approach”, it equalizes purchasing power across countries so employees can enjoy the same living standard in their foreign posting, as the enjoyed at home.
It also provides financial incentives to offset qualitative differences between assignment locations.
Ch 1

24. 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
European multinationals
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.

25. Expatriate Pay - Balance Sheet Approach

26. Components of a typical compensation package
Base Salary – in same range as base salary for similar position in home country.
Foreign Services Premium – extra pay to work outside country of origin. Offered as inducements to accept foreign postings. Compensates for living in an unfamiliar country.
Allowances –
Hardship allowance – difficult location, where basic amenities like health care schools, etc are deficient.
Housing allowance – to afford same quality of housing
Cost of living allowance – maintain std. of living
Education Allowance – expatriate’s children receive same std. of education as in home country
Taxation
Benefits – Medical, pension, etc.
Ch 1