Chapter 5

Global Human
Resource
Management

McGraw-Hill/Irwin

Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

1.

Describe the drivers behind globalization.

2.

Comprehend how global HRM practices support an

organizations expansion into the global marketplace.

3.

Give examples of how culture can influence the effective use

of human resource practices.

4.

Distinguish between multinational and global corporations in

terms of how they utilize their human resources.

5.

Examine several factors related to the successful selection,

training, and compensation of expatriates.

6.

Recognize the unique role that host country nationals play in

global corporations.

7.

Compare and contrast the legal and ethical components of

global human resource management.

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GLOBALIZATION

 Domestic

International

Multinational

Reasons for Globalization?

Expand Market Share

Cheap labour, Raw material is
easily available
Extensive Global
Communication
New technology
To Sustain in Foreign
Competition
Trade Agreement like NAFTA

What is an Expatriate?

An employee who is working and

temporarily residing in a foreign
country
They are also called international
assignees
assignees
by some firms.
All three categories of employees,
i.e. PCNs,
TCNs, and HCNs are expatriates
Nationality of the employee is major factor in
determining the persons category

Transfer of subsidiary staff

back to the parent country
(headquarters) operations.

The external environment greatly

influences HRM activities

Laws
Business customs

The most difficult challenge to

overcome is the people challenge

Each country has its own

Workforce
characteristics
Political climate

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Exhibit 5-1
Top 10 Most Important HRM Challenges for
Global Companies

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Recent years have seen a rapid increase

in global activity and global competition.

As the MNCs increase in number and

influence, so the role of international
HRM in those companies grows in
significance.

The effective management of human

resources internationally is increasingly
being recognized as a major determinant
of success or failure in international
business

Individualism
Individualismvs
vs
Collectivism
Collectivism

Hefstedes
Hefstedes
Cultural
Cultural
Dimensions
Dimensions

Power
Powerdistance
distance

LongLong-vs
vs
short-term
short-term
orientation
orientation

Masculinity
Masculinity
Avoidance
Avoidanceof
of
uncertainty
uncertainty

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Fit

HRM policies are congruent with the

strategic plan of the organization and the
work-related values of the foreign culture

Internal fit

HRM policies facilitate the work values

and motivation of the employees

External fit

HRM matches the context in which the

organization is operating

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4-15
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Sources of employees for an

international assignment
Parent country nationals (PCNs)
Host country nationals (HCNs)
Third country nationals (TCNs)
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The geocentric organization

ignores national boundaries
for staffing overseas
operations
Ethnocentricity is strong in
many foreign organizations
conducting business in the
U.S.
MNCs generally take an
ethnocentric perspective

The believe key

personnel should
be PCNs
They use HRM
policies from
home with minor
adaptations

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The
Thebiggest
biggestHR
HRchallenge
challengefacing
facingany
anyglobally
globallyoriented
oriented
corporation
corporationisisfinding
findingcompetent
competentmanagers
managers
An expatriate manager (PCN) comes from the
corporations home nation
Relocation can be troublesome, regardless
of the managers country of origin
The challenge is capitalizing on the diversity of a global
workforce without suppressing cultural heritage
The
Thebiggest
biggestmistake
mistakeglobal
globalorganizations
organizationsmake
make
Assuming there is one best way to structure HRM
policies and practices
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80
80Percent
Percentof
ofall
allMiddleMiddle-to
toLarge-size
Large-size
Companies
CompaniesUse
UseExpatriates
Expatriates

Many are not

effectively selecting
and preparing
employees for
overseas
assignments

74 percent of
companies provide
cross-cultural
training

American
expatriates fail
more often than
their Japanese
and European
counterparts

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4-20
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Success
Success in
in domestic
domestic operations
operations may
may have
have
little
little to
to do
do with
with success
success overseas
overseas
Many
Many expats
expats believe
believe too
too little
little attention
attention isis
paid
paid to
to other
other critical
critical factors
factors during
during the
the
selection
selection process
process
Expatriate
Expatriate selection
selection should
should focus
focus on
on
managers
managers
Self-image
Self-image
Interaction
Interaction with
with others
others
Perceptual
Perceptual orientation
orientation

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Dual
Dual
Careers
Careers

Role of Expats
Family Should
Not be Underestimated

Schooling
Schooling

Training
Training
Process
Process
Selection
Selection
Process
Process

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A phenomenon experienced

by people who move across

cultures. They experience a
shock reaction (or
psychological disorientation)
when exposed to new cultural
experiences, because they
misunderstand or do not
recognize important cues

Kuwait citizen faced C. Shock when British

father passed away and the family arguing
about who was going to pay for the funeral
expenses.
A taxi driver (Oman) stopping to wash
himself, then praying and making the Indian
late for a job interview.
In Germany People rarely speaking English
even if they know it.
Egyptian boss asking why you are changing
your clothes every day? Because rich?
Strange payment system for Dolmus (shared
taxi or minibus in Turkey)
Fasting in India means eating fruits and noncooked and food (Oman expat C. Shocking).
24

EXHIBIT 46
Cross-Cultural
Training and
Consulting
Companies

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Training Determinants

Self-Awareness

Level of contact with the

host culture

Important aspect of
successfully preparing for
an international assignment

Degree of dissimilarity
between the home and
host cultures

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4-27
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Phase 2 of training occurs at host country site

Language training continues
Mentoring relationships established
Local support groups help entire family
Immersion (interest) with daily experiences

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Final training phase occurs upon return home

Can result in more culture shock than was
experienced overseas
Expats more likely to quit than
domestic counterparts
Returning managers often feel they have
lost career advancement opportunities

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Helping managers deal with culture shock

Actively plan how
the overseas
assignment will
fit with career
aspirations

Identify
prospective
international
managers early
in their careers

Treat every new

hire as a
prospective
global employee

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Middle- to Upper-Level
Executives
1. Can cost two to three
times more than a
domestic manager
2. Often due to the
compensation practices
of multinational
organizations

Balance-sheet Approach
1. Ensure similar standard
of leaving
2. Extras often provided
as an incentive
3. Foreign service
premiums adjust the
expatriates base salary
for the inconvenience
the assignment causes

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Broad
Broad Categories
Categories of
of
Compensation
Compensation

Financial
Financial

Family
Family
Support
Support

Social
Social
Adjustment
Adjustment

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4-33
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Furnishings,
Furnishings,
maintenance
maintenance
allowances
allowances

Costs
Costsoffset
offsetwith
with
cost-of
cost-ofLiving
Living
premiums
premiumsplus
plus

Helpmaintaining
maintaining
Help
orselling
sellinghome
home
or

Hardship
Hardship
premiums
premiums

Educational
Educational
allowances
allowances
Transportation
Transportation
differential
differential
allowance
allowance

To combat costs, firms are shifting to short-term assignees

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Ethical
Ethical
Challenges
Challenges
Weaker environmental
regulations

International
International
business
businessmaze
maze
Trade agreements
Parent country laws

Gift giving or greasing

Host country regulations

The Foreign Corrupt Practices Act of 1977 (FCPA) makes it

illegal for employees of American corporations to offer money or
other items to foreign officials in order to gain an unfair
competitive advantage
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Regulations
Regulations
regarding
regarding
employment
employment
discrimination
discrimination
vary
varyfrom
from
country
countryto
to
country
country

The U.S. has some of the more stringent

anti-discrimination laws
Many countries have not created this kind
of enforcement
The Civil Rights Act of 1991 applies to
overseas operations of U.S. corporations

Ethical
Ethicaldilemmas
dilemmasbetween
betweenprofits
profitsand
andthe
thepreservation
preservationof
ofbasic
basic
human
humanrights
rightsmay
mayalso
alsoexist
exist

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