staffing in international context
TRANSCRIPT
CHAPTER - 14
Staffing in International context
Compiled By –
Richa Goel
Neha Siwach
SYNOPSIS
International human resource management focuses on the management of human resources on a global basis. An organization’s strategy on globalization strongly affects the approach it takes to international human resource management. The approach to international human resource management in turn influences the implementation of the major international human resource management functions of recruitment and selection, development and training, performance evaluation, remuneration and benefits, and labor relations. Companies taking an ethnocentric approach attempt to impose their home country methods on their subsidiaries. The polycentric approach follows local practices. Finally, a geocentric or global approach develops practices for world-wide use.
Staffing in International context
14.1 Definition of IHRM
Is defined as human resource management issues, function and policies and practices that result from the strategic activities of multinational enterprise and
impact of international concerns and goals of that enterprise.
14.2 Major differences between Domestic HRM and IHRM.
Business activities e.g. taxation, international relocation, expatriate remuneration, performance appraisals, cross-cultural training and repatriation.
Increased complexities e.g. currency fluctuations, foreign HR policies and practices, different labour laws.
Increased involvement in employee’s personal life e.g. personal taxation, voter registration, housing, children’s education, health, recreation and spouse employment.
Complex employee mix – cultural, political, religious, ethical, educational and legal background.
Increased risks e.g. emergency exits for serious illness, personal security, kidnapping and terrorism
14.3 Main challenges in IHRM
High failure rates of expatriation and repatriation
Deployment – Getting the right mix of skills in the organization regardless of geographical location
Knowledge and innovation dissemination – Managing critical knowledge and speed of information flow
Talent identification and development – Identify capable people who are able to function effectively
Barriers to women in IHRM
International ethics & Language (e.g. spoken, written, body language)
14.4 Major IHRM Functions
1. Recruitment and selection – Recruitment is the process of attracting a pool of qualified applicants for available positions & selection is the process of choosing qualified applicants from the available candidates and ensuring that the skills, knowledge, and abilities of the selected employees match the requirements of the positions
2. Performance evaluation – Is the process of appraising employees’ job performance
3. Compensation and benefits- Function of HRM is designed to develop uniform salary systems and other forms of remuneration, such as health insurance, pension funds, vacation, and sick pay
4. Training and development -Function involves planning for effective learning processes, organizational development, and career development
5. Labor relations - Function is designed to assist managers and workers determine their relationships within the workplace
6. Also, management of expatriate workers
14.5 Staffing Needs
Firms that centralize decision making at headquarters typically favor home-country managers, while Firms that decentralize decision making to the subsidiary level often employ host country nationals.
Since most companies do not fall at one extreme or the other, most companies have a combination of both home and host country managers.
14.6 TYPES OF GLOBAL EMPLOYEES.
1. Parent country national (PCN): The nationality of the employee is the same as that of the headquarters of the global organization
2. Host country national (HCN): The employee’s nationality is the same as that of the subsidiary
3. Third country national (TCN): The employee’s nationality is neither that of the headquarters or of the local subsidiary
14.7 Parent country Nationals
14.7.1 Advantages
1. Control and co-ordination by HQ is maintained.
2. Promising managers get international experience.
3. PCNs may be the best people for the job.
Assurance that the subsidiary will comply with company objectives policies etc
Disadvantages
1. HCNs promotion opportunities are limited.
2. Adaptation to host country may take a long time.
3. PCNs may impose an inappropriate HQ style.
4. Compensation differences between PCNs and HCNs may cause problems.
14.7.2 Host-country Nationals
Advantages
1. No problems with language and culture.
2. Reduced hiring costs.
3. No work permits required.
4. Continuity of management improves since HCNs stay longer in positions.
5. Govt. policy may force hiring of HCNs.
6. Promotional opportunities not limited - so higher morale among HCNs
Disadvantages
1. HQ may have less control over operations.
2. HCNs may still have limited career opportunities outside the subsidiary.
3. Hiring HCNs limits opportunities for PCNs to gain overseas experience.
4. Hiring HCNs may encourage a federation of disintegrated national units rather than one integrated global unit.
14.7.3 Third-country Nationals
Advantages
1. Salary and compensation may be lower than for PCNs.
2. May be more familiar with host country than the PCNs.
Disadvantages
1. Transfers must consider national animosities.
2. Host government may resent TCNs as much as PCNs.
3. TCNs may not comply with HQ style of management.
TCNs may not want to return after assignment
14.8 Types of International Staffing Policy.
14.8.1 Ethnocentric
All key managerial positions are filled by parent-country nationals.
Consistent with international strategy
Disadvantage: cultural myopia
The cultural differences & environmental differences will be huge and expatriates may not be able to cope up with. Thus resulting in costly management mistakes. e.g., Procter & Gamble – Associate with higher incidence of IHRM problems
Example - Korean MNC's Hyundai, Samsung, Indian MNC's TCS, Infosys, Wipro. US MNC's GE, Citi corp., Exxon appoint home country nationals to lead the foreign subsidiary. (Ethnocentric approach)
14.8.2 Polycentric
Key positions are filled with HCN’s
Host country nationals manage subsidiaries
Consistent with multidomestic strategy
Disadvantage: Create a gap between home and host operations( This gap is created due to cultural differences between the two countries(i.e. host and subsidiary)
Example: US MNC's P&G, Pepsi, Coca cola. Indian MNCs Ranbaxy appoint a host country executive along with a home country executive to support or vice-versa (polycentric approach)
14.9.3 Geocentric or global
Best managers are recruited from within or outside the company regardless of nationality, TCN’s – used by European MNC’s, transpatriates, some U.S. companies (Philips, Heinz, Unilever, IBM)
Help build an informal management network
Disadvantage: May be subject to the immigration policies
Electrolux (the vacuum cleaner company) has for many years attempted to recruit and develop a group of international managers from diverse countries. These people constitute a mobile base of managers who are used in a variety of facilities as the need arises.
14.9.4 Regiocentric
Recruiting on a regional basis.
For example, a U.S. based firm could create three regions;
Europe, the Americas, and Asia-pacific.
European staff would be transferred throughout the European region (say a Briton to Germany, a French national to Belgium, and a German to Spain).
Eg: Ford Motor Company.
Disadvantage: produce federalism at a regional rather than a country basis and constrain the organization from taking a global stance.
Figure 14.9.1 Advantages and disadvantages of using local employees to staff international subsidiaries
Advantages Disadvantages
Lower labor costs
Demonstrates trust in local citizenry
Increases acceptance of the company by the local community
Maximizes the number of options available in the local environment
Leads to recognition of the company as a legitimate participant in the local economy
Effectively represents local considerations and constraints in the decision-making process
Makes it difficult to balance local demands and global priorities
Leads to postponement of difficult local decisions until they are unavoidable, when they are more difficult, costly, and painful than they would have been if implemented earlier
May make it difficult to recruit qualified personnel
May reduce the amount of control exercised by headquarters
Figure 14.9.2. Advantages and disadvantages of using expatriate employees to staff international subsidiaries
Advantages Disadvantages
Cultural similarity with parent company ensures transfer of business/management practices
Permits closer control and coordination of
Creates problems of adaptability to foreign environment and culture
Increases the »foreigness« of the subsidiary
international subsidiaries
Gives employees a multinational orientation through experience at parent company
Establishes a pool of internationally experienced executives
May involve high transfer and salary costs
May result in personal and family problems
Leads to high failure rate
14.10 Staffing For International Assignment
• Today, as businesses globalize, the market for executive talent is also globalizing.
• Top management teams are increasingly diverse in their members.
While most MNCs do not hire new college graduates to take foreign positions immediately, many hire graduates with the intention of sending them abroad in the future.
14.11 Factors in Expatriate Selection
Diagram 14.11.1
14.11.1 Cross cultural Suitability
Expatriates require cross-cultural abilities that enable the person to operate in a new environment.
This includes: cultural empathy, adaptability, diplomacy, language ability, positive attitude, emotional stability and maturity.
Effectiveness skills are defined as the ability to successfully translate the managerial or technical skills into the foreign environment
14.11.2 Family requirements
Adjustment of the spouse can be positively correlated with the adjustment of the expatriate manager.
Inclusion of the family members especially spouse essential in the selection process.
Reluctance of the company to delve in to the private lives of their employees can become a constraint in selecting the right couple
14.11.3 Country/ Cultural Requirement
The host country may be an important determinant.
Some regions and countries are considered "hardship postings”- remote areas away from major cities or modern facilities, or war-torn regions with high physical risk.
14.11.4 MNE Requirements
Situational factors have an influence on the selection decision.
This also affect the selection ratio - that is PCN:TCN:HCN
Other situational factors are:
The mode of operation involved – input from local partner in selecting staff
The duration of the assignment – essential if family is accompanying the manager
The amount of knowledge transfer inherent in the expatriate’s job in the foreign operation – the nature of the job and the essential skills required to do that job
14.11.5 Language
The ability to speak a second language is an aspect often linked with cross-cultural ability.
Language skills may be regarded as of critical importance for some expatriate positions, but lesser in others.
Communication skills rather than specific language skills was an important selection criteria for the top subsidiary management position.
Differences in language are recognized as a major barrier to effective cross cultural communication.
Language problems were largely viewed as mechanical and manageable problems that could be solved individually.
Another component to language as a situation factor in the selection decision.
14.12 .1 Training
At the international level, human resource development professionals are responsible for:
1. Training and development of employees located in subsidiaries around the world.
2. Specialized training to prepare expatriates for assignments abroad, and
3. Development of a special group of globally minded managers.
14.12.2 Cross Cultural training
14.12.3 Methods of Cross Cultural Training
Cultural BriefingsExplain the major aspects of the host country culture, including customs, traditions, everyday behaviors.
Area BriefingsExplain the history, geography, economy, politics and other general information about the host country and region.
CasesPortray a real life situation in business or personal life to illustrate some aspect of living or working in the host culture.
Role PlayingAllows the trainee to act out a situation that he or she might face in living or working in the host country.
Culture AssimilatorProvides a written set of situations that the trainee might encounter in living or working in the host country.
Field ExperiencesProvide an opportunity for the trainee to go to the host country or another unfamiliar culture to experience living and working there for a short time.
14.12.4 Advantages of CCT
People Learn About Themselves: Through cross cultural training, people are exposed to facts and information about their own cultures, preconceptions, mentalities and worldviews that they may otherwise not have contemplated. Cross cultural training helps people learn more about themselves through learning about others.
Encourage Confidence: Cross cultural training promotes self-confidence in individuals and teams through empowering them with a sense of control over previously difficult challenges in the workplace.
Break Down Barriers: All of us have certain barriers such as preconceptions, prejudices and stereotypes that obstruct our understanding of other people. Cross cultural training demystifies other cultures through presenting them under an objective light. Through learning about other cultures, barriers are slowly chipped away thus allowing for more open relationships and dialogue.
Build Trust: When people’s barriers are lowered, mutual understanding ensues, which results in greater trust. Once trust is established altruistic tendencies naturally manifest allowing for greater co-operation and a more productive workplace.
Motivate: One of the outcomes of cross cultural training is that people begin to see their roles within the workplace more clearly. Through self-analysis people begin to recognise areas in which they need to improve and become motivated to develop and progress.
Open Horizons: Cross cultural training addresses problems in the workplace at a very different angle to traditional methods. Its innovative, alternative and motivating way of analysing and resolving problems helps people to adopt a similarly creative strategy when approaching challenges in their work or personal lives.
Develop Interpersonal Skills: Through cross cultural training participants develop great ‘people skills’ that can be applied in all walks of life. By learning about the influence of culture, i.e. the hidden factors upon people’s behaviours, those who undertake cross cultural training begin to deal with people with a sensitivity and understanding that may have previously been lacking.
Develop Listening Skills: Listening is an integral element of effective and productive communication. Cross cultural training helps people to understand how to listen, what to listen for and how to interpret what they hear within a much broader framework of understanding. By becoming good listeners, people naturally become good communicators.
People Use Common Ground: In the workplace people have a tendency to focus on differences. When cross cultural communication problems arise the natural inclination is to withdraw to opposing sides and to highlight the negative aspects of the other. Cross cultural training assists in developing a sense of mutual understanding between people by highlighting common ground. Once spaces of mutual understanding are established, people begin to use them to overcome culturally challenging situations.
Career Development: Cross cultural training enhances people’s skills and therefore future employment opportunities. Having cross cultural awareness gives people a competitive edge over others especially when applying for positions in international companies with a large multi-cultural staff base.
14.13.1 Expatriate Failure:
The selection process in international firms is particularly important because of the high cost of expatriate failure.
Expatriate failure is the early return of an expatriate manager to his or her country because of an inability to perform in the overseas assignment.
14.13.2 Causes of expatriate assignment failure:
Spouses in 90% of cases come back early .They faces isolation, loneliness, boredom.
Financial package, cost in foreign country may be higher. Example's family overseas in Japan may face such a situation.
Lack of inability to adapt. In host country they have to face uncertainties ,relate with people with different values and beliefs. this happens when no training is given on cultural nuances
Poor programmers for career support and repatriation.
Lack of support from HQ.
Inadequate preparation, training and orientation prior to assignment.
Managers sent on foreign assignments may experience culture shock, a psychological phenomenon that may lead to feelings of fear, helplessness, irritability, and disorientation
14.13.3 Costs of Expatriate Failure:
Direct costs:
Airfares
Associated relocation expenses
Salary and benefits
Training and development
Costs vary according to:
Level of position
Country of destination
Exchange rates
Whether ‘failed’ manager is replaced by another expatriate
Indirect Cost of Expatriate Failure:
Damaged relationships with key stakeholders in the foreign location
Negative effects on local staff
Poor labor relations
Negative effects on expatriate concerned
Family relationships may be affected
Loss of market share
14.13.4 Steps for reducing Expatriate Failure:
Firms are now beginning to pay more attention to repatriation-bringing a manager back home after a foreign assignment has been completed.
Individuals that successfully adapted to the foreign environment may experience culture shock upon returning to their own country
Regarding “non-cultural” issues leading to success or failure overseas, managers tend to be more successful in foreign assignments when 5 conditions are met:
They can freely decide whether or not to accept a foreign assignment
They have a realistic understanding of the new job and assignment
They have a realistic expectation of a repatriation assignment.
They have a mentor in the parent firm who will look out for their careers
There is a clear link between the foreign assignment and the manager’s long-term career path.
14.13.5 Compensation to Expatriate Manager:
Compensating expatriate managers can be a complex process because factors such as differences in currency valuation, standards of living, lifestyle norms, and so forth must be taken into consideration
A cost-of-living allowance may be given to managers to offset differences in the cost-of-living in the home and host countries.
A hardship premium (also known as a foreign service premium) may be paid to mangers who accept assignments in relatively unattractive locations.
Special benefits packages that may be provided to expatriate managers include housing, education, medical treatment, travel to the home country, and club memberships
14.14.1 REPATRIATION:
Virtually all repatriated personnel experienced some personal difficulty in reintegrating on return home. The main complaints were loss of status loss of autonomy lack of recognition of the value of the experience and lack of career direction
Means PNCs, TCNs, or even HCNs finish their overseas assignment & come back to their home headquarters & which leads to reverse cultural shock.
Effects-
Anxious.
Dissatisfied.
Co-workers may not be interested in hearing his experience.
Repatriate’s job may not make as much use of internationally acquired KSAs as it could
14.14.2 Repatriation: Reverse Culture-shock
JOB RELATED FACTORS
“Out of sight out of mind”
International experience devalued
Loss of status and pay relatively peaking
Changes in the HQ
SOCIAL FACTORS
Expat assignment - different type of social interaction (going from a very close expat community to where everyone is very busy with their own lives)
Problems of spouse returning to the workforce
Lack of peer support for teenagers
14.14.3 Making most of repatriate’s KSAs
Serving as trainer or mentor for CCT programs.
Acting as long distance supervisor to other expatriates.
Join the pool of international managers
14.15 Other issues in strategic HRM:
INTERNATIONAL PERFORMANCE APPRAISAL:
Performance appraisal in an expatriate assignment depends upon various things like:
Scope of communication in job Accounting system of host country Mode of communication and infrastructure of that country Cost of labor in that country.
The method for the performance evaluation should be bars and anchor rating scale which measure behavior approach.
INTERNATIONAL COMPENSATION:
in case of an expatriate assignment it is necessary to give compensation keeping various in consideration like:
Cost of living Taxes Savings Travelling allowance Education
By keeping in mind all these factors there are three methods employed by organizations like:
Host country based: In this case base salary is kept as that in host country and other expenses according to home country.
Home country based: In this case base salary is kept as that of home country but other expenses according to host country.
Region based: In this case people working away from their home country or in a different region are paid more.
INTERNATIONAL LABOR RELATIONS:
In this it is necessary for an organization going global to know about types of unions and rate of unionization in that country.
14.16 Important lessons for global firms
The need to manage change
The need to respect local cultures
The need to understand a corporation’s culture
The need to be flexible
The need to learn
14. 17 Summary
Expatriates – Employees who are assigned to work overseas on temporary basis.
14.17.1 Staffing in IHRM
Staffing Philosophy
Strategy Fit Pros Cons
Ethnocentric
Key overseas positions staffed by home managers
International
Puts qualified managers in place
Creates global culture
Transfer of core competences
Local manager resentment
Cultural myopia Immigration
barriers Costly
Polycentric
Key overseas positions staffed by local managers
Multidomestic Alleviates cultural myopia
Inexpensive to implement
Limits career mobility
Isolates HQ from overseas subs
Geocentric
Best for job gets it
Global and Transnational
Uses HR efficiently Builds strong global
culture and informal management network
Costly Immigration
barriers
14.17.2 Cross cultural training.
CCT prepares an expatriate to live and work in a different culture because coping with a new environment is much more challenging than dealing with a new job
To treat the international assignment as merely one step in overall career development one should take care of issues & policies of job rotation. Employee should remain on rotation long enough to attain a level of proficiency that enhance knowledge & efficacy.
14.17.3 Other issues in strategic HRM
International performance appraisal – in international context along with job objective several other factors become criteria for PA like –
• Extent of interaction position requires.
• Upper level managers often evaluated on basis of subsidiary bottom line result
• Volatility of foreign labour market
• Telecommunication & transportation infrastructure.
International compensation – covers 3 policies
Home based policy- links expatriate’s salary to salary structure of relevant home country.
Adv- creates equity with home country colleagues
Can be cheaper when home country has lower wage than host country.
Problem occur when expatriate is been bouncing from subsidiary to subsidiary over many years and no longer identifies himself as a birth country national
Host based – links base salary to salary structure of host country but retains the home country salary structure for other international supplements.
Region based – compensates expatriates working in their home regions at somewhat lower levels than those who are working in region far from home.
International labour relations. International hr manager must devise strategies to improve best fit between labour relation activities & external environment
14.18 Questions
Q1) Discuss the issues need to be considered for recruitment in the context of IHRM?
Q2) Discuss the causes of expatriate failure?
Q3) What is repatriation and how can one make most of expatriates knowledge?
References
• Strategic HRP
• Research Paper : Expatriation: the cross cultural issues and design of training for coping by Amit Pande (IIM)
• HUMAN RESOURCE MANAGEMENT IN INTERNATIONAL ORGANIZATIONSby Sonja Treven.