INTERNATIONAL

HRM
International HRM Differences

• Greater Number of
Services
• Special Services to
Unique Group
• Compensation Complexity
• Foreign Exchange Rate
Attention
• Language and Cultural
Differences
Increasing Importance of Global Human
Resources Understanding
International
Mergers and
Acquisitions

Importance of
Foreign Human Global Human Global
Resources Resources Competition
Management

Market Access
Opportunities
Composition of the Cultural Environment of
International Business
Religion Values and Attitudes
Language
sacred objects Toward:
spoken
philosophical time
written language
systems achievement
official language
beliefs & norms work
linguistic pluralism
prayer wealth
language hierarchy
taboos change
international languages
holidays scientific method
mass media
rituals risk-taking
Education
Law
formal education
common law
vocational training
code law
primary education
foreign law
secondary education
home country law
higher education
antitrust policy
literacy level
international law
human resources
regulation
planning
Technology and Material
Politics Culture Social Organization
nationalism transportation kinship
sovereignty energy systems social institutions
imperialism tools & objects authority structures
power communications interest groups
national interests urbanization social mobility
ideologies science social stratification
political risk invention status systems
Key Issues in International HRM
1. Worldwide Human Resources
Planning
– Recruiting and Selection
– Expatriate orientation and training
– Repatriation
– Performance appraisal
2. Compensation
– Dealing with inflation and unexpected
changes in exchange rates
– Providing sufficient pay to keep
individuals
– Should company pay hardship
allowance?
– Dissatisfaction with cost of living
allowances
3. Housing (Complex problems at
home and overseas)
Key Issues in International HRM
4. Benefits Planning
– Developing equity among employees
– Several plans necessary for different
categories of personnel
5. Taxation (Proliferation of new laws)
6. Communication of HR Policies and
Programs Worldwide
– Treat communication as a continuous
process
– Face-to-Face contact frequently
– Make policy manuals brief and simple
– Be sensitive to needs of receiver
– Send regular written explanations of
policy changes
– Periodic rotation of overseas HR
managers desirable
– Security
Global Manufacturing
International Corporation

Domestic firm that uses

its existing capabilities to
move into overseas
markets.
Multinational Corporation (MNC)

Firm which independent

business units operating
in multiple countries.
Global Corporation

Firm that had integrated

worldwide operations
through a centralized
home office.
Transnational Corporation

Firm that attempts to

balance local
responsiveness and
global scale via a network
of specialized operating
units.
 Types of Organizations

Global Transnational
Specialized facilities permit
Views the world as a single
High local responsiveness;
market; operations are
complex coordination
controlled centrally from the
mechanisms provide global
corporate office.
Global integration.
Efficiency
Multinational
International
Several subsidiaries
Low Uses existing capabilities to
operating as stand-alone
expand into foreign
business units in multiple
markets.
countries.

Low High

Local Responsiveness
The Multi-National Corporation
(MNC)

• Home Country
Employment
• External Country
Employment
Managing in a Foreign
Environment

• Attitudes Vary
• Motivational Tools
are Distinctly
Different
 Cultural Environment
of International Business
Clustering Nations Approach

• Geography
• Languages • Work Goals
• Religion • Values
• Job Attitudes • Needs
Managerial Values

• Role of Competition
• Role of Blame
• Role of Shame
• Role of Participation:
Japan (hi)
• Role of Autocratic: Europe
(hi) and South America
(hi)
Sources of Managerial Talent

• Home Country Nationals

(Expatriates)
• Host Country Nationals
(Natives)
• Third Country Nationals
(Non-Home/Host)
Advantages of Different Sources
for Overseas Managers

Host Country Home Country Third Country

•Less cost •Talent available •Broad
within company experience
•Preference of
host country •Greater control •International
government outlook
•Company
•Knowledge of experience •Multi-lingualism
environment
•Mobility
•Language
facility •Experience
provided to
corporate
executives
 SOME OF THE LARGEST U.S.
MULTINATIONALS
AT&T General Electric Microsoft

Cisco General Motors Procter and Gamble

Citicorp. Hewlett-Packard RJR Nabisco

Coca-Cola IBM Texaco

DuPont Intel United Technologies

Exxon/Mobil Oil J.P. Morgan Wal-mart

Ford Motor Johnson & Johnson Xerox

Motorola
6 Major Reasons for American Expatriate
Failures in Foreign Environment

• Inability of the manager’s spouse to

adjust to a different cultural
environment.
• The manager’s inability to adapt to a
different physical or cultural
environment. Other family-related
problems.
• The manager’s personality or
emotional immaturity.
• The manager’s inability to cope with
the responsibilities posed by the
overseas work.
• The manager’s lack of technical
competence.
• The manager’s lack of motivation to
work overseas.
Selection Methods

• Interviews (executives
and psychologists)
• Assessment Centers
(exercises)
• Tests (language and
special tests)
• Role of Family
 Flowchart of the Selection-Decision Process
Start the Selection Process

YES Select local national and subject him/her to training

Can the position be filled by a local national? basically aimed at improving technical and managerial
skills.

NO

Identify degree of interaction required with local

community – using a 7- or 9- point scale, ranging from Emphasis* on tasks variables.
LOW
low to high, indicate the degree of interaction with local Second but by no means unimportant question is to ask
community required for successful performance on the whether the individual is willing to serve abroad.
job.
HIGH YES NO

Is candidate willing? Probably not suitable for position

YES
NO Identify degree of similarity /
dissimilarity between cultures – using a
7- or 9-point scale, ranging from similar
Probably not suitable for position to highly diverse, indicate the magnitude
of differences between the two
VERY SIMILAR cultures, Start orientation
HIGHLY DIVERSE (moderate to high rigor)
Emphasis* on task variables

Emphasis* on “relational abilities”

factor.
Start orientation
“Family situation” factor must also be
(moderate to high rigor)
taken into consideration.

Start orientation (most rigorous)

Preparing for an International
Assignment
Study the following subjects:
• Social and business etiquette.
• History and folklore.
• Current affairs, including relations between
the country and the United States.
• The culture’s values and priorities.
• Geography, especially the cities.
• Sources of pride: artists, musicians, novelists,
sports, great achievements of the culture,
including things to see and do.
• Religion and the role of religion in daily life.
• Political structure and current players.
• Practical matters such as currency,
transportation, time zones, hours of business.
• The language.
Cultural Shock

• "A Disorientation that

Causes Perpetual Stress"

– Disorienting Incidents
– Impossible Communication
– Telephone Difficulties
– Family Frustrations
Special Considerations

• Career Development
Risks
• Reentry Problems
• Managing Family Life
• Terrorism
Recruitment

• Government Regulations
• Work Permits Universally
Required
• Recruitment of Locals
Varies
• Guest Workers
• Role of Church, Family,
Politics
Selection
• Merit Versus Best Family
• Family Ties
• Social Standing
• Origin
• Industrialized versus Less
Developed
Training Issues

• Local Resources
• Less Technical
Capabilities
• Apprenticeship Strengths
in Europe
• Management
Development (US Leader)
• Language (English Need)
Compensation

• Host Country Employees

– Production Standard or
Time or Combination
– Benefits (often higher than
U.S.)
– Profit Sharing (may be
Required)
• Managers
– Narrowing of Salary Gap
with USA
Expatriate Compensation

• Base Pay
• Differentials
• Incentives
• Company Assistance
• Cost: 3-4 times USA Rate
Compensation of Expatriate Managers

To be effective, a compensation
program must:

1. Provide an incentive to leave the

united states.
2. Maintain an American standard
of living.
3. Facilitate reentry into the united
states.
4. Provide for the education of
children.
5. Maintain relationships with
family, friends, and business
associates.
Compensation Elements of an Expatriate

• Programs used by most U.S. Based

MNCs have four elements:
• Base pay – equal to pay of domestic
counterparts in comparably evaluated
jobs.
• Differentials – to offset the higher
costs of overseas goods, services,
and housing.
• Incentives – to compensate the
person for separation from family,
friends, and domestic support
systems.
• Company assistance programs – to
cover added costs such as moving
and storage costs, automobile, and
education expenses.
 The Price of an Expatriate
Note: Additional costs An employer’s typical first-year expenses
often incurred aren’t of sending a U.S. executive abroad.
listed above, including Direct Compensation Costs

language and cross- Base Salary 100%

Foreign-service premium 15%
cultural training for
Goods and services differential 20%
employee and family,
Housing costs 20-40%
and costs of selling
home and cars in the
Transfer Costs
U.S. before moving. Relocation allowance 5%
Air fare 2%
*Figures take into
Moving household goods 25%
account payments by
employee to company
Other Costs
based on hypothetical Company Car 15%
U.S. income tax and Schooling (two children) 20%
housing costs. Annual home leave (four people) 5%
Personal income tax abroad 50%
*It is not unusual to
triple costs compared Total = Salary plus 187-207%
to USA earnings.