1. Managing Human Resources in an International Context
Chapter 16
Managing Human Resources
in an International Context
McGraw-Hill/Irwin
Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

2. The Global Mind-set A prerequisite for global industry dominance
“Combines an openness to and an awareness of diversity across markets and cultures with a propensity and ability to synthesize across this diversity”
Global managers are open minded, respect how different countries do things, have imagination and appreciation for them, push the limits of culture, and never just accept what people say.
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3. Recruitment and Selection of Employees
Ethnocentric Staffing Policy
“related to hiring and promoting employees on the basis of the parent company’s home-country frame of reference”
Polycentric Staffing Policy
“related to hiring and promoting employees on he basis of the specific local context in which the subsidiary operates”
Regiocentric Staffing Policy
“related to hiring and promoting employees on the basis of the specific regional context in which the subsidiary operates”
Geocentric Staffing Policy
“related to hiring and promoting employees on the basis of ability and expertise without considering race or citizenship”
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4. Recruitment and Selection of Employees
Ethnocentric Staffing Policy
International Strategic Orientation
Decisions made at headquarters with home country frame of reference
Use Parent Country Nationals (PCNs) in key expatriate foreign management & technical positions
Issues:
Expatriates have difficulty with cultural bias toward host country
Specialized teams need to be sent to deal with specific problems
Prepares Managers for higher level positions at headquarters
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5. Recruitment and Selection of Employees
Polycentric Staffing Policy
Multidomestic Strategic Orientation
HR policies created at local level for local operations context
Some governments demand employment at all levels to reflect racial composition of the society
Issues:
Familiarity with local customs, culture & language
Hiring costs lower
Training costs may be high
Unfamiliar with ICs home country and corporate culture, policies and culture
Best people may be pirated by other firms
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6. Recruitment and Selection of Employees
Regiocentric Staffing Policy
Regional Strategic Orientation
Regional employees selected for key positions from HCNs and TCNs
Issues:
Problems of using home or host country nationals can be avoided
An executive adapting to one language and culture make adapting to another easier
Potential cost savings
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7. Recruitment and Selection of Employees
Geocentric Staffing Policy
Transnational Strategic Orientation
Find the best person for the job regardless of national origin
Capitalize on advantages of each staffing policy
Issues:
HRM strategy must be consistent across all subsidiaries
HRM borrows best practices from wherever found
HRM does not show any preferences to Headquarters practices
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8. Training and Development
Home- or Parent-County National (PCNs)
Trained in home country before being sent abroad
Host-Country National (HCNs)
HNCs hired in home country
HNCs hired in host country
Third Country National (TCNs)
Host-country attitudes
Generalizations about TCNs are difficult
More common as more companies take a geocentric view
International agencies are a source for TCNs
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9. Expatriates Expatriate Inpatriates Flexpatriates Why use expatriates?
LO4
Expatriates
Expatriate
“a person living outside his/her country of citizenship”
Inpatriates
“Employees hired in the host country”
Flexpatriates
“home or third-country employees on short term assignments”
Why use expatriates?
Bring technical or managerial skills that might be scarce in host country
Transfer and install companywide systems/cultures
Trusted connection for oversight and control of foreign operations
Develop skills/experiences for promotion
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10. Culture Shock Culture Shock Symptoms: Reverse Culture Shock
LO4
Culture Shock
Culture Shock
“anxiety people often experience when they move from a culture they are familiar with to one that is entirely different”
Symptoms:
Lack of direction from not know how to do things in new culture
Feelings/emotional discomfort
Disorientation or confusion
Reverse Culture Shock
Occurs when returning home
Three dimensions of cross-cultural adjustment:
Work Context
job clarity, role conflict, discretion in job completion
Adjustment to General Environment
Differences in housing, food, education, health, safety, transportation
Interaction with Local Nationals
Differences with behavioral norms, conflict communication patterns
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11. The Expatriate’s Family
LO4
The Expatriate’s Family
LO5
Facts:
90% expatriate failures are family related
81% who decline give family concerns as reason
Unhappy spouses are a major reason for early return
An expatriate failure translates into a loss of a “million-dollar corporate-training investment” in the executive
Trailing Spouses in Two-Career Families are a Challenge for ICs
Offer help in adjustment
Assistance with job hunting in host country
Identifying career opportunities
Cultural training
Expatriate Children May Suffer the Most
Third Culture Kids (TCKs) are multilingual and hold several passports
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12. Preparation for the Transition: Language Training
LO4
Preparation for the Transition: Language Training
English is the world’s lingua franca and common 2nd language
Expatriate & family need host country language skill for effective adjustment
Many foreign customers speak English but will hide behind their language in negotiations
Mandarin Chinese is the new “hot” language
LEARN ANOTHER LANGUAGE!!
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13. LO4
Expatriate Services
Health care programs exist to assist companies and expatriates with:
Claims administration
Language translations
Currency conversions
Service standardization
Websites for expat issues:
Other expatriate services include assistance with:
banking services
culture and language training
house hunting, utilities hook-up, grocery and hardware shopping
long-distance care for relatives
schools
clubs, organizations, and memberships
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14. Repatriation – the Shock of Returning Home
LO4
Repatriation – the Shock of Returning Home
Issues to Address:
Reverse culture shock
Autonomy abroad but restrictive work context at home
Headquarters' people and attitudes will change
Returning expatriate’s skills and knowledge are valuable but may be unappreciated
Positions of responsibility similar to that of expatriate position may not be available home
Promotion or career expectations may not happen
Family adjustment at home can be problematic
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15. Compensation Compensation & Salary Trends:
LO6
Compensation
Compensation & Salary Trends:
Paying HCNs the same salaries as their domestic counterparts –
permits worldwide consistency
add allowances & bonuses
Trend to use “local terms” package equal to local manager
“Equal-pay-for-equal-work” concept with extra payments to expats
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16. Allowances & Bonuses Allowances Bonuses Examples: Examples:
“employee compensation payments added to base salaries because of higher expenses encountered when living abroad”
Examples:
Housing Allowances
Cost-of-Living Allowances
Allowances for Tax Differentials
Education Allowances
Moving and Orientation Allowances
Bonuses
“Expatriate employee compensation payments in addition to base salaries and allowances, because of hardship, inconvenience, or danger”
Examples:
Overseas Premiums
Contract Termination Payments
Home Leave
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17. Compensation Packages Can Be Complicated
LO6
Compensation Packages Can Be Complicated
Compensation Packages
“for expatriate employees, packages that incorporate many types of payments or reimbursements and must take into consideration exchange rates and inflation”
Issues:
Expensive – can add 50+% to base salary
What Percentage?
Allowances and percentage of base salary are usually paid in host country currency
Percentage is usually 65 to 75 percent, with the remainder banked where employee directs
What Exchange Rate?
Firms must decide which exchange rate to use
This is more difficult in countries with exchange controls and nonconvertible currencies
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18. Compensation of Third-Country Nationals
LO6
Compensation of Third-Country Nationals
There is a trend toward applying the same compensation plan to third country nationals as home country expatriates
Problems can arise in
The calculation of the income tax differential when an American expatriate is compared with an expatriate from another country
Home leave bonus
Use of third-country national is growing. They get jobs because they are multilingual, know industry, and country well.
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19. International Status International Status
LO6
International Status
International Status
“Entitles expatriate employee to all the allowances and bonuses applicable to the place of residence and employment”
Being from another country does not always qualify for international status
Host-country employees can be promoted to international status without being sent abroad
Rewards are used to retain valuable employees
International status means receiving some or all available allowances and bonuses
Complexity of compensation requires international personnel management specialists or consultants
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20. Perks Cars, including chauffeurs for high level executives
LO6
Perks
Cars, including chauffeurs for high level executives
Private pension plan
Retirement payment
Life insurance
Health insurance
Emergency evacuation services (for medical or other reason)
Kidnapping, ransom, & extortion insurance
Company housing or apartment
Directorship of a foreign subsidiary
Seminar holiday travel
Club memberships
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