Issues in Global Human Resource

Management
Session Objectives
Identify with the strategic role of HRM.
Examine HRMs 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.
The Strategic Role of International HRM
Ensure that HRM policies are congruent
with the firms strategy, structure and
controls.
High



Cost
pressures


Low
Low High
Global
Strategy
Transnational
Strategy
Multi domestic
Strategy
International
Strategy
Pressures for local responsiveness
Four Basic Strategies in International
Business
Strategy, Structure and Control Systems
Global area Global Global 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
Staffing Policy
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.

Types of Staffing Policy
Ethnocentric
Key management
positions filled by
parent-country
Nationals Philips, Matsushita
& P&G
Polycentric
Host-country
nationals manage
subsidiaries,
parent company
nationals hold key
Headquarter
Positions eg Unilever
Geocentric
Seek best
people, regardless
of nationality
Comparison of Staffing Approaches
Staffing Strategic
qualified managers in host country
Alleviates cultural Limits career mobility
Inexpensive to from foreign
Transnational
Uses human resources National immigration
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
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 expatriates annual salary plus the cost of
relocation (impacted by currency exchange rates and assignment
location).
Reason for Expatriate Failure
US Multinationals
Inability of spouse to adjust.
Managers inability to adjust.
Other family problems.
Managers 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.
Expatriate Selection
Four dimensions that predict success in foreign posting
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.
According to Mendenhall & Oddou an executives domestic performance does not
(necessarily) equate to his/her overseas performance.
Training and Management Development
Training: obtaining skills
for a particular
(foreign) posting.
Development: develops
managers skills over
his/her career in the
Firm.
Training for Expatriate Managers
Cultural:
Seeks to foster an appreciation of the host-
countrys culture.
Language:
Can improve expatriates effectiveness, relate
more easily to culture and fostered a better firm
image.
Practical:
Ease into day-to-day life of the host country.
Repatriation of Expatriates
Didnt 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
10 20 30 40 50 60 70
percent
Management and Development Strategy
Programs designed to increase overall skill through mix of
education and assignment rotations.
Provides varied experience.
Attempt to improve firms 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.
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.
Guidelines for Performance Appraisal
More weight given to onsite
managers 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.
Compensation
Two issues:
How to adjust compensation to reflect national
differences in economic circumstances and
compensation practices.
How expatriate managers should be paid.
National Differences in Compensation
Country/De
signation
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
Compensation Issues
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.
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.
A Typical Balance Sheet
Reserve Reserve Reserve Reserve
Goods and
Services
Goods and
Services

Goods and
Services
Goods and
Services
Housing
Housing
Housing
Housing
Income
Taxes
Income
Taxes
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
Additional
Costs Paid by
Company
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.
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
unions influence and power.
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.
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.