International Human Resources Management(IHRM) Issues-A learning Resource

Jayadeva de Silva.M.Sc ,FIPM ,FITD

ObjectivesAfter following this lesson, you should be able to: 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.

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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.

Increasing Importance of Global Human Resource Understanding Managing Across Borders

Types of Corporations

• 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

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network of specialized operating units.

How International Companies Affect the World Economyo Their production and distribution extend beyond

national boundaries, making it easier to transfer technology.

o They have direct investments in many countries, affecting the balance of payments.

o 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

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host country influence how HR is conducted in that country.

Cultural Environment of International Business

Domestic versus International HRMIssues in international HRM in helping employees adapt to a new and different environment outside their own country: Relocation Orientation Objective Translation services

International StaffingExpatriates, or Home-country Nationals Employees from the home country who are on international assignment.Host-country Nationals Employees who are natives of the host country.

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Third-country Nationals Employees who are natives of a country other than the home country or the host country.

Changes in International Staffing over Time

Hiring Host-Country NationalsThree main advantages: Hiring local citizens is generally less costly than relocating expatriates. Since local governments usually want good jobs for their citizens, foreign employers may be required to hire locally. Most customers want to do business with companies they perceive to be local versus foreign.

Recruiting InternationallyWork Permit, or Visa Government document granting a foreign individual the right to seek employment.Guest Workers

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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 ManagersGlobal manager A manager equipped to run an international business

Skills Categories Ability to seize strategic opportunities Ability to manage highly decentralized organizations Awareness of global issues Sensitivity to issues of diversity Competence in interpersonal relations Skill in building community

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

Measured Expatriate CharacteristicsCore Skills Skills that are considered critical to an employee’s success abroad.Augmented Skills

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Skills that are helpful in facilitating the efforts of expatriate managers.Failure rate Percentage of expatriates who do not perform satisfactorily.

Comparison of Advantages in Sources of Overseas Managers

Host Country Home country Third countryLess costly Talent available within company Broad experience

Preferred byhost-country Greater control International outlook Intimate knowledge of Company experience Multilingualismenvironment and cultureLanguage facility Mobility

Experience provided to Corporate xecutives

Expatriate Selection Criteria

Causes of Expatriate Assignment Failure

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

Training and DevelopmentEssential 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 AssignmentTo prepare for an international assignment, one should become acquainted with the following aspects of the host country:

1. Social and business etiquette2. History and folklore3. Current affairs, including relations between the

host country and the United States4. Cultural values and priorities5. Geography, especially its major cities6. Sources of pride and great achievements of the

culture

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7. Religion and the role of religion in daily life8. Political structure and current players9. Practical matters such as currency,

transportation, time zones, hours of business10 The Language

Training Methodso Reviewing available information about the host

company: books, magazines, video tapes.o Conversations with host country natives.o Sensitivity training to become familiar with the

customs and overcome prejudices.o Temporary assignments to encourage shared

learning.

A Synthesis of Country Clusters

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Returning from an Overseas AssignmentRepatriation 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.

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CompensationDifferent 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 culture—create 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.

Forces Driving Global Pay

CULTURAL PREFERENCES

Importance of statusRole of individual vs. organization vs. governmentEquality vs. disparityAchievement vs. relationships

ECONOMIC CONDITIONS

Size of economyTypes of industries, natural resourcesInflation, unemploymentProtectionism vs. open market

PERSONAL PREFERENCES

Attitudes toward riskQuality of life vs. workShort- vs. long-termCompetitiveness vs. solidarity

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SOCIAL CONSTRAINTS

Income tax rates, social costsLaws and regulationsCollective bargaining, worker participationSkills, education of workforce

Compensation of Host-Country Employeeso Hourly wages vary dramatically from country to

country.o Pay periods are different.o Seniority may be an important factor.o High pay rates can upset local compensation

practices.o Bonuses, profit-sharing, benefits and paid leave

may be more extensive and legally required.

Hourly Wages in Different Countries* in US DollarsNorway 31.55Germany (former West) 31.25 Switzerland 27.87 Belgium 27.73 Sweden 25.18 United States 21.97 France 21.13 Britain 20.37 Japan 20.09 Australia 20.05 Canada 19.28 Italy 18.35 Spain 14.96 Israel 11.73 Korea 10.28 Portugal 6.23

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Taiwan 5.84 Brazil 2.67 Mexico 2.48 China 0.63 Sri Lanka 0.49

Compensation of Expatriate Managerso Provide an incentive to leave the United Stateso Allow for maintaining a U.S. standard of livingo Provide for security in countries that are

politically unstable or present personal dangerso Include provisions for good healthcare o Provide for the education of childreno Consider foreign taxes the employee is likely to

have to pay (in addition to domestic taxes) and help with tax forms and filing

o Allow for maintaining relationships with family, friends, and business associates.

o Facilitate reentry homeo Be in writing

Expatriate Compensation SystemsHome-Based Pay Pay based on an expatriate’s home country’s compensation practicesBalance-Sheet Approach A compensation system designed to match the purchasing power in a person’s home country Calculate base pay Figure cost-of-living allowance (COLA) Add incentive premiums Add assistance programs

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Expatriate Compensation Systems (cont’d)Host-Based Pay Expatriate pay comparable to that earned by employees in a host country to which the expatriate is assigned.Localization Adapting pay and other compensation benefits to match that of a particular countryOther Issues Adequacy of medical care Personal security Education

Performance Appraisal of International ManagersWho Should Appraise Performance? Home-country evaluations Host-country evaluationsAdjusting Performance Criteria Augmenting job duties Individual learning Organizational learningProviding Feedback Debriefing interview

Boosting ROI of ExpatriatesMajor initiatives planned to improve assignment return on investment (ROI):Better candidate selection 32%Career-planning skills 26Communicating objectives 24Assignment preparation 20Monitoring program 17Cross-cultural training 10

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Developing or expanding intranet 7Communication/recognition 6Web-based cultural training 5Mandating destination support 4Other 17

International Organizations and Labor RelationsInternational 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 (parties and issues) The degree to which government intervenes The degree of unionization and union strength.

Key Terms augmented skills balance-sheet approach codetermination core skills cultural environment culture shock expatriates, or home-country nationals failure rate global corporation global manager guest workers home-based pay host-based pay host country host-country nationals international corporation

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localization multinational corporation (MNC) repatriation third-country nationals transnational corporation transnational teams work permit, or visaYour Notes

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