Module 5-3

International Human Resources

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Learning Objectives
To discuss the importance of human resource management To explain the types of expatriates To profile the staffing frameworks used by MNEs To assess how MNEs select, prepare, compensate, and retain expatriates

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Introduction
Learning Objective 1: To discuss the importance of human resource management

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Introduction
In addition to insightful strategies, great supply chains, sharp financial systems, and so on, successful MNEs have great people It is important to get the right person in the right job in the right place at the right time for the right compensation

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What is HRM?

Human resource management (HRM)

the activities that staff the MNE

HRM is more difficult in international companies because of

Environmental differences Strategic contingencies Organizational challenges

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What is HRM?
Factors Influencing HRM in International Business

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Strategizing HRM

Superior human resources are essential to

high productivity competitive advantage value creation

MNEs need to integrate strategy and HRM

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The Perspective of the Expatriate

Learning Objective 2: To explain the types of expatriates

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The Perspective of the Expatriate

MNE executives can be

locals expatriates leave their own country to live and work in another Home country nationals Third-country nationals

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The Perspective of the Expatriate

Trends in expatriate assignments

most expatriate assignments are short term lasting less than a year more assignments are going to younger and older workers than in the past the number of female expatriates, thirdcountry nationals, and reverse expatriates is rising

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Staffing Frameworks in the MNE

Learning Objective 3: To profile the staffing frameworks used by MNEs

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Staffing Frameworks in the MNE

There are three approaches to staffing policy

Ethnocentric fill key management positions with home-country nationals Polycentric use host-country nationals to manage local subsidiaries Geocentric seek the best people for key jobs throughout the organization, regardless of nationality
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Staffing Frameworks in the MNE

The Ethnocentric Framework: Key Benefits

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Staffing Frameworks in the MNE

The Polycentric Framework: Key Benefits

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Staffing Frameworks in the MNE

The key advantage of the geocentric approach is that managers can move between countries and cultures without losing their personal effectiveness But, this approach is difficult to develop and maintain

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Staffing Frameworks in the MNE

Comparing Approaches to Staffing Foreign Operations

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Managing Expatriates
Learning Objective 4: To assess how MNEs select, prepare, compensate, and retain expatriates

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Managing Expatriates

Expatriate selection screening executives to find those with the greatest inclination and highest potential for a foreign assignment Candidates are screened according to Technical competence Adaptiveness self-maintenance satisfactory relationships with host nationals sensitivity to host environments Leadership

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Managing Expatriates
Key Competencies of Expatriates

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Managing Expatriates

Expatriate failure

a managers premature return home due to poor performance

The rate of failure is dropping in general, but is higher in emerging economies

China and India

The cost of failure can easily reach $1 million

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Managing Expatriates
Concerns of Expatriates Ahead of Moving to Foreign Assignments

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Managing Expatriates

Common reasons for expatriate failure

inability of the spouse and family to adapt to the host country

To prevent expatriate failure, companies may provide preparation programs to provide

General country understanding Cultural sensitivity Practical skills

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Managing Expatriates

Compensation packages should

Motivate employees Allow employees to maintain their standard of living Reflect the responsibilities of the position Ensure that after-tax income will not fall Maintain pay equity among peers Compete with industry packages Be easily administered

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Managing Expatriates
Types of compensation plans Balance sheet approach

equalizes purchasing power across countries so expatriates have the same living standard in their foreign posting that they had at home Home-based method Headquarters-based method Host-based method

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Managing Expatriates

A typical compensation package includes Base salary Foreign service allowance Fringe benefits Tax differentials

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Managing Expatriates
What Does an Expatriate Cost?

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Managing Expatriates
Top Five Most Expensive Cities for Expatriates by Region

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Managing Expatriates

Repatriation

the process of reintegrating the expatriate into the home country upon completion of the foreign assignment
Work Financial Social

Can pose problems

The challenge is to find the right job for the returning manager
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Brainpower: Drains, Circulation, or Returns?

Trends

worker populations will grow faster in developing countries wealthier countries will continue to grow in the number of retirees
Brain drain Labor-saving threats Brain circulation

MNEs must adapt

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