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CHAPTER 13 HRIS and International HRM

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CHAPTER 13HRIS and International HRM

REGIONAL TRADE ZONES

• Asia-Pacific Economic Cooperation– Members account for nearly 25% of world trade

• North American Free Trade Agreement– Created a free trade zone among Canada, Mexico,

and the U.S.

• European Union– Single largest market

• ASEAN and SAARC

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 2

INCREASING IMPORTANCE OF HR TECHNOLOGY

• Imported products increase competition.• Deregulation changes the business environment.• U.S. companies must expand their markets globally.• Globalization means managing human resources

around the world.• The aggregate world exports as a percentage of

world gross domestic products (GDP) increased from 11.6% in 1970 to 30.7% in 2006.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 3

INCREASING IMPORTANCE OF HR TECHNOLOGY

• Deregulation has increased market accessibility.

• There has been an increase in international mergers and acquisitions.

• Increased awareness of the existence of talented human capital throughout the world

• Availability and cost-effectiveness of computer technology

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 4

TYPES OF INTERNATIONAL BUSINESS OPERATIONS

• International Corporation – Uses its existing core competencies to expand operations into foreign markets. These organizations compete in the global marketplace by exporting existing products and eventually opening facilities in other countries.

• Multinational Corporation – More complex international business operation that operates as fully autonomous units in multiple countries in an attempt to capitalize on lower production and distribution costs.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 5

TYPES OF INTERNATIONAL BUSINESS OPERATIONS

• Global Corporations – Similar to multinational corporations. However, global corporations integrate their operations worldwide through a centralized home office. Global corporations emphasize flexibility and mass customization to meet differing customer needs worldwide.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 6

GOING GLOBAL

• The top IHRM-related challenges facing global organizations: – Cultural differences (47%)– Lack of resources (40%)– Technology/systems issues (39%) – Time zone differences (35%)

• Top HR global data being maintained in HR systems:– Core HR (86%)– Compensation (71%) – Performance (45%) – Payroll (42%)

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 7

DIFFERENCES IN HR MANAGEMENT IN MULTINATIONAL ENTITIES

• More functions and activities• Broader perspective• More involvement in personal lives• Changes due to workforce mix• Risk exposure• More external influences

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 8

MANAGING DIFFERENT TYPES OF EMPLOYEES IN MNEs

• Global diversity and inclusion• Education• Political/legal system• Economic system

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 9

MANAGING EMPLOYEES IN A GLOBAL CONTEXT

• Types of employees– Expatriates– Parent-country nationals (PCN)– Host-country nationals (HCN)– Third-country nationals (TCN)

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 10

HR PROGRAMS IN GLOBAL ORGANIZATIONS

• Major issues include the following:• International staffing• Selecting global managers: managing

expatriates• Training for expatriates and other employees• Performance appraisals in MNEs• Managing international compensation

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 11

INTERNATIONAL STAFFING

• Home-Country Nationals– Staffing the organization with expatriates (PCNs) is

advantageous because the organization can rely on the talent currently available.

• Host-Country Nationals – Staffing positions with HCNs provides a number of

advantages for the MNE. HCNs are less costly, in terms of both time and money.

• Third-Country Nationals – TCNs bring a different and often broad experience to the

organization. TCNs add an international outlook to the workforce. Kavanagh, Human Resource Information Systems 4e.

SAGE Publications, 2018. 12

SELECTING GLOBAL MANAGERS: MANAGING EXPATRIATES

• Success in selecting expatriates is difficult due the following factors:– The cultural environment of countries– Expatriate failure and its causes– Selection criteria and procedures for expatriates

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 13

CULTURAL ENVIRONMENT OF COUNTRIES

• Country culture will have an effect on all of the activities and programs administered by HR.

• Hofstede’s five dimensions on which the cultures of countries differ1. education/human capital2. values/ideologies3. social structure4. religious beliefs5. communication

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 14

EXPATRIATE FAILURE AND ITS CAUSES

• Defined as the return of an expatriate to the home country before the period of the assignment has been completed.

• Two categories of costs: direct and indirect• Major factor affecting expatriate failure is the

inability to adjust to the new situation and culture by the expatriate and her or his family.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 15

WHY DO EXPATRIATES FAIL?

• Family adjustment• Lifestyle issues• Work adjustment• Bad selection• Poor performance• Other opportunities arise• Business reasons• Repatriation issues

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 16

SELECTION CRITERIA AND PROCEDURES FOR EXPATRIATES

• Two general categories: individual and situational

• Individual – Technical ability – Cross-cultural suitability – language ability, cultural

empathy, adaptability, and a positive attitude toward the assignment in the specific country

– Family requirements – adjustment of the accompanying spouse/partner and children

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 17

SELECTION CRITERIA AND PROCEDURES FOR EXPATRIATES

• Situational factors– Country/cultural requirements could include work

permits and visas – Opportunity for the expatriate, spouse/partner,

and the children to learn another language– MNE requirements could involve getting

permission from the host country for the selection of any expatriate

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 18

TRAINING AND DEVELOPMENT OF EXPATRIATES

• Purposes of expatriate training• To supplement the selection process and

assist the expatriate and family to adjust to the new situation

• Economic: the potential direct and indirect costs of expatriate failure relative to the amount of the investment is obvious.

• Predeparture training• Repatriation training

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 19

EMPHASIS IN CROSS-CULTURAL TRAINING PROGRAMS

• Expatriates must be clear about their own cultural background.

• Expatriates must understand the particular aspects of culture in the new work environment.

• Expatriates must learn to communicate accurately in the new culture.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 20

TOPICS FOR PREDEPARTURE TRAINING FOR EXPATRIATES

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 21

TOPICS FOR PREDEPARTURE TRAINING FOR EXPATRIATES

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 22

TRANSFER OF TRAINING

• The training methods would attempt to immerse the expatriate in the host country’s culture through assessment centers, simulations, sensitivity training, and extensive language training.

• The use of the HRIS to analyze the success or failure of these training programs will enable the MNE to make more effective decisions about expatriates and their training in the future.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 23

APPRAISING EXPATRIATE PERFORMANCE IN MNEs

• What performance criteria should be appraised? – The specific job-related competencies of the

expatriate manager – Three non-job-related qualities they need to possess

to perform their role effectively• Possess cross-cultural interpersonal skills • To understand and have sensitivity to differences in

norms, laws, and cultures • Capable of adapting to uncertain and unpredictable

circumstances Kavanagh, Human Resource Information Systems 4e.

SAGE Publications, 2018. 24

APPRAISING HCNs AND TCNs PERFORMANCE IN MNEs

• PCN managers need to be sensitive to cultural differences in appraising performance (e.g., in Japan, discussing the negative aspects of an employee’s performance may be taken as an insult).

• Appraisals are used to determine pay increases and promotional decisions, training opportunities, and dismissal decisions for HCNs and TCNs.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 25

MANAGING INTERNATIONAL COMPENSATION

• Most complex but critically important function of the IHRM department

• IHRM compensation manager must be aware of differences in taxation, labor laws affecting compensation and benefits, currency fluctuations, and cost-of-living differences within and between countries where the MNE has a presence.

• Critical importance of compensation management in subsidiaries is its link to the strategy of the MNE

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 26

COMPENSATION POLICY OBJECTIVES IN MNEs

• First objective for an MNE is to align its compensation administration with the strategy of the firm.

• Second objective is to motivate employees’ behaviors, which is complicated since multiple countries and cultures are involved.

• Third objective of compensation policy for an MNE is that it must be perceived as fair by the employees.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 27

THE COMPONENTS OF INTERNATIONAL COMPENSATION

• Base salary and a set of benefits • Foreign service or hardship premium for

expatriates • Other premiums for “risk level” of the

assignment in the country• Between- and within-country cost of living

adjustments (COLAs)

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 28

APPROACHES TO INTERNATIONAL COMPENSATION

• Going rate approach or “host-country” approach: The base salary for international employees is tied to the salary levels in the host country. Expatriate would earn pay that is comparable with the salaries of employees in the host country.

• “Balance sheet” approach: Has as its goal the maintenance of a home-country living standard plus a financial inducement for accepting an international assignment.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 29

HRIS APPLICATIONS IN MNEs

• HRM in an MNE is exceedingly more complex than in a domestic firm.– Organizational structure for effectiveness– IHRM-HRIS administrative issues– HRIS applications in MNEs

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 30

HRIS APPLICATIONS: STRUCTURE FOR EFFECTIVENESS

• The issue of the most effective structure for the operation of an HRIS in an MNE has been a “moving target.”

• “Structure does not drive success—people do.” In building an organizational structure for an HRIS in an MNE, it would seem very reasonable to consider “thinking locally and acting globally” to create an HRIS structure for the entire MNE that is sensitive to local concerns first.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 31

HRIS APPLICATIONS IN IHRM:ADMINISTRATIVE ISSUES

• Service-oriented architecture (SOA) – The SOA is focused on providing a service for a function that is well-defined, self-contained, and context and platform independent that adds value to the organization’s business purpose.

• Outsourcing, offshoring, and insourcing – MNEs were the first organizations to outsource many of their jobs that required low levels of skills (e.g., call centers).

• Data privacy and security – The MNE has to create additional safeguards to be in compliance with security and privacy laws and regulations in different countries.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018. 32