Human Resource Management

Fifteenth Edition

Chapter 17
Managing Global
Human Resources

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights

 The HR challenges of international
business.

Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved
 The Manager’s Global Challenge

• The global employer faces these differences

– Political
– Social
– Legal
– Cultural
 What is International Human Resource
Management?
• International Human Resource Management - is
the human resource management concepts and
techniques employers use to manage the human
resource challenges of their international
operations.
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International Human Resource

Management
In the new millennium, of course, the traditionally conceived and
practiced leadership skills do not seem to produce results. The
leadership skills that are required for the newly emerging global
economy seem to be somewhat different.
30-6
Competencies needed by a
transnational managers
Transnational Skills Transnationally competent managers Traditional international managers
Global perspective Understand worldwide business Focus on a single foreign country and on
environment from a global perspective managing relationships between headquarters
and that country
Local responsiveness Learn about many cultures Become an expert in one culture
Synergistic learning v Work with and learn from people v Work with and coach people in each foreign
from many cultures simultaneously culture separately or sequentially
v Create a culturally synergistic Integrate foreigners into headquarters’
v
organisational environment national organisational culture
Transition and Adapt to living in many foreign cultures Adapt to living in a foreign culture
adaptation
Cro ss - cultural Use cross - cultural interaction skills on a Use cross cultural interaction skills primarily on
interaction daily basis throughout one’s career foreign assignments
Collaboration Interact with foreign colleagues as equals Interact within clearly defined hierarchies of
structural and cultural dominance
Foreign experience Transportation for career and organisation Expatriation or impartation primarily to get the job
development done.

International Human Resource Management

30-7
International Human Resource
Management
It is the process of procuring, allocating and effectively utilising human
resources in a multinational corporation. Generally speaking, there are
three sources of employees for an international assignment: parent
country nationals, host country nationals and third country nationals.
When compared to domestic HRM, the scope of IHRM is very wide as it
has to take care of a number of constituencies

International Human Resource Management

30-8

Model of International HRM

H R A C T IV IT IE S

H o s t C o u n tr y N a tio n a ls ( C N s )

P a re n t C o u n try N a tio n a ls (P C N s )

T h ir d C o u n t r y N a t i o n a ls ( T C N s )

International Human Resource Management

30-9

Cultural Differences And HRM

Expatriate managers, generally, face a kind of culture shock when they

begin their operations in a different cultural setting. The list of barriers
that confront them seem to be unending

International Human Resource Management

30-10 Puzzles confronting the expatriate
manager

The following questions must be looked into carefully before sending managers on a
foreign assignment:
 What is the host country's business culture like? What is the management style?
Do I have the skills I will need to handle relationships with my employees?
 Will this assignment be good for my long-term career growth? Can I expect to be
promoted when I return? How will I be treated if I do not succeed in my overseas
job?
 What is the country like? What are the customs? Will I be able to adjust to the
culture?
 Will my family be able to adjust to the new situation? Will my spouse be able to find
suitable employment? Will my children be able to adjust to going to school in
another country? How good is the educational system there?
 How will we learn enough of the new language to communicate effectively?
 Where will we live? How will the new housing arrangements compare to our current
home? What will happen to our current home when we leave for the new
assignment?
 What are the tax and other financial issues I will have to address as an expatriate?
Who will advise me on these topics? Will the Company pay me in a way that
protects my income from high foreign tax rates?
 How will our medical needs be taken care of?
L. Grant, "That overseas job could derail your career," Fortune, 14.4.97; S. Taylor R.N. Nappier, "Working in
Japan", Sloan
International Human Management
Resource Review, Spring 1996)
Management
10
30-11

Cultural Differences And HRM

 Sense of self and space

 Language
 Dress and appearance
 Food, eating habits and perceptual problems
 Time and time consciousness
 Relationships
 Values and norms
 Beliefs and attitudes
 Mental processes and learning
 Work habits and practices

Understanding the problems brought by the above complicating factors is very

important for an expatriate manager, because a small mistake could lead to grave
personal insult and jeopardise important business dealings. Fortunately cultural
sensitivity can be learned through various techniques.

International Human Resource Management

11
30-12

Cross cultural training techniques for

expatriate managers
(a) Documentary programmes: Trainees read about a foreign country's history,
culture, institutions, geography, and economics. Videotaped presentations are often
used.
(b) Culture assimilation: Cultural familiarity is achieved through exposure to a
series of simulated intercultural incidents, or typical problem situations. This technique
has been used to quickly train those who are given short notice of a foreign
assignment.
(c) Language instruction: Conversational language skills are taught through a
variety of methods. In most multinational companies, executives learn various
languages in a routine way, so that they can be useful to the company in case of
short-term foreign assignments.
(d) Sensitivity training: Experiential exercises teach awareness of the impact of
one's actions on others.
(e) Field experience: Firsthand exposure to ethnic subcultures in one’s own country
or to foreign cultures heightens awareness.
(f) Business basics: This covers negotiating cross-culturally, working with various
types of clients, making presentations etc.
(S. Oden Wald, "A Guide for Global Training", Training and Development, July 93.)

International Human Resource Management

12
30-13

Economic Factors And HR Practices

Differences in economic systems among countries also translate into inter

country differences in HR practices. In free enterprise systems, companies
focus on cost cutting, enhancing shareholder value, productivity etc. in
socialist systems, the focus shifts to prevention of unemployment, even at
the expense of efficiency. In labour surplus and capital hungry economies
like India, upholding labour laws, respecting political ideologies, and
offering jobs to economically poor and underprivileged sections may
occupy the centre stage. These inter-country differences in cultures,
economic systems, labour policies, thus, complicate the task of selecting,
training and managing employees abroad.

International Human Resource Management

13
30-14

Economic Factors And HR Practices

 International Recruitment
While hiring executives, global companies are guided by three
things; ethnocentrism, polycentrism and geocentrism
a. Ethnocentrism: it is a cultural attitude marked by the
tendency to regard one's own culture as superior to others
b. Polycentrism: In the polycentric corporation there is a
conscious belief that only host country managers can ever
really understand the culture and behaviour of the host country
market, therefore, the foreign subsidiary should be managed
by local people.
c. Geocentrism: it assumes that management candidates must
be searched on a global basis, without favouring anyone.

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30-15

Reasons for expatriate failures

 Transfer anxieties: Foreign assignments might have been pushed ahead

without adequate preparation and advance planning. The expat might, as result,
find the task insurmountable, feel the pressure unbearable and return empty-
handed.
 Career problems: A foreign posting creates, for the expatriate a number of
career problems (i) being 'out of sight, out of mind' and being bypassed for
promotions (ii) the danger of coming home a stranger with few familiar faces to
greet his/her arrival (iii) the likelihood of being tempted by the foreign life style
and losing the desire to return.
 Personal problems: As Negandhi reported, expatriates may encounter
serious adjust problems such as: personal discomfort and uncomfortable living
conditions, homesickness; education, medical, health problems of family
members; social aloofness, cultural mismatch.
 Other concerns: These include: (i) the foreign posting might be looked at as
a short term obligation (ii) the expats performance might be evaluated against
a short-term criteria, (iii) the expat may begin to feel the pinch due to lack of
continuity in plans empowering him to conduct the show for a reasonable
period (iv) business environment of the host country might be too restrictive,
unfriendly and even unbearable.

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30-16

Economic Factors And HR Practices

 International selection
While selecting executives for international postings, the following
things could be kept in mind
i. General and technical criteria
ii. Language skills
iii. Cross cultural suitability
iv. Motivation for foreign assignment
v. Family situation

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30-17

Expatriate managers : success and

failure
T h e f ir s t k e y t o f i n d in g a s u c c e s s f u l e x p a t r ia t e i s a s e le c t i o n p r o c e s s t h a t a c c u r a t e ly d e t e r m i n e s w h o is c u l t u r a l ly f l e x ib le
a n d a d a p t a b le , h a s a s u p p o r t iv e f a m ily s i t u a t io n , a n d is m o t iv a t e d t o a c c e p t t h e o v e r s e a s a s s ig n m e n t .

C h a r a c te r is tic s o f th e e x p a tr ia te m a n a g e r

S t r o n g t e c h n ic a l s k ills U n c e rta in te c h n ic a l c o m p e te n c y
G o o d la n g u a g e s k i lls W e a k la n g u a g e s k il ls
S tr o n g d e s ir e to w o rk o v e rs e a s U n s u re a b o u t g o in g o v e rs e a s
S p e c ific k n o w le d g e o f o v e r s e a s c u ltu r e F a m i ly p r o b le m s
W e ll- a d ju s t e d f a m ily s i t u a t io n L o w s p o u s e s u p p o rt
C o m p le t e s u p p o r t o f s p o u s e B e h a v io u r a l r ig id ity
B e h a v io u r a l f le x i b ilit y U n a d a p t a b ilit y - c lo s e d t o n e w i d e a s
A d a p t a b ilit y a n d o p e n - m i n d e d n e s s P o o r r e la t io n a l a b i lit y
G o o d r e la t io n a l a b ilit y W e a k s t r e s s m a n a g e m e n t s k i lls
G o o d s t r e s s m a n a g e m e n t s k i lls
H i g h p r o b a b il it y f o r s u c c e s s L o w p ro b a b ility f o r s u c c e s s

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30-18

Economic Factors And HR Practices

In selecting the individual who gets an overseas assignment, organisations

must not only consider their ability to do the job but, in addition, must
consider their ability to work in a new culture and emotionally handle the
stress associated with a new set of cultural concerns

 International training and development

Careful selection is only one side of the coin. To ensure success,
expatriates require proper orientation, cross cultural training, career
counselling etc.
i. Orientation
1. cultural briefing
2. assignment briefing
3. shipping requirements
ii. cross cultural training
iii. career development and counselling

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Economic Factors And HR Practices

 International compensation
Compensation practices for international employees are much more
complex than tose for domestic employees because many more
factors must be considered
i. Income that the expatriate was getting at HRM
ii. Additional incentives to be paid on global assignment
iii. The income of local employees reporting to the expatriate

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30-20

Economic Factors And HR Practices

 International labour relations

Labour management relations in international companies depend on
the peculiar customs, traditions, laws and practices followed in
respective countries. Global companies must pay adequate attention
to the health, safety and security of their employees also.
1. The role of unions
2. Collective bargaining
3. Labour participation
4. Employee health
5. Employee safety
 Repatriation
1. logistics
2. readjustment and integration into the community for the
employee and his or her family
International Human Resource Management
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 Adapting HR Activities to Inter-
Country Differences
Intercountry
Differences That
Influence
International HR
Practices
 Culture Factors

• The Hofstede Study

• Legal Factors
• Codetermination
 Economic System

• Market
• Planned
• Mixed
HR Abroad Example: The European Union

• Minimum EU Wage
• Working Hours
• Termination of
Employment
 HR Abroad Example: China

• Recruiting
• Selection
• Compensation
• Labor Unions
 Discussion : HR Practices in the United States and China

• Comparing Small Businesses, HR Practices in the United States and China Cross-country
differences tend to manifest themselves in small businesses, too. For example, one study
compared practices in 248 small U.S. companies with those in 148 small Chinese companies.
First, in terms of job analysis, jobs in small Chinese companies tend to be more narrowly
defined and set in stone than those in small U.S. businesses. For example, the small Chinese
firms have more up-to-date job descriptions, their employees deviate from their assigned job
duties less frequently, their job descriptions tend to cover all the job’s duties, and the job
descriptions shape what the workers do. Similarly, the researchers found significant
differences in performance appraisal practices between U.S.and Chinese firms. In Chinese
firms, compared to the United States, performance appraisals more often focus on the bottom
line; appraisal feedback is evaluative rather than developmental; the appraisal focuses on
objective, quantifiable results; and the main objective is to improve performance (rather than
to develop the employee). Perhaps surprisingly, therefore, performance appraisals in small
Chinese companies tend to be more hard-nosed than are those in the United States. Finally
(perhaps surprisingly given China’s communist roots), there’s more emphasis on incentive pay
than guaranteed salaries in China’s small businesses. Employees in the Chinese firms are more
likely to receive bonuses based on the company’s profits, to receive bonuses based on
company-wide gainsharing plans, to get stock or stock options as incentives, and to be paid
based mostly on an incentive plan rather than on a guaranteed income plan. On the other hand,
there tends to be less variation among Chineseemployees in pay, and more emphasis on
seniority.

• Why do you think appraisal in these Chinese firms seems to be tougher than in the United
States?
 Staffing the Global Organization

• International staffing: home or local?

– Expatriates (Expats)
– Home-Country Nationals
– Locals (host-country nationals)
– Third-Country Nationals
 Discussion :Reducing Expatriate Costs

Given the expense of sending employees abroad for overseas assignments, the
employer’s human resource team plays a big role in controlling and reducing
expatriate costs. A survey shows some of the steps HR managers are taking to
reduce these expenses.41 First, companies are upping the numbers of short-
term assignments they make. This lets them use short-term expats to replace
some long-term expats (and their families) who the company must maintain
abroad for extended periods. Fifty percent of the companies surveyed are also
replacing some expatriate postings with local hires. With an eye on cutting
costs, many employers were also reviewing their firms’ policies regarding
such things as housing, education, and home leave, along with expatriate
allowances and premiums (cost-of-living allowance and mobility/quality-of-
living premiums). The bottom line is that there’s a lot human resource
managers can do to cut costs and boost profits by better managing expat
assignments. .

• What else would you do to cut expat expenses?

28
 International Staffing: Home or Local

• Using Locals
• Using expats
• Other solutions
• Offshoring
 Management Values and International
Staffing Policy
• Ethnocentric practices
• Polycentric practices
• Geocentric practices
 Discussion

• A few years ago, the Japanese conglomerate Hitachi embarked on a

strategy to streamline its business into six market-based but integrated
groups around the world, and to meld them into what the company
called“One Hitachi.” Takeo Yamaguchi, Hitachi’s top human resource
officer, knew Hitachi needed a new humanresource strategy to support the
One Hitachi strategy. He therefore set out to standardize Hitachi’s human
resource practices around the world.

• For example, he built a global HR database including data on thingslike

employee name and performance history. To further support One Hitachi,
he also standardized appraisal and compensation policies worldwide. So,
for instance, now a manager in one region of the world is graded and
compensated using the same processes and standards as a comparable
manager in another region

What problems would you expect Mr. Yamaguchi to face in

31
achievingstandardization? How would you suggest he handle them?
Ethics and Code of Conduct
 Selecting International Managers

• Testing
• Realistic Previews
• Adaptability Screening
• Legal Issues
• Avoiding early expatriate returns
• Family pressures
 Training and Maintaining Employees
Abroad
• Orienting and training employees on international
assignment
• Performance Appraisal of International managers
• Compensating managers abroad
– The balance sheet approach
– Incentives
 Steps in Establishing A Global Pay System
Step 1. Set Strategy
Step 2. Identify crucial executive behaviors
Step 3. Global philosophy framework
Step 4. Identify gaps
Step 5. Systematize pay systems
Step 6. Adapt pay policies
 Training and Maintaining Employees
Abroad
• Union Relations abroad
• Terrorism, Safety, and Global HR
• Taking Protective Measures
• Kidnapping and Ransom (K&R) insurance
• Repatriation: Problems and Solutions
 Managing HR Locally

Putting a Global HR System into Practice

Best Practices for Creating Global HR

Systems
 Developing a More Effective Global HR
System
• HR Networks
• Standardize
 Implementing the Global HR System

• Communicate
• Dedicate Adequate Resources