Chapter 16

MANAGING HUMAN
RESOURCES GLOBALLY

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• What Do I Need to Know?
LO 16-1 Summarize how the growth in international business activity
affects human resource management.
LO 16-2 Identify the factors that most strongly influence HRM in
international markets.
LO 16-3 Discuss how differences among countries affect HR planning
at organizations with international operations.
LO 16-4 Describe how companies select and train human resources in
a global labor market.
LO 16-5 Discuss challenges related to managing performance and
compensating employees from other countries.
LO 16-6 Explain how employers prepare managers for international
assignments and for their return home.

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• HRM in a Global Environment 1 of 5

• Most companies now function in global markets

• Exporting
• building facilities
• Entering alliances
• Trade agreements facilitate global activities
• NAFTA
• WTO

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• HRM in a Global Environment 2 of 5

As companies in U.S. and

Britain cut software jobs and
outsource to other countries
in order to drive down costs,
countries such as India
continue to see employment
rise.

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• HRM in a Global Environment 3 of 5

Employees in an International Workforce

– Parent-country – the country in which the
organization’s headquarters is located
– Host-country – country (other than the parent country)
in which an organization operates a facility
– Third-country – a country that is neither the parent
country nor the host country
– Expatriates – employees assigned to work in another
country

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• Figure 16.1 Levels of Global Participation

Jump to Appendix 1 long image

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• HRM in a Global Environment 4 of 5

Employers in the Global Marketplace

– International organization –sets up operations in one
or more foreign countries.
– Multinational company –builds facilities in a number of
different countries in an effort to minimize production
and distribution costs.
– Global organization – locates a facility based on the
ability to effectively, efficiently, and flexibly produce a
product or service, using cultural differences as an
advantage.

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• Test Your Knowledge (1 of 3)
Hans works for a company who’s headquartered in France
and has foreign operations in Germany only. Hans is a
citizen of the Netherlands. Which of the following is most
likely true?
a) Hans works for a domestic company and is from the parent
country.
b) Hans works for a multinational company and is from the host
country.
c) Hans works for a global company and is from a third country.
d) Hans works for an international company and is from a third
country.

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• HRM in a Global Environment 5 of 5

Transnational HRM system:

• Makes decisions from a global perspective
• Includes managers from many countries
• Based on ideas contributed by people representing a
variety of cultures
Decisions that are the outcome of a transnational
HRM system balance uniformity with flexibility.

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• Factors Affecting HRM in International Markets 1 of 6

Culture – a community’s set of shared

assumptions about how the world works and what
ideals are worth striving for.
 Greatly affects a country’s laws.
 Cultural influences may be expressed through
customs, languages, religions, and so on.
 Influences what people value, so it affects people’s
economic systems and efforts to invest in education.
 May determine effectiveness of HRM practices.

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• Hofstede’s Five Dimensions of Culture
1.Individualism/Collectivism
2. Power Distance
3. Uncertainty Avoidance
4. Masculinity/Femininity
5. Long-term/Short-term
Orientation
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Strength of the relation between an
individual and other individuals in the
society.
Way the culture deals with unequal
distribution of power and defines the
amount of inequality that is normal.
How cultures handle the fact that the
future is unpredictable.
Emphasis a culture places on practices
or qualities that have traditionally been
considered masculine or feminine.
Suggests whether the focus of cultural
values is on the future (long term) or the
past and present (short term).
• Factors Affecting HRM in International Markets 2 of 6

In Taiwan, a country that

is high in collectivism,
coworkers consider
themselves more as
group members instead of
individuals.

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• Factors Affecting HRM in International Markets 3 of 6

Culture (Continued)
– Organizations must prepare managers to recognize
and handle cultural differences.
• Recruit managers with knowledge of other cultures
• Provide training
– For expatriate assignments, organizations may need to
conduct an extensive selection process to identify
individuals who can adapt to new environments.

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• Factors Affecting HRM in International Markets 4 of 6

Education and Skill Levels

– U.S. has a growing need for knowledge workers.
– Spending on education is greater per pupil in high-
income countries than in poorer countries.
– Countries need to foster economic development by
expanding access to education, thus creating a large
trained workforce.
– In countries with a poorly educated population,
companies will limit their activities to low-skill, low-
wage jobs.

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• Factors Affecting HRM in International Markets 5 of 6

Economic System
• An economic system provides many incentives or
disincentives for developing the value of the labor
force.
• In developed countries with great wealth, labor costs
are relatively high, impacting compensation recruiting
and selection decisions.
• Income tax differences between countries make pay
structures more complicated when they cross national
boundaries.

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• Factors Affecting HRM in International Markets 6 of 6

Political-Legal System
• Country’s laws often dictate requirements for HRM
practices: training, compensation, hiring, firing, and
layoffs.
• An organization that expands internationally must
gain expertise in the host country’s legal
requirements and ways of dealing with its legal
system.
• Organizations will sometimes hire host- country
nationals to help in the process.

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• HR Planning in a Global Economy 1 of 3
• Relevant human resource issues: local market pay rates
and labor laws.
• HR planning includes where and how many employees
are needed for each international facility.
• Decisions about where to locate include considerations
such as cost and availability of qualified workers which
must be weighed against financial and operational
requirements.
• Outsourcing may be involved.

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• HR Planning in a Global Economy 2 of 3

Criteria for selection of employees for foreign

assignments
1. Competency in employee’s area of expertise
2. Ability to communicate verbally and nonverbally in
the foreign country
3. Flexibility, tolerance of ambiguity, and sensitivity to
cultural differences
4. Motivation to succeed and enjoyment of challenges
5. Willingness to learn the foreign country’s culture,
language, and customs
6. Support from family members

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• HR Planning in a Global Economy 3 of 3

© Rob Brimson/The Image Bank/Getty Images

Qualities associated with success in foreign
assignments are the ability to communicate in the
foreign country, flexibility, enjoying a challenging
situation, and support from family members.
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• Figure 16.2 Emotional Stages Associated with a Foreign
Assignment

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• Test Your Knowledge (2 of 3)
Rachel, an expatriate working in Japan is feeling very
uncomfortable in her surroundings. She often feels as if
she has said the wrong thing. Rachel is most likely in
which emotional stage of expatriation:
a) Honeymoon
b) Culture shock
c) Learning
d) Adjustment

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• Training and Developing a Global Workforce 1 of 3

• Training and development programs should be effective

for all participating employees, regardless of their country
of origin.
• When organizations hire employees to work in a foreign
country or transfer them to another country, the employer
needs to provide employees with training in how to
handle the associated challenges.

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• Training and Developing a Global Workforce 2 of 3

Training Programs for an International

Workforce
1. Establish the objectives for the training and its
content
2. Developers should next ask what training
techniques, strategies, and media to use
3. Developers should identify any other interventions
and conditions that must be in place for the training
to meet its objectives
4. Developers should identify who in the organization
should be involved in reviewing and approving the
training program

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• Table 16.1 Effects of Culture on Training
Design
Cultural Dimension Impact On Training
Individualism Culture high in individualism expects participation in
exercises and questioning to be determined by status in the
company or culture.
Uncertainty Culture high in uncertainty avoidance expects formal
avoidance instructional environments. There is less tolerance for
impromptu style.
Masculinity Culture low in masculinity values relationships with fellow
trainees. Female trainers are less likely to be resisted in low-
masculinity cultures.
Power distance Culture high in power distance expects trainers to be experts.
Trainers are expected to be authoritarian and controlling of
session.
Time orientation Culture with a long-term orientation will have trainees who
are likely to accept development plans and assignments.

Source: based on B. Filipczak, “Think Locally, Act Globally,” Training, January 1997, pp. 41-48.

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• Training and Developing a Global Workforce 3 of
3

Cross-Cultural Preparation
1. Preparation for departure—language instruction and
an orientation to the foreign country’s culture.
2. The assignment itself—some combination of a formal
program and mentoring relationship to provide
ongoing further information about the foreign
country’s culture.
3. Preparation for the return home—providing
information about the employee’s community and
home-country workplace (from company newsletters,
local newspapers, and so on).

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• Test Your Knowledge (3 of 3)

Employees from a high-power distance culture

would feel most comfortable in a training class
that:
a) Involved several group activities with classmates
b) The teacher was the expert and responded
definitively to all questions
c) The teacher acted as a facilitator of group
discussion
d) None of these

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• Foreign Assignments

• Would you consider taking a foreign assignment

for a 6 months to 1 year duration?
A = YesB = No

• Before you took on a foreign assignment, what

would you want to know?

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• Cross-Cultural Preparation

• Training to prepare employees and their family

members for an assignment in a foreign country.
• Covers all three phases of an international
assignment:
1. Preparation for departure
2. The assignment itself
3. Preparation for the return home

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• Performance Management Across National
Boundaries
When establishing
performance management
methods in other countries,
consider:
 Legal requirements
 Local business
practices
 National cultures
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Differences may include:
 Which behaviors are
rated
 How and the extent to
which performance is
measured
 Who performs the rating
 How feedback is
required
• Compensating an International Workforce 1 of 3

Pay Structure
– Market pay structures can differ substantially across
countries in terms of both pay level and relative worth
of jobs.
– Dilemma for global companies:
• Should pay levels and differences reflect what workers
are used to in their own countries?
• Should pay levels and differences reflect the earnings
of colleagues in the country of the facility, or earnings at
the company headquarters?

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• Figure 16.3 Earnings in Selected Occupations in Three
Countries

Source: Wage and hour data from International Labour Organization, LABORSTA Internet, http://laborsta.ilo.org, accessed June 20, 2016.
Jump to Appendix 2 long image
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• Compensating an International Workforce 2 of 3

Pay Structure
• Compensation decisions affect a company’s costs
and ability to compete.
• When comparing wages, companies must also
consider differences in education, skills, and
productivity
• Cultural and legal differences also can affect pay
structure.

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• Compensating an International Workforce 3 of 3

Incentive Pay
– Organizations must make decisions with regard to
incentive pay, such as bonuses and stock options
– United States and Europe differ in the way they award
stock options
Employee Benefits
– Decisions about benefits must take into account the
laws of each country involved, as well as employees’
expectations and values in those countries.

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description
Jump to Appendix 3 long image

Source: Organisation for Economic Co-operation and Development, “Average

Annual Hours Actually Worked per Worker,” OECD.Stat, http://stats.oecd.org,
• Figure 16.4 Average Hours Worked in Selected Countries

accessed June 20, 2016.

• International Labor Relations
• Organizations establish policies and goals for labor
relations, overseeing labor agreements, and monitoring
labor performance.
• Day-to-day decisions about labor relations are usually
handled by each foreign subsidiary.
• Cultural differences also affect interactions in labor
negotiations

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• Managing Expatriates 1 of 6

Selecting Expatriate Managers

– Expatriate managers need technical competence in
the area of operations.
– Adapting to a new culture requires abilities to:
1. Maintain a positive self-image and feeling of well-being
2. Foster relationships with host-country nationals
3. Perceive and evaluate the host country’s environment
accurately

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• Table 16.2 Selected Topics for Assessing Candidates
for Overseas Assignments 1 of 3
Motivation
•What are the candidate’s reasons and degree of interest in wanting an
overseas assignment?
•Does the candidate have a realistic understanding of what is required
in working and living overseas?
•What is the spouse’s attitude toward an overseas assignment?
Health
•Are there any health issues with the candidate or family members that
might impact the success of the overseas assignment?
Language ability
•Does the candidate have the potential to learn a new language?
•Does the candidate’s spouse have the ability to learn a new
language?
Sources: P. Caligiuri, Cultural Agility: Building a Pipeline of Successful Global Professionals (San Francisco: Jossey-Bass, 2012); P. Caligiuri, D. Lepak, and J.
Bonache, Managing the Global Workforce (West Sussex, United Kingdom: John Wiley & Sons, 2010); M. Shaffer, D. Harrison, H. Gregersen, S. Black, and L.
Ferzandi, “You Can Take It with You: Individual Differences and Expatriate Effectiveness,” Journal of Applied Psychology 91(2006): 109–125; P. Caligiuri, “Developing
Global Leaders,” Human Resource Management Review 16 (2006): 219–228; P. Caligiuri, M. Hyland, A. Joshi, and A. Bross, “Testing a Theoretical Model for
Examining the Relationship between Family Adjustment and Expatriates’ Work Adjustment,” Journal of Applied Psychology 83(1998): 598–614; David M. Noer,
Multinational People Management: A Guide for Organizations and Employees (Arlington, VA: Bureau of National Affairs, 1975).

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• Table 16.2 Selected Topics for Assessing Candidates
for Overseas Assignments 2 of 3
Family considerations
•How many moves has the family made among different cities or parts of the United States?
What problems were encountered?
•What is the spouse’s goal in this move overseas?
•How many children are in the family and what are their ages? Will all the children move as part
of the overseas assignment?
•Has divorce or its potential, or the death of a family member had a negative effect on the
family’s cohesiveness?
•Are there any adjustment problems the candidate would expect should the family move
overseas?
Resourcefulness and initiative
•Is the candidate independent and capable of standing by his or her decisions?
•Is the candidate able to meet objectives and produce positive results with whatever human
resources and facilities are available regardless of challenges that might arise in a foreign
business environment?
•Can the candidate operate without a clear definition of responsibility and authority?
•Will the candidate be able to explain the goals of the company and its mission to local
managers and workers?
•Does the candidate possess sufficient self-discipline and self-confidence to handle complex
problems?
•Can the candidate operate effectively in a foreign country without normal communications and
supporting services?

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• Table 16.2 Selected Topics for Assessing Candidates
for Overseas Assignments 3 of 3
Adaptability
•Is the candidate cooperative, open to the opinions of others, and able to compromise?
•How does the candidate react to new situations and efforts to understand and appreciate
cultural differences?
•How does the candidate react to criticism, constructive or otherwise?
•Will the candidate be able to make and develop contacts with peers in a foreign country?
•Does the candidate demonstrate patience when dealing with problems? Is he or she
resilient and able to move forward after setbacks?
Career planning
•Does the candidate consider the assignment more than a temporary overseas trip?
•Is the overseas assignment consistent with the candidate’s career development and one
that was planned by the company?
•What is the candidate’s overall attitude toward the company?
•Is there any history or indication of interpersonal problems with this candidate?
Financial
•Are there any current financial and/or legal considerations that might affect the
assignment (e.g., house or car purchase, college expenses)?
•Will undue financial pressures be put upon the candidate and his or her family as a result
of an overseas assignment?

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• Figure 16.5 Impressions of

description
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Americans: Comments by Visitors to U.S.

Source: J. Feig and G. Blair, There Is a Difference, 2nd ed. (Washington, DC:
Meridian House International, 1980), cited in N. Adler, International
Dimensions of Organizational Behavior, 2nd ed. ( Boston: PWS-Kent, 1991).
• Managing Expatriates 2 of 6

Selecting Expatriate Managers continued

– Employees preparing for foreign assignments need
• Cross-cultural training in how to behave in business
settings in another country
• Information about such practical matters as housing,
schools, recreation, shopping, and health care facilities
• Potentially learning a new language
• Career development activities and coaching
• Help navigating challenges

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• Managing Expatriates 3 of 6

• Performance management requires

– Clear goals
– Frequent evaluation of whether the expatriate
employee is on track to meet those goals
• Communication technology – email and teleconferencing

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• Managing Expatriates 4 of 6

Compensating Expatriates
– Balance sheet approach – adjusts manager’s
compensation so that it gives the manager same
standard of living as in the home country plus extra
pay for inconvenience of locating overseas.
 Involves an effort by the global organization to
ensure that its expatriates are made whole.
 Most organizations use this approach.

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Compensation

description
Jump to Appendix 5 long image

Source: From C. Reynolds, “Compensation of Overseas Personnel,” in

Handbook of Human Resource Administration, 2nd ed., ed. by J. J. Famularo,
McGraw-Hill, 1986, p. 51. Reprinted with permission of The McGraw-Hill
Companies, Inc.
• Figure 16.6 Balance Sheet for Determining Expatriate
• Managing Expatriates 5 of 6

After setting total pay, organization divides this

amount into four components of total pay package:
1. Base salary
2. Tax equalization allowance
3. Benefits
4. Allowances

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• Figure 16.7 International Assignment Allowance
Form

Jump to Appendix 6 long image

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• Managing Expatriates 6 of 6

Helping Expatriates Return Home

– Repatriation – process of preparing expatriates to
return home from foreign assignment.
1.Communication: expatriate receives information and
recognizes changes at home while abroad
2.Validation: giving expatriate recognition for overseas
service when this person returns home.
Preparing Expatriates
– Employee’s spouse should be included in the
preparation activities
– Focus on cross-cultural training

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• Summary (1 of 3)
• More companies are entering international markets by
exporting and operating foreign facilities.
• Organizations need employees who understand
customers, suppliers, local laws and customs in other
countries and able to adapt their plans to local situations.
• Organizations may hire a combination of parent-country,
host-country, and third-country nationals.

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• Summary (2 of 3)
• Another influence on international HRM is the foreign
country’s political-legal system.
• A country’s economic system, as well as the
government’s involvement in the economy, is a strong
factor determining HRM practices.
• HR planning involves decisions about where and how
many employees are needed for each international
facility.
• Most foreign operations positions are filled with host-
country nationals.

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• Summary (3 of 3)
• Organization must prepare the manager selected for an
overseas assignment.
• Cross-cultural training for the assignment as well as
preparation for repatriation after the assignment are
critical success factors.
• Communication of changes at home and validation of a
job well done abroad help expatriate through repatriation
process.

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