1. Human Resource Selection and Development Across Cultures
chapter fourteen
Human Resource Selection and Development Across Cultures
McGraw-Hill/Irwin
Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.

2. Chapter Outline Sources of human resources
Selecting managers for overseas assignments
Compensation
Repatriation

3. Sources of Human Resources
Home country nationals
Host country nationals
Third-country nationals
Inpatriates
Offshore outsourcing

4. Home-country Nationals
Are citizens of the country where the MNC is headquartered but live & work elsewhere
Often used
To start up operations (most common reason)
To provide technical expertise
To help the MNC maintain financial control over the operation
In top management positions
to give promising home-country managers international experience

5. Host-country Nationals
Citizens of the country where they live & work
They are familiar with the culture and know the language
They can often do a better job than home-country nationals
They are less expensive than home-country personnel
Host-country governments often prefer use of host-country nationals and some require it
Hiring them is good public relations
U. S. companies tend to rely heavily on host-country nationals

6. Third-country Nationals
People who are citizens of neither the home country or the host country
Example: A Mexican, employed by an American company, working in Argentina
The employee's native country and the country where he works are often in the same geographic region

7. Advantages of Third-Country Nationals
They often require less compensation than home-country nationals
If they are from the same geographic region as the host country and also know the company's culture, they can often achieve objectives better than other types of managers
Have cross-cultural skills
Provide a global or transnational image

8. Inpatriates
Persons who work in the home country and are citizens of a different country
Advantages of inpatriates
Help to develop global core competencies
Provide diversity and an international perspective in the home office
Improve career opportunities for company managers who are not from the home country

9. Expatriate
Any person who lives and works outside the country of which he/she is a citizen
Includes home-country nationals, third-country nationals, and inpatriates
In most cases, expatriates must have work visas from the government of the country where they live and work
Citizens of one EU country can live and work in other EU countries (There are some restrictions on citizens of new EU member countries.)

10. Offshore Outsourcing Home Country Perspective
Buying goods or services from a firm in one country for use in another
Can significantly reduce overhead & labor costs
Quality and timeliness are sometimes problems
Can create public relations problems in the home country
Job losses in the home country
Abuse of foreign workers by overseas contractors
Liability issues from unsafe products

11. Outsourcing: Corporate Viewpoint Looking Abroad for a Workforce

12. Skills MNCs Seek Within Countries

13. Selecting Managers for Overseas Assignments
Overview of selection criteria
Adaptability to cultural change
Willingness to take an overseas assignment
Selection procedures

14. Criteria for Selecting Managers for International Assignments
Adaptability
Independence
Self-reliance
Physical & emotional health
Age
Experience
Education
Knowledge of local language
Motivation
Support of spouse & children
Leadership

15. Expatriate Selection Criteria

16. Adaptability to Cultural Change
Work experiences with cultures other than one’s own
Previous overseas travel
Knowledge of foreign languages
Recent immigration background or heritage
Ability to integrate with different people, cultures, and types of business organizations

17. Adaptability to Cultural Change (2)
Ability to sense and accurately evaluate events in the host country
Ability to solve problems within different frameworks and perspectives
Sensitivity to differences of culture, politics, religion, and ethics
Flexibility in managing operations on a continuous basis despite lack of assistance and gaps in information

18. Willingness to Take an Overseas Assignment
Unmarried employees are more willing than other groups to work overseas.
Married employees with teenage children are usually the least willing to work overseas.
Employees with prior international experience are more likely to accept an overseas assignment.

19. Willingness to Take an Overseas Assignment (2)
People who are most committed to their careers are more likely to work overseas
Careers and attitudes of spouses have a significant impact on employee willingness to work overseas.
Employee and spouse perceptions of company support are crucial to employee willingness to work overseas.

20. Selection Procedures
Both technical competence and adaptability should be considered
Interviews are a common selection tool.
Both the employee and the spouse may be interviewed
Home-country and host-country interviewers may be used
Psychological testing of the employee
Used less often than interviews
Many managers believe that interviews are more effective than testing.

21. Compensation Compensation overview Compensation details
Compensation approaches

22. Common Elements of Compensation Packages
Compensating expatriates can be difficult because there are many variables to consider
Most compensation packages are designed around four common elements:
Allowances Taxes
Base Salary Benefits

23. Compensation Details Base Salary
Base salary: the amount of money that an expatriate would receive for doing the same job in the home country
Used as a basis to establish salary in the host country
Salary may be paid in home country currency, host country currency, or a combination of the two

24. Compensation Details Benefits
Benefits: a substantial portion of expatriate compensation
Is the home country or the host country responsible for the expatriate's social security benefits?
Should home-country benefits programs be available to host-country nationals?

25. Compensation Details Allowances
Relocation allowance
Cost-of-living allowances are paid when the employee must incur extra costs that he would not pay in the home country
Examples: housing allowance, and the costs of private schools for the employee's children
Hardship allowance: Often paid to employees who work in a country with difficult living conditions

26. Compensation Details Allowances (2)
Allowances (continued)
Foreign service premium
In the past, a foreign-service premium was often a monthly payment that continued as long as the employee worked overseas
Many firms have eliminated the ongoing foreign-service premium.
Today, a one-time, lump sum foreign service premium is often paid at the start of the overseas assignment to provide cash for immediate expenses.

27. Compensation Details Taxes
An expatriate may be required to pay income taxes to both the host country and his/her native country
The company compensates the employee for the extra amount of tax

28. Compensation Details Summary
The cost of an expatriate employee =
salary costs
+ benefit costs
+ allowance costs
+ tax costs

29. Compensation Approaches
The compensation package must be cost-effective and should be seen as fair
Balance-sheet approach: ensure that the expatriate does not lose money from the foreign assignment
Negotiation approach: Negotiate compensation with each employee
Localization: Pay the expatriate a salary comparable to local nationals

30. Compensation Approaches (2)
Lump sum method: give expatriate a pre-determined amount of money. Employee decides how to spend it.
Cafeteria approach: Offer the employee a choice among various compensation options, with a limit on total costs
Regional system: Set up a compensation system for all expatriates who are assigned to a particular region

31. Repatriation of Expatriates
Reasons for returning home
Readjustment problems
Transition strategies

32. Repatriation of Expatriates
Reasons for returning to the home country
Most expatriates return home when their agreed-on tour of duty is over
Some want their children educated in a home-country school
Some are not happy in the overseas assignment
Some return early because they failed to do a good job

33. Repatriation of Expatriates (2)
Readjustment problems
“Out of sight, out of mind” syndrome: the expatriate may not have been considered for jobs that he/she could do well
Organizational changes may have:
eliminated the jobs for which the expatriate is well-qualified
reduced the importance of the expatriate's position or department
The new job may be seen as a demotion.

34. Repatriation of Expatriates (3)
Readjustment problems
Technological advances may have made the expatriate's skills obsolete
The former expatriate may not have an opportunity to use skills gained abroad.
The former expatriate's salary and benefits may be lower than they were abroad.
The former expatriate has to readjust to home-country culture and adjust to a new job

35. Effectiveness of Returning Expatriates

36. Repatriation of Expatriates (4)
Transition strategies: Help smooth the adjustment from an overseas to a home-country assignment
Repatriation agreement: addresses the concerns of the individual and the company before the foreign assignment begins.
Keep the expat involved in home office communication and projects during the foreign assignment.
Appoint a higher-level manager as a career mentor for the expatriate (helps to avoid "out of sight, out of mind" problem).