chapter 15 international human resources management

Copyright © 2004 South-Western. All rights reserved. 15–2

ObjectivesAfter studying this chapter, you should be able to:

1. Identify the types of organizational forms used for competing internationally.

2. Explain how domestic and international HRM differ.

3. Discuss the staffing process for individuals working internationally.

4. Identify the unique training needs for international assignees.

5. Reconcile the difficulties of home-country and host-country performance appraisals.


Objectives (cont’d)After studying this chapter, you should be able to:

6. Identify the characteristics of a good international compensation plan.

7. Explain the major differences between U.S. and European labor relations.


Increasing Importance of Global Human Resource Understanding

International International Mergers and Mergers and AcquisitionsAcquisitions

International International Mergers and Mergers and AcquisitionsAcquisitions

Importance of Global Human Resources Management

Importance of Global Human Resources Management

Foreign Human Foreign Human ResourcesResources

Foreign Human Foreign Human ResourcesResources

Global Global CompetitionCompetition

Global Global CompetitionCompetition

Market Access Market Access OpportunitiesOpportunities

Market Access Market Access OpportunitiesOpportunities

Presentation Slide 15–1


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

Figure 15.1

GLOBALGLOBAL

Views the world as a single Views the world as a single market; operations are market; operations are controlled centrally from controlled centrally from the corporate office.the corporate office.

GLOBALGLOBAL

Views the world as a single Views the world as a single market; operations are market; operations are controlled centrally from controlled centrally from the corporate office.the corporate office.

TRANSNATIONALTRANSNATIONAL

Specialized facilities permit Specialized facilities permit local responsiveness; local responsiveness; complex coordination complex coordination mechanisms provide mechanisms provide global integration.global integration.

TRANSNATIONALTRANSNATIONAL

Specialized facilities permit Specialized facilities permit local responsiveness; local responsiveness; complex coordination complex coordination mechanisms provide mechanisms provide global integration.global integration.

MULTINATIONALMULTINATIONAL

Several subsidiaries Several subsidiaries operating as stand-alone operating as stand-alone business units in multiple business units in multiple countries.countries.

MULTINATIONALMULTINATIONAL

Several subsidiaries Several subsidiaries operating as stand-alone operating as stand-alone business units in multiple business units in multiple countries.countries.

INTERNATIONALINTERNATIONAL

Uses existing capabilities Uses existing capabilities to expand into foreign to expand into foreign markets.markets.

INTERNATIONALINTERNATIONAL

Uses existing capabilities Uses existing capabilities to expand into foreign to expand into foreign markets.markets.

LOCAL RESPONSIVENESSLow High

GL

OB

AL

EF

FIC

IEN

CY

Lo

wH

igh



Top Ten Global Companies

Figure 15.2

MARKET VALUECOMPANY HEADQUARTERS (MILLIONS USD)

1. General Electric United States $309,462

2. Microsoft United States 275,701

3. Exxon Mobil United States 271,228

4. Wal-Mart Stores United States 240,907

5. Citigroup United States 223,040

6. Pfizer United States 216,777

7. BP Britain 192,116

8. Johnson & Johnson United States 186,942

9. Intel United States 184,667

10. American International Group United States 174,986

Source: Business Week Global 1000.


How International Companies Affect the World Economy

• 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 EconomiesClosely partnered nations such as the European

Union have developed into strong competitors.Promotes job growth in trading nations.

• Cultural environmentThe communication patterns, religion, values and

ideologies, education, and social structure of a host country influence how HR is conducted in that country.


The Nations of the European

Union

The Nations of the European

Union

Figure 15.3


Cultural Environment of International Business

Figure 15.4Presentation Slide 15–3

Values/Ideologies

• Work ethic• Time orientation• Individualism/ collectivism• Risk propensity• Achievement

Social Structure• Kinship/family• Mobility• Nationalism• Urbanization• Social stratification• Paternalism/

materialism

Communication• Language(s)• Dialects• Nonverbal• Media• Technology

Education/Human Capital• Primary/ secondary• Vocational• Professional• Literacy

Religious Beliefs• Denominations• Totems/taboos• Rituals• Holy days


Domestic versus International HRM

• Issues in international HRM in helping employees adapt to a new and different environment outside their own country:RelocationOrientationObjectiveTranslation services


HR Strategy Development

HRM 2

Source: Nancy Wong, “Mark Your Calendar! Important Tasks for International HR,” Workforce 79, no. 4 (April 2000): 72–74.


International Staffing

• Expatriates, or Home-country NationalsEmployees from the home country who are on

international assignment.

• Host-country NationalsEmployees who are natives of the host country.

• Third-country NationalsEmployees who are natives of a country other than

the home country or the host country.


Advantages in Sources of Overseas Managers• Host-country

Nationals

Less cost

Preference of host-country governments

Intimate knowledge of environment and culture

Language facility

• Home-country Nationals (Expatriates)

Talent available within company

Greater control

Company experience

Mobility

Experience provided to corporate executives

Figure 15.5

• Third-country Nationals

Broad experience

International outlook

Multilingualism



Changes in International Staffing over Time

Figure 15.6


Overseas Recruitment Issues

• Work Permit, or Work CertificateGovernment document granting a foreign individual

the right to seek employment.

• Guest WorkersForeign workers invited to perform needed labor.

• Transnational teamsTeams composed of members of multiple

nationalities working on projects that span multiple countries.


Selecting Expatriates

• Begin with self-selection.• Create a candidate pool.• Assess core skills.• Assess augmented skills and attributes.


Measured Expatriate Characteristics

• Core SkillsSkills that are considered

critical to an employee’s success abroad.

• Augmented SkillsSkills that are helpful in

facilitating the efforts of expatriate managers.

• Failure ratePercentage of expatriates who

do not perform satisfactorily.


Expatriate Selection Criteria

Figure 15.7


Causes of Expatriate Assignment Failure

Figure 15.8

Why Do Expats Fail?

Family adjustment Poor performance

Lifestyle issues Other opportunities arise

Work adjustment Business reasons

Bad selection Repatriation issues


Skills Of Expatriate Managers

• Core SkillsExperienceDecision makingResourcefulnessAdaptabilityCultural sensitivity Team building Maturity

• Augmented SkillsComputer skills Negotiation skills Strategic thinkingDelegation skills Change management

HRM 3


Boosting ROI of Expatriates

• Better candidate selection 32%• Career planning skills 26• Communicating objectives 24• Assignment preparation 20• Monitoring program 17• Cross-cultural training 10• Developing or expanding intranet 7• Communication/recognition 6• Web-based cultural training 5• Mandating destination support 4• Other 17

Figure 15.9

Major initiatives planned to improve assignment return on investment (ROI):

Source: Andrea Poe, “Selection Savvy,” HRMagazine 47, no. 4 (April 2002): 77–83.


Training and Development

• Global ManagerA manager equipped to run an international business.

• Skills of a Global ManagerAbility to seize strategic opportunitiesAbility to manage highly decentralized organizationsAwareness of global issues Sensitivity to issues of diversity Competence in interpersonal relations Skill in building community


Training Programs for International Managers

• Essential training program content to prepare employees for working internationally: Language trainingCultural trainingAssessing and tracking career developmentManaging personal and family life

• Culture shockPerpetual stress experienced by people who settle

overseas.


Preparing for an International Assignment

1. Social and business etiquette

2. History and folklore

3. Current affairs, including relations between the host country and the

4. United States

5. Cultural values and priorities

6. Geography, especially its major cities

7. Sources of pride and great achievements of the culture

8. Religion and the role of religion in daily life

9. Political structure and current players

10.Practical matters such as currency, transportation, time zones, hours of business

11.The language

Figure 15.10

To prepare for an international assignment, one should become acquainted with the following aspects of the host country:


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.


A Synthesis of Country Clusters

Figure 15.11Source: Simcha Ronen and Oded Shenkar, “Clustering Countries on Attitudinal Dimensions: A Review and Synthesis,” Academy of Management Review 10, no. 3 (July 1985): 435–54. Copyright Academy of Management Review. Reprinted with permission of the Academy of Management Review and the authors; permission conveyed through the Copyright Clearance Center, Inc.


Selected Foreign-Born Executives

Figure 15.12

COUNTRY OFCOMPANY—TITLE NAME ORIGIN

Alcoa—President & CEO Alain Belda Morocco*

A-Med—Founder Walid Aboul-Hosn Lebanon

American International Underwriters— Martin J. Sullivan United KingdomPresident & CEO

Aramark—Chairman & CEO Joseph Neubauer Israel

Baker & McKenzie—Chairman Christine Lagarde France

Becton Dickinson—Chairman & CEO Clateo Castellini Italy

Case Corporation—Chairman & CEO Jean-Pierre Rosso France

Computer Associates—Chairman & CEO Charles Wang Taiwan

eBay—Founder & Chairman Pierre Omidyar France

Eli Lilly and Company—President & COO Sidney Taurel Morocco

Source: Denis Lyons and Spencer Stuart, “International CEOs on the Rise,” Chief Executive 152 (February 2000): 51–53.


Returning from an Overseas Assignment• Repatriation

The process of an employee transitioning home from an international assignment. Throw a “welcome home” party.

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.

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


Performance Appraisal of International Managers

• Who Should Appraise Performance?Home-country evaluationsHost-country evaluations

• Adjusting Performance CriteriaAugmenting job duties Individual learningOrganizational learning

• Providing FeedbackDebriefing interview



Forces Driving Global Pay

• Cultural Preferences Importance of status Role of individual vs.

organization vs. government Equality vs. disparity Achievement vs.

relationships

• Economic Conditions Size of economy Types of industries, natural

resources Inflation, unemployment Protectionism vs. open

market

• Personal Preferences Attitudes toward risk Quality of life vs. work Short- vs. long-term Competitiveness vs.

solidarity

• Social Constraints Income tax rates, social

costs Laws and regulations Collective bargaining,

worker participation Skills, education of work

force

Figure 15.13Source: Steven Gross and Per Wingerup, “Global Pay? Maybe Not Yet!” Compensation and Benefits Review 31, no. 4 (July/August 1999): 25–34.


Hourly Wages* in Different Countries

Figure 15.14

*Hourly compensation costs in U.S. dollars for production workers in manufacturing

Source: Department of Labor.


COUNTRYCOUNTRY $/HOUR$/HOURGermanyGermany 23.8423.84NorwayNorway 23.1323.13SwitzerlandSwitzerland 21.8421.84BelgiumBelgium 21.0421.04United StatesUnited States 20.3220.32JapanJapan 19.5919.59SwedenSweden 18.3518.35BritainBritain 16.1416.14FranceFrance 15.8815.88CanadaCanada 15.6415.64ItalyItaly 13.7613.76Hong KongHong Kong 13.5313.53IsraelIsrael 13.5313.53AustraliaAustralia 13.1513.15SpainSpain 10.8810.88KoreaKorea 8.098.09TaiwanTaiwan 5.705.70BrazilBrazil 3.023.02MexicoMexico 2.302.30Sri LankaSri Lanka 0.480.48

COUNTRYCOUNTRY $/HOUR$/HOURGermanyGermany 23.8423.84NorwayNorway 23.1323.13SwitzerlandSwitzerland 21.8421.84BelgiumBelgium 21.0421.04United StatesUnited States 20.3220.32JapanJapan 19.5919.59SwedenSweden 18.3518.35BritainBritain 16.1416.14FranceFrance 15.8815.88CanadaCanada 15.6415.64ItalyItaly 13.7613.76Hong KongHong Kong 13.5313.53IsraelIsrael 13.5313.53AustraliaAustralia 13.1513.15SpainSpain 10.8810.88KoreaKorea 8.098.09TaiwanTaiwan 5.705.70BrazilBrazil 3.023.02MexicoMexico 2.302.30Sri LankaSri Lanka 0.480.48


Compensation of Expatriate Managers

• To be effective, an international compensation program must:Provide an incentive to leave the United States.Allow for maintaining a U.S. standard of living.Facilitate reentry into the United States.Provide for the education of children.Allow for maintaining relationships with family, friends,

and business associates.



Expatriate Compensation Programs

• Balance-Sheet Approach

A compensation system designed to match the purchasing power in a person’s home country

1. Calculate base pay.

2. Figure cost-of-living allowance (COLA)

3. Add incentive premiums

4. Add relocation assistance programs


International Organizations and Labor Relations

• International Differences in Unions

The level at which bargaining takes place (national, industry, or workplace)

The degree of centralization of union-management relations

The scope of bargaining

The degree to which government intervenes

The degree of unionization.

chapter 15 international human resources management

Recruiting & HR

global integration

global corporation firm

global scale

south western

single market operations

corporate office

worldwide operations

transnational corporation