1. CHAPTER 15 Managing Human Resources Globally
fundamentals of Human Resource Management 4th edition by R.A. Noe, J.R. Hollenbeck, B. Gerhart, and P.M. Wright
CHAPTER 15
Managing Human Resources Globally
This chapter discusses the HR issues that organizations must address in a world of global competition.

2. What Do I Need to Know?
Summarize how the growth in international business activity affects human resource management.
Identify the factors that most strongly influence HRM in international markets.
Discuss how differences among countries affect HR planning at organizations with international operations.
After reading and discussing this chapter, you should be able to:

3. What Do I Need to Know? (continued)
Describe how companies select and train human resources in a global labor market.
Discuss challenges related to compensating employees from other countries.
Explain how employers prepare managers for international assignments and for their return home.
After reading and discussing this chapter, you should be able to:

4. HRM in a Global Environment
The environment in which organizations operate is rapidly becoming a global one.
Foreign countries can provide a business with new markets.
Companies set up operations overseas because of lower labor costs.
Technology makes it easier for companies to spread work around the globe.

5. As companies in the United States and Britain cut software jobs and outsource to other countries in order to drive down costs, countries such as India continue to see employment rise.

6. HRM in a Global Environment (continued)
Global activities are simplified and encouraged by trade agreements among nations.
As these trends and arrangements encourage international trade, they increase and change demands on human resource management.
Organizations need employees who understand the customers and suppliers in foreign countries.
Organizations need to understand the laws and customs that apply to employees in other countries.
A variety of international activities require managers to understand HRM practices prevalent in global markets.

7. Employees in an International Workforce
Parent-country national – employee who was born and works in the country in which an organization’s headquarters is located.
Host-country national – employee who is a citizen of the country (other than parent country) in which an organization operates a facility.
Third-country national – employee who is a citizen of a country that is neither the parent country nor the host country of the employer.
When organizations operate globally, their employees are very likely to be citizens of more than one country. Employees may come from the employer’s parent country, a host country, or a third country

8. Employees in an International Workforce (continued)
When organizations operate overseas, they hire a combination of parent-country nationals, host-country nationals, or third- country nationals.
Expatriates – employees assigned to work in another country.
The extent to which organizations use parent-country, host-country, or third-country nationals varies.

9. Figure 15.1: Levels of Global Participation
Just as there are different ways for employees to participate in international business so there are different ways for employers to do business globally, ranging from simply shipping products to customers in other countries to transforming the organization into a truly global one with operations, employees, and customers in many countries.
Figure 15.1 shows the major levels of global participation.

10. Employers in the Global Marketplace
International organization – an organization that sets up one or a few facilities in one or a few foreign countries.
Multinational company – an organization that builds facilities in a number of different countries in an effort to minimize production and distribution costs.
Global organization – an organization that chooses to locate a facility based on the ability to effectively, efficiently, and flexibly produce a product or service using cultural differences as an advantage.

11. Test Your Knowledge
Hans works for a company who’s headquartered in France and has foreign operations in Germany, only. Hans is a citizen of the Netherlands. Which of the following is most likely true?
Hans works for a domestic company and is from the parent country.
Hans works for a multinational company and is from the host country.
Hans works for a global company and is from a third country.
Hans works for an international company and is from a third country.
Hans works for a company who’s headquartered in France and has foreign operations in Germany, only. Hans is a citizen of the Netherlands. Which of the following is true?
Hans works for a domestic company and is from the parent country.
Hans works for a multinational company and is from the host country.
Hans works for a global company and is from a third country.
Hans works for an international company and is from a third country.
Answer: D

12. Transnational HRM System
makes decisions from a global perspective
includes managers from many countries
based on ideas contributed by people representing a variety of cultures
Decisions that are the outcome of a transnational HRM system balance uniformity with flexibility.
A global organization needs a transnational HRM system that features decision making from a global perspective, managers from many countries, and ideas contributed by people from many cultures..

13. Factors Affecting HRM in International Markets
Global HRM
Culture
Education
Economic Systems
Political-Legal Systems
Whatever their level of global participation, organizations that operate in more than one country must recognize that the countries are not identical and differ in terms of four key factors:
Culture
Education
Economic systems
Political systems

14. Culture
Culture – a community’s set of shared assumptions about how the world works and what ideals are worth striving for.
Culture can greatly affect a country’s laws.
Culture influences what people value, so it affects people’s economic systems and efforts to invest in education.
Culture often determines the effectiveness of various HRM practices.
The most important influence on international HRM is the culture of the country in which a facility is located.

15. Culture (continued)
Cultural characteristics influence the ways members of an organization behave toward one another as well as their attitudes toward various HRM practices.
Cultures strongly influence the appropriateness of HRM practices.
Cultural differences can affect how people communicate and how they coordinate their activities.

16. Hofstede’s Five Dimensions of Culture
1. Individualism/Collectivism
Describes the strength of the relation between an individual and other individuals in the society.
2. Power Distance
Concerns the way the culture deals with unequal distribution of power and defines the amount of inequality that is normal.
3. Uncertainty Avoidance
Describes how cultures handle the fact that the future is unpredictable.
4. Masculinity/Femininity
The emphasis a culture places on practices or qualities that have traditionally been considered masculine or feminine.
5. Long-term/Short-term Orientation
Suggests whether the focus of cultural values is on the future (long term) or the past and present (short term).
Such cultural characteristics as these influence the ways members of an organization behave toward one another, as well as their attitudes toward various HRM practices.

17. In Taiwan, a country that is high in collectivism, coworkers consider themselves more as group members instead of individuals.

18. Culture (continued)
Organizations must prepare managers to recognize and handle cultural differences.
Recruit managers with knowledge of other cultures
Provide training
For expatriate assignments, organizations may need to conduct an extensive selection process to identify individuals who can adapt to new environments.
The challenges presented by culture have some impacts on HRM.

19. Education and Skill Levels
Companies with foreign operations locate in countries where they can find suitable employees.
The educations and skill levels of a country’s labor force affect how and the extent to which companies want to operate there.
In countries with a poorly educated population, companies will limit their activities to low-skill, low-wage jobs.
Countries also differ in the degree to which their labor markets include people with education and skills of value to employers.

20. Economic System
The economic system provides many of the incentives or disincentives for developing the value of the labor force.
In developed countries with great wealth, labor costs are relatively high. This impacts compensation and staffing practices.
Income tax differences between countries make pay structures more complicated when they cross national boundaries.
A country’s economic system, whether capitalist or socialist, as well as the government’s involvement in the economy through taxes or compensation, price controls, and other activities, influences HRM practices in a number of ways.

21. Political-Legal System
The country’s laws often dictate the requirements for HRM practices: training, compensation, hiring, firing, and layoffs.
An organization that expands internationally must gain expertise in the host country’s legal requirements and ways of dealing with its legal system.
Organizations will hire one or more host- country nationals to help in the process.
A country’s political-legal system – its government, laws, and regulations – strongly impinges on human resource management.

22. Human Resource Planning in a Global Economy
Human resource planning involves decisions about where and how many employees are needed for each international facility.
Decisions about where to locate include considerations such as the cost and availability of qualified workers.
These considerations must be weighed against financial and operational requirements.
Other location decisions involve outsourcing.
As economic and technological change creates a global environment for organizations, human resource planning is involved in decisions about participating as an exporter or as an international, multinational, or global company. Even purely domestic companies may draw talent from the international labor market.
When organizations decide to operate internationally or globally, human resource planning involves decisions about where and how many employees are needed for each international facility.

23. Criteria for Selection of Employees for Foreign Assignments
Competency in the employee’s area of expertise
Ability to communicate verbally and nonverbally in the foreign country
Flexibility, tolerance of ambiguity, and sensitivity to cultural differences
Motivation to succeed and enjoyment of challenges
Willingness to learn about the foreign country’s culture, language, and customs
Support from family members
Whether the organization is hiring immigrants or selecting parent-country or third-country nationals for foreign assignments, some basic principles of selection apply.
Selection for foreign assignments should reflect criteria that have been associated with success in working overseas. These are listed on this slide.

24. Ask students: “What would persuade you to take a foreign assignment?”
Qualities associated with success in foreign assignments are the ability to communicate in the foreign country, flexibility, enjoying a challenging situation, and support from family members.

25. Figure 15.2: Emotional Cycle Associated with a Foreign Assignment
The emotions that accompany an overseas assignment tend to follow in a cycle like that in Figure 15.2.
Culture Shock: Disillusionment and discomfort that occur during the process of adjusting to a new culture.

26. Test Your Knowledge
Rachel, an expatriate working in Japan is feeling very uncomfortable in her surroundings. She often feels as if she has said the wrong thing. Rachel is most likely in which emotional stage of expatriation:
Honeymoon
Culture shock
Learning
Adjustment
Rachel, an expatriate working in Japan is feeling very uncomfortable in her surroundings. She often feels as if she has said the wrong thing, Rachel is most likely in which emotional stage of expatriation:
Honeymoon
Culture shock
Learning
Adjustment
Answer: B
Honeymoon – period of fascination and euphoria as the employee enjoys the novelty of the new culture
Culture shock– the disillusionment and unfreezing of ideas that occur during the process of adjusting to a new culture.
Learning – continued learning about the host country’s culture, language increase their comfort level and their mood
Adjustment – stage where the expatriate accepts and enjoys the host country’s culture

27. Training and Developing a Global Workforce
Training and development programs should be effective for all participating employees, regardless of their country of origin.
When organizations hire employees to work in a foreign country or transfer them to another country, the employer needs to provide the employees with training in how to handle the challenges associated with working in a foreign country.
In an organization whose employees come from more than one country, two special challenges arise with respect to training and development. They are discussed on this slide.

28. Table 15.1: Effects of Culture on Training Design
The plan for training program must consider international differences among trainees.
Table 15.1 provides examples of how cultural characteristics can affect training design.

29. Test Your Knowledge
Employees from a high-power distance culture would feel most comfortable in a training class that:
Involved several group activities with classmates
The teacher was the expert and responded definitively to all questions
The teacher acted as a facilitator of group discussion
None of the above
Employees from a high-power distance culture would feel most comfortable in a training class that:
Involved several group activities with classmates
The teacher was the expert and responded definitively to all questions
The teacher acted as a facilitator of group discussion
None of the above
Answer: B

30. Delivering Training in Other Countries
Know your goals – clarify what overseas training is supposed to achieve.
Consider international differences among trainees when developing the training plan.
Keep an eye on quality – overseas trainers should meet the same quality standards as training at headquarters.
Be clear about standards for confidentiality and intellectual property.
Know the local laws that affect training programs.
Training professionals offer the following ideas for preparing and delivering training programs overseas:
Know your goals – clarify what the overseas training is supposed to achieve.
The training program must consider international differences among trainees.
Keep an eye on quality – Your overseas trainers should meet the same quality standards you have at headquarters.
Be clear about standards for confidentiality and intellectual property
Know the local laws that affect training programs
For details, see the “HR How To” box on page 448 in the text.

31. Foreign Assignments
Would you consider taking a foreign assignment for a 6 months to 1 year duration?
A = Yes B = No
Before you took on a foreign assignment, what would you want to know?
With the globalization of business, foreign assignments have become more regular. It used to be that people who were most available or technically qualified would be asked to take these assignments. However, more and more companies are paying attention to non-technical factors that predict success in foreign roles as it is very expensive to have someone make the move.
Would you consider taking a foreign assignment for a 6 months to 1 year duration?
A=Yes, B=No
If you did take one you would be called an expatriate.
Because of the cost and criticality of success of foreign assignments many researchers have studied what competencies are important for such a role and effort has been placed in extensive preparation of expatriates.
Before you took on a foreign assignment, what would you want to know?
Use student’s answers to lead into the preparation stages on next slide.

32. Cross-Cultural Preparation
This is training to prepare employees and their family members for an assignment in a foreign country.
The training covers all three phases of an international assignment:
Preparation for departure
The assignment itself
Preparation for the return home
When an organization selects an employee for a position in a foreign country, it must prepare the employee for the foreign assignment. This kind of training is called cross-cultural preparation. It often includes family members who will accompany the employee on the assignment.

33. Performance Management Across National Boundaries
When establishing performance management methods in other countries, organizations have to consider:
Legal requirements
Local business practices
National cultures
Differences may include:
Which behaviors are rated
How and the extent to which performance is measured
Who performs the rating
How feedback is required
The general principles of performance management may apply in most countries, but the specific methods that work in one country may fail in another.

34. Compensating an International Workforce
Market pay structures can differ substantially across countries in terms of both pay level and the relative worth of jobs.
This creates a dilemma for global companies:
Should pay levels and differences reflect what workers are used to in their own countries?
Should pay levels and differences reflect the earnings of colleagues in the country of the facility, or earnings at the company headquarters?
Compensation decisions about pay structure, incentive pay, and employee benefits become more complex when an organization has an international workforce.

35. Figure 15.3: Earnings in Selected Occupations in Three Countries
As Figure 15.3 shows, market pay structures can differ substantially across countries in terms of both pay level and relative worth of jobs.

36. Compensating an International Workforce (continued)
Compensation decisions affect a company’s costs and ability to compete.
The challenge of competing with organizations in low-wage countries can be very difficult.
Decisions about benefits must take into account the laws of each country involved, as well as employees’ expectations and values in those countries.

37. Figure 15.4: Average Hours Worked in Selected Countries
Paid vacation tends to be more generous in Western Europe than in the United States. Figure 15.4 compares the number of hours the average employee works in various countries. Of these countries, only in South Korea and Poland do workers put in more hours than U.S. workers. In the other countries, the norm is to work fewer hours than a U.S. worker over the course of a year.

38. International Labor Relations
Labor relations on an international scale involves differences in laws, attitudes, economic systems, and differences in negotiation styles.
Organizations establish overall policies and goals for labor relations, overseeing labor agreements, and monitoring labor performance.
The day-to-day decisions about labor relations are usually handled by each foreign subsidiary.
Companies that operate across national boundaries often need to work with unions in more than one country.

39. Managing Expatriates: Selecting Expatriate Managers
Expatriate managers need technical competence in the area of operations.
In addition, many other skills are necessary to be successful in an overseas assignment:
Ability to maintain a positive self-image and feeling of well-being
Ability to foster relationships with host-country nationals
Ability to perceive and evaluate the host country’s environment accurately
Most international organizations assign managers to foreign posts. These assignments give rise to significant human resource challenges:
Selecting managers for these assignments
Preparing them
Compensating them
Helping them adjust to a return home
The same kinds of HRM principles that apply to domestic positions can help organizations avoid mistakes in managing expatriates:
Planning and goal setting
Selection aimed at achieving the HR goals
Performance management that includes evaluation of whether the overseas assignment delivered value relative to the costs involved

40. Topics for Assessing Candidates for Overseas Assignments
Motivation
Health
Language ability
Family Considerations
Resourcefulness
Adaptability
Career Planning
Financial
To assess candidates’ ability to adapt to a new environment, interviews should address topics such as the one’s listed in Table 15.2 on pages in the text.
The interviewer should be certain to give candidates a clear and complete preview of the assignment and the host country culture. This helps the candidate evaluate the assignment and consider it in terms of his or her family situation, so the employer does not violate the employee’s privacy.

41. Managing Expatriates: Preparing Expatriates
Pre-assignment site visit
Job orientation
Country orientation
Culture orientation
Language training
Compensation / benefits / taxes counseling
Housing counseling
Health care / schools / shopping / recreation counseling
Counseling by returning expatriates
Local sponsorship from host country
Once the organization has selected a manager for an overseas assignment, it is necessary to prepare that person through training and development. Because expatriate success depends so much on the entire family’s adjustment, the employee’s spouse should be included in the preparation activities.

42. Figure 15.5: Impressions of Americans – Comments by Visitors to the United States
The general purpose of cross-cultural training is to create an appreciation of the host country’s culture so expatriates can behave appropriately. Paradoxically, this requires developing greater awareness of one’s own culture, so that the expatriate manager can recognize differences and similarities between the cultures and, perhaps, home-culture biases.
Consider, for example, the statements in Figure 15.5, which are comments made by visitors to the United States.
Ask Students: “Do you think these observations accurately describe U.S. culture?”

43. Compensating Expatriates
Balance sheet approach – this approach adjusts the manager’s compensation so that it gives the manager the same standard of living as in the home country plus extra pay for the inconvenience of locating overseas.
This approach involves an effort by the global organization to ensure that its expatriates are “made whole.”
One of the greatest challenges of managing expatriates is determining the compensation package.

44. Figure 15.6: The Balance Sheet for Determining Expatriate Compensation
As shown in Figure 15.6, the balance sheet approach begins by determining the purchasing power of compensation for the same type of job in the manager’s own country – that is, how much a person can buy, after taxes, in terms of housing, goods and services, and a reserve for savings. Next, this amount is compared with the cost of these same expenses in the foreign country. In Figure 15.6, the greater size of the second column means the costs for a similar standard of living in the foreign country are much higher in every category except the reserve amount. This situation would be likely in one of the cities identified in the chart on the next slide. For the expatriate in this situation, the employer would pay the additional costs, as shown by the third column. Finally, the expatriate receives additional purchasing power from premiums and incentives.

45. Toyko Tops Priciest Cities
For details, see the “Did You Know” box on page 458 in the text.
Expatriates spend more for housing, transportation, food, clothing, and other living expenses in Tokyo than in any other major city.

46. Compensating Expatriates (continued)
After setting the total pay, the organization divides this amount into the four components of the total pay package:
Base salary
Tax equalization allowance
Benefits
Allowances

47. Figure 15.7: International Assignment Allowance Form
Figure 15.7 is an example of a summary sheet for an expatriate manager’s compensation package, showing a variety of allowances.
Allowances can include:
Cost-of-living
Housing
Dependent Education
Relocation
Automobile

48. Helping Expatriates Return Home
Repatriation – the process of preparing expatriates to return home from foreign assignment.
Communication: the expatriate receives information and recognizes changes at home while abroad
Validation: giving the expatriate recognition for the overseas service when this person returns home.
As the expatriate’s assignment nears its end, the human resource department faces a final challenge: helping the expatriate make the transition back to his or her home country.
The process of preparing expatriates to return home from a foreign assignment is called repatriation.

49. Summary
More and more companies are entering international markets by exporting and operating foreign facilities.
Organizations therefore need employees who understand customers and suppliers in other countries.
They need to understand local laws and customs and be able to adapt their plans to local situations.
To do this organizations may hire a combination of parent-country, host-country, and third-country nationals.

50. Summary (continued)
A global organization needs a transnational HRM system, which:
Makes decisions from a global perspective
Includes managers from many countries
Is based on ideas contributed by people representing a variety of cultures
The most important influence is the culture of each market – its set of shared assumptions about how the world works and what ideals are worth striving for.

51. Summary
Another influence on international HRM is the foreign country’s political-legal system.
A country’s economic system, as well as the government’s involvement in the economy, is a strong factor determining HRM practices.
HR planning involves decisions about where and how many employees are needed for each international facility.
Most foreign operations positions are filled with host-country nationals.

52. Summary (continued)
Foreign positions are also filled with parent-country and third-country nationals.
Pay structures can differ substantially among countries in terms of pay level and the relative worth of jobs.
Laws may dictate differences in benefits packages, and the value of benefits will differ if a country requires them or makes them a government service.

53. Summary (continued)
The organization must prepare the manager selected for an overseas assignment.
Cross-cultural training for the assignment as well as preparation for repatriation after the assignment are critical success factors.
Communication of changes at home and validation of a job well done abroad help the expatriate through the repatriation process.