chapter 18 global human resource management. learning objectives discuss the strategic role of hrm...
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Chapter 18
Global Human Resource
Management
Learning Objectives
Discuss the strategic role of HRMExamine HRM major functions
Staffing policyTraining and developmentPerformance appraisalCompensation policyLabor relations
Identify issues and problems in staffing and managing expatriates
IBUS 330 Dr. Nini Yang
The Strategic Role of International Human Resource Management
To insure that HRM policies are congruent with and in support of the firm’s strategy, structure and controls.
IBUS 330 Dr. Nini Yang
Strategy, Structure and Control Systems
Worldwide area Worldwide Worldwide Informal structure product division product division matrix
centralized centralized and decentralized
International Strategy
Structure Multi-domestic International Global Transnational & ControlsCentralization of operating decision
Decentralized Core competency Some Mixed centralized
Horizontal differentiation
Rest decentralized Informal matrix
Need for coordination Low Moderate High Very high
Integrating mechanisms None Few Many Very
manyPerformance Ambiguity Low Moderate High Very
highNeed for cultural controls Low Moderate High Very
high
IBUS 330 Dr. Nini Yang
Table 18.1
Staffing Policy
Staffing policy:Selecting individuals with requisite skills to do a particular job.Also as tools for developing and promoting corporate culture.
Types of staffing policy:Ethnocentric.Polycentric.Geocentric.
IBUS 330 Dr. Nini Yang
Types of Staffing Policy
Ethnocentric
Key management positions filled by
parent-country nationals
Polycentric
Host-country nationals manage
subsidiaries, parent company
nationals hold key Headquarter
positions
Geocentric
Seek best people, regardless
of nationality
IBUS 330 Dr. Nini Yang
Comparison of Staffing Approaches Staffing Strategic
qualified managers in host country
Alleviates cultural Limits career mobilityInexpensive to from foreign
Transnational
Uses human resources National immigration
Table 18.2
myopia
Approach Appropriateness Advantages Disadvantages
Ethnocentric International
Polycentric Multi-domestic
Geocentric Global and
Overcomes lack of Produces resentment
in host nation Unified culture Can lead to cultural
Helps transfer core competencies
myopia Isolates headquarters implement subsidiaries
efficiently policies may limitimplementationHelps build strong
culture and informal management network
Expensive
Higher cost
IBUS 330 Dr. Nini Yang
The Expatriate Problem
Citizens of the firm’s home country working in another countryExpatriate failure:
Premature return of the expatriate manager to his/her home country
Cost of failure is high:Estimate at three times of an expatriate’s annual salary plus the cost of relocation (impacted by currency exchange rates and assignment location)$250,000-1million
IBUS 330 Dr. Nini Yang
Expatriate Failure Rates
Recall Rate Percent Percent of CompaniesUS
Multinationals20 - 40% 7%10 - 20% 69
< 10 24European Multinationals11 - 15% 3%
6 - 10 38<5 59
Japanese Multinationals
11 - 19% 14%6 - 10 10
<5 76 Table 18.3
IBUS 330 Dr. Nini Yang
Reason for Expatriate Failure
U.S. MultinationalsInability of spouse to adjustManager’s inability to adjustOther family problemsManager’s personal or emotional immaturityInability to cope with larger overseas responsibilities
Japanese FirmsInability to cope with larger overseas responsibilitiesDifficulties with the new environmentPersonal or emotional problemsLack of technical competenceInability of spouse to adjust
European Multinationals: Inability of spouse to adjust.
IBUS 330 Dr. Nini Yang
Expatriate Selection
Self-orientation:Strengthen self-esteem, self-confidence and mental well-being
Others-orientation:Enhance ability to interact with host country nationals
Perceptual ability:The ability to empathize - understand why people in host-country behave the way they do
Cultural toughness:How well an expatriate adjusts to a particular posting tends to be related to the country of assignment
An executive’s domestic performance does not necessarily equate to his/her overseas performance.
Mendenhall &
Oddou’s Predictors of success
IBUS 330 Dr. Nini Yang
Training and Management Development
Training: Obtain skills for
a particular (foreign) posting.
Development: Develop
manager’s skills over his/her career
in the Firm.
IBUS 330 Dr. Nini Yang
Training for Expatriate Managers
Cultural:Seeks to foster an
appreciation of the host-country’s culture.
Language:Can improve expatriate’s
effectiveness, relate more easily to culture and fostered a better firm image.
Practical:Ease into day-to-day life of the
host country.
1. Culture
2. Language
3. Practical
IBUS 330 Dr. Nini Yang
Repatriation of Expatriates
percent
Didn’t know what position they hold upon return.Firm vague about return, role and career progression.
Leave firm within three years
10 20 30 40 50 60 70
Took lower level job.
Leave firm within one year.
IBUS 330 Dr. Nini Yang
Management and Development Strategy
Programs designed to increase overall skill through a mix of education and assignment rotations
Provides varied experienceAttempt to improve firm’s management productivity and qualityParticularly true for transnational strategy
Unifying corporate culture and management networks
Socialize norms and value systemsFoster esprit de corpsBuild informal networksStrengthen identification with company
IBUS 330 Dr. Nini Yang
Performance AppraisalProblems:
Unintentional bias.Host-nation biased by cultural frame of reference.Home-country biased by distance and lack of experience working abroad.
Expatriate managers believe that headquarters unfairly evaluates and appreciates them.
Many believe a foreign posting does not benefit their career.
IBUS 330 Dr. Nini Yang
Guidelines for Performance Appraisal
More weight given to onsitemanager’s evaluation.
Expat who worked in same location should assist home-office
manager with evaluation.
If foreign on-site manager preparing evaluation, home-office manager should
be consulted before finalization.
IBUS 330 Dr. Nini Yang
Compensation
Two issues:How to adjust compensation to reflect national differences in economic circumstances and compensation practices.How expatriate managers should be paid.
IBUS 330 Dr. Nini Yang
National Differences in Compensation
Country CEO HR Director
Accountant
Mfg. Employee
Japan $545,233 $235,536 $59, 107 $51, 994
Canada 742,228 188, 070 44,866 36,289
Germany 421,622 189,785 61,375 36,934
Taiwan 179,486 102,491 30,652 11,924
United Kingdom
719,665 268,302 107,839 28,874
United States
1,403,899 306,181 66,377 44,680
Table 18.4
IBUS 330 Dr. Nini Yang
Compensation Issues
EthnocentricHow much home-country expatriates should be paid
PolycentricPay can and should be country-specific
Geocentric/Transnational
May have to pay its international cadre of managers the same
IBUS 330 Dr. Nini Yang
Expatriate Pay
Typically use balance sheet approach.Equalizes purchasing power across countries.Provides financial incentives to offset qualitative differences between assignment locations.
Components of a typical expatriate compensation package include:
Base salary.Foreign service premium.Various allowances.Tax differentials.Benefits.
IBUS 330 Dr. Nini Yang
A Typical Balance Sheet
Reserve Reserve Reserve Reserve
Goods and Services
Goods and
ServicesGoods and Services
Goods and Services
Housing
HousingHousing
Housing
Income Taxes
Income Taxes
Income Taxes
Home and Host-
Country Income Taxes Premiums
and Incentives
Home-Country Salary
Host-Country Costs
Host-Country Costs Paid
by Company and from
Salary
Home- Country
Equivalent Purchasing
Power
Additional Costs Paid
by Company
IBUS 330 Dr. Nini Yang
Figure 18.1
International Labor Relations
Foster harmony and minimize conflict between the firm and organized labor.Key issue:
Degree to which organized labor can limit the choices of an international business.
IBUS 330 Dr. Nini Yang
Concerns of Organized Labor
Firms can counter bargaining power by threatening to move production to another country.International business will keep highly skilled tasks in home country and farm out only low-skilled tasks to foreign plants.Importing employment practices and contractual agreements from home country that may diminish union’s influence and power.
IBUS 330 Dr. Nini Yang
Strategy of International Labor
Try to establish international labor organizations.Lobby legislatures to restrict multinationals.Use united nations to regulate multinationals.
Efforts have not been successful.
IBUS 330 Dr. Nini Yang
Multinationals’ Approach to Labor Relations
Decentralize: labor laws, union power and nature of collective bargaining vary from country to countryNow a trend toward centralization:
Want to rationalize global operationsNeed to control labor costs and maximize threat of move to lower cost countryCompetitive advantage can come from the way work is organized in a plant. Bargaining with local unions is, therefore, a priority
Before move, get new union approval for work practices
IBUS 330 Dr. Nini Yang
Implication for Effective IHRHuman Resource Management practices vary across borders.Both home-country and host-country economic, social, cultural, political, and legal factors influence and constrain HR functions.Corporate strategies guide and determine how HR works in an organization.Global experience and good knowledge of IHR can enhance one’s career as a successful manager whether one works at the home-country headquarters or overseas.
IBUS 330 Dr. Nini Yang