1. International
Business
Fourth Edition

2. Global Human Resource Management
CHAPTER 18
Global Human Resource Management

3. Chapter Focus Look briefly at the strategic role of HRM.
Examine HRM’s four major tasks:
Staffing policy.
Management training and development.
Performance appraisal.
Compensation policy.
Tasks are complicated by:
Varying compensation policies among countries.
Labor laws may prohibit unions in one country and mandate them in another.
Equal employment legislation may be pursued in one country and not in another.

4. The Strategic Role of International HRM
Insure that HRM policies are congruent with the firm’s strategy, structure and controls.

5. Strategy, Structure and Control Systems
Worldwide area Worldwide Worldwide Informal matrix
structure product division product division
centralized and decentralized
International Strategy
Structure Multidomestic International Global Transnational and Controls
Centralization of operating decision
Decentralized Core competency Some centralized Mixed centralized
Horizontal differentiation
Rest decentralized Informal matrix
Need for coordination
Low Moderate High Very high
Integrating mechanisms
None Few Many Very many
Performance Ambiguity
Low Moderate High Very high
Need for cultural controls
Low Moderate High Very high
Table 18.1

6. Staffing Policy Staffing policy: Types of staffing policy:
Selecting individuals with requisite skills to do a particular job.
Tool for developing and promoting corporate culture.
Types of staffing policy:
Ethnocentric.
Polycentric.
Geocentric.

7. Types of Staffing Policy
Ethnocentric
Key management
positions filled by
parent-country
nationals
Polycentric
Host-country
nationals manage
subsidiaries,
parent company
nationals hold key
Headquarter
positions
Geocentric
Seek best
people, regardless
of nationality

8. Comparison of Staffing Approaches
Staffing Strategic
myopia
Approach Appropriateness Advantages Disadvantages
Ethnocentric International
Polycentric Multidomestic
Geocentric Global and
Overcomes lack of Produces resentment
host nation
Unified culture Can lead to cultural
Helps transfer core competencies
myopia Isolates headquarters
implement subsidiaries
efficiently policies may limit
implementation
Helps build strong culture and informal management network
Expensive
qualified managers in host country
Alleviates cultural Limits career mobility
Inexpensive to from foreign
Uses human resources National immigration
Transnational
Table 18.2

9. The Expatriate Problem
Citizens of one country working in another.
Inpatriates: expatriates who are citizens of a foreign country working working in the home country of their multinational employer.
Expatriate failure:
Premature return of the expatriate manager to his/her home country.
Cost of failure is high:
Estimate = 3X the expatriate’s annual salary plus the cost of relocation (impacted by currency exchange rates and assignment location).

10. Expatriate Failure Rates
Recall Rate Percent Percent of Companies
US Multinationals
% % %
<
European Multinationals
% %
<
Japanese Multinationals
% %
<
Table 18.3

11. Reason 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.
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.
European Multinationals: Inability of spouse to adjust.

12. Expatriate Selection Self-orientation: Others-orientation:
An executive’s domestic performance does not
(necessarily) equate to his/her overseas performance.
Mendenhall & Oddou
Predictors of success:
Self-orientation:
Strengthen self-esteem, self-confidence and mental well-being.
Others-orientation:
Enhance ability to interact with host-country nationals.
Perceptual ability:
The ability to empathize - understand why people in host-country behave the way they do.
Cultural toughness:
How well an expatriate adjusts to a particular posting tends to be related to the country of assignment.

13. Training and Management Development
Training: obtaining skills
for a particular
(foreign) posting.
Development: develops
manager’s skills over
his/her career in the
Firm.

14. Training for Expatriate Managers
Cultural:
Seeks to foster an appreciation of the host-country’s culture.
Language:
Can improve expatriate’s effectiveness, relate more easily to culture and fostered a better firm image.
Practical:
Ease into day-to-day life of the host country.
1. Culture
2. Language
3. Practical
18-9

15. Repatriation of Expatriates
Didn’t know what position they hold upon return.
Firm vague about return, role and career progression.
Took lower level job.
Leave firm within one year.
Leave firm within three years
percent

16. Management and Development Strategy
Programs designed to increase overall skill through mix of education and assignment rotations.
Provides varied experience.
Attempt to improve firm’s management productivity and quality.
Particularly true for transnational strategy.
Unifying corporate culture and management networks.
Socialize norms and value systems.
Foster esprit de corps.
Build informal networks
Strengthen identification with company.

17. Performance Appraisal
Problems:
Unintentional bias.
Host-nation biased by cultural frame of reference.
Home-country biased by distance and lack of experience working abroad.
Expatriate managers believe that headquarters unfairly evaluates and appreciates them.
Many believe a foreign posting does not benefit their career.

18. Guidelines for Performance Appraisal
More weight given to onsite
manager’s evaluation.
Expat who worked in same
location should assist home-office
manager with evaluation.
If foreign on-site manager preparing
evaluation, home-office manager should
be consulted before finalization.

19. Compensation Two issues:
How to adjust compensation to reflect national differences in economic circumstances and compensation practices.
How expatriate managers should be paid.

20. National Differences in Compensation
Table 18.4
CEO
HR Director
Accountant
Mfg. Employee
Argentina
$860,704
$326,874
$63, 948
$17, 884
Canada
742,228
188, 070
44,866
36,289
Germany
421,622
189,785
61,375
36,934
Taiwan
179,486
102,491
30,652
11,924
United Kingdom
719,665
268,302
107,839
28,874
United States
1,403,899
306,181
66,377
44,680

21. Compensation Issues How much home-country expatriates should be paid.
Ethnocentric
How much home-country expatriates should be paid.
Polycentric
Pay can and should be country-specific.
Geocentric/Transnational
May have to pay its international cadre of managers the same.

22. Expatriate Pay Typically use balance sheet approach.
Equalizes purchasing power across countries.
Provides financial incentives to offset qualitative differences between assignment locations.
Components of a typical expatriate compensation package include:
Base salary.
Foreign service premium.
Various allowances.
Tax differentials.
Benefits.

23. A Typical Balance Sheet
Additional Costs Paid by Company
Reserve
Goods and Services
Housing
Income Taxes
Home and Host-Country Income Taxes
Premiums and Incentives
Home-Country Salary
Host-Country Costs
Host-Country Costs Paid by Company and from Salary
Home- Country Equivalent Purchasing Power
Figure 18.1

24. International Labor Relations
Foster harmony and minimize conflict between the firm and organized labor.
Key issue: degree to which organized labor can limit the choices of an international business.

25. Concerns of Organized Labor
Firms can counter bargaining power by threatening to move production to another country.
International business will keep highly skilled tasks in home country and farm out only low-skilled tasks to foreign plants.
Importing employment practices and contractual agreements from home country that may diminish union’s influence and power.

26. Strategy of International Labor
Try to establish international labor organizations.
Lobby legislatures to restrict multinationals.
Use United Nations to regulate multinationals.
Efforts have not been successful.

27. Multinationals’ Approach to Labor Relations
Decentralize: labor laws, union power and nature of collective bargaining varies from country to country.
Now a trend toward Centralize:
Want to rationalize global operations.
Need to control labor costs and maximize threat of move to lower cost country.
Competitive advantage can come from the way work is organized in a plant. Bargaining with local unions is, therefore, a priority.
Before move, get new union approval for work practices.