CHAPTER 17. INTERNATIONAL HRM CHALLENGE Stage 1: Domestic operations. The firm s market is exclusively domestic.

Boulder beer is a good example of this type of operations. They produce it s ales in boulder Colorado and seldom sells outside the mountain states region. Many US firms fells in this category but their number is decreasing as manufacturing, staffing, training and compensation of stage 1 firms are mainly decided by local and/or national forces. Stage 2: Export operations. The firm expands it market to include other countries, but retains production facilities within domestic borders. Turbo-Tek Enterprise, Inc in LA is a good example of this category that produces Turbo wash (a water spraying attachment for household use) y Produced in LA but repackaged in the Netherlands for European market y Uses instructions in 11 languages y Product is modifies according to target market to suite local needs(special adaptor to fit English hoses) HRM should facilitate exporting of the firm s products through managerial incentives, appropriate training, and staffing strategies that focus on the demands of international customers Stage 3: Subsidiaries or joint ventures. The firm physically moves some of its operations out of the home country. These operations mainly include parts assembly. Many U.S apparel manufacturers have opened assembling facilities throughout Caribbean. The foreign subsidiary is under close control of corporate headquarters, and a high proportion of employees are expatriate. HRM practices need to focus on the selection, training, and compensation of expatriates, as well as on the development of HR policies for local employees where the foreign facilities are located Stage 4: Multinational Operations. The firm becomes an MNC with assembly and production facilities in several countries and regions of the world. Some decentralization of decision-making is common, but many HR decisions are still made at corporate headquarters The alliance between Ford motor company and Mazda Motor Corporation to build trucks in Thailand is very common. While there is usually some decentralization of decision making for firms at stage 4, many personnel decisions affecting foreign branches are still made at corporate headquarters. Stage 5: Transnational Operations. Firms in this stage owe little allegiance to their country of origin. Operations are highly decentralized, with each business unit free to make HR decisions with very loose control from corporate headquarters. HRM practices are designed to blend individuals from diverse backgrounds to create a shared corporate (vs. national) identity and a common vision. There are three approaches to managing an international subsidiary:

Ethnocentric approach - top management and other key positions filled by people from the home country. For exp, Fluor Daniel Inc uses large group of expatriate including 500 international HRM professionals who are involved in recruitment. Polycentric approach - international subsidiaries managed and staffed by personnel from the host country. GE subsidiary in Hungry runs eight factories and employs 8000 people almost all of them are Hungarian nationals. Geocentric approach - nationality is deliberately downplayed and the firm actively searches on a worldwide or regional basis for the best people to fill key positions. Electrolux has a group of international managers from diverse countries which they use in variety of facilities as the need arises. Advantages and Disadvantages of hiring Locals ADVANTAGES Lower labour cost Demonstrate trust in local citizenry DISADVANTAGES Makes it difficult to balance local demands and global priorities Leads to postponement of difficult local decisions (such as layoff) 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

Increases acceptance of the company by the local community Maximises 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 Greater understanding of local conditions

Advantages and Disadvantages of hiring Expatriates ADVANTAGES Cultural similarity with parent company ensures transfer of business/management practices Permits closer control and coordination s of DISADVANTAGES Creates problems of adaptability to foreign environment and culture Increases the foreignness of the industry.

international subsidiaries Gives employees a multinational orientation through experience at parent company Establishes a pool of internationally experienced executives Local talent may not yet be able to deliver as much value as expatriate can Provides broader global perspective May involve high transfer, salary, and other costs May result in personal and family problems Has disincentive effect on local- management morale and motivation May be subject to local government restrictions

Why International Assignments Fail Career blockage Initially, many employees see the opportunity to work and travel abroad as exciting. But once the initial rush wears off, many feels that the home office had forgotten them and that their career has been sidetracked while their counter parts at home are climbing the corporate ladder. Culture shock Many people who take international assignment cannot adjust to a different cultural environment, a phenomenon called culture shock. Instead of learning to work within the new culture, the expatriate tries to impose the home office s or home country s values on the host country s employees. Firms should select employees for foreign assignments based on their cultural sensitivity. Lack of pre-departure cross-cultural training Many firms do not provide any cross cultural training for the expatriate and his/her family which creates problem in near future when expatriate start working in a foreign country. Overemphasis on technical qualifications A firm give overemphasis on employee s technical qualification and his/her performance in home country and totally ignores other important aspects such as cultural sensitivity, communication and language skills. Getting rid of a troublesome employee International assignment may seen to be a convenient way of dealing with managers who are having problems in the home office. By sending these managers abroad, the organization thinks that they resolve the problem but in reality they have just transferred the problem but did not solve it. Family problems The inability or unwillingness of the expatriate s spouse and children to adapt to life in another country is one of the most important reasons for failure. Difficulties in return Lack of Respect for Acquired Skills The expatriate who has gathered a wealth of information and valuable skills on a foreign assignment may be frustrated by the lack of appreciation shown by peers and supervisors. Loss of Status

Returning expatriates often experience a substantial loss of prestige, power, independence and authority. Poor Planning for Return Position Uncertainty regarding their new career assignment may provoke much anxiety in returning employees. Reverse Culture Shock Those expatriate returning from extended international assignment, living and working in another country for a long time changes a person especially if he or she has internalized some of foreign country s norms and customs. Selection of Employees for International Assignments

Emphasize cultural sensitivity as a selection criteria Establish a selection board of expatriates Require previous international experience Explore possibility of hiring foreign-born employees to serve as expatriates at future date Screen candidates spouses and families Approach to Cross-Cultural Training Length and Level of Training Cross-Cultural Training Approach 1-2 months, high Impression Approach Assessment center Field experiences Simulation Sensitivity training Extensive language training 1 - 4 weeks of training; Moderate level Affective Approach Language training Role playing Critical incidents Cases Stress-reduction training Moderate language training Informative-Giving Approach Area briefings Cultural briefings Films/books Use of interpreters Survival-level language training

Length of stay 1-3 years

2 - 12 months

1 month or less

Less than a weeks of training; Low level

Hofstedes Cultural Dimensions Power distance Extent to which individual expect a hierarchical structure that emphasizes status difference between subordinates and superiors. Individualism Degree to which a society values personal goals, autonomy, and privacy over group loyalty, commitment to group norms, involvement in collective activities etc. Uncertainty avoidance Extent to which a society places a high value on reducing risk and instability. Masculinity/femininity Degree to which a society views assertive or masculine behavior as important to success and encourages rigidly stereotyped gender roles. Long-term/short-term orientation Extent to which values are oriented toward the future as opposed to the past or present Compensation Firms can use compensation packages to enhance the effectiveness of expatriate assignments- but compensation policies can create conflict if locals compare their pay packages to the expatriate s and conclude that they are being treated unfairly calculating compensation packages for expatriate employees is one of the most difficult tasks facing MNCs Provide expatriate with disposable income equivalent to what s/he would get at home Provide explicit add-on incentive for accepting international assignments Avoid having expatriates fill same jobs held by locals or lower-ranking jobs EEO (equal employment opportunity) in the International Context: - Globalization of industry raises numerous EEO issues, - Some of which the U.S. courts addressed and others, not - is not a well-developed area of employment law U.S. firms cannot base employment decisions on employee race, sex, and age, but firms are not required to violate a host nation law Foreign national employees of U.S. firms in their own country or in another foreign country are not covered by U.S. employment law Immigration Control and Reform Act of 1986: people who are not U.S. citizen, but who are living and have legal work status in the U.S., may not be discriminated against