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International HRM- Lecture 11

Managing Across Borders

International corporation Domestic firm that uses its existing capabilities to move into overseas markets. Multinational corporation (MNC) Firm with independent business units operating in multiple countries. Global corporation Firm that has 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

Increasing Importance of Understanding Global Human Resources Management

International Mergers and Acquisitions

Foreign Human Resources

Global Human Resources Management

Global Competition

Market Access Opportunities

How International Companies Affect the World Economy

Their production and distribution extend beyond national boundaries, making it easier to transfer technology. They have direct investments in many countries, affecting the balance of payments. They have a political impact that leads to cooperation among countries and to the breaking down of barriers of nationalism.

How Does the Global Environment Influence Management?

Unified Economies Closely partnered nations such as the European Union (EU) have developed into strong competitors. Promotes job growth in trading nations. Cultural Environment The communication patterns, religion, values and ideologies, education, and social structure of a host country influence how HR is conducted in that country.

Domestic versus International HRM

Issues in international HRM in helping employees adapt to a new and different environment outside their own country:
Relocation Orientation Translation services

Why is international HRM more challenging than domestic HRM

Dealing with a more diversified external environment ( PEST) Geographical distances makes control by HQ more difficult Dealing with an international staff of managers and workforce who come from diverse cultures, religion, customs and educational backgrounds Having to operate with different currency levels in pay that are subject to fluctuation Dealing with the complexity of expatriate management Training and development initiatives must be adapted to suit local conditions and it is not possible to implement uniform standadized programs

International Staffing
Expatriates, or Home-country Nationals Employees from the home country who are on international assignment. for ethnocentric orientation Host-country Nationals Employees who are natives of the host country. More for polycentric orientation Third-country Nationals Employees who are natives of a country other than the home country or the host country.- more for geocentric and regio-centric orientation

Hiring Host-Country Nationals

Advantages: 1. Hiring local citizens is generally less costly than relocating expatriates. 2. Since local governments usually want good jobs for their citizens, foreign employers may be required to hire locally. 3. Most customers want to do business with companies they perceive to be local versus foreign. 4. Local employees will be more supportive of local managers 5. Facilitates technology transfer where local managers are trained to use sophisticated technology from developed nations

Hiring parent country nationals

Support ethnocentric orientation with centralised HQ control Protect sensitive information and confidential technology and knowledge Business venture is only short term and there is no need to train locals Provide career development opportunities for their managers Where the host country managers are too nationalistic and loyalty to their own country comes before loyalty to their employers at the parent country

Recruiting Internationally
Work Permit, or Visa Government document granting a foreign individual the right to seek employment. Guest Workers Foreign workers invited to perform needed labor. Apprenticeships Vocational training programs in skilled trades. Transnational Teams Teams composed of members of multiple nationalities working on projects that span multiple countries.

Selecting Global Managers

Global Manager A manager equipped to run an international business ( PCN & HCN) Skills Categories for Global Managers Ability to seize strategic opportunities in the global environment Ability to manage highly decentralized organizations Awareness of global issues Sensitivity to issues of diversity Competence in interpersonal relations Community-building skills

Comparison of Advantages in Sources of Overseas Managers

Selecting Global Managers

1. Begin with self-selection. 2. Create a candidate pool. 3. Assess core skills. Skills considered critical to an employees success abroad. 4. Assess augmented skills and attributes. Skills helpful in facilitating the efforts of expatriate managers

Skills of Expatriate Managers
CORE SKILLS Experience Decision-making Resourcefulness Strategic thinking Adaptability Cultural sensitivity Change management Team building Maturity AUGMENTED SKILLS

Technical skills
Negotiation skills Strategic thinking

Delegation skills
Change management

Expatriate Selection Criteria

Issues in International Expatriate Selection- Reasons for assignment failure

Expatriate failure the inability of the expatriate to

complete the overseas assignment or the inability to meet expected levels of performance

Common reasons
Family adjustment wife & children experience problems Lifestyle issues unable to accept changes in style of living Work adjustment cannot adapt to new work culture, loneliness Bad selection expatriate who does not hold the right credentials Poor performance business difficulties that are unexpected

Other opportunities arise more attractive job offers

Business reasons Expatriate cannot accept the nature of business practices overseas that conflicts with home country practices Repatriation issues Expatriate is disappointed with arrangements made for homecoming

Training and Development

Essential training program content to prepare employees for working internationally: Language training Cultural training Assessing and tracking career development Managing personal and family life Repatriation Culture shock Perpetual stress experienced by people who settle overseas.

Preparing for an International Assignment

To prepare for an international assignment, one should become acquainted with the following aspects of the host country: 1. Social and business etiquette 2. History and folklore 3. Current affairs, including relations between the host country and the United States 4. Cultural values and priorities

5. Geography, especially its major cities

6. Sources of pride and great achievements of the culture 7. Religion and the role of religion in daily life 8. Political structure and current players 9. Practical matters such as currency, transportation, time zones, and hours of business 10. The language

Nonverbal Communications in Different Cultures

Training Methods
Reviewing available information about the host company: books, magazines, video tapes. Conversations with host country natives. Sensitivity training to become familiar with the customs and overcome prejudices. Temporary assignments to encourage shared learning.

Assessing and Tracking Career Development

Developmental and Career Advantages of an International Assignment: Increases the expatriates responsibilities and influence within the corporation Provides a set of unique experiences beneficial to both the individual and the firm Enhances understanding of the global marketplace Offers the opportunity to work on a project important to the organization

Repatriation Checklist Before they go:

Make sure there is a clear need for the international assignment. Dont send someone abroad unnecessarily. Develop a clear set of objectives and expectations and time frames in which they should be met. Make sure that your selection procedures are valid. Select the employee and also look at and involve the employees family.

Provide (or fund) language and cultural training for the employee and the employees family.
Offer counseling and career assistance for the spouse. Establish career planning systems that reward international assignments and lead to promotion and knowledge sharing.

Repatriation Checklist (contd)

While they are away: Jointly establish a developmental plan that focuses on the goal to be achieved. Tie performance objectives to the achievement of the goal. Identify mentors who can be a liaison and support person from home. Keep communications open so that the expatriate is aware of job openings and opportunities. Arrange for frequent visits back home (for the employee and the family). Make certain they do not lose touch with friends and relatives.

Repatriation Checklist (contd)

When they come back home: Throw a welcome home party and arrange for a meeting with other former expatriates. Offer counseling to ease the transition. Arrange conferences and presentations to make certain that knowledge and skills acquired away from home are identified and disseminated. Set up an expatriate database to help other employees who go abroad later.

Get feedback from the employee and the family about how well the organization handled the repatriation process..

Global Compensation Challenges

Different countries have different norms for employee compensation: Financial (money) incentives versus nonfinancial incentives (prestige, independence, and influence) Individual rewards versus collectivist concerns for internal equity and personal needs General rule: Match the rewards to the values of the local culturecreate a pay plan that supports the overall strategic intent of the organization but provides enough flexibility to customize particular policies and programs to meet the needs of employees in specific locations.

Compensation of Host-Country Employees

Hourly wages can vary dramatically from country to country. Pay periods are different. Seniority may be an important factor. High pay rates can upset local compensation practices. Bonuses, profit-sharing, benefits and paid leave may be more extensive and legally required.

Compensation of Host-Country Managers

Global Compensation System
A centralized pay system whereby host-country employees are offered a full range of training programs, benefits, and pay comparable with a firms domestic employees but adjusted for local differences

Compensation of Expatriate Managers

An effective international compensation program must: 1. Provide an incentive to leave the United States 2. Allow for maintaining an American standard of living 3. Provide for security in countries that are politically unstable or present personal dangers 4. Include provisions for good health care

5. Reimburse the foreign taxes the employee is likely to have to pay (in addition to having to pay domestic taxes) and help him or her with tax forms and filing 6. Provide for the education of the employees children abroad, if necessary 7. Allow for maintaining relationships with family, friends, and business associates via trips home and other communication technologies 8. Facilitate the expatriates reentry home 9. Be in writing

Expatriate Compensation Systems

Home-Based Pay Pay based on an expatriates home countrys compensation practices Balance-Sheet Approach A compensation system designed to match the purchasing power in a persons home country 1. Calculate base pay 2. Figure cost-of-living allowance (COLA) 3. Add incentive premiums 4. Add assistance programs

Expatriate Compensation System

Split Pay A system whereby expatriates are given a portion of their pay in the local currency to cover their day-today expenses and a portion of their pay in their home currency to safeguard their earnings from changes in inflation or foreign exchange rates Host-Based Pay Expatriate pay is comparable to that earned by employees in a host country to which the expatriate is assigned.

Expatriate Compensation Systems

Adapting pay and other compensation benefits to match that of a particular country Reduces resentment among local staff members if they are earning significantly less.

Other Issues
Adequacy of medical care Personal security Compensation policies of competitors

Performance Appraisal of International Managers

Who Should Appraise Performance? Home-country evaluations Host-country evaluations Adjusting Performance Criteria Augmenting job duties Individual learning Organizational learning Providing Feedback Debriefing interview

The Labor Environment Worldwide

International Differences in Unions:
The level at which bargaining takes place (national, industry, or workplace) The degree of centralization of unionmanagement relations The scope of bargaining (parties and issues) The degree to which government intervenes The degree of unionization and union strength The political affiliations of unions

Identify the types of organizational forms used for competing internationally. Explain the economic, political-legal, and cultural factors in different countries that HR managers need to consider. Explain how domestic and international HRM differ. Discuss the staffing process for individuals working internationally. Identify the unique training needs for international assignees and their employees

Identify the characteristics of a good international compensation plan. Reconcile the difficulties of home- and host-country performance appraisals. Explain how labor relations differ around the world.